Friday, September 7, 2012

Cheescake Medicine


I greatly enjoyed Atul Gawande's "Big Med". It is the most eloquent and damning indictment of Obamacare I have read to date.

Gawande never asks what drives The Cheesecake Factory. Why is it so relentless about quality and cost? The answer is simple: If they aren't relentless, customers will go somewhere else. It is subject to the discipline of the market.

Gawande marvels at the cost control at the Cheesecake Factory and says, "as a doctor, I found such control alien--possibly from a hostile planet. We don't have patient forecasting in my office, push-button waste monitoring, or such stringent, hour-by-hour oversight of the work we do, and we don't want to." But why not? Isn't that the most relevant question when we are having this discussion about price for value? Why haven't doctors implemented these systems but the Cheesecake Factory has?

When I go to dinner, I don't consult my insurance company for approved restaurants. And if I don't like the service, or the food, I leave, or I don't come back. I walk across the street to Red Robin or California Pizza Kitchen or a dozen other places. There is no American Restaurant Association restricting supply and the only enforcer of quality is the consumer.

Why do doctors lack a cost control and customer service mentality? Isn't it obvious? Because they are not subject to market forces. Supply is restricted by the AMA and consumers are restricted to even fewer doctors due to insurance and worse, we pay ridiculously low prices, like a $20 co-pay. We value the visit much more than that $20 co-pay, which is why we "pay" with time, like waiting 30 minutes beyond our appointment time. The doctor is insulated from the market by the AMA, and the upside down insurance payment system and the consumer has no incentive, and sometimes no power, to fire doctors, or reward the physicians he likes.

Gawande describes his mother's experience of waiting to see a doctor and comments, "it was as if the clinicians were the customers, and the patients job was to serve them." This would be funny if it weren't so tragic. Welcome to the twisted world of medicine Dr. Gawande. Why do the clinicians not care? Because they face no consequences for their poor customer service.

Gawande comments, "in medicine, good ideas still take an appallingly long time to trickle down." He points out in can take fifteen years for a discovery to reach even half of Americans, and compares this to the six month spin for a new menu at the Cheesecake Factory. But why? Why does it take so long? He is silent. But this isn't a mystery. The market for innovation has been stifled.

Certainly the FDA is partly to blame. (Please, no thalidomide pictures again). Consumers aren't incentivized to find the best care at the lowest price since they are shielded from the market. Doctors aren't incentivized to advertise the latest and greatest procedures, and (I think) are prevented from engaging in competitive behavior by the AMA and laws. And the AMA restricts supply. Gawande is confused why medicine lacks the discipline of the market when the answer is obvious: because we have removed medicine from the discipline of the market.

This is where people like Peter Orszag, Ezekial Emanuel and Jonathan Gruber claim the markets don't work on medicine and point to all of the above as proof. I point to all of the above and say there is no market in medicine. When there is a market, Lasik surgery and plastic surgery are good examples, we see the exact results I expect: lower prices and better service.

Obamacare will exacerbate all of the forces that result in high prices, un-responsive practitioners and the glacial pace of innovation. Instead of inserting the discipline of the market into health care it shields it further. It mandates free (FREE??!!??) services like my recent colonoscopy and Sandra Fluke's birth control. Why should I pay for Sandra Fluke's birth control? Why should she pay for my colonoscopy? If we happened to frequent the Cheesecake Factory it would be absurd if the waiter gave her bill to me and mine to her but for some reason we think this is a reasonable way to approach medicine? And it is already getting worse. In California acupuncture is now a required to be covered by insurance.

Obamacare recognizes lowering prices will result in greater demand and has no mechanism to increase supply so resorts to the only option it has: restricting services arbitrarily by what Romney/Ryan dub the "15 unelected, unaccountable bureaucrats," the IPAB, Independent Payment Advisory Board.

Orszag, Emanuel and Gruber's IPAB will stifle innovation. How can it not? What is the genesis for a new menu item at the Cheesecake Factory? The idea comes from the cooks, the CEO, customers. It looks at what the competition is doing and what consumers are demanding. Nothing like this will be allowed with the IPAB. Why would it. It faces no consequence if it suppreses innovation. Quite the opposite, it will have accomplished its mission of restricting services.

Why does Gawande admire the Cheesecake Factory? Good food, low prices, innovation. But these are the results of a robust competitive market. Free entry by suppliers. Customers free to seek out the best quality at the lowest price. Poor quality and service is punished. Good quality and service is rewarded. Lack of innovation results in loss of market share.

Why is medicine unlike the Cheesecake Factory? Because there isn't a free market in medicine. And Obamacare, by restricting the market even further, will make it worse.


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