Dear Fellow Health Plan Members And Medical Patients, I’m Sorry
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Dear Fellow Health Plan Members And Medical Patients, I’m Sorry

Incentive problems plague the health care system. Market-based reforms are needed.

I want to apologize for my expensive and unnecessary recent hospital visit that, in some ways, helps explain the high costs of our health care system.

My father and grandfather both died, relatively young, of heart attacks. So when I started feeling minor chest discomfort and dizziness I emailed my primary care physician, who suggested I go to the emergency room. I told her that seemed unnecessary, and we ended up agreeing that I would instead visit an in-network urgent care facility.

Once there, a physician’s assistant took one look at my electrocardiogram (EKG) and concluded I had suffered a heart attack and sent me to the emergency room, where I had more EKGs as well as a computerized axial tomography scan (CAT) scan. The attending physician found those results inconclusive and recommended I take a stress test. Although this seemed like a reasonable precaution, there was a complication: Outpatients had to wait six weeks for a stress test, but if I was admitted to the hospital, I could be tested the next day.

Interestingly, just before I was admitted, a hospitalist told me that she had looked at my scans and didn’t think anything was wrong. Her opinion was borne out by the following morning’s stress test, which was negative after I spent the night in the hospital.

The emergency room visit, hospital stay, various tests and doctor visits during my adventure cost a total of $11,000, with 90 percent of it covered by my insurance. But that $11,000 was the rate that my insurance provider received because it negotiated a discount from the hospital’s list price. Had I been uninsured, the cost for the same services would have been $31,000.

My experience cannot be spun into a morality tale about the evils of corporate profits: both the medical group and my insurance provider are not-for-profits. There are no profits to squeeze out of this case by switching to switching to the single-payer system California has been considering in recent years.

In looking at my case specifically, you could make the case that the EKG results should’ve been interpreted differently, or that doctors could’ve reasonably decided to wait six weeks for an outpatient stress test. But the medical system’s incentives are heavily weighted toward minimizing risk rather than controlling costs — and in many ways, that’s completely understandable. But it’s also easy to see how the existing system results in people, particularly those with insurance, getting procedures and tests done that aren’t really needed. And everyone ends up subsidizing those costs.

Economists argue that the medical system cannot be analyzed like, or function as, a normal market because many patients, including those who are unconscious or in severe pain, are incapable of being rational consumers in the moments they need health care. But many patients, like me, are fully capable of rational decision-making. These patients and their health care providers need better incentives to bring health care costs under control.

Most health insurance plans, including traditional, government-run Medicare and Medi-Cal, pay fees to providers based on the number and type of procedures performed, which gives medical providers incentive to perform more procedures. Insured patients, who often pay a small or zero share of the costs of those procedures, are likely to follow their provider’s recommendations because they won’t bear the lion’s share of the costs.

And it is like this at nearly every level of our current health care system. The incentives are misaligned.  A huge amount of California’s health care spending is done by the state and federal government, which are often plagued by waste and make little effort to try to maximize efficiencies or hold costs down.  In addition to the government’s heavy involvement in driving up prices, health care insurers and doctors often use regulations and occupational licensing requirements to their advantage as well, blocking competition and further increasing costs.

While I’m appreciative of the care I received and glad it wasn’t as serious as some doctors feared, I recognize that my two-day journey is a good example of the incentive problems that plague the health care system and why market-based reforms are needed.

This article originally appeared at the Orange County Register.