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Malcolm Gladwell and David Goldhill Interview on Health Care – Disappointing, Dangerous, Frightening

In part two of my analysis of David Goldhill’s proposal to fix health care, I promised to blog about his interview with my favorite author, thinker, and fellow Canadian, Malcolm Gladwell. Goldhill, a businessman, lost his father to a hospital acquired infection and witnessed multiple errors during that hospitalization which compelled him to write not only a piece in the September 2009 Atlantic titled How American Health Care Killed My Father, but also a new book titled, Catastrophic Care – How American Health Care Killed My Father — and How We Can Fix It.  The question is does his solution offer hope? If it was based purely on his interview with Gladwell, the answer would be no.

Goldhill perspective of health care boils down to this: health care suffers from distorted thinking that is different that other industries. His simple solution is that health care should not be treated any special than other industries, is an illusion of accounting, and if people really knew the true costs of care, people would act differently.

Of course he provides no evidence that any of this would actually occur. His analysis and solutions are too simplistic. The concern should be that given the platform that he has that people might take him seriously. If Gladwell can be shaken by Goldhill’s book, doctors and others who are trying to fix health care will also be shaken as well, but not for the same reasons.

Initially, Goldhill starts with some valid observations. Medical care wasn’t able to offer much until the 20th century. Health care bills aren’t particularly consumer friendly and charge masters aren’t linked to true costs of delivering care.  Wages for employees have been flat as a consequence of rising health care costs. Markets where prices are not anchored to a cost do not function well.

From the New Yorker

From the New Yorker

When it comes to explaining the why these things exist, Goldhill shows his lack of depth in understanding the complexity of health care. His conclusions should worry those trying to fix health care.

Insurers Want to Keep You in the Dark with Confusing Billing

The reason there is no accurate billing in health care is because Goldhill feels that there is a deliberate attempt to confuse the public and make them feel grateful. “We all know that health care bills are unreadable. They are intentionally unreadable. You are not the customer number one. They don’t want you to understand it number two. And number three you are supposed to feel grateful. You get a lot of bills from your insurer. They know how to write English. They are not writing English because they don’t want you to understand. They just want you to appreciate that you have health insurance. It’s not an accident.”

Though Gladwell is a brilliant thinker and writer, it is clear that his understanding of health care is also very limited. Gladwell reinforces Goldhill’s theory by noting that Goldhill’s father’s medical care, which was charged at $650,000, would be $150,000 had he been hospitalized in a four star hotel, received round a clock nursing, and had the best doctors spend two hours with his father (without accounting for costs like blood). Gladwell wonders what insurers are thinking when they “charade and [print] up a phony number” in creating the hospital bill.

Both have conveniently ignored the regulations and costs in building a hospital, which today can cost a billion dollars, as well as all of the internal infrastructure, wiring, venting, and other systems that make a hospital far different than a hotel.

Another Better Reason and Framework That Describes This Behavior?

In addition, could the high prices in hospitalization also be due to something else? Is it possible that part of the issue is that hospitals and insurers are using the wrong framework in determining the value of services provided? As Professor Clayton Christensen from Harvard Business School notes, hospitals have been hired to do two jobs. One – I have a problem, but I’m not sure what the right course of action is. Two – The problem is well defined, so know I need to most effective and efficient approach to solve the problem. As Christensen notes:

“We will do everything for everybody” has never been a viable value proposition for any successful business model that we know of–and yet that’s the value proposition managers and directors of general hospitals feel they are obligated to put forth.

Instead of trying to understand why hospitals behave as they do with billing, Goldhill unknowingly attributes the hospitals pricing behavior as an attempt to make the public grateful. Gladwell also falls into this trap of a classic fundamental attribution error.

Sadly, there are even more errors and analogies that sound so good, but upon more reflection fall short.

Goldhill wonders if emergency rooms really are the most expensive place to get care? “What is in an emergency room that is expensive?” It’s not because of the physicians, the art, the decor, or the equipment (which is shared with other departments of the hospital).  Gladwell chimes in “if I make patients wait 19 hours to get care, that is an awfully efficient way to use doctor services. How is this expensive?” He continues:

“You come in, no matter how sick you are. You just sit there until you give up, or die, or whatever. This is somehow expensive?… I have accepted this notion for years and years and years and walked by ERs and said ‘Goodness, it’s the Taj Mahal in there. It’s costing so much.’”

Goldhill feels that we as a nation allocate resources based on “this fiction”. He concludes that “[emergency room care] is by far the cheapest form of care.” The reason it is so expensive is because hospitals want to inflate their costs to maximize their credit for charity care.

