Making the healthcare industry more like the music industry
Few people would suggest that the music industry is as healthy as it once was. Record companies have been badly bruised by the internet. Online radio, iTunes, and other technological innovations in both music distribution and production, have led to a shift in the relationship between big record labels and the artists they produce. For years now, people have been predicting the collapse of the industry. And yet, music itself has not dried up. Rock and roll is not dead. Indeed, in many ways quite the opposite is true.
If anything, MySpace and other online venues have given bands of all stripes more access to consumers and fans than ever before, making the music market wider and more diverse than it was even a few years ago. The ability to purchase music cheaply and a la carte or to share it over the internet for free has put downward pressure on the cost of music, while at the same time drastically increasing the supply and diversity available to consumers.
Where fifteen years ago a kid had to shell out twenty dollars for one album only to discover that only a handful of the songs were any good, that same kid in 2010 can pick and choose only the songs they like, and pay a dollar or less for each. And whereas in 1995 there were only a handful of bands with access to radio stations and music stores across the country, people today can listen to bands from all over the world just as easily as they can listen to the big hits. Satellite radio and the numerous online music services have led to a new diversity in music that the old industry was never able to provide.
All of this has not been good for the music industry if you consider it to be nothing more than a handful of big record labels. For musicians, it’s been more of a mixed bag. Gone are the days of the super-stars, and the prospect of getting rich by selling millions of records has fallen off dramatically. But that was never a very good bet for most musicians in the first place.
Now local bands can distribute their music much more widely than they ever dreamed possible, and what was once a garage band with a demo tape can become an internet phenomenon overnight thanks to Youtube and other online music and video sites. Bands may still sign on with record labels, but the asymmetrical relationship between those labels and the musicians is fast becoming much more mutually beneficial. New recording technologies have helped as much as these new forms of distribution, giving amateur musicians the ability to put together quality recordings at a fraction of the cost.
In this sense, though the industry’s old players have suffered serious economic downturn, the industry as a whole is undergoing a renaissance of sorts, with music cheaper and more abundant than ever before. This is true of both the supply of music, as more and more independent musicians gain access to the market, and to consumers who have more money than ever to purchase more music than ever before – and who, for the first time ever, can pick and choose the music they like and how they’d like to purchase and consume it. Indeed the number of online music providers increased from around 50 in 2003 to over 400 in 2009. Digital music sales increased from just $20 million dollars in 2003, to over $4.2 billion dollars in 2009, and now account for 40% of total music sales, a number that is rising yearly. Between 2004 and 2009 digital sales of music increased over 940%. The music market as a whole, however, was down 30% in the same time period, according to the IFPI’s latest report [pdf]. As music has become more accessible, it has also became cheaper, cutting into industry profits but leading in turn to new waves of innovation and competition across the board.
Now let’s look at another industry dominated by old players and constricted by prices far too high for most consumers to bear: healthcare. Hospitals and doctors are paid in what is referred to as a “fee for service” model by insurers and Medicare, meaning that those providers are paid for each service rendered rather than for the results of those services. This is similar to being charged $20 for a CD, even if that CD only has three good songs on it. The analogy isn’t perfect, but the general idea holds up – when you go to the doctor you pay for services you don’t need, and there’s no way for you, the consumer, to get around that.
As more and more unnecessary services are rendered, the bill to the insurance companies grows accordingly, leading the insurers to charge ever higher premiums and ever larger deductibles to their customers. You don’t see this increase directly, but it creeps up each year – long after those unnecessary services were made on your behalf and without your knowledge.
Since healthcare consumers are usually not in control of their own health insurance but rather receive employer-provided benefits, these consumers have very little say in what services they receive or how those services may affect their premiums and other costs.
In this sense, consumers of healthcare today are much more akin to consumers of music back in the 80’s before CD burners began to change the face of music forever, and before Napster and the internet began their assault on the big record labels.
