Tuesday, March 23, 2010

Health Care Cost Conundrum

Why are U.S. health care costs so high? Check out this article in The New Yorker written by Dr. Atul Gawande.

Here's Warren Buffett commenting on CNBC about Dr. Gawande earlier this month:

"...he had an article last summer that was absolutely magnificent. My partner Charlie Munger sat down and wrote out a check for $20,000 to him and he's never met him, never had any correspondence with it, he just mailed it to the New Yorker and he said, `This article is so useful socially.' He says, 'Just give this as a gift to the--to Dr. Gawande.' It compared medical costs in McAllen, Texas, to El Paso, and it just showed how, with no better results, that in McAllen they were, you know, they were spending close to twice as much per person. And you have these enormous variances around the country."

Below is an excerpt from Dr. Gawande's article in The New Yorker. In the article he describes having dinner with six McAllen doctors. He told those doctors that McAllen was the country's most costly place as far as health care goes and he showed them the data to back it up.

"Maybe the service is better here," the cardiologist suggested. People can be seen faster and get their tests more readily, he said.

Others were skeptical. "I don’t think that explains the costs he's talking about," the general surgeon said.

"It's malpractice," a family physician who had practiced here for thirty-three years said.

"McAllen is legal hell," the cardiologist agreed. Doctors order unnecessary tests just to protect themselves, he said. Everyone thought the lawyers here were worse than elsewhere. 

That explanation puzzled me. Several years ago, Texas passed a tough malpractice law that capped pain-and-suffering awards at two hundred and fifty thousand dollars. Didn't lawsuits go down? 

"Practically to zero," the cardiologist admitted.

Come on," the general surgeon finally said. "We all know these arguments are bullshit. There is overutilization here, pure and simple." Doctors, he said, were racking up charges with extra tests, services, and procedures.

Check out the full article by Dr. Gawande.


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