Noah Smith has entered the debate:
So the fundamental reason your health care costs so much is not that the health insurance companies are lining their pockets. And it’s not that insurers are an inefficient mess. It’s that the actual provision of America’s health care itself just costs way too much in the first place.
The actual people charging you an arm and a leg for your care, and putting you at risk of medical bankruptcy, are the providers themselves. The smiling doctor who writes you prescriptions and sends you to the MRI and refers you to a specialist without ever asking you for money knows full well that you’re going to end up having to wrangle with the insurance company for the cost of all those services. The gentle nurse who sets up your IV doesn’t tell you whether each dose of drugs through the IV could set you back hundreds of dollars, but they know. When the polite administrative assistants at the front desk send you back to treatment without telling you that their services are out of your network, it’s because they didn’t bother to check. The executives making millions at “nonprofit” hospitals, and the shareholders making billions on the profits of companies that supply and contract with those hospitals, are people you never see and probably don’t even think about.
Excessive prices charged by health care providers are overwhelmingly the reason why Americans’ health care costs so cripplingly much. But they’ve outsourced the actual collection of those fees to insurance companies, so that your experience in the medical system feels smooth and friendly and comfortable. The insurance companies are simply hired to play the bad guy — and they’re paid a relatively modest fee for that service. So you get to hate UnitedHealthcare and Cigna, while the real people taking away your life’s savings and putting you at risk of bankruptcy get to play Mother Theresa.
So the way to make our health care system affordable is not to browbeat insurers, in the hope that they will be able to reduce their profits and pay for us to have cheap health care. Insurance companies simply do not have the power to do that, even if you threaten to shoot them. What we need is to reduce costs within the actual medical system itself...
He jumps in to the comments to add:
They [providers] don't know the exact costs, but they have a general idea, they know the costs are very high, and they typically don't talk to patients about those costs when prescribing services to them. This is understandable, given that talking about costs would make patients less comfortable while receiving care, and one of doctors' main jobs is to make patients feel comfortable. But there's basically no point in the process of receiving care at which patients could make a decision based on cost.
Incentives matter, and patients aren't automata who are unable to follow incentives, as much as some doctors would like them to be. They can understand pricing concerns/risk, and they're coming from a wide variety of financial situations. A recent NYT op-ed admits as much:
One of my first lessons as a new attending physician in a hospital serving a working-class community was in insurance. I saw my colleagues prescribing suboptimal drugs and thought they weren’t practicing evidence-based medicine. In reality, they were doing something better — practicing patient-based medicine. When people said they couldn’t afford a medication that their insurance didn’t cover, they would prescribe an alternative, even if it wasn’t the best available option.
As a young doctor, I struggled with this. Studies show this drug is the most effective treatment, I would say. Of course, the insurer will cover it. My more seasoned colleague gently chided me that if I practiced this way, then my patients wouldn’t fill their prescriptions at all. And he was right.
Of course, the op-ed is doctor-apologia, working as hard as possible to finger point at insurance companies and only admitting a possible problem of lacking clear and reasonable pricing when it comes to drugs; after all, patients and their insurance companies pay pharmacists and drug companies for drugs, not doctors. They can't see that there could be a similar problem for their own services (insert Upton Sinclair quote). But they admit that patients can and do make decisions based on their understanding of prices and risk. Yet, when it comes to their own services, this is absurd to them. Surely they know better than the patient, and the patient should just do what they say; cost doesn't matter.
But as Noah points out, they "know", but they don't know. They "don't bother to check". They give every excuse imaginable to avoid the topic. And some of this is understandable! As Noah points out, they just want to focus on the medicine; they want to make the patient feel comfortable with the medicine; medicine is sacred and money is profane, so never the two shall meet. Doctors don't want to know. They're happy to sit back and say that they're prohibited by law to consider their costs in providing recommendations, but conveniently forget to be patient-based, not remembering that patients can and do make such decisions. But patients can only do this in a reasonable way when they're properly informed before making decisions. Without information, it's generally fear that rules the day, be it fear of medical issues or fear of medical expenses. Some doctors want to not know so much that they can't even identify the names of the relevant numbers in the billing/insurance process that might be involved in the decision-making process. This is perfectly fine, of course; they shouldn't have to spend all their time becoming intimately familiar with the details of how each of their patients' insurance works.
