Skip to main content
Menu

Main navigation

  • About
    • Annual Reports
    • Leadership
    • Jobs
    • Student Programs
    • Media Information
    • Store
    • Contact
    LOADING...
  • Experts
    • Policy Scholars
    • Adjunct Scholars
    • Fellows
  • Events
    • Upcoming
    • Past
    • Event FAQs
    • Sphere Summit
    LOADING...
  • Publications
    • Studies
    • Commentary
    • Books
    • Reviews and Journals
    • Public Filings
    LOADING...
  • Blog
  • Donate
    • Sponsorship Benefits
    • Ways to Give
    • Planned Giving

Issues

  • Constitution and Law
    • Constitutional Law
    • Criminal Justice
    • Free Speech and Civil Liberties
  • Economics
    • Banking and Finance
    • Monetary Policy
    • Regulation
    • Tax and Budget Policy
  • Politics and Society
    • Education
    • Government and Politics
    • Health Care
    • Poverty and Social Welfare
    • Technology and Privacy
  • International
    • Defense and Foreign Policy
    • Global Freedom
    • Immigration
    • Trade Policy
Live Now

Blog


  • Blog Home
  • RSS

Email Signup

Sign up to have blog posts delivered straight to your inbox!

Topics
  • Banking and Finance
  • Constitutional Law
  • Criminal Justice
  • Defense and Foreign Policy
  • Education
  • Free Speech and Civil Liberties
  • Global Freedom
  • Government and Politics
  • Health Care
  • Immigration
  • Monetary Policy
  • Poverty and Social Welfare
  • Regulation
  • Tax and Budget Policy
  • Technology and Privacy
  • Trade Policy
Archives
  • February 2021
  • January 2021
  • December 2020
  • November 2020
  • October 2020
  • September 2020
  • August 2020
  • July 2020
  • June 2020
  • May 2020
  • April 2020
  • March 2020
  • February 2020
  • January 2020
  • December 2019
  • November 2019
  • October 2019
  • September 2019
  • August 2019
  • July 2019
  • June 2019
  • May 2019
  • April 2019
  • March 2019
  • February 2019
  • January 2019
  • December 2018
  • November 2018
  • October 2018
  • September 2018
  • August 2018
  • July 2018
  • June 2018
  • May 2018
  • April 2018
  • March 2018
  • February 2018
  • January 2018
  • December 2017
  • November 2017
  • October 2017
  • September 2017
  • August 2017
  • July 2017
  • June 2017
  • May 2017
  • April 2017
  • March 2017
  • February 2017
  • January 2017
  • December 2016
  • November 2016
  • October 2016
  • September 2016
  • August 2016
  • July 2016
  • June 2016
  • May 2016
  • April 2016
  • March 2016
  • February 2016
  • January 2016
  • December 2015
  • November 2015
  • October 2015
  • September 2015
  • August 2015
  • July 2015
  • June 2015
  • May 2015
  • April 2015
  • March 2015
  • February 2015
  • January 2015
  • December 2014
  • November 2014
  • October 2014
  • September 2014
  • August 2014
  • July 2014
  • June 2014
  • May 2014
  • April 2014
  • March 2014
  • February 2014
  • January 2014
  • December 2013
  • November 2013
  • October 2013
  • September 2013
  • August 2013
  • July 2013
  • June 2013
  • May 2013
  • April 2013
  • March 2013
  • February 2013
  • January 2013
  • December 2012
  • November 2012
  • October 2012
  • September 2012
  • August 2012
  • July 2012
  • June 2012
  • May 2012
  • April 2012
  • March 2012
  • February 2012
  • January 2012
  • December 2011
  • November 2011
  • October 2011
  • September 2011
  • August 2011
  • July 2011
  • June 2011
  • May 2011
  • April 2011
  • March 2011
  • February 2011
  • January 2011
  • December 2010
  • November 2010
  • October 2010
  • September 2010
  • August 2010
  • July 2010
  • June 2010
  • May 2010
  • April 2010
  • March 2010
  • February 2010
  • January 2010
  • December 2009
  • November 2009
  • October 2009
  • September 2009
  • August 2009
  • July 2009
  • June 2009
  • May 2009
  • April 2009
  • March 2009
  • February 2009
  • January 2009
  • December 2008
  • November 2008
  • October 2008
  • September 2008
  • August 2008
  • July 2008
  • June 2008
  • May 2008
  • April 2008
  • March 2008
  • February 2008
  • January 2008
  • December 2007
  • November 2007
  • October 2007
  • September 2007
  • August 2007
  • July 2007
  • June 2007
  • May 2007
  • April 2007
  • March 2007
  • February 2007
  • January 2007
  • December 2006
  • November 2006
  • October 2006
  • September 2006
  • August 2006
  • July 2006
  • June 2006
  • May 2006
  • April 2006
  • Show More
November 3, 2008 9:40PM

Uncertainty in Medicine: the Last Refuge of a Scoundrel

By Michael F. Cannon

SHARE

The way we pay hospitals, doctors, and other health‐​care providers can have a big impact on how aggressively they try to reduce medical errors. That is one of the themes of my “Universal Coverage Kills” oped, where I argue that Medicare locks most of the market into a payment system that actually rewards medical errors. (You read that right, rewards.) Last month, Medicare launched a new policy that attempts to reduce medical errors by forcing providers to bear the costs of what it calls “never events.”