The difference, of course, is that while you can choose to simply not buy music, when it comes to health there almost inevitably comes a time when going without insurance will come back to haunt you. And also unlike purchasing music – even expensive music – purchasing healthcare to cover a catastrophe, or even a monthly premium, can be hugely and sometimes catastrophically expensive.
So how can we make the healthcare industry of 2010 less like the music industry of 1985 and more like the innovative, accessible music market we have today?
Let’s look at the changes which led to greater supply, access, and lower cost of music today:
First, the old players – the big record labels – have lost their control over the market, and thus their control over the prices in the market.
Second, musicians have greater access to production and distribution of their own music, giving them increased control over their product. Some established musicians have signed on with music venues instead of record labels. Others, like Radiohead, have released their music for free (asking only for donations, and reaping most of their money from live shows.)
Third, music has become decentralized. Now it can be produced and distributed almost as easily on a living-room PC as in a studio in Los Angeles or Nashville. This has lowered the barrier to entry for music producers, giving amateurs inroads into an industry they were previously excluded from.
And last, consumers have more control over which music they purchase, and can generally sample whether they like the music before purchasing it; similarly they are no longer bound to industry-generated hits played on traditional radio, but have access to a plethora of online radio stations and other music services. Increased demand for music has led to an increased supply, which has in turn led to better prices and better music for almost everyone involved.
Could these basic changes be applied to the healthcare industry?
Currently the industry is dominated by a system of provider cartels, bulwarked by a thicket of government regulations, and insulated by monopolistic insurers. The solution to this problem is not to subsidize the broken system or prop up the current industry, but rather to find ways to strip away restrictions which have led to a constricted supply and poor competition. This does not mean ending all regulations in the health care industry, but it does mean we need to reevaluate some of the ways regulations have played a role in our healthcare thus far.
First, we need to break up the cartels by repealing unnecessary regulations on who can provide our healthcare in the first place. A doctor should not be the only person in town who can provide you with stitches. The cost of that doctor’s tuition and malpractice insurance is reflected in every stitch, and that translates into higher premiums for everybody in the system. Barefoot doctors, nurse practitioners, midwives, and other low-cost providers should be freed up to provide cheaper services instead of relying entirely on doctors. It should not be more expensive to have a home birth provided by midwives then to have a birth in a hospital provided by a team of nurses and a doctor and all their expensive equipment, insurance, and so forth – but it is for most people because the system is set up to benefit doctors and hospitals over alternative care providers.
Pharmaceutical companies need to be exposed to greater competitive pressure as well. There is no reason we should pay more for our own drugs than Canadians pay for the same exact product. Allowing generics to enter the market quicker and removing many of the protectionist hurdles that stifle competition between drug companies and their generic competitors could go a long way toward breaking up the pharmaceutical cartels.
Second, we should do away with special tax-treatment for employer provided healthcare. If you receive benefits from your employer, you do so tax free. If you purchase insurance yourself, you have to do so with after-tax dollars. Ending this imbalance would push insurance toward a personal, portable model. Soon people would no longer lose their insurance simply because they also lost their job. This would lead not only to greater economic security, but to greater economic mobility as well. People should not refuse to leave a bad job for fear of losing their health benefits, but this is all too common in America today.
Making insurance personal would also place health-related costs more directly into the hands of the people making the actual healthcare decisions, leading to a more rational system of pricing and self-rationing. Fee for service would quickly shift to fee for result, as consumers would quickly grow tired of paying for unnecessary treatments, and would refuse to purchase policies that subsidized these unnecessary treatments.
Third, allow healthcare providers to operate like other businesses. There’s no reason we shouldn’t have low-cost, private health clinics staffed with low-cost providers who can do many of the simple check-ups and preventative care that the uninsured currently use the ER or walk-in clinics for. If these were in Walmarts or shopping malls across the country, or even in the local pharmacy, we’d suddenly have a lot more access to basic healthcare services – much as consumers now have to music via the internet. To get to this step, though, you have to break up the cartels. Otherwise these cheap, private clinics would need to be staffed by expensive (and highly insured) doctors instead of much cheaper nurses and nurse practitioners.
And finally, we should decentralize medicine. Allow for more competition and, paradoxically, more cooperation between providers of healthcare. Let insurance companies operate nationally rather than confining them to states, and let consumers have more choice over not just their insurance but also their providers. Here, as in the music industry, the internet may also play a vital role, as transparency in costs and treatments becomes more and more widely available to consumers. When patients learn that an MRI across town costs five hundred dollars less than the one at their hospital, they’ll start asking questions.
Making the healthcare industry more like the music industry will not be easy, but if we ever hope to contain costs while drastically expanding coverage, we have to also increase supply and access. Placing more and more onerous regulations and restrictions on providers and insurers, while at the same time trying to fix prices on insurance at the federal level is not the way to increase either access or supply, as fewer and fewer people will see any net gain in becoming a provider of health services.
This is what the current legislation in congress will do – increasing subsidies to consumers, while doing nothing to address the supply shortage, and doing far too little to address concerns over access to actual healthcare providers. Throwing money at the problem will inevitably lead to it getting more expensive. Imagine if the best solution to making music cheaper was simply regulating the music industry more while giving handouts to low-income consumers of music. It’s preposterous. But that’s what Congress is doing to fix healthcare.
We don’t need lots more highly-paid doctors to make healthcare better, any more than we need lots of big, famous rock bands to make music better. What we need are more providers across the board. Indie-rock has changed the face of music, now indie medicine needs to change the face of healthcare.
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A doctor should not be the only person in town who can provide you with stitches.
Um, yes, they should. People die from amateur health care, you know. You’ve never heard the word “quack”?
There is no reason we should pay more for our own drugs than Canadians pay for the same exact product.
Agreed, but why is it the Canadians pay less? You don’t even seem to give it any thought. Here’s a hint – generics don’t come to market any faster in Canada than they do here, and their patent system is about the same.
Canadians pay much, much less because of their single-payer system: the Canadian system puts the government as gatekeeper for drug importation and as such, can negotiate prices for the entire country. Not so in the American patchwork of smaller, private insurance providers.
There are almost 30 American manufacturers of pharmaceuticals. And somehow “more competition” is the answer? How many more manufacturers do we need? Why are drugs so cheap in Canada where they have basically no pharmaceutical companies at all? Isn’t it your job to think about this stuff, or something?
Making insurance personal would also place health-related costs more directly into the hands of the people making the actual healthcare decisions, leading to a more rational system of pricing and self-rationing.
Studies show that regular people don’t have the medical expertise to safely “self-ration”, because they can’t reliably tell the difference between necessary and elective care, they often fail to get the care they need simply for cost’s sake. When they do get care, they don’t have the expertise to assess the quality of care. In every sense, health care isn’t something we can parcel out via the market, because consumers lack the medical training to make informed purchases. We’re not all doctors.
It’s worth pointing out that the nations with the lowest medical costs as a function of quality health care are the nations where individual recipients pay nothing out of pocket. Here in the US, where we’re the least personally insulated from the costs of health care, we pay half again as much as the next most expensive system.
There’s no reason we shouldn’t have low-cost, private health clinics staffed with low-cost providers who can do many of the simple check-ups and preventative care that the uninsured currently use the ER or walk-in clinics for.
Doctors do check-ups and preventative care. What “low-cost” providers do you think have the expertise to do a medical check-up? Even nurses have post-secondary degrees; how are they supposed to cover their student loans on a Walmart wage?
Plenty of other countries have found more effective ways to deliver health care. Why not find out how they do it, E.D., rather than spinning these elaborate fantasies of turning our health care over to quacks?
Basically if you knew anything about other country’s health care systems you wouldn’t have written any of this, so I’m not sure how to even respond. Suffice to say, no – you don’t need doctors to provide stitches.
In response to another comment. See in context »You need people with medical training. Not only the medical training to perform the stitches, but to anticipate problems and complications, recognize the signs of healing or infection, and be able to recognize the problems that need to be escalated up the chain of expertise.
