The failure of the Clinton health plan has not changed the reality: American health care is in crisis. We now use 13.9% of the gross national product to pay for health care, and this year we will spend more than $890 billion. Medical inflation is considerably higher than that for other goods and services and currently stands somewhere near 9%.
There have been many proposals for dealing with skyrocketing medical costs. Some have called for adopting the Canadian system of universal government health insurance. Some argue that each American should be assigned to an HMO or to a huge "health alliance."
These plans universally fail to address the real force driving the costs of medical care: the physician.
The physician is the patient's agent within the health-care system. It is the doctor's job to assess the status of the patient, survey all of the treatment options and select the best one. But what few people realize is that the physician is also society's agent in health-care decisions. Economists estimate that 80% of the money spent on health care is directed by physician decisions and advice. This will be more than $700 billion in 1995.
Every treatment decision is also a financial decision. But physicians have no training in how to work as an economic agent; they are trained to treat patients. And the bias within the training is to offer the most aggressive, recently developed high-tech treatment available. This is expensive. With no training on how to make sound financial decisions, physicians have been bewildered by the recent pressures put upon them. Pre-approval rules, Medicare changes and utilization review have all confused and upset doctors but haven't really altered their behavior.
Perhaps most important, doctors do not know just how expensive medical care really is. For a project, I recently examined costs for more than 1,000 in-patient stays at a university hospital; they ranged from $5,166 to $208,202 per patient. When I discussed the figures with the doctors who provided the care, they were shocked at the huge expense. Many didn't know the costs of individual tests and procedures. And yet they are the ones ordering those tests and procedures. It's as absurd as a factory foreman buying a forklift not knowing the price.
There is a simple remedy to this problem: Detailed cost information should be consistently presented to physicians. Every form they use to order tests and procedures should include the price. Every patient chart in the hospital should have an itemized and running total of costs. Physicians should see costs before, during and after they make their treatment decisions.
Usually there is a spectrum of different treatment options--all medically valid but some considerably less expensive. Until now, physicians have been shielded from price in their decision-making process. When they are routinely provided with price information, they will begin to act as rational economic decision makers. When there is no decrease in quality, they will select from the inexpensive end of the spectrum of appropriate treatments.
Doctors want to make medical care less expensive. They just do not know how to do it. Armed with a price list, doctors will be empowered to serve as responsible, rather than ignorant, economic agents. This proposal would not solve the health-care funding crisis, but it could help.