Patients Should Have a $25,000 Deductible

Goldhill would like to make transparent the costs that individuals pay to get health care. He dismisses the belief that if people know the costs of care that people are less likely to get care, which is a belief of “island experts” in health care. The latter would prefer that financial costs not play a role in health care decisions.  Though as a CEO, he would like to make transparent the costs to the employer and the employee in the latter’s paycheck (and well as the potential salary increases given up to health care), he does not. Goldhill says that politicians don’t want people to know. Interestingly, as a CEO, would not Goldhill have the power and authority to make the changes he so desperately wants to occur in his own company? Yet, he does not do so.

Health insurance should cover mainly catastrophic care. This will drive down premiums as insurance coverage will be much less. With these lower premiums he wants to “encourage” people to save this money to cover their future health care costs. Goldhill believes in giving patients money and that they should use the money as they see fit and save for future costs. He feels that since for many people major medical will occur in our later ages in life (80s to 90s) that it really isn’t an insurable event it should not be covered by insurance. Americans should instead save for this certainty.

He is correct that people don’t realize how much they are giving up in salary increases as those funds are going into rising health care costs. As an example, Goldwill says a 23 year old worker making $35,000 annually health care costs are borne by employee ($2000 out of pocket pre-tax), employer ($6000), both employee and employer (Medicare tax $600), federal taxes (20 percent pays for Medicare or about $500), and a $500 health insurance deductible. He rounds up to $11,000, which is the funds the employee could have received as income if not for health care (or Medicare or taxes). Goldhill projects that this employee over a lifetime will contribute over $1 million (death at age 90 and health care costs don’t increase) or up to $2.5  million (if has spouse who does not pay anything).

He feels that “most families could pay their health care bill on 1.1 million” and that they could easily pay for their lifetime of care if only things we done differently. He suggests for a new deductible plan that we start with a $25,000 deductible, which is currently the price of a brand new 2013 Toyota Camry.

If Gladwell Dumped Health Care and Went Rogue

Gladwell picks up on that idea, wonders what would happen if he went “rogue” and dumps United Healthcare. He pays $1400 a month in premiums but perhaps uses only $200 worth of health care annually. He wonders why he is “such a sucker” to be paying so much over decades in premiums and yet uses minimal amount. Why not go without health insurance? If something happens, he could find lawyers to negotiate down future medical bills which aren’t anchored to reality anyway. What would stop others from going rogue?

The problem, Goldhill notes, is that real health insurance does not exist. Real health insurance Goldhill argues would be a $25,000 deductible that a person like Gladwell would probably only use 1 to 3 years of his life. He would have 50 to 60 years of premium savings to cover and spend a needed $200,000 of total exposure in future medical expenses. Gladwell would probably also need coverage for major medical. Instead of spending $17000 annually in premiums as Gladwell is currently doing, Goldhill predicted insurance would cost only $3000 annually. The $25,000 deductible would be made back in two years.  (Whether people actually save for that deductible is not Goldhill’s concern and he again provides no evidence this would occur). Does his proposal essentially describe the increasing rise in health savings account offerings by employers? Will employees save for future health care costs? Again, Goldhill says nothing about this every important assumption. Already there continues to be evidence that employees already don’t save for future retirement costs, another life certainty. Would it be reasonable to assume that a similar behavior might also occur in health care? If people don’t save adequate money in the future and have a serious medical condition, what does Goldhill think people should do then? What should doctors and hospitals do if these people still want care? In a true consumer driven market, the ones doing the selling have a right to refuse service. Are we as a society prepared for this as well? He doesn’t talk about this either.

Goldhill argues the mindset of Americans is wrong in that currently health insurance covers everything. Goldhill feels that they should not be complaining about $1000 deductible or rising copays, but instead should be demanding $50,000 deductibles so they have more in take home pay.

Why Analogies Like Lasik Surgery, Veterinary Medicine, and Retail Clinics Don’t Work in Health Care

Goldhill believes that if only health care was like other markets which are customer focused and compete is how health care can better. He holds up other areas in health care like dentistry, retail clinics (Minute Clinics), cosmetic surgery, lasik surgery, and veterinary medicine as examples. The technology and services are similar to others in health care, but because they are more customer focused is why they are less expensive.

