Health Care and Furnace Repair

Posted by Nolan Miller on May 6, 2010

Filed Under (Health Care)

I recently had a problem with my furnace.  Water was dripping from a joint in the PVC exhaust pipe.  So, I called the heating company.  The repair man came out and told me that it looked like the original installer had had a problem with that joint, so they smeared a bunch of glue over it to seal it.  He said that he could do the same, and it might work for a while.  But, if the joint opened up, there was the possibility that exhaust/carbon monoxide would enter the house.  The other option was to rebuild the exhaust pipe, which would cost $150 more but would eliminate the added risk of killing me and my family.  I weighed the options and chose to rebuild the pipe.


I thought about this story when reading this recent article from the New York Times about efforts to teach doctors about the costs of various medical treatments.  In particular, I wondered what the right role of a doctor is in deciding, based on cost, whether I should have a particular treatment or not.  Suppose, for the moment, that medical care were not insured.  You could imagine a conversation very much like the one that took place between me and the furnace repair man.  “We could put you on drugs, and that might help.  Or, we could do surgery, which would fix the problem but cost $5000 more.”  I could then weigh the costs and benefits and make a decision.  Actually, now that I think of it, the doctor doesn’t even really need to know the cost of the treatments.  Dr. Jones could explain the health effects of the various treatments, and then Smith from the business office could come in and explain the cost of things.


If people are given this kind of information and make decisions based on it, then we will tend to choose expensive treatment when we think the benefits warrant the extra cost.  While this may not bring the cost of care down to European levels, it will at least improve efficiency – we’ll tend to spend money on services we think are more valuable.  But, this is really a point about giving patients information on costs, not doctors.


So, what is the role of doctors in medical cost-benefit analysis?  I’m not sure.  But, it seems like there are at least two key differences between health care and furnace repair.  First, there’s insurance.  If I’m paying $0 out-of-pocket regardless of the treatment, I’ll tend to choose treatments that have higher cost.  So, informing the doctor of the costs and benefits of treatment might be important here.  But, this would only be the case if the doctor then makes different choices than he or she would without the information.  My sense is that doctor’s often view themselves as advocating for patients against insurance companies.  So, the doctor, just like the patient, may say that the patient doesn’t pay anything more for the high-cost treatment than the low-cost treatment, so why not go with the better one?  It is unclear whether just giving the docs information, without any financial consequences for choosing high-cost treatment, will make a big difference.


A second reason why health care is different than furnace repair is that people in need of health care often do not have the time or capacity to make well-reasoned decisions.  If I am acutely ill, doctors may have to make choices about how to treat me without consulting me about how I feel regarding various cost-benefit trade-offs.  In such a case, it is also unclear whether the doctor would get anything useful out of knowing the cost of various treatments, except maybe in the case of treatments that are dominated both on cost and benefit grounds.  As one surgeon put it “I get them out of the operating room alive.”


In the end, while it is interesting that medical schools are beginning to invest more time and energy into teaching doctors about the cost of care, it is unclear whether and how that will translate into changes in the overall cost of medical care in this country.