It's hard for me to come to any conclusion other than that providers shouldn't be bothered to know those details. Instead, there is an extremely simple solution that takes one small step toward what Noah wants - providers just need to inform patients of what they know about the pricing for suggested courses of actions before those courses of action are taken. We need to create a point in time where patients can have the relevant information with which to make a decision that takes their own understanding of their own finances into account. I have suggested that providers simply provide the price that they will be billing insurance and their negotiated rate. The negotiated rate gives the patient a good idea of what to expect if the procedure is covered. Sure, the provider doesn't know the rest of the details of the insurance policy (deductibles, co-insurance, out-of-pocket max, etc.), which are important for estimating things like out-of-pocket costs - again, they shouldn't. But the patient can know these things. The only information the patient is missing is the information that the providers refuse to give them. In addition to the negotiated rate, it would be nice to have the full bill amount, so the patient can consider the risk of an insurance denial (and perhaps have a conversation about this risk or gather more information). Then, they at least have some idea of how much they could be nominally on the hook for if there is an insurance snafu.
I am generally anti-regulation, but the good doctors here at TheMotte have convinced me that there is no way that we are going to persuade them on this point with reason, so I am reluctantly throwing in my support for as minimally-scoped regulation as we can come up with, just as much as it takes to cast off the excuses and actually get numbers in front of patients at a point in time where they can use those numbers to make decisions. Hopefully, someone can get this idea to people like Noah, so they can consider advocating for something like this rather than tired ideas he gave like having the gov't "play hardball" to negotiate prices. He seems open to ideas:
There are probably other ways to foster competition and increase efficiency in the medical care system.
Indeed, there is, and it's right in front of your eyes. It's the natural conclusion of your request in the comments for what NYT would call "patient-based medicine".
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Notes -
I do think we have some low hanging fruit. Tort reform would dramatically reduce the instances of expensive low value care and could be done while still allowing patients to sue.
I don't have the states on me at hand right now but administrative bloat is something absurd, like 1:1 (with physicians) 50 years ago to 1:16 now.
A lot of this is driven by bedside nurses being burnt out and wanting a different job, we also have a bedside nursing shortage right now. One fix fixes another.
Tort reform is less low-hanging fruit than a buzzword that refers to a set of vague policy ideas that only have a tenuous relationship to actually reducing the number of lawsuits. The exception is that when it's done really aggressively, in which case it pretty much bars all lawsuits excepting the few that meet stringent criteria. Most of this is based upon a myth that what's driving these costs isn't just lawsuits but frivolous lawsuits. And yeah, any News of the Weird type publication can show you all kinds of examples of clearly frivolous suits, but these are a distinct minority, especially in medical malpractice litigation.
The thing about medical malpractice and most other personal injury suits is that they're already expensive to litigate. Plaintiff's lawyers aren't going to take a case unless the damages are enough to make it worthwhile. Just to start with, you're going to need medical records, which are going to cost hundreds and can easily run into the thousands if there was a lengthy hospital stay. Then you need attorney time to go through these records. You need to depose witnesses and order transcripts; you're looking at least at deposing the doctor you're suing, the Plaintiff (or other damage witnesses if the plaintiff is deceased), and possibly other medical personnel. Once you've gathered this information, it's useless unless you have an expert who can explain to the jury why the doctor's conduct deviated from the standard of care, so add another 10 grand or so to get an expert report.
And this is all just to get to the point where you can talk settlement with the defense. If the case actually goes to trial, tack on another $60,000–$100,000 in time and expenses to see the case through to verdict. The upshot is that very few plaintiff's attorneys are willing to take on "frivolous" cases. Ideas like imposing the English rule where an unsuccessful plaintiff has t cover the defense costs is ultimately irrelevant in a legal environment where 99.9% of cases are settled before trial. It may make some defendants more likely to take a chance on borderline cases, but there aren't many of those.
I've never actually talked to a lawyer (well, one who knew about malpractice) about this so I welcome instruction if you think I'm off base.
My two primary thoughts are:
The problem isn't the expense of lawsuits and the verdicts, it is the impacts the threat of those have on patient care and physician decision making. Doctors are already (generally appropriately) very risk averse. Lawsuits are scary and we all know somebody who lost a lawsuit for bullshit reasons or went through ten years of suffering before winning. Even a dropped complaint makes licensing and other stuff a huge fucking pain in the ass. Therefore we do things like order unnecessary CTs and spend twice as long on note writing in order to hypothetically ward off the threat of malpractice. Most of the time it doesn't do shit but that doesn't stop it from making things more expensive, time consuming and increasing the risks on patients. Defensive medicine is problematic than actual malpractice is.
