Wednesday, February 11, 2009

Cost Effectiveness

The stimulus bill has created some consternation over its creation of a federal board to evaluate the realtive cost effectiveness of various medical treatments. I have no problem with the general theory of evaluating the cost effectiveness of medical care, but I share the qualms about an appointed government entity doing so. The reason is quite simple: Appointed government boards are not objective. In fact any such body is prone to degenerate into an ideological feifdom in which the personal agendas, tastes, prejudices and hare-brained theories of the members compete for validation. This is true of any body that pretends to consensus, such as the Joint Commission on Accreditation of Healthcare Organizations, The Intergovernmental Panel on Climate Change, The Judicial Qualifications Committee of the American Bar Association, or the various Nobel Prize juries.

It is quite natural for individual memers of such bodies to adopt pet issues, which they then focus on until they become causes, and eventually obsessions. This is how the current campaigns against "medical errors" and patient confidentiality are allowed to go to such pointless extremes in disrupting the practice of medicine. It explains how one powerful politicial could mandate universal testing for phenylketonuria, despite the notable rarity of the condition. A fifteen member federal commission assessing the cost effectiveness of medical treatment might reflect the personaol conviction of one member that any casue of death is preferable for a person who has shown the first signs of Alzheimer's disease. Another might believe that "cost effectiveness" should include the relative economic contribution expected of a Down's syndrome child in deciding that any type of care is not cost effective, or that an objective measure of years of life saved must be adjusted for the subjective sense of what makes life worth living.

As an alternative, one might consider what would happen if halthcare payers were freed of any mandates regarding the coverage that they provide. It should be emphasized here that health insurance neither insures health nor provides access to healthcare. It fundamentally protects the assets of the insured against catastrophic financial losses resulting from the use of expensive medical services. If insurers could contract directly for specific services, e.g. ICU care for heart attack, or dialysis for kidney failure, the actuarial process would naturally weed out therapies that are not cost effective. Now the person needing a non-cost effective treatment would be disadvantaged regardless if the cost effectiveness decision were made by the marketplace or by some pack of bureaucrats, but in the former case at least, this disadvantage would not be due to the ideological bent or the flawed judgment of politcal appointees. People would be free to pursue availablity of orphan therapies, much as they do now for elective plastic surgery, or new age mumbo jumbo. Since insurers would have to compete for insureds, they would have an incentive to make the broadest array of services available, but would naturally favor those with the greatest cost effectiveness. The providers of services not covered would have na incentive to improve the cost effectiveness of those services, and if the demand for such services is great, the insurer could fairly distribute the cost among those creating the demand. Cost effectiveness would be determined, in short by what types of services people value and are willing to pay for, rather than what some policy makers would like to prescribe.

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