Maybe you don’t exactly need a doctor for that. Maybe a physician’s assistant or clinician is sufficient. But you do need a licensed medical professional for that, and that’s simply not someone you can pay a Walmart wage, for.
Anyway, I wrote eight paragraphs and all I get is three lines? It’s impossible to take you seriously on this subject, Kain. It seems like the only thing you seem to know about health care in other countries is that, in some of them, doctors aren’t needed for stitches. (Full-on doctors aren’t required in the US, either, but whatever. Keep on pretending like you know something about health care.)
In response to another comment. See in context »Justin, I just don’t think it’s worth trying to convince you beyond what I’ve written. You wrote eight paragraphs, fine, I wrote a pretty long post before that. I don’t have the time or energy to try to convince you of my side of the equation. Of course my vision for reform won’t work unless the entire structure of the market is altered. I think if the structure were altered in the right ways, costs would come down, and access would increase. Is this likely to happen? Maybe not – maybe not any more than single-payer. And I agree! Single-payer would be better than what we have now, or what the current reforms would give us. I say, either we go my route, creating a more robust viable market with safety nets, or we go for uniformity and do away with this crazy scheme of subsidies and grants and price controls and just go the single-payer route.
In response to another comment. See in context »But health care – fundamentally – simply isn’t a good we can parcel out on the market. Markets work when consumers make informed decisions, but it’s the very nature of health care that being informed about it requires substantial medical training. It’s the same mistake underlying your absurd delusions about providing health care at Walmart wages – the training it takes to make health care decisions that literally won’t kill you isn’t something that you can pick up, except after years of very intense and expensive training.
The idea that we should just take our health and sell it off to the lowest bidder is an absurdity, it’s the absurdity at the heart of all your mistakes. It’s the reason you’re making the total boneheaded comparison between health care and the music industry. Nobody dies when they can’t get the latest Lady Gaga album in a format for their iPod; people don’t even die when they don’t get food, at least not right away. People do die when they don’t get health care at the exact moment when they need it. People can even need health care when they’re unconscious! How are they supposed to comparison shop for ambulance service when they’re laying bleeding in the street?
We need to keep the market out of health care, as much as possible. The health care consumer needs to be insulated from the costs, that’s the only way the system can work. The proof of that is manifest – we’re the system with the least insulation for the consumer, and our health care is the most overpriced. If that’s not enough to convince you that health care is fundamentally its own type of good – one that doesn’t respond to market incentives in the way that, say, music products do – I can’t imagine what possibly could.
In response to another comment. See in context »You’re way off tack. There are many 4year MDs and RNs that would be qualified to do a level 1 type of basic care. Being I know several, I know they are trained in dealing with those situations. These would be people making 70-100K, where level 2 would be the 6-8 year GPs making 125+, and level 3 being your surgical specialists. Moving more work from level 2 to the level 1 would better filter care to patients.
I agree focusing on a bigger level 1 clinical structure may help a little, but their cost would be marginalized with liability costs.
And the reason drugs are cheaper in Canada is they are priced to market. Canada has a lower cost/standard of living. Plus drug companies have a much less liability risk in Canada. Law suits are rampant in US and rare in Canada. Plus the currency exchanges.
http://www.aims.ca/library/MPPI_pharma-revised_.pdf
Since you believe that many will be too dumb to handle their own insurance, how about Govt. defining plan types A-F(instead of a single plan), that define a standard levels of insurance care, from full plan to minimum catastrophic plan. An insurance provider can provide a plan that qualify under A-F, or sell custom plans for those that are educated or informed.
Kain’s on the right track. Fix the system by opening it up and moving it to the individual. Moving to a social approach will always have unintended consequences. Thinking the govt. can do single-payer right is the true fantasy.
In response to another comment. See in context »sirnate – agreed, though I still think single-payer makes more sense (more sense, but not necessarily the right idea) than Obamacare…
In response to another comment. See in context »Health care is obviously a fundamentally different type of good, one that by it’s very nature responds to the market incentive in very nearly the opposite way.
