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    The visible hand of Adam smith
    Recent events have forced me to consider many things in my life. For instance, I make my living as a doctor. Just consider for a moment those words “I MAKE MY LIVING”. It is easy to say that I make my living as a stock broker, an electrician, a steel worker or a baker or a grocery store owner. And if we think of these jobs in the macroeconomic scheme of things we surely can see where these vocations fit into the classic Adam Smithian view of economic theory. You can provide a service and or a product and it neatly fits into the supply/demand concept of a market economy.
    But to say I make my living as a doctor puts a strain on conceptualizing how this fits into this market scheme. After all, do we think of firefighters, police and teachers in this manner? Do we say that these callings have a market value and therefore have a supply/demand that can be plotted on a Cartesian axis?
    How does the market economy work?
    Historically, no matter how satisfied or dissatisfied we are with the services just mentioned, we have always, (at least in recent history) thought of them as “public sector” activities. Being in the public sector means that the services provided are required for the safe and orderly running of a society or are required for the commonweal. The latter involves the promulgation of laws, administrative and statutory, in order for those of us who pursue life in the market economy to operate in an arena with rules that are fair for all; all understand them and no one can pursue a personal agenda independent of these societal norms.
    What we think of as a “free market economy” must have some common elements crucial to all participants. First, silly as it may sound, you can have no market for a good that has no demand. Neither can you have a market for a good for which you have no supply. These by definition make items so rare or overabundant that they will not respond to normal market pressures. If there is a market for “widgets” and there are widget manufacturers then the price of those widgets will be a product of the equilibrium between the demand and the supply. In a perfectly efficient market pricing works by balancing the demand for a product with the supply. That “balance” is expressed as the price of the good. If there is suddenly more demand for a good the price will increase. If the demand for a particular good diminishes then the price decreases to either increase demand or production decreases until inventory is depleted. Of course this is a very simplified version of the market economy but it is an accurate construct of the much more complex economy.
    Basic assumptions in this model concern elasticity of both supply and demand in order to make the products that people want available at the price they are willing to pay. This allows for an efficient market.
    And where does medicine fit into this?
    So what is my quandary about medicine and the market economy? Well Adam Smith required elasticity as a prime force in setting prices and supplies. If I get sick can I afford to forgo medical care? Do I even have enough information to know if I can forgo such care? Maybe. There are many questions surrounding the need for medical care which experience has shown is open to a variety of voluntary choices. For many of the common ailments that occur frequently but are self limited, choice in seeking care is reasonable to expect of people. Seeking preventive care may be discretionary and these are just the areas in which medicine is most formulaic and amenable to standards and standardization of care. But too often we find ourselves in a position where urgent, emergent or calamitous need for care rules out the option of thoughtful discretionary decision making. In fact, the most expensive care is the least likely to afford any time to reflect about the most cost effective pecuniary choices.
    When faced with life and death decisions, one can’t choose the most “efficient” hospital even in an area where choice is available! How do you know who charges the least for a particular set of services or a procedure? Or, how do you find out? Free marketers would say that in a perfectly efficient market these information services would be available. There is some merit to this point of view and in fact this knowledge is available. Preventive health services, drug choices, side effects, generic drug substitutes, these are products and services for which information is available to the interested person. But even the most intellectually curious among us, when ill, would like to defer our health care decisions to a trusted family physician or other health care provider.
    Left to our own devices we may not make the best choices while we are ill. In fact, this may be quite hazardous. So the very nature of the service is to allow of our healthcare providers, our doctors, great latitude to treat us as they have been taught, to the best of their abilities considering but not necessarily sparing any expense. To paraphrase Atul Gawande when confronted with having his son’s heart repaired, he would have paid each person involved in the process a million dollars. That was how much their services were worth to him. It was after all, his newborn son. And he was a doctor! 1 So much for considered, deliberative efficient care by a well informed public.
    I, a physician, want to be involved in my care, but I also want the advice of my physician not my accountant or my lawyer. Just because I have an M.D. does not mean that I can or should be making every medical decision by myself. And the last thing I am thinking about, when ill, is how much the cost will be. If I can’t be good medical consumer how can the average citizen.
    Rethinking the economic medical model
    Arnold S. Relman, in his thoughtful article “The Health of Nations”2, posits that the health care model in the United States is based on fallacious reasoning. In this article we learn that not only do free market principles not apply to our health care economy but they should not. Since, for instance, I can’t determine when I will need my angioplasty, or chemotherapy, or kidney transplant or a host of other urgent medical treatments, elasticity, the most characteristic feature of the free market economy, is lost or rarely available, and therefore choices must be made in a monopolistic (anti-competitive) environment. This inelasticity of demand leads to an essentially infinite or straight line cost curve.