I figure one solution is to make the results more predictable. All of these posted cases where somebody didn't do anything wrong and the jury still dropped a hundred million dollar verdict are terrifying. Have a non-jury resolution somehow. Expert panel. Doesn't need to be just physicians, can be industry or legal experts or whatever, just anybody who knows what they are talking about so when the expert witness lies about what happened nobody believes it. Or empower licensing boards to take away the licenses of expert witnesses who sell a pile of shit. That's a dangerous power that I'm not super comfortable with but we gotta do something. And I do want to preserve the power of people to sue if someone actually does something wrong.
Ultimately the root of the problem is that awards and verdicts are independent of actual malfeasance and deviation from standard of care.
Just as a preliminary matter, I looked up some statistics at work today on the issue, and they were surprising. The average malpractice settlement is around 350k, and the average verdict is around 1 million. I thought these numbers were low, but I saw them quoted in multiple sources, so I'm going to assume they're true. I practice product liability and toxic tort law, and while I don't know the total settlement average due to the number of defendants, we usually estimate verdicts in the 2 to 3 million range for someone with cancer, even if it's an older person in bad health. There are very few verdicts we can use for comparison, but they're almost all significantly larger than this. That being said, I saw another statistic suggesting that 80%–90% of cases with weak evidence resulted in defense verdicts, 70% of borderline cases did, and only 50% of good cases did. This suggests that juries really don't like awarding damages, but when they do, they go big. In my line of work a defense verdict is highly unlikely, so 1 million may be a reasonable amount if you consider that the modal jury award is zero.
I also learned that 29 states already have tort reform that limits non-economic damages, including some big ones like Texas and California. These caps range anywhere from 250k to 1 million, but they're still significantly smaller than what you'd expect from a jury. Without non-economic damages, it's pretty hard to get to these huge amounts, since they are by nature designed to put a dollar amount on what's priceless. For economic damages to get truly large you'd have to have something like a high-earning plaintiff who is totally disabled and needs to be in a skilled nursing facility for the rest of their life, and even then I can't see it getting above 20 million or so. To show you how we'd calculate that, say you have a 25 year old who makes 100k a year and is permanently disabled. That gives you 4 million in lost earnings assuming retirement at 65. However, if he's entitled to disability payments totaling $1500/month, you'd deduct that leaving you with about 3.2 million. If the skilled nursing facility costs 10k/month and he's expected to live an additional 50 years, that's 6 million, except medicaid is covering part of that cost so you have to deduct that. Add on the medical bills and other stuff and you might get to ten million, which is steep, but nothing like 70 million for pain and suffering alone. And this isn't something the plaintiff is just going to assert out of thin air; they have to show medical bills and hire an economic expert to estimate future earnings and costs. To address your points:
Like I said earlier, trials are rare. Something has to go seriously off the rails for a case to go to trial. While caps eliminate some of the tail risk of claims, they don't seem to eliminate the amount of total claims. It's worth remembering that most claims are going to settle well within any reasonable award cap. Even in states without caps, while plaintiff's attorneys may dream of huge awards, they're really a mixed blessing. A settlement offers cash almost immediately; a jury verdict means waiting months for a shot at a large judgment that may get appealed, keeping the money out of your hands for years. If you get sued as a doctor it's more likely to be the kind of case that settles for 200k than the kind where a jury awards a multi-million dollar verdict. The only thing I can conclude is that even if you were to make large awards impossible, as long as you're allowing any kind of malpractice suits the insurance companies are going to want to limit the risk, and if that means defensive medicine, that's what you're going to have to do.
Requiring arbitration isn't something you have to wait around for the state legislature to require; doctors and hospitals can and have put mandatory arbitration provisions in their patient care agreements. If the patient doesn't like it, they can choose another doctor or go to another hospital. But these provisions are actually becoming less common than they were a couple decades ago. Why? Because the average settlements are higher.
For whatever reason, arbitrators (and judges) love splitting the baby. With juries it's all or nothing. With arbitrators, it's like they calculate the damages and make the award based on how strong they think the case is. They aren't going to give out a bonanza in any circumstances, so the ceiling is lower compared to juries. But the floor is higher; a weak case that would result in a defense verdict at trial is going to result in at least some award in arbitration, even if the award is small. And since the process is significantly less expensive than litigation, the whole calculus changes. If I go to a traditional trial I'm going to spend a ton of my own money in exchange for, at best, a 50/50 chance of getting a favorable verdict. In arbitration, the marginal cost of going all the way is lower, and the chance of walking away with something is higher. There's less of an incentive to settle, so if the defendant wants to make the case go away he's going to have to offer something close to what he expects the award to be. Realistically, though, in arbitration the plaintiff has no real motivation to settle, so what you end up with is an arbitration award that ends up being more than you would have paid in a traditional settlement, and since the process is so frictionless for the plaintiffs, they're going to file more suits.