And, look, “70-100K” is a whole hell of a lot more than what Kain is proposing these people be paid. He’s suggesting either that 4 year MD’s and RN’s be paid Walmart wages, or that we invent a “level zero” standard of medical care necessitating a lot less training and expertise. Some kind of two-year program, because that’s probably the most training you could expect someone to endure for the promise of Walmart wages.
In the real world, completely insufficient for training an adequate clinician.
In response to another comment. See in context »Here’s an example of what Justin is saying about the “consumer” and their lack of expertise in certain judgments regarding their care. Since there has been a focus on “stitches”, it would be important to note that not all lacerations are created equally, and scars may cause constant (unnecessary pain) when stitched improperly. These things are ultimately best treated by the best qualified to treat. An ED physician or physician assistant are often good enough. Sometimes, they really ought to defer to a plastic surgeon (sounds outrageous but true).
Anyway, the commentary about “Walmart” wages is important. In other countries, the litigation issue and immediacy of treatment issues are variable. Regarding legal, in England the largest settlement for a medical error was far less than here. The error? A woman had a breast biopsy and the initial pathology result came back as cancer. The pathologist had reviewed the wrong specimen. The women elected to have bilateral mastectomy (both breasts removed). She had several complications including wound infections and lymphedema (swelling of the arms) from her lymph node dissection. Her age? 28. The settlement? 1 million dollars. The largest single individual injury settlement I know came from a patient in Pennsylvania who saw a patient that was new to his practice. He did not have the time to do a complete physical exam and recommended a follow up visit to do a certain test called a guiac. This tests for blood in the stool. The patient didn’t come back but was diagnosed with terminal colon cancer 7 months later. The settlement? 117 million dollars. Yup. Did I mention that cancer kinetics make that a near impossibility that he did not already have stage 4 cancer the time he originally saw his new doctor? The point is that legal liability for doing medical work will make people NOT practice medicine. The exam reimbursement that the physician got for seeing that patient? 60 bucks. That significantly impacts the way people practice medicine. Anyway, if you want basement bargain prices, you actually have to institute a totally social system where you never have to worry about health care and retirement (like Europe) to pay doctors the type of wages you are imagining.
The second point is regarding immediacy. The thing people don’t realize when they speak of the “waiting periods” in Canada is that certain conditions don’t require immediate medical attention. Here in the US, a combination of patient expectation, monetary reward (hospital, physician, etc) and fear of litigation drive that immediacy often unnecessarily. If you have “back pain” in Canada, you will undergo physical therapy before you get an MRI (at least two weeks after being seen). Here, the MRI is instantaneous. Ridiculous. The thing is that is an example of the trumped up “waiting periods”.
Finally, Kain, you probably ought to know that the ENTIRE income of ALL physicians is 160 billion dollars. Every single doctor’s income in the US adds up to 160 billion. AND they get paid less for everything they do annually. The ENTIRE health care budget is 2.25 TRILLION dollars (includes therapy, treatment, surgery, pharmaceuticals, hospitals, insurance premiums, out of pocket expenses etc). Therefore, the ENTIRE income of ALL physicians is about 7% of the entire annual budget of health care expenditures. So, EVEN if they did work for NOTHING, the health care budget is extremely expensive. There are numerous practical and economical considerations you haven’t taken into account in your blog on this.
In response to another comment. See in context »[...] Making the healthcare industry more like the music industry – E.D. Kain – American Times… [...]
“Making the healthcare industry more like the music industry” Did you mean by turning it into a business that treats its best customers like criminals? Or perhaps you haven’t heard of the RIAA? Actually, now that you mention it, in some ways the health insurance companies are very much like the RIAA.
I think your vision of the music industry is highly idealized and your vision of the medical industry is quite impractical. Unfortunately, while a simple symptom may have a simple remedy 99 times; in the 100th, that same symptom may be the key to uncover a serious disease that must be treated immediately. Without serious medical training, a caregiver wouldn’t know the difference.
Did you even read the article? He’s referring to the music industry that has grown outside of the big business RIAA market. How consumers pushed the market to a more efficient direct channel.