This is where Goldhill and others who always trot out these analogies fall short. The reason areas like retail clinics (Minute Clinics) and lasik eye surgeries are more competitive is again best illustrated in Professor Clayton Christensen’s book, the Innovator’s Prescription. These areas of medicine are highly algorithmic and predictable. Retail clinics do strep testing, allergies, bladder infection, and other very simple and predictable symptoms and treatments. For lasik eye surgery, the only reason costs have come down is not because it was customer facing but because increasingly over time the process has been automated and highly reliable. In the beginning before the understanding of automation and the technology that evolved with it, lasik surgery was quite expensive. Dentistry, cosmetic surgery, and lasik surgery care for healthy patients. Dentists, plastic surgeons, retail clinics, and lasik eye surgeons can turn away patients are are not healthy enough to undergo these procedures.

Gladwell never asked, where do these people who are not healthy, go? Goldhill wasn’t asked and didn’t volunteer answers.

They would go to the other health care system. Chronically and acutely ill patients don’t seek dental, plastic surgery, or elective eye surgeries. Since Goldhill brought up veterinary medicine as being an example of how health care can be better, one wonders why Gladwill didn’t challenge his analogy with this question -  when pets have cancer do owners choose to pay expensive chemotherapy, surgery, or radiation therapy? If not, then what do they do? How does this analogy then translate to people?

Goldhill’s Solution – Dangerous, Frightening. Lack of Understanding.

Certainly, the American health care system can and must be better. Goldhill’s solution is dangerous and frightening. On the surface, he presents many analogies which appear to make sense. Upon further reflection and introspection, one discovers that he conveniently portrays a point of view that is too simplistic. By trying to make the health care system more customer focused and market driven, Goldhill in fact creates a health care system that is far more flawed, leaves more patients in jeoporday, and ultimately makes the health care system worse than the one he so desperately wants to fix.

My prediction is that this future will drive into a two tiered health care system, those who can pay for care get the care and those who can’t. The latter will be on their own.  Is this what America really wants? Time will tell.

2 thoughts on “Malcolm Gladwell and David Goldhill Interview on Health Care – Disappointing, Dangerous, Frightening”

  1. While I’m appreciative that you came to hear Malcolm and I discuss health care, you really don’t seem to understand much of what we were talking about. My work is an attempt to think about health care as an industry, and using comparisons to how other industries behave to understand why health care delivers such mixed performance — with extraordinarily high rates of error — at such high cost. My argument is a systemic one: bad industrial outcomes are a result of badly structured economic incentives; in health care most of the badly structured incentives are a result of the consumer function being assigned to giant intermediaries rather than remain with patients. So, I’m not arguing that hospitals, insurers, providers etc. are unusually corrupt, but rather that they don’t face the type of market discipline that restrains bad behavior/outcomes in other industries.

    Most critiques of my argument start from the premise that health care is so different from other industries that comparisons to what works in others are irrelevant. Your post seems to start from mis-understanding of other industries. We do have insurance covering risks other than health care. There are plenty of industries that face the high capital costs of hospitals. Most importantly, society has found ways to produce and fully distribute plenty of necessities and urgent services other than health care at declining cost and increasing quality. Really to understand my critique, you need to understand the question I’m asking: why has health care done so much worse than these other industries in price/value, service, and safety.

    Every industry is unique, and some aspects of health care demand are truly special and urgent. That’s why we recognize a special societal role — and why I favor universal health insurance. But saying that some elements of health care are unusually urgent is not the same as saying all elements are. And a crucial element of my argument which you seem to miss is that an increasing share of health care is long-term condition management, which allows for the introduction of economic mechanisms which drive efficiency and quality in everything else. Health care is very different today from when our system was founded.

    Because you don’t understand my argument, you also don’t seem to get my solution. I’m arguing that different economic arrangements will force PROVIDERS to drive down prices and to improve safety, quality and service. Like many in health care, you seem to believe that “consumer-driven” reforms require consumers to do more work — price shop, etc. That’s the OPPOSITE of what I believe — which is that proper economic incentives allow consumers to do far less work they we need to do today in navigating our absurdly complex system.

    But the fundamental difference in our perspectives is your focus is on healthcare, while mine is on societal choices. To me, our system of subsidizing all health care spending not only enables the lack of discipline behind absurd prices, erratic care, terrible service and 200,000 deaths from errors per year; it also grabs an unconscionable share of resources away from the things that really drive happiness, fairness and even health. Don’t kid yourself: no system that lacks cost discipline will ever provide properly for society’s most needy, even if it’s successful at hiding its true costs from society. To you, the system “can and must be better.” Such complacency in the face of fundamental dysfunction is what’s truly “dangerous.”

  2. Both Dr . Liu (.on the island ) and Mr. Goldhill ( on the mainland) are making moral arguments.
    To me, Dr. Liu is correct that Mr G. Does. Not have the perspective of a physician. But he misses a more fundamental point: Who’s paying the bills?

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