Instead I got a shot in the backside ($50+), and was prescribed a cream that cost over $500! I protested when he told me how much his prescription would cost my insurance company, but he flatly said, “your insurance will cover all of if because of the coupon I gave to you…so it doesn’t matter.” I even called his office while I was standing in line at the pharmacy but he insisted that his recommendation was justified and because I had all ready paid to see him I wasn't going to visit another doctor and be charged twice. Three weeks later my hands still itched and I called my doctor friend again to get the old prescription ($40), and within a week my hands were no longer itching.
Why would this doctor be so insensitive to overall cost? Does the pharmaceutical representative buy him that many lunches? Are these conflicts of interest influencing patient care and overall expense? According to the New England Journal of Medicine these conflicts of interest are incredibly influential. I think coding reimbursement also contributes to wasteful diagnosis. To receive payment from insurance companies’ physicians perform pre-approved procedures at pre-approved rates; these procedures are given a code (sometimes broadly) and billed to the carrier. Because doctors have an incentive to maximize profits, they bill codes that are most profitable by categorizing a visit/procedure accordingly (limited by ethical diagnosis). What most interested me when I thought back to this experience is the contrast of recommendations from each doctor and their incentives. My doctor friend simply wanted to help me get feeling better and was sensitive to price; the other doctor billed and prescribed in a way that maximized his utility at the hefty expense of the insurance company and therefore my expense (remember insurance is pooled risk of policy holders). My doctor friend’s treatment plan cost about 7% of the other doctor’s treatment plan and was more affective.
Our health-care-system is wasteful for many reasons but two of the primary reasons are misaligned incentives (for both physicians and administrators), and conflicts of interests. Managing any large organization requires understanding economic incentives and this is especially true when managing organizations within health-care.