You saw that first statement, triggered a reaction, and were completely blinded by the rest of the article.
In response to another comment. See in context »Yeah misterb – it really does seem like you didn’t read the post itself before offering up your two cents. Maybe you should come back after you read it and give it another go.
In response to another comment. See in context »Busted! That was a pretty long article, but I have now read it in its entirety. The part I agree with doesn’t have anything to do with the music paradigm (making health insurance portable). I absolutely disagree with reducing licensing requirements for health care personnel. The AMA has shown itself completely incapable of ensuring bad doctors are purged from the system. Your low-cost providers are going to make Dr Nick Riviera look responsible. I stand by my previous point that simple procedures can and should be performed by
In response to another comment. See in context »less expensively trained personnel, but only under the supervision of an MD trained to catch those dangerous complications.
One point you don’t make is that we need to increase the seats in medical schools – we don’t have enough doctors in the US and training more protects our nation’s health best.
The biggest difference between medicine and music is that music listeners can’t make choices that increase their need for music (OK, certain drugs), but every day we make choices that can endanger our health.
You said it’s not a perfect analogy, I wholeheartedly agree.
The music distribution industry is collapsing because we now have a many to many distribution system called the Internet. What we lack here is some way to level the playing field for medicine.
It’s not just an issue of deregulating medicine. It’s the distribution system. It’s also a matter of deciding whether you’re going to communicate with medical consumers and get the word out on what is quackery and what is a known workable procedure.
To those who insist upon licensed medical professionals, allow me to point out that licensing only proves that you have had an education and that you’re expected to know the limits of your knowledge and experience. It is not a measure of competence. Do not confuse the two. It may well be that a PA might be better at stitching up your kid’s injuries than a doctor who may not do it as often.
So how do we find these things out in a level market place? I don’t know. It’s easy to sample music. It’s not so easy to sample medical care.
[...] Making the healthcare industry more like the music industry – E.D. … [...]
A pretty good argument for consumer driven health care. A few issues that always nag on this approach -
1. While I very much agree with vastly increasing the use of nurse practitioners – particularly those who specialize in a particular area of medicine, say, diabetes treatment – we have to take care that consumers, in the process of making their decisions, do not end up self-diagnosing.
2. I like the comparison with the music industry, but there is one difference that has to be factored in. The new approach to getting music completely fits a consumer model. Buy what you want and pass on what you don’t want. The difference is that, in health care, we don’t always know what we want because we don’t know what we need.
3. The testing issue is often misunderstood. While we clearly have a problem with over-testing as a part of defensive medicine, there is a very real tendency for patients to think the over-testing is bad —-until it involves them. I am intellectually aware of the problem, yet I have never asked my physician to skip a test because of costs and I can’t imagine I ever will.
4. I think the consumer based approach works insofar as it relates to primary care where serious illness is not involved. As you say, you don’t really need doctor to give you stitches. However, most of the costs in medicine are connected to serious illness – and serious illness does not match up well with the consumer model. Would you go shopping for the cheapest chest cracker when told you need a heart by-pass? Would you look for the least expensive chemotherapy when receiving a cancer diagnosis? I agree that we need to change the model for primary care but I don’t really think this will solve the problem without a lot of serious illness going undiagnosed.
All excellent points. I think my main point, at the end of this, is that we have to be careful when we expand coverage to not at the same time restrict supply. There is a danger of this. At the same time, we need a rational way to ration demand, and this is tricky when you start tossing in subsidies, etc. This is one reason that right after market-based solutions, I prefer single-payer. I don’t like all the messy middle-road nonsense which is, sadly, what we seem to be getting.
In response to another comment. See in context »I don’t understand how you think you can ration demand. “Ok, this week only the people on the odd side of the street can get sick! Sorry, Tim, your house is on the wrong side, you can’t be allowed to have the flu today.”
Demand for health care exists because people have bodies that get sick, injured, etc. Saying we need to “ration” that makes as much sense as ordering the tide not to come in. The end result of that is that you’re all wet.
In response to another comment. See in context »