Malpractice Law vs. ACOs
One thing almost all economists seem to know instinctively is that there is a tradeoff between spending on health and safely and other uses of money. Because of this, it would never make sense to make something “as safe as possible.” Because of diminishing returns, there will always be a point where the marginal increase in safety is not worth the sacrifice of other goods and services that could be purchased with the same money.
This is not the way ordinary people think, however. Or judges. Or juries. Or the voting public. To most economists, the way ordinary people think is not thinking at all. But let’s not let that observation cause us to make other mistakes.
An article in JAMA summarizes the problems Accountable Care Organizations (ACOs) are going to have this way:
[W]hether ACOs or not, health systems are exposed to institutional liability related to medical malpractice. How big of a divergence is ACO liability from the existing forms of institutional liability common to health systems? The key difference is the introduction of a new dimension of medical malpractice liability that goes hand in hand with the cost containment charge: the claim that the ACO’s actions or policies prioritized cost savings over patient safety, contributing to the plaintiff’s harm.
This caused Aaron Carroll to say, “Stuff like this makes me despair for cost containment at all.” Agree. But remember that the incentives of the ACOs will be perverse. As I explained in Priceless and in other venues, managed competition encourages health plans to over-provide to the healthy and under-provide to the sick. So their decisions are unlikely ever to be optimal.
What I never see from Aaron or Austin or any other bloggers at the Incidental Economist is how they would deal with these perverse incentives. And don’t (as the JAMA article did) tell us evidence-based medicine will be a safe harbor. That way out is unreliable and it doesn’t have any mechanism for insuring the appropriate tradeoffs will be made.
Accountable Care Organization sounds like a great concept. The problem is: they won’t be accountable to anybody. They are integrated health care delivery systems that seek to maximize revenue against Medicare reimbursement formulas.
It just sounds too idealistic and not very pragmatic
Utopia doesn’t exist. Let’s implement real healthcare reform.
Excellent argument Dr. Goodman:
“As I explained in Priceless and in other venues, managed competition encourages health plans to over-provide to the healthy and under-provide to the sick. So their decisions are unlikely ever to be optimal.”
This argument should be at the forefront of the healthcare debate.
Especially, because it will appeal to both liberals and conservatives.
“What I never see from Aaron or Austin or any other bloggers at the Incidental Economist is how they would deal with these perverse incentives. And don’t (as the JAMA article did) tell us evidence-based medicine will be a safe harbor. That way out is unreliable and it doesn’t have any mechanism for insuring the appropriate tradeoffs will be made.”
What are the appropriate tradeoff’s?
Defensive medicine is one result of the lack of trade-offs. Doctors spend more resources on care in an attempt to 1) degrease the chance for an unforeseen problem; 2) increase the appearance that everything possible is being done. In a system with extensive third-party payment, this becomes more pronounced.
If consumers are paying their own bills, they could decide if they wanted to spend the extra funds on the best doctor (or multiple second opinions). Patients could decide how many redundant tests they wanted. They can decide if they wanted to pay premiums for adverse event insurance and liability by contract.
“This is not the way ordinary people think, however. Or judges. Or juries. Or the voting public. To most economists, the way ordinary people think is not thinking at all.”
Find that comment to be rather true, which only exposes the problems with human nature. To some economists, the only viable way a society can function is via economic principles and therefore we should derive all else based on these principles and numbers. This is certainly not the case and nobody, nor any field, has a monopoly on what is logical and right for society. Malpractice is a great example of this and something we can’t yet seem to figure out how to control.
Economics could possibly be one of the best social sciences for understanding logic and applying it to society, but you are correct there is no one who has a monopoly on that concept, but can another science explain these trends better than economics?
“How big of a divergence is ACO liability from the existing forms of institutional liability common to health systems? The key difference is the introduction of a new dimension of medical malpractice liability that goes hand in hand with the cost containment charge: the claim that the ACO’s actions or policies prioritized cost savings over patient safety”
Costs over patient safety is a horrendous mindset to have when dealing with medicine.