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The principal-agent problem of medicine

Alan Jacobs about Amerian health-care, or what passes for it:

I think the first thing to understand about the American health-care system is this: some people lose money from illness, and some people make money from illness. Some people pay, and some people get paid.

I don’t think there are many doctors who consciously make medical decisions based on their lust for money. But I do think there are a great many doctors who go along with the incentives established by the system, without thinking about it too much or at all, because on some level they know that thinking about it could well lead to their losing money.

Of course, most people getting paid from the illness of others are not the doctors, the nurses, or the pharmacists. In fact, outside of lucrative procedure-based specialties — and there aren’t as many of those as a Top Docs glossy would make you think — most doctors, certainly most of those who deal with chronic medical conditions, have no idea how much treatments and tests they order actually cost.

This is, in fact, not a feature but a bug of the system, and one of its main ones. Most doctors work not for their patients, but for amorphous “health systems” graced with all the charm and efficiency of a lumbering bueracracy. They, in turn, deal not with the patients directly, but rather with medical insurance companies or, worse yet, “benefits managers” who insert themselves as mediators nominally there to simplify the process but instead further increasing its complexity. And presto, you now have a series of matryoshka dolls each doing its part to create the mother of all principal-agent problems.

Should the patients' perspective be the primary consideration in improving American health-care? Absolutely! But lets not fool ourselves into thinking that the mess we are in is due to doctors' priorities overwhelming everyone else’s.

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