John Cochrane's After the ACA

All that anyone has been able to talk about recently (or so it seems), is "repeal and replace."

It's a pretty interesting topic to me, partly because, as I get older, I'm thinking more and more about healthcare, and partly just because I think it's an awfully important topic.

But I didn't feel like I learned a lot during all the recent debates.

So I wandered here, and I wandered there, and eventually I found myself looking at a John Cochrane paper: After the ACA: Freeing the market for health care

Now, Cochrane is a pretty serious fellow, with pretty serious credentials, so my expectations were fairly high, perhaps unreasonably high.

And this is a major effort: the paper is nearly 50 pages long, and covers lots of ground

At the very least, I hoped to learn something new, and certainly, the paper sets out well:

I survey the supply, demand, and market for health care, and health insurance, to think about how those markets should work to provide quality care, low cost, and technical innovation. A market-based alternative does exist, and it is realistic.

As a survey, I was surprised how narrowly-focused Cochrane seemed to be. For example, there is almost no discussion in the entire paper about the role of malpractice lawsuits in driving up healthcare cost, modulo a mostly-throwaway line about its role in constraining the outsourcing of certain medical work:

Personal-injury law firms are already lining up to sue based on the “inferior quality” of outsourced readings, with requisite horror stories.

But this is just the tip of the iceberg when it comes to the effect that malpractice lawsuits have had on healthcare costs. Surely he should have more to say than this?

And I was saddened that there was very little reflection about the basic fact that the biggest reason that the United States spends dramatically more on healthcare than we did 75 years ago is because of ADVANCES in healthcare: people are living longer, so over the course of their lives they get more healthcare. Moreover, many ailments which were formerly not treatable now are reliably and safely treatable, so we treat them.

More treatment, over longer life spans, equals a greater amount of resources spent on healthcare.

But this is a GOOD thing! We should be happy that people are living longer, and are having their illnesses treated. And Cochrane seems to understand this, for he notes that

We don’t want 1950s care at 1920s prices

But then he moves rapidly on, without really spending any time to discuss how we might get by with less healthcare, overall, in some sensible fashion.

I did learn a few things:

• I had not previously been aware of the role of the "Certificate of Need." Here's how Cochrane describes it:

  In Illinois as in 35 other states, every new hospital, or even major purchase, requires a “certificate of need.” This certificate is issued by our “hospital equalization board,” appointed by the governor and, like much of Illinois politics, regularly in the newspapers for various scandals. The board has an explicit mandate to defend the profitability of existing hospitals. It holds hearings at which they can complain that a new entrant would hurt their bottom line.

• And Cochrane makes a well-worded argument in favor of a new conceptualization of health-care insurance:

  To summarize briefly, health insurance should be individual, portable, life-long, guaranteed-renewable, transferrable, competitive, and lightly regulated, mostly to ensure that companies keep their contractual promises. “Guaranteed renewable” means that your premiums do not increase and you can’t be dropped if you get sick. “Transferable” gives you the right to change insurance companies, increasing competition.

  Insurance should be insurance, not a negotiator and payment plan for routine expenses. It should protect overall wealth from large shocks, leaving as many marginal decisions unaltered as possible.

These are both tremendously good insights, and were certainly worth the time I invested in Cochrane's essay.

But most of the rest of Cochrane's paper baffled me.

More than just baffled me; it flat-out astonished me.

Cochrane's main point seems to be that consuming healthcare should be much more like going to a restaurant, or hiring a gardening service for your house, or buying an airplane ticket, or choosing a new set of tires for your car: you should check Yelp before you make your decision; you should shop around for the best price; you should probably even try to use a coupon or negotiate for a better deal.

Is he serious?

Does he really think that selecting medical care is like these other activities? Apparently, he does:

Health care is not that different from the services provided by lawyers, auto mechanics, home remodelers, tax accountants, financial planners, restaurants, airlines or college professors.

Does he really think that it makes sense to change medical providers on an incident-by-incident basis, just like you go to one restaurant one day, and a different one the next week? He certainly doesn't seem to think that a person's medical information is very sensitive or private, dismissing that notion breezily as:

Confidentiality regulations, apparently more stringent than those for your money in the bank.

Is it possible that Cochrane has never had to have a sensitive discussion with his doctor? Never felt like he needed to have any deeper of a relationship than he has with the barista who makes his coffee in the morning? Is his life really that uncomplicated?

Even more astonishing is this notion he has of "negotiating" for your healthcare. Cochrane is a big proponent of negotiation, and wonders why it is missing in healthcare, when it is so prevalent elsewhere:

You don’t need an “insurance” company to negotiate your cellphone contract, home repair and rehab, mortgage, airline fare, legal bills, or clothes, as we do for health.

Is he serious?

I'll grant that people certainly negotiate the price they pay for their house, and there may be some people who negotiate the price they pay for their legal bills, but do you actually know anyone who negotiates their cellphone contract? Their airline fare? The price of their clothes?

And how many acquaintances do you have (other than medical professionals) who have the requisite base knowledge to negotiate, say, a reasonable price for spinal surgery?

Discussing the well-known (and, admittedly, frustrating) strawman that "a man in the ambulance on his way to the hospital with a heart attack is in no position to negotiate," Cochrane just completely dismisses it:

Our health care system actually does a pretty decent job with heart attacks.

... have they no families? If I’m on the way to the hospital, I call my wife. She’s a heck of a negotiator.

And then continues to invoke The Mighty Yelp:

In a competitive, transparent market, a hospital that routinely overcharged cash customers with heart attacks would be creamed by Yelp reviews

Is he serious?

When you have a heart attack, your wife should be negotiating with the hospital while you're in the ambulance? Or she should be browsing Yelp, deciding whether to tell the ambulance to take you to hospital A or hospital B?

Maybe all Cochrane means by "negotiate" is "shop around", and if that's true, then certainly I grant that there's a big place for that.

For example, when my parents were planning to get cataract surgery, they certainly did their homework, tried carefully to select the best surgeon. (Although, I don't think they actually used Yelp? Maybe they did?)

And it definitely seems like it used to be Common Wisdom that for any significant medical issue, you should get a second opinion, so maybe that's what Cochrane is trying to say.

Although, when people used to say "you should get a second opinion," it was typically the QUALITY of the medical advice that was of concern, not the PRICE of the medical advice.

The people that I know are generally much more concerned about the SUCCESS of that triple bypass, not about its cost.

Most of the people that I know don't even really negotiate the price of their house. Rather, they try to pick a decent real estate agent, and let the agent handle the negotiation. I do know a handful of people that are able to do this successfully on their own; a much smaller number of them enjoyed it; a smaller segment still have actually done that multiple times in their life.

Ask around about buying a car: this is really the experience you want when you need arthroscopic surgery on your knee?

What you want is for the pain to go away, and for you to be able to take up hiking again.

So, in the end, I struggle to comprehend what sort of world it is that Cochrane envisions.

It seems like his ideal is a situation in which we are all informed consumers, and have no trouble evaluating whether we are being given a good deal for duodenal atresia surgery or base cell carcinoma immunotherapy, in which we arrange to have strokes, aneurysms, broken arms and heart attacks with enough advance notice that we can consult Yelp before the ambulance arrives, and in which we respond to being told that the yearly mammogram will cost $375 by saying: "how about $225 instead?"

I guess I'm still looking for that informed, readable, clear-headed, approachable paper which explains what we, as a society, can truly and effectively do about healthcare costs.

Thank you Mr. Cochrane for trying.

But I'm afraid that, for me at least, you were not successful.