    To return to the “public sector” referenced above, we know and can estimate the need for police, fire, and educational services. Why not healthcare too? We already can estimate healthcare needs with reasonable precision. If we can predict need then we can plan for it. How much that need is worth to us needs to be publicly discussed and debated. This is not a subject for snap decisions. It warrants close and careful consideration.
    Health care costs
    Healthcare in the USA already consumes 15% of USA’s GDP, close to 2 trillion dollars, greater than the whole GDP of either the Peoples’ Republic of China, Italy, Canada or Spain. That is some hospital bill! The cost of healthcare insurance has been rising recently at a rate of 9% per year.
    From the point of view of this physician, it isn’t whether we can afford to spend the money. We can and we do. But from my point of view it is a question of how we spend it and to whom it is distributed. If I can return to the somewhat embarrassed statement at the beginning of this essay, “I make my living” from medicine one might ask why the embarrassment? After all don’t fireman and police get paid to stand as guardians against the ills of humanity? Then why not physicians? The truth is I am less embarrassed about my role in the scenario than I am of the whole healthcare enterprise and especially the gatekeeper role or, one might say guard at the gate of healthcare that the insurance companies play.
    We have created a system which has become administratively so bloated that whether a physician makes enough money to cover expenses or to live comfortably or not is not dependent upon how good a physician he is but how well he knows how to collect fees from the health insurance companies. But medical training ill prepares the nascent physician to learn how to survive in the thicket of insurance bureaucracy (see Gawande1). According to a report in the New England Journal of Medicine August 31, 2003 “Health administration accounted for 31% of U.S. health expenditures versus 16.7% in Canada”. So a crucial question to ask is on whom do we wish to spend our money, insurance companies or us (patients)? That amounted to $558 billion in 2004 dollars or $275 billion more than the Canadian system. It is a dearly and deeply held belief of mine that there is serious healthcare that that money could be applied to rather than profits to an industry that truly has a stake in profiteering on the misery of humans.
    Although this sounds “radical” and “leftist” and has a lot of politically incorrect notions if you are on the political right, I would suggest that healthcare is not a political issue to be bandied about so that no resolution is forthcoming. It is a human issue and requires careful consideration but in that consideration the notion of healthcare as a right must be entertained. This issue requires that we stop and think just what our real priorities are. Are the priorities Healthcare and good Health for all, or great profits for just a few? As a point of reference the reader might be surprised to know that William W. McGuire, President of UHC (United Healthcare) earned $9.4 million in salary, bonus and “other” compensation in 2004. He can’t be blamed for operating in his own interests in a “market economy”. But if we accept the premise that healthcare dollars should be spent on healthcare rather than healthcare administrators, then one has to look on this level of remuneration as obscene on the face of it.
    A redistribution of distribution
    The premise thus argued would urge the rethinking of healthcare in our economy and return its role to its preventive and restorative function in our society. Nobody disputes that physicians earn good livings at what they do. They also deliver service that is considered laudable and even noble in our society. Physicians work long hours and do not shirk from life and death decisions that they must routinely make. A physician’s greatest wish would be granted if he could serve his patients without consideration for ability to pay or whether he would in turn be justly recompensed for his efforts.
    1. Gawande, Atul “Piecework, Medicine’s money problem”, New Yorker April 4, 2005.
    2. Relman, Arnold S., “The Health of Nations, Medicine and the free market”, The New Republic, March 7, 2005.
    PHONE: 203 846-6900 • FAX: 203 847-3445
    © April 3, 2005

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  4. Speaking of new blogs…
    The American Cancer Society just did a survey that indicated Americans age 50 and older are more likely to know the name of a judge on “American Idol” than know they are at risk for colon cancer. The poll also revealed that Americans are more uncomfortable talking about colon cancer than either politics or religion.
    The fact that two out of three adults don’t know they need to be tested should serve as a wake-up call about how much more needs to be done to beat this preventable cancer. We are losing too many lives from lack of information, fear, and shame.
    What can you do about it? You can help the American Cancer Society alert those you know age 50 and older about the need to get screened for colon cancer.
    There are many ways to reach out, but one very simple, fun and positive way is through http://www.cancer.org/ColonFab50. Check it out. You’ll discover fabulous 50+year-olds who have made a commitment to keep blogs about their colonoscopy experiences and fears. On the site, you also can send free e-cards or enter our Fabulous at 50 contest for a chance to win great prizes. You also can qualify to receive our latest, blue “Fear Nothing” wrist band.
    Visit http://www.cancer.org/ColonFab50 today. Help make March the new October. In the fall, women are reminded to get a mammogram. In the spring, men and women, age 50 and over, should know to get their colon checked.