Tag Archives: obamacare

Why Health Care is a Disaster

Today’s Wall Street Journal had a must read story with an example of why health care costs are out of control, and why a significant overhaul is going to be needed to fix them. In 2007 a major study demonstrated that in most cases, inserting a stent (a $15,000 procedure) to help chest pain was no more effective than using drugs alone. The study laid out the circumstances in which this was the case, and made clear that performing a stress test to determine the cause of the chest pain was a good idea before inserting a stent. The head of the American College of Cardiology called the study a “blockbuster.” Awesome: fewer surgical procedures, cheaper health care, same outcome. Good news, right?

Wrong! The study made no change in the number of stent procedures in the US. Why? Well for one thing, cardiologists make $900 per stenting procedure, which is why the average interventional cardiologist makes $500,000 per year, up 22% over the last decade after adjusting for inflation. As the author of the study put it, “What’s going to continue to drive practice is reimbursement.” But if the only challenge was the greed of doctors (regular Thoughtbasket readers know how I feel about doctors who see their practice as a path to riches), that could be addressed. Insurance companies could just pay less.

But insurance companies face a competitive problem: if one cuts payment for stents, maybe customers will go to another insurance company that doesn’t. Plus, since insurance companies usually mark up the cost of procedures anyway, they often don’t have a great incentive to push down the price doctors charge.

When Washington state tried to use the study to change its Medicaid rates, and wanted additional data, the stent makers and cardiologists in the state (including the cardiologists at the University of Washington…employees of the state!) refused to cooperate. Washington had to give up.

And patients get some blame too: as one cardiologist put it, if your doctor says “let’s try drugs first, and then maybe we’ll stent later,” you are likely to just find a doctor who will stent immediately. Americans tend to expect an immediate fix from their doctors.

So doctors, insurance companies and patients all essentially conspire to have unnecessary treatments that cost about $5 billion per year. That is $5 billion, each year, or 5% of the total cost of the health care bill currently in Congress. If something so simple and so clear is so hard to fix, how do we expect to bring other health care costs down?

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