Monday, December 26, 2011

Lasik, an example of how medicine can work with rational incentives

A little more than a week ago, a friend of mine got LASIK done on both of his eyes.  His vision was extremely wretched with quite a bit of astigmatism as well.  For the price of around $2400, and what was almost literally an overnight recovery (by the morning he was up to 20/30), he now has 20/20 vision and the possibility of improving to 20/15 or so.  Apparently better than normal vision isn't an uncommon result from LASIK.

LASIK is almost universally NOT covered by health insurance (although you CAN often pay it with pretax dollars through an HSA or the like), and it is also one of the only medical procedures where the cost has fallen dramatically over time.  The cost collapse hasn't been quite like that of computers, but it has fallen around an order of magnitude in only 10-15 years.  Perhaps in anticipation of my questioning, my friend also talked to his provider about the business model being used as well.

Apparently in many LASIK shops, the manufacturer actually owns the equipment, and is paid a fixed fee every time the machine is used.  In addition, they receive the results and feedback to help them drive software and hardware improvements.  It's almost effectively a royalty model.  Pricing is very transparent---even ADVERTISED in many cases, a clear departure from the opaque norms of medicine.  Satisfaction with the procedure also is considerably higher than the norm and innovation in this space has been very strong (the procedures used now are a lot more reliable---thank you early adopters for beta testing for me in the future).

One wonders if there's any way we can move more of medicine onto this model (transparency, declining costs to customers over time, and strong technological innovation).  Perhaps we could get areas of medicine banned from health insurance coverage?

7 comments:

Matt said...

I'm all for the free market, but the human eye is VASTLY different from most costly health issues. The eye is a small, closed system. Making a single cut in it requires precision, but little else.

Contrast that with most healthcare: it is consumed by the old, whose bodies are failing in complex, inter-related ways. the obese (same deal), the cancerous, and the pregnant. None of those things require a "fix." They require care, judgment calls, lifestyle modification (which many perpetually sick people are too far down on the bell curve to even comprehend, let's leave motivation aside), drugs, and experimentation.

Every one of those things is expensive, because there's a human factor. That human factor costs money. It costs $100,000 per year in Doctor's Malpractice Insurance. It costs a decade of College and internship. It costs the infrastructure of small skyscrapers to get the relevant experts together in the same building.

I'm all for getting the cartels out of it, ending the artificial influx of Federal money that keeps prices up, reforming the liability system, and letting Nurses do more of what Doctors do now, but none of those things will make medicine cheap.

Not in a culture that fears death and responsibility as much as ours does.

Jehu said...

Matt,
Health insurance wasn't the norm when I was a kid. It'd be interesting to see what would happen if more areas of medicine were unmoored from that system (LASIK and plastic surgery are the only big areas I know of that are presently).

perfidy said...

While this is a sterling example of a good trend, it may really be an outlier. Charles Stross, sf writer, just had an interesting post where he imagines future trends toward price opacity even in areas where we now have transparency and lowering costs.

http://www.antipope.org/charlie/blog-static/2011/12/the-coming-retail-apocalypse-s.html

Jehu said...

Certainly prices being opaque is desired on the seller's side---unless, of course your niche is competition primarily on price. But to get things well and truly opaque on an entire market level, you really need governmental malfeasance---I mean...regulation.

Chris said...

I think Matt hit the nail on the head. Lasik has many characteristics not shared with other procedures or situations. I doubt there are actually principles, such as "transparency" that will help control costs. Strong technological innovation, for example, is actually working to drive up costs as far as I can tell. I think our problems with healthcare are more in the line of metaphysical issues.

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