It’s the Incentives, Stupid!

David Brooks gives President Obama a reading list to prepare for his upcoming speech on healthcare reform. The list has two items on it, David Goldhill’s essay, “How American Health Care Killed My Father”, in the current issue of The Atlantic which has been frequently recommended to me and which I have read. It’s online here. The other is a report from the Brookings Institution on healthcare reform, online here.

There is a common thread uniting these two: the greatest problem with our healthcare system is the perverse incentives, a problem I’ve commented on here with some regularity. It is pervasive and end-to-end in the healthcare system. Unfortunately, the bills most likely to be enacted into law by the Congress enshrine those incentives rather than reforming them. No good can come of that.

6 comments… add one
  • You know, I agree that the incentives need to be sorted in health care.

    But, God help me, a lot of that essay by Goldhill is pure drivel, including the title and its premise.

    The notion that it was “the system” that caused his father to get a Nosocomial infections is belied by the fact that the UK has the same troubles. It is estimated that in the US we have 1.7 million nosocomial infections a year. How many do they get in the UK? 300,000. Since they are roughly 1/5 the population of the US, that would come out to a yearly total of 1.5 million were they our size. Should we try to0 lessen those rate (and in the UK too), but this in no way proves a specific deficiency in the “system.”

    I also had to laugh when Goldhill stated, “Why, in other words, has this technologically advanced hospital missed out on the revolution in quality control and customer service that has swept all other consumer-facing industries in the past two generations?”

    I think about customer service in the 70’s & 80’s and I think about the level of service today, and I have to wonder what country Goldhill lives in because it aint the same one I live in. The more officious something (anything) becomes, the less customer service oriented it becomes.

  • PD Shaw Link

    Goldberg is conspicuous in ignoring one incentive that could have saved his father’s life based upon Goldberg’s own claims. His father died of an infection, the risk of which could have been reduced by two-thirds through the use of simple protocols promoted by Dr. Pronovost against a reluctant medical community. While Goldberg believes the people at the hospital were operating in good faith, he ultimately finds that the lack of interest in avoiding such infections stems from the $636,687.75 the hospital charged for treating the infection, all but $992 paid for by Medicare.

    Consider a somewhat similar situation facing McDonalds. They brewed and stored coffee at temperatures above those recommended by industry standards. By doing so, McD saved the cost of throwing out unused coffee. The cost of paying claims for occasional third degree burns didn’t change this accounting or perhaps those numbers were never placed side-by-side. McD now brews and stores coffee within recommended standards. What was the vehicle for that change?

    Golberg’s dad was not a good malpractice plaintiff because his claims (at least those that survive under a state’s survival statute) are not great. He had $992 in medical claims, no lost wages, and basically he was an 83-year old man with a variety of ailments that made his life expectancy uncertain.

    Interestingly, Goldberg’s solution might sweeten the pot for the malpractice attorney. He anticipates Health Savings to pay off these bills. When the estate administrator receives a bill for over $600,000 for the treatment of the infection, and communicates this liability to the heirs, he might challenge the bill or even seek the advise of a malpractice attorney.

    Incentives can be positive and negative.

  • dude Link

    This is pretty typical of folks thinking after the fact that x and y were obvious. Since it was so obvious, the person(s) who didn’t see the link between x and y are incompetent.

    It’s easy being a genious after the fact.

  • Unfortunately, the bills most likely to be enacted into law by the Congress enshrine those incentives rather than reforming them. No good can come of that.

    Sure they can Dave! Why once we pass them into law and we move health care from being a “commodity/privelege” to being a “right” why what can possibly go wrong.? We’ll find a way to pay for it even if it means we have nothing but health care in the end. No houses, schools, or food. But we’ll somehow be mystically healthy…or something. I don’t know michael reynolds seems to have the insight on that last one.

  • Drew Link

    Rich –

    I similarly found some of the commentary hyperbolic. (Perhaps to gain attention?) But there is a core thread of sound thinking in that article.

    Also, we shouldn’t confuse poor medical practices with the economics of the US health care system. If a doctor lops off your left foot instead of right its not because of the insurance system.

  • steve Link

    The whole premise of the article is weak. 83 y/o’s often die from pneumonia. Was the hospital acquired infection preventable? He does not give enough detail. If it was from line placement, probably. Medicare is pushing (not private insurance please note) protocols for reducing line acquired infections that work quite well.

    Goldhill also totally botches the economics for surgeons taking patients to their own surgicenters. They skim off healthier patients (fewer complications) and those with better insurance. There are many other areas he got wrong that could have been corrected if he had someone knowledgeable about medicine proof read for him. I would suggest just skipping to the conclusions. He is correct that incentives are misaligned.


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