Now, you could say that you meant that this panel should include doctors and not lawyers, or maybe a combination of the two, or maybe that you didn't mean arbitration but a more formal system like trial but with an expert panel instead of a jury, or whatever. Just keep two things in mind. The first is that the system is designed to compensate people for injuries, not to make things easier for doctors. The effects of malpractice suits on medicine are unfortunate, but as long as we believe that people who are injured by malpractice are entitled to compensation, they will persist. You may think certain cases are bullshit, but the plaintiff is still suffering, and I'm saying this as part of the defense bar. The other thing to keep in mind is that there's no reason to believe that some alternative fact finder is going to do better than a jury. You can change things, but you may not like the result.
Wow.
First of all - thank you for writing this up, I imagine if I had asked for this in a work capacity it would have cost me, so I very much appreciate it (and I'm going to feel somewhat guilty about replying in a lot less words).
Second - I spend a ton of time here complaining about myths in medicine and so on so you bet your ass I'm paying close attention when a subject matter expert in something else is talking (again, thank you).
Third - Shit. I guess this means I have to drop this line of "here's the solution!!!"
To dig into some of the specifics you mentioned, those numbers don't surprise me. Supposedly (correct me if I'm wrong) damages in most cases are soft capped near the maximum the insurance will pay out because that's "easier" to get approved and would therefore result in lower numbers. Again this is all supposedly, but the numbers you tossed out line up with what I've seen a lot.
Ultimately physician decisions on this topic are absolutely vibe based - you see one colleague get nailed for something that wasn't even wrong and end up going through a five year trial and become a different, broken person... that changes what you do, even if it shouldn't. Or maybe we just say that's what we do and it's a meme? Hard to accurately study.
There are costs for settling though and we hate it even if it makes the most sense (or the hospital/our insurance forces us to). That's because it impacts all the hugely annoying paperwork we have to do for the rest of our career which sounds like a lame complaint but with the hoop jumping we have to do it adds up to a huge pain in the ass.
Fourth - Double shit. You are spot on, I was asking for arbitration - and I hate arbitration! I don't know if it is actually bad but my opinions on it are totally drive by the anti-arbitration memes.
I guess the next move would be to request the malpractice standards used in the VA and Prison, which are different. Not happy about that though because the care they give is awful typically.
Two sidebars:
Meddit has a running medmal blog poster. It's pretty instructive and you see a mix of "Jesus Christ fire that expert witness into the sun" and "fuck I hope I never make that mistake." Generally good discussion, if you develop any interest in this take a look!
OB malpractice can be absurd - as high as 150k a year (although that's the high end). On the low end Psych is like 5k. Darkly hilarious given that's the specialty with the most people who want to sue. That's an absolutely insane business expense though (for OB).
Is this for OB's who've already been sued, or is this some kind of adjustment for high risk markets(Louisiana...) or whatever?
That's the high end of the range, here's what google AI bullshit says on the matter:
"Obstetric malpractice rates are high, with OB/GYNs having one of the highest malpractice rates of any medical profession: Malpractice claims: More than 62% of OB/GYNs are sued during their career. Malpractice insurance: OB/GYNs have some of the highest malpractice insurance rates. Costly claims: Obstetric malpractice claims are among the most expensive medical malpractice claims. Birth injuries: Birth injury claims are the most expensive obstetric malpractice claims."
And from an article: "As a result, an OB in Chicago typically pays about $140,000 a year for med mal insurance, while the median premium for other specialties is $30,000 to $40,000."
Some key bits - OB gets sued a lot, OB patients are pretty much by definition healthier than most patients so that means bad outcomes are more expensive (compare 75 year old with kidney failure with 30 year old mother of two with no past medical history). If you injure a kid literally while they are being born you are like on the hook for everything that ever happens to them...
I think it's probably more of a practice environment issue than mistake issue, on average they get sued (62%) and there are states that are known to be hell holes for this (example: NJ).
Don't know for sure though.
I mean I've definitely heard whisperings about this- there's a pro-life canard that abortion doctors are mostly ones who can't carry insurance for a live birth because of this issue+being on the left hand of the bell curve for good doctoring- but the magnitude is a surprise.
Doctors (and myself) certainly exaggerate sometimes but the amount of good (and bad) shit that happens and sounds fake is nuts.
I'm assuming quite a few of the downvoters on my latest posting spree are assuming that the 24 hour shifts aren't real or are a gross exaggeration.
Nope.
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