Sunday, September 6, 2009

Why Fee For Service Doesn't Work

Here's a write-up of a study that shows that exercise is better than surgery for many patients. It highlights one the big problems with our current health care system, which is that the incentives are designed to promote surgeries, expensive tests, and prescription drugs, because doctors and hospitals make money off these procedures.

How much money do we spend annually on angioplasty? According to the American Heart Association, 1,314,000 of them were performed in 2006. According to U.S. News & World Report, the average cost of these procedures was $10,107 in 2004 dollars, a number that includes figures for Canada, which are quite lower than those of the United States. This means that the cost per treatment for the US is actually higher. Nonetheless, using these numbers we get an average expenditure, in the United States alone, of around $13.3 billion.

How much of this money is wasted? How many of these surgeries are unnecessary? Apparently, judging from the Barcelona study, quite a few. And keep in mind that this is but one procedure, and there are many more procedures for which there are dubious benefits. There all also procedures which may or may not be beneficial, depending on the situation, but which are performed anyway, because the incentive is for doctors to do them. Often the doctors assume that there is no cost to the patient (and there often is no direct cost), and they know that procedures will get them paid, whereas giving good medical advice will not.

As long as fee-for-service is a feature of our health care system, we will continue to see rising costs, and the neglect of basic preventative measures like exercise and good diet.

We need a public option to keep insurance companies from ripping us all off. We need universal coverage, so that we can join the rest of the civilized world. But we also need to change the structure of the whole system, so that we focus on making patients healthy, and not just cutting them open for money.

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