Wednesday, June 24, 2009

Why is electronic record-keeping practiced everywhere except in health care?

At Technology Review (via Instapundit), Andy Kessler discusses the medical industry's vested interest in inefficiency. Kessler points out that just about every other industry has switched to electronic records without the need for government involvement, but the medical industry has not. The question is why?

Conservatives tend to drone on about patient privacy, but I don't think that's a real issue. For example, I don't wake up every day worrying that the mountains of private data credit card companies have on me will somehow lead to a violation of my privacy.

Kessler partially identifies the true reason we don't already have electronic medical records: such records would expose the massive number of medically unnecessary tests, procedures, treatments, and outright fraud that goes on every day at our nation's hospitals. As Kessler puts it:
In those medical records lie the ugly truth about the business of medicine: sickness is profitable. The greater the number of treatments, procedures, and hospital stays, the larger the profit. There is little incentive for doctors and hospitals to identify or reduce wasteful spending in medicine.
However, Kessler misses the underlying truth, the driving force that makes this fraud possible and sustainable. Every industry has a profit incentive to get its customers to pay for unnecessary things. The reason other industries can't sustain that practice is simple: basic free-market forces. In other industries, consumers make purchases with their own money, and therefore they make choices based on cost.

Here's an analogy:

If two contractors can do an equally-good job repairing my roof, but Contractor A can do it at half the cost, and Contractor B tells me I also need to repair my chimney but Contractor A says that's a bunch of hooey - I'll go with Contractor A because I'll save money and I won't pay for unnecessary work.

However, if somebody else - say, an insurance company, or the government - comes along and tells me that they'll pay for all the roof work a contractor says needs to be done, all of a sudden the reasons I had to choose Contractor A disappear. I'll go with Contractor B, because I don't care how much it costs anymore - the money's not coming out of my pocket - and who cares if the chimney really needs fixing, I might as well get it done anyway because someone else is paying for it.

The lack of free-market competition - consumers making individual choices about where to spend their own money - is the disease that has allowed the medical industry to grow out-of-control with bloat, inefficiency, and fraud. The lack of electronic records is just a symptom of that. Forcing electronic records upon the industry is probably a good thing overall, but it will do nothing to cure the disease, and our health care woes will continue.

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