The similarity between financial markets and healthcare: uncertainty
A question: Does uncertainty in medicine mean consumers should be more or less involved in choices?
As the country watched wild swings in the stock market these past weeks, every investor faced unfortunate hindsight: if only I had cashed out at 12,500! Combined with the pain of continued uