I’ve been blogging and will continue to do so on issues related to the conflict between the economics and health perspectives of consumption (utilization) of medical goods and services. The following passage, from The Anatomy of Health Insurance, by Cutler and Zeckhauser, which appears in the Handbook of Health Economics (ungated NBER working paper version), raises the key issues. I’ve bolded some value-laden words that reflect an economics perspective. I’ve underlined those that reflect a focus on health.
Patients who face but a fraction of the costs they incur will desire excessive treatments. Service benefit insurers usually pay more to physicians who provide more medical services. The result is that patients and physicians want essentially all care that improves health, respectively ignoring and welcoming resource expenditures. The view that physicians should do only what is best for the patient is codified in the Hippocratic Oath – providers should promote the best medical outcomes for their patients. Hippocrates said nothing about providing care the patient or society would have deemed ex ante to be wasteful.
Plato anticipated the application of agency theory to the health care arena by a goodly margin. He wrote that, “No physician, insofar as he is a physician, considers his own good in what he prescribes, but the good of his patient; for the true physician is also a ruler having the human body as a subject, and is not a mere moneymaker” (The Republic, Book 1, 342-D). […]
Increasingly, the arrows of responsibility among the players – who is agent, who principal – now point in all directions. For example, doctors now have responsibilities to other providers and insurers, not just to patients. Such added doctor responsibilities, primarily to hold down expenditures, ultimately enhance patient welfare, at least on an expected value basis, if not when the patient is sick. Insurers, acting for their customers as a whole, want to limit spending to only that care that is necessary; i.e., the care patients would select given a lump-sum transfer that depends on their condition and making them pay all costs at the margin. With patients, physicians and insurers pulling in different directions, a conflict over what care will be provided frequently results.
What I’m trying to highlight is a meta-issue that pertains to policy discourse. Though insurers, physicians, and patients may be acting at cross purposes in the market/exam room, the health policy debate is rife with conflict between a medical and an economics perspective. One can see it in the passage above, which is not even from a policy document.
Cutler and Zeckhauser are not confused. They have scalpel-like linguistic precision. But when the language of welfare economics mixes with that of medical care, what is meant by “improves,” “best,” “excessive,” “wasteful,” “necessary,” and so forth is easily misunderstood by a reader who isn’t prepared to properly interpret the contextual distinctions.