The cost of everything and the value of nothing

I know I said I would talk about the Peter Mac-sponsored “community conversation” about PC last week, and I will, I will! But first, there is some good stuff coming out about surgeons’ fees. Among the questions asked: how much do operations cost? If you have to have an operation, is there any way in which you you can predict the cost? Are more expensive operations better?

First there was the recent Four Corners program (which I have recorded, but not seen; there is an article by Brigid Anderson and Norman Swan on the ABC web site covering some of the dicussion.) Then there was the Fairfax press article covering much of this ground, but with some case studies. (If these links don’t work, a search on “Your medical bills: Out-of-pocket costs, hidden fees and who’s to blame” and “Egregious Sydney surgeon bill” will bring up the articles.)

Basically, it is like getting your car repaired: if we’re talking about a vintage Ferrari, that is. The number of people who work on these things, and who know whereof they speak, is small. So there is not an abundance of competition.

The analogy falls down from this point, unfortunately. You can drive your vintage Ferrari (assuming it is ambulant) to another garage and get another quote. To do this with another medical specialist requires returning to your GP for another referral. (They will usually not know which specialists charge how much, so it is really taking pot luck.) However, even if you decide to do this, you obviously have to wait until the second specialist has an appointment. And if you have a condition like an aggressive cancer, panic can easily set in and you think “I have to get this fixed now!”.

So there is a number of ways in which the market economy analogy doesn’t apply. One is the relative lack of competition. Another is the absence of perfect information on the part of you, the consumer of the service. Specialists are unlikely to advertise their prices; as far as I know, there is no comparethemarket.com for medicos. It is difficult, also, to calculate the value of the service being offered. What value would you put on your life?

Once one has chosen a surgeon, who generally operates at a particular hospital, the costs don’t stop there. There are anaesthetist’s fees, pharmacy costs, and of course the costs associated with the hospital stay itself. I was fortunate in that our health fund covered the last of these. Everything else was pretty much an out of pocket expense. The main elements of the surgeon’s fee were clearly disclosed up front; even so, there were a few surprises.

So, putting all the costs I was up for together, I got out of it for well under half the figure quoted in the SMH article. Survivors’ groups are a good way to find out how much other guys were charged for what you had. This reinforces my view that my operation wasn’t that expensive. (Fancy things like robotic surgery are more expensive, and, from what I have read, and heard from people who have had it, don’t confer any additional benefit.)

I’m not against surgeons being well remunerated. They do a job that, if they get it right – and they are more likely to than someone without their training and expertise – will save your life. I think a lot of surgeons do pro bono work as well, something they don’t advertise. It takes them a long time to learn to do what they do. A surgical career can be fairly short while they are at the top of their game. Most work formidable hours under great pressure.

However, it’s obvious that they don’t have any incentives to charge less than what they think the market will bear. (The only sanction seems to be getting a rap over the knuckles from the appropriate college.)  How can this be addressed? What about giving them a meaningful incentive to advertise their fees on their practice web site? What this would look like, of course, I have no idea. But it is good that this is all being talked about.

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