The blogger WhiteCoat was among the many who responded (sometimes angrily) to that oped, and has since responded to my response to those responses. (And here I go, responding…)


WhiteCoat still believes I support Medicare’s “never events” policy and that I want to lump everyone into a “national HMO.” I’m not sure why, given that I advocate “a market free to experiment with different payment systems” and write, “We need experiments with different payment policies to see which produce the best outcomes for patients, and the rigidity that government brings to that process is downright harmful.”


WhiteCoat does, however, raise two interesting issues.


1. Should payers attempt to punish medical errors when it’s hard to tell whether anyone committed an error?


All agree that providers should bear the costs of obvious medical errors. But what if it’s unclear whether an adverse event was the result of error?


Clostridium difficile-associated disease (CDAD) is a growing problem in hospitals. Sometimes, hospital workers pass the bacterium to patients. Other times, patients bring it in with them. (An estimated 3 percent of the adult population already has C. diff living in their intestines.) Who should bear the cost of CDAD in hospital patients?


WhiteCoat argues that forcing providers to bear the cost inevitably punishes them for cases of CDAD that weren’t the providers’ fault. Since that would be unfair to providers, WhiteCoat (unless I’m misreading him) supports fee‐​for‐​service payment in the absence of obvious errors.


In the name of fairness to providers, however, that payment system would be decidedly unfair to payers. Patients, insurance purchasers, and taxpayers, would have to pay for CDAD cases where a provider was at fault.


Then again … if providers bear the cost, they will avoid high‐​risk patients who are likely to suffer such adverse events.


Then again … if payers bear the cost, providers will have no financial incentive to reduce medical errors.


Here’s the point: there is no obviously superior way of paying doctors, just as there is no obviously superior way of paying managers, CEOs, taxis, lawyers, roofers, etc. Every payment system involves tradeoffs. That’s why we need competition between different payment systems: “to see which produce the best outcomes for patients.” My guess is that, with all government does to encourage fee‐​for‐​service and discourage prepayment, we’ve probably erred on the side of the former and that the latter would be more prevalent in an open marketplace.


For providers to say, “We must have fee‐​for‐​service wherever there is uncertainty about the cause of an adverse event,” is self‐​serving crap. Cries of “uncertainty in medicine!” are often the last refuge of a scoundrel.


2. Who is most likely to discover new ways of avoiding medical errors?


I’ll give you a hint: it ain’t me.


Sure, I could tell you that providers should pay closer attention to their patients, wash their hands more often, deploy electronic medical records, e‐​prescribe, use bar‐​coding for medications, use standardized checklists more often, blah, blah, blah.


But let’s assume that health‐​care providers are currently using everything tool technology offers to prevent medical errors. (Stop laughing. C’mon, this is serious.) How can we generate innovations that allow us to prevent adverse outcomes that were once thought unpreventable?


I’ll give you a hint: M-O-N-E-Y.


Sure, most providers already do whatever they can to avoid medical errors. They’re good people. But under fee‐​for‐​service payment, reducing errors means they take a financial hit, individually and institutionally. (Some thanks.) We’re just not going to get as much error reduction under pure, blind fee‐​for‐​service as we would if providers could profit by reducing errors.


The beauty of prepayment (combined with an integrated delivery system) is that not only does the provider profit from eliminating adverse events that are known to be preventable, but the provider also profits by finding ways of preventing adverse events that were once thought unpreventable.


Prepayment thus has the potential to generate new knowledge about how to save lives. Pretty cool stuff, I know. That’s economics for you.


I’ll close by suggesting that everyone who still thinks I support Medicare’s “never events” policy or a “national HMO” should go back to the top. And. Re‐​read. Carefully.

Related Tags
General, Health Care

Stay Connected to Cato

Sign up for the newsletter to receive periodic updates on Cato research, events, and publications.

View All Newsletters

1000 Massachusetts Ave, NW,
Washington, DC 20001-5403
(202) 842-0200
Contact Us
Privacy

Footer 1

  • About
    • Annual Reports
    • Leadership
    • Jobs
    • Student Programs
    • Media Information
    • Store
    • Contact

Footer 2

  • Experts
    • Policy Scholars
    • Adjunct Scholars
    • Fellows
  • Events
    • Upcoming
    • Past
    • Event FAQs
    • Sphere Summit

Footer 3

  • Publications
    • Books
    • Cato Journal
    • Regulation
    • Cato Policy Report
    • Cato Supreme Court Review
    • Cato’s Letter
    • Human Freedom Index
    • Economic Freedom of the World
    • Cato Handbook for Policymakers

Footer 4

  • Blog
  • Donate
    • Sponsorship Benefits
    • Ways to Give
    • Planned Giving
Also from Cato Institute:
Libertarianism.org
|
Humanprogress.org
|
Downsizinggovernment.org