Friday, September 08, 2006

The Law of Demand and Health Care

Malcolm Gladwell wrote an article wrote an article for The New Yorker in August, 2005 entitled The Moral Hazard Myth. Actually, Gladwell mixed up two economic concepts. One concept is moral hazard (mentioned previously). The other concept is the law of demand.

The law of demand states that if you reduce the price of a good or service, then people consume more of it. Because Universal Health Care coverage reduces the price that people pay (at the time of care) for routine health care, the argument goes, the law of demand will increase their use of the commodity.


As applied to health care, the law of demand says that by making the consumer pay for all or more of the costs of health care, patients will use health care more efficiently because they will go to the doctor only when needed. The idea is to encourage people to use less access to health care because – according to the argument – not requiring the consumer to bear the cost of their health care will result in overconsumption.

The argument put forward assumes that you will always know when you need to see the doctor. There are many medical problems that can only be treated or cured before symptoms manifest themselves – before the consumer even knows that they need treatment. Having to pay for routine but necessary medical care for a low to middle class consumer may mean having to cut back on other essential needs – like rent, for instance. It assumes that receiving less medical care = more efficient use of resources – but, as the saying goes, “an ounce of prevention is worth a pound of cure.” Combine this with the fact that many illnesses are only treatable before symptoms arise, therefore, only utilizing access to care when a problem is known is spending a pound of money when an ounce of preventive care would have been the more efficient use of national resources.
The main reason health care is not well-suited to a free-market capitalist system can be understood by appealing to the logic of an old Ben Franklin proverb: “An ounce of prevention is worth a pound of cure.” A pound of cure will always be more profitable than an ounce of prevention. Right now American health care is based on a pound of cure.

Small, low-impact personal injury lawsuits

A lot of small-impact personal injury lawsuits could end if we instituted national health care. In my practice, I have seen people file lawsuits over very small injuries that amounted to $1000-2000 in medical costs. Now it is true that there is a cottage industry that files lawsuits because fraud can be profitable, but it amounts to a very small amount of all lawsuits. Creating a national health care system would take a lot of the profit out of the system because personal injury awards would not be tied to the amount of medical bills. The only award would be for pain and suffering.

Another problem is that there are people that will claim they got hurt in an auto accident so that they can see a new doctor and get pain medication. Creation of a national health care system would allow us to more closely track patients that are overusing pain medication and prevent their abuse.

4 comments:

Anonymous said...

One problem with the ounce of prevention idea is that sometimes the tests that can catch diseases in their early stages can also have side effects. Even a blood draw has certain risks of infection, not to mention these tests are generally given in medical offices where you stand the greatest chance of getting an infection.

I get what you are saying that right now the US health care system encourages people to wait until they are very sick to seak help, but the other side of the equation is pharmacutical marketing that bombards people with the message that they are sick and that their is a pill that can fix it. In some ways this marketing is contributing to a nation of hypochondriacs that seek medical attention for every percieved ache, inadvertentely these people are ptting themselves at risk for real diseases by demanding invasive procedures and drugs that potentially have bad side effects.

OkieLawyer said...

Anonymous:

Thanks for stopping by and leaving the thought-provoking comments.

Even with the risks of side effects and infection, the potential risk/benefit ratio still comes heavily on the side of early detection and treatment. The greatest risk in a hospital comes from staph infections, which is mainly due to the overuse of antibiotics and people not using them as prescribed.

"...but the other side of the equation is pharmacutical marketing that bombards people with the message that they are sick and that their is a pill that can fix it. In some ways this marketing is contributing to a nation of hypochondriacs that seek medical attention for every percieved ache, inadvertentely these people are ptting themselves at risk for real diseases by demanding invasive procedures and drugs that potentially have bad side effects."

I agree with you to a point about drug advertising. Another problem is that doctors can get a "kickback" from each time they prescribe a drug -- which gives them an incentive to prescribe it, even when a cheaper, more effective drug, will do the trick.

The pharmaceutical industry advertises the medicine for the profit motive, which in the case of health care, is actually working against the interest of public health. The pharma industry would argue they need to make large profits to make up for the costs of research and development (R&D). However, from what I remember, most of the R&D is done by publically funded universities. I could be wrong about that, and I haven't researched it, but that is what I remember from previous discussions about the topic.

The issue of hypochondria and say, a somewhat related illness, Manchausen's Syndrome (and Manchausen's Syndrome by Proxy), can be better caught if we had an integrated system. A national health care system can more easily do that. Such a system would have large startup costs (think railroads, or national highway system). Private for-profit actors would have little incentive to create such a system. In fact, such a system would work against them as it would cut down on duplicative patients. This is really the point I was trying to make when I referred to drug addicts ("overuse of pain medication"). However, it would be in the interest of society.

Teri said...

The other issue ignores that we practice medicine FOR profit. My husband and I each had a totally useless MRI last year. All they did was rule out a tumor as a cause for hearing loss in one ear (for me) and told my husband he needed surgery on a ruptured muscle in his calf (he didn't--it had healed by the time we got the results). Both MRIs, I believe, were designed to increase profits for the hospitals involved. Both could have been prevented by better doctoring. The doctor I went to didn't even think to ask me if I'd had measles. When I mentioned that, he decided that sure enough that could be the cause. Never mind that the hearing was fine several months before.

I am forced to go into the doctor on a regular basis to get a renewal of my prescription for estrogen (which I need due to a hysterectomy some years back). They then tell me that to get the prescription, I have to go through several other procedures, like having a mammogram. I have to do these things, whether I need them or not, to continue to get the prescription which I do need. The condition that causes me to need this prescription doesn't change. Yet I have to either pay for this out of my own pocket (when I don't have insurance) or charge the insurance company for it. This behaviour is causing me to look for herbal alternatives so that I can have more control over when I choose to see the doctor. It's all being driven by profit for the medical industry.

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