Supply of Medical Services

This American Life on America’s Healthcare System

This American Life has a two-part series on America’s healthcare system.  Below are some highlights from the first part: More is Less.

On supplier-induced demand

  My old partner that I joined here in 1971 was asked by a friend of his 


“…at what level of vision do you do a cataract operation?” 


And he said


  “Well, if there’s one ophthalmologist in town, then its 20/200.  If there are two ophthalmologists in town then its 20/80.  If there’s three ophthalmologists in town, then it’s 20/40.”

  • Dr. Frank Reed

On why doctor agree to do unnecessary tests:

Then, I said to him something that I had long known, but had never crystalized for me exactly in this way in that moment.  I said to him, “You know, for me, it really is the right thing for me to do the CAT scan.  If I don’t do the CAT scan, you’ll probably lodge a complaint about me.  If I do the CAT scan you’re be really happy with me.  In addition, I’m almost certain that you daughter is fine, but there’s a maybe a 1 in million chance that she isn’t; that maybe there is a hidden fracture and I’m missing it.  And if that’s the case, the CAT scan will save my butt.  On the other hand, if I do the CAT scan and your daughter gets cancer twenty years from now, no one will blame me.  In addition, I’m spending a lot of time talk to you that I would be doing other things.  If I got the CAT scan, I could do it in a second and it would be done with, it would be easy.  And finally, the really strange thing is, I’ll get paid more if I do the CAT scan…So everything about this was pushing me to do the CAT scan.”

  • Dr. Jerome Hoffman.  In this case, Dr. Hoffman convinced the patient’s family not to do the CAT scan.  

On the need to control costs.


And now you always hear “No one should stand between you and your doctor.”  You know what that means, that means no one should ever control utilization, even if its unnecessary, if your doctor thinks its necessary.  No one should every say no.  Almost anyone who’s looked at the data says, “Oh yes, you should.”  

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