Thursday, August 13, 2009

Does Marginal Analysis Work for Health Care Policy?

In the debate over my post yesterday on physician qualifications, David Barker says:

We should continue to license doctors until we reach the point where the marginal benefit of additional medical care (assuming a negative relationship between quantity and quality) equals the benefit of no additional care at all.

But I am guessing there are some pretty big threshold effects--that there might be large discontinuities as one maps qualifications to outcomes. You really don't want a cardiologist who keeps just missing veins and you don't want an internist who can't quite get the drug interactions right (just as you don't want a 747 pilot who just misses the runway 1 percent of the time).

I think one of the ways economic analysis gets us into trouble is when we rely on continuousness in production and utility functions. Even worse is when we linearize around points--and that perform large comparative statics experiments based on that linearization.


David Barker said...

The idea of discontinuities is interesting, and could be a good answer to my argument. But when I look at mortality data and Hospital Quality Alliance scores for hospitals, I see a pretty smooth distribution. My hunch is that this would not change if we imported another 10,000 physicians and permitted another 100 hospitals to open. Physician salaries might be driven down significantly, which would be a good thing.

I think this answers your point about performing large comparative statics experiments based on linearization around a point - we could open these hospitals gradually, make sure their mortality stats are ok for a year, make sure prices are coming down, then open more.

We could also allow non-licensed people to provide some medical services. I once wanted a strep test for my son on a weekend. (we were about to leave on a trip and he had a sore throat) I was told to go to the ER, and the bill was $900. I have had the same situation with suspected ear infections.

Rapid strep test kits cost about $2each, and lab cultures are also pretty cheap. Cheap otoscopes retail for $24, and good ones cost around $350. Why not allow a parent to set up shop in a neighborhood and charge $20 for quick tests? Costs would decline and overall health would improve because more people would get care instead of ignoring symptoms.

The risks of either proposal strike me as small. But they won't happen because doctors would lose income and they are well organized. Consumers are not.

Anonymous said...

emm. cognitively post..