Thursday, July 02, 2009

Read this article! Finally, a reasonable answer to the health care crisis.

Apparently, this New Yorker article by Atul Gawande has been getting a lot of attention, circulated amongst doctors, and pushed by Obama's team, and frankly I am heartened, because it is the most reasonable response to the health care crisis and the puzzle that I normally devote a lecture of my classes to: Why does US healthcare cost so damn much. Written by Atul Gawande, a Harvard surgeon and long time New Yorker columnist, I've loved his books Complications and Better, because he is a doctor who appreciates the views of economists, but with a healthy dose of skepticism.

To save you some time, Gawande's answer is that the high costs are due to excess healthcare (too many scans, too many procedures, too much surgery). I can believe that, though it may be too simplistic an answer, but I have long argued that the traditional reasons people give for excess costs don't hold up to scrutiny--medical malpractice, insurance administrative costs, paper records, emergency room visits, excess end of life care, these all do lead to waste, but none come anywhere close to explaining why the US spends pretty much twice as much per person more than any other country.

Gawande then argues that as a result, the left's solution--government paid healthcare, and the right's solution--individual paid healthcare, won't work. Since neither gets the incentives right. Gawande is a bit too dismissive of the profit motive--nothing wrong with the profit motive if the incentives are properly aligned as in most industries. But his solution is reasonable nevertheless.

All that said, Gawande doesn't provide any evidence to back up his hypothesis beyond charming anecdotes. There is still reason to believe that actually the US is underspending on healthcare, because while we're spending a lot, we're actually getting a lot of value from it despite what others may claim. However, at least unlike just about everybody else out there, he's not pushing an argument that I know for a fact is patently wrong.

Also, a cool aside on the small world of academia, even though this isn't my field, I know half of the academics he cites in this paper, I happen to know them all pretty well actually. Kate Baicker I worked with at CEA. Amitabh Chandra I chatted with a long time when he came to visit Cornell, and he once co-authored a paper with R-'s classmate. And Woody Powell, I took two seminars with at Stanford.

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