Queueing Theory and Health Care

I attended a seminar last week on improving R&D effectiveness and part of the discussion involved queueing theory. Wherever queues form waiting time increases and productivity goes down. Some things make queues worse, including things like 'free' resources: resources that are perceived to be 'free' or at least prepaid. These 'free' resources are nearly always over-utilized as folks seek to 'get their money's worth'. So, for example, if expedited testing costs no more than normal testing, everyone will try to 'rush' their testing. If a corporate testing lab is paid for by allocating the cost to everyone regardless of how much they use it then people will try to use it as much as they can to get their money's worth. All of this reminded me of the health care debate.

It seems to me that by rushing towards a plan that just provides more 'free' resources to more people we may be making things worse, not better. We have not taken time to define the problems with the health care system but have only been fixated with spreading more health care 'free' or prepaid benefits to more people at a time when everyone agrees that cost and overconsumption is already a big part of the problem. This is similar to the corporate problem mentioned above: when health care is prepaid or perceived as 'free', people will over-consume. If their cost is fixed to a set co-pay, they will not shop for a better price. When the provider is not penalizing his patient via higher cost to prescribe excess testing to cover himself against a suit because their co-pay does not change, he will also cause over-consumption. To provide more insurance to more people will simply provide the incentive for over-consumption to still more people without addressing any root causes.

Another R&D problem related to this is that some resources, like pilot plants, tend to be managed for high utilization of the assets. Excess capacity is seen as 'bad'. But for every 5% increase in utilization beyond about 70%, wait time doubles in the queue. As a result, high utilization results in slower product development. High utilization for low cost results in slow speed to market and lost sales. Often the cost savings are no where near compensating for the lost sales and growth that could have been. To lower health care costs there is much talk of better utilization of resources, and the queue time will necessarily increase exponentially when it is managed that way. This simply trades one problem, over-consumption, for another one, long wait times, without ever attempting to address the root causes.

We also have a resource allocation issue in health care. We have excess capacity in specialty areas where much money can be made while other areas like general practice and obstetricians go under-served. Much of this is due to malpractice issues and much to the cost of med school and the huge debt many doctors start with. Insuring more people does nothing to help move resources to underserved areas, though it may well drive out some of the specialists by dramatically cutting their pay if the government does as it proclaims it will to lower their fees. This may well simply make every area short of capacity.

It seems to me that we would do better to address some underlying issues before trying to add more people to coverage. Some things that come to mind include:

• Move toward medical insurance that is primarily aimed at avoiding catastrophic costs and bankruptcy, while letting routine care be directly felt by the consumer. This would reduce over-consumption and promote shopping for price.
• Provide incentives for practice in under-served areas by offering forgiveness of med school loans in return for service in rural areas; also limit malpractice liability.
• Require posting of prices and quality ratings by doctors and hospitals. This may require some sort of Consumer Reports type of agency to standardize quality assessments, but this would allow patients to compare cost and quality.

Some of this has been mentioned in the current debate, but none of it seems to be getting addressed. The effort seems to be more about buying votes than about fixing the real problems.