The consumer of health care is unlike any other consumer, and the product he purchases is unlike any other product. This is something that those who embrace “consumer-driven medicine” choose to ignore.
Advocates like Harvard Business Professor Regina Herzlinger insist that if we just
put the consumer in the driver’s seat, giving him both transparent pricing and a little “skin in the game,” the consumer could put a lid on health care prices while demanding the best quality care. Herzlinger is particularly hopeful that the baby-boomers, a group she describes as “the most manipulative, the most narcissistic and the most effective generation this country has ever seen,” can do the job. (Why one would want such a group setting priorities for our health care is beyond my understanding; I’ll return to this point in a later post.)
Last week I spoke at the Massachusetts’ Medical Society’s Leadership Forum on the rising cost of care. In two earlier posts (here and here) I’ve described what other speakers had to say about how and why Massachusetts is running into trouble trying to fund its experiment in universal care.
In my speech, I explained why I don’t think that “consumer-driven medicine” is the answer. I don’t believe the “consumer” can rein in healthcare spending. As an alternative, I proposed a “patient-centered” model of health care which depends on patient and doctor, working together.
Begin with the flaws in the consumer-driven model. First, it assumes that the patient has the same power that a buyer has in the commercial marketplace. But in truth, the patient does not have nearly as much leverage as other consumers.
To exert influence in the market for flat-screen TVs or laptops, all
that the buyer has to do is postpone his purchase: eventually
competitors will come into the market, offering a very similar product
at a lower price, and the consumer wins. But if you are a cancer
patient who needs a $45,000 drug, you can’t put off the purchase—even
if you have a 20 percent co-pay. And if you did postpone buying, it’s
not likely that the next new cancer drug would be any cheaper. In fact,
if history is any guide, it would be more expensive.
The same can be said of most of the medical technologies designed to
treat serious illnesses. Keep in mind that the bulk of our health care
dollars are spent on patients who suffer from severe chronic illnesses.
Health care economists talk about the 80/20 rule: 80 percent of our
health care dollars are spent on 20 percent of the population. These
people are not hypochondriacs. They are seriously ill, and they are not
bargain-hunting. As a result, they have very little power to drive
The second problem with the consumer model is that it assumes
patients are in a position to judge the quality of the product. I
remember, a few years ago, reading a story in the Wall Street Journal
describing how, in this brave new era of healthcare consumerism, “new
rating systems . . .will make it possible for people to shop for a
hospital the way they shop for a mutual fund.”
Did we learn nothing from the 1990s? Just as most people are not
cut out to be their own money managers, most people are not qualified
to do their own medical research.
To rate the quality of a hospital, you need to know more than
whether patients found it pleasant. When I wrote about the hospital
building boom a few weeks ago, and asked “can we afford the
waterfalls—and other luxury amenities?” more than one hospital insider
posted a comment warning that the mahogany paneling may be masking
understaffing and other dangers to the patients’ health. (See comments
Too often, reports “rating” hospitals tell us only what percent of
patients died following a particular procedure. To begin to grade the
hospital, I would want to know more. What was the “quality of life” for
the patients who survived? Did they spend the next two years warehoused
in a nursing home before they finally died, or did they go home and
play with their grandchildren? What was the “quality of death” for the
patients who survived? Were they in great pain? Were palliative care
services available at the hospital?
How many of the patients who went under the knife didn’t really need
the operation in the first place? (“This,” a hospital COO in New York
once told me, “is the question they never ask. And, in terms of
exposing patients to unnecessary risks, that’s the most important
I also would want to know about co-morbidities: were the patients in
some hospitals sicker? How did the report card adjust for risk? How
many patients acquired infections why in the hospital? How many were
readmitted? What is the rate of errors in that hospital?
I am not suggesting that we shouldn’t try to compare care in various
hospitals. But “outcomes research” is still an infant science. It’s
complicated because outcomes are complicated. Such research should be
done by panels of doctors and researchers. (Ideally, the panel would be
made up of health care professionals from another state who do not
compete with the hospital and who are not part of its referral network.)
In other words, this is not something the consumer can do. The
consumer is not a physician. He isn’t a researcher. He isn’t a
scientist. He’s not in a position to adjust for risk, to weigh all the
variables, or to analyze how the situation could improve.
This brings me to the essential reason why the health care consumer
can’t comparison-shop and find the best care at the lowest price. Even
if the prices for health care were made transparent, the product is
not. There are just too many variables, too many unknowns. Healthcare
is not a commodity, like a refrigerator—often the product is quite
This is why there is no Consumer Reports for health care. While
Consumer Reports can rate mid-priced refrigerators briskly and clearly,
in a way that makes comparisons easy, it is often all but impossible,
even for a physician, to be positive of the relative benefits of a
great many medical treatments. Think, for example, about the
uncertainty surrounding early detection and treatment of prostate
cancer, which I wrote about here.
We need more comparative-effectiveness research, ranking the
effectiveness of various drugs, devices and procedures. Traditionally,
the health care industry has avoided head-to-head comparisons because
those with a financial stake in the market know that there will be
winners and losers. But today, as we move toward evidence-based
medicine, Medicare is likely to begin insisting upon comparative
information before agreeing to cover a product.
Even so, there will always be grey areas in medicine, in part
because medical science is always evolving and always changing. Most
patients don’t know—and perhaps don’t want to know—that the science of
medicine is riddled with question marks. But as anyone who has ever
been seriously ill soon discovers, the more one learns about a disease
and the odds of success with possible treatments, the more ambiguous
the situation can become.
This is why “Uncertainty” is, as Dr. Atul Gawande puts it, “the core
predicament of medicine. . . Uncertainty is the thing that makes being
a patient so wrenching, being a doctor so difficult, and being part of
the society that pays the bills so vexing . . .” In Complications: A
Surgeon’s Notes on an Imperfect Profession, Gawande emphasizes that,
despite the enormous progress made in the 20th century, medicine is
still a young science: “With all that we know today about people and
diseases and how to diagnose and treat them, it can be hard to grasp .
. . how deeply the uncertainty runs.”
Kenneth Arrow, the father of health care economics, made the very
same point as he carved out his field: “Uncertainty, as to the quality
of the product is perhaps more intense here than in any other market.”
In sum, the healthcare market is different from any other market
because it is so much harder for the purchaser to evaluate what he is
buying. Adding to his dilemma, unlike other shoppers the patient knows
that he can’t rely on a friend’s experience with the product. Every
body is unique. While two consumers may drive pretty much the same
value from the same mid-priced refrigerator, a particular course of
treatment can have a drastically different effect on two people.
Nor can the consumer rely on his own past experience. Three-quarters
of health care dollars are spent on products and services that the
patient has never purchased before and most likely hopes never to
To make the patient’s dilemma even more wickedly difficult, he knows
that there are no warrantees, no guarantees, no returns. And if he’s
unhappy with the outcome, he may be stuck with something far worse than
a bad haircut. As a consumer he is in a uniquely vulnerable position:
He can’t sample the product beforehand. There is a very real
possibility that it could do him more harm than good. Yet, even if it
proves useless, he is expected to pay for it.
This is how the purchase of healthcare is different from any
transaction that takes place in the commercial marketplace. And this is
why the purchase of healthcare must be a transaction based on trust.
How could the patient possibly go forward if he didn’t trust the
seller? This is a market where caveat emptor cannot apply.
I believe that this goes to the heart of the difference between “the
consumer” and “the patient.” When advocates of consumer-driven medicine
talk about the patient as a consumer, often the relationship between
patient and doctor begins to sound adversarial. And in truth, in most
markets “caveat emptor” is a good warning. The buyer cannot trust the
seller to put the buyer’s interests first. So the buyer must demand the
best product at the best price.
By contrast, the physician is a professional who has pledged to put
his patient’s interests ahead of his own. The patient must trust in his
doctor’s knowledge and professionalism. Otherwise, the health care
market couldn’t function. Who would submit to a painful, invasive
procedure if he didn’t trust the doctor?
Healthcare economist Victor Fuchs sums up the situation: “The
patient-physician relationship is very different from the one that we
accept in commercial marketplaces because it requires patients and
health professionals to work cooperatively (rather than as adversarial
buyers an sellers). Mutual trust contributes to the efficiency of
But what about the uncertainty of medicine? Does all of this mean
that the patient must simply trust (or hope) that his doctor has the
Not at all. Tomorrow, I’ll talk about shared-decision-making and
“patient-centered” medicine—and suggest why patient-centered medicine
could help curb healthcare inflation, making universal coverage