Atul Gawande1, writing about useless medical care for the New Yorker:
One major problem is what economists call information asymmetry. In 1963, Kenneth Arrow, who went on to win the Nobel Prize in Economics, demonstrated the severe disadvantages that buyers have when they know less about a good than the seller does. His prime example was health care. Doctors generally know more about the value of a given medical treatment than patients, who have little ability to determine the quality of the advice they are getting. Doctors, therefore, are in a powerful position. We can recommend care of little or no value because it enhances our incomes, because it’s our habit, or because we genuinely but incorrectly believe in it, and patients will tend to follow our recommendations.
Interesting, in an otherwise thoughtful and well-written essay (as always), Gawande never once mentions fear of medical malpractice as a component that is driving useless healthcare utilization. His best anecdotal examples come from surgeons and proceduralists, who in private practice have an incentive to operate. The family doc, on the opposite end of the spectrum, doesn’t have a direct monetary incentive to order non-indicated radiological exams.
He also never mentions the “patient as consumer” either. Keeping private paying patients happy is the only real monetary incentive most providers have. The argument he references above is that doctors have the power and are (inherently?) inclined to over-test and over-treat. But anyone who has tried to not give antibiotics to someone with a viral URI knows that patients often go to the doctor to get what they want, not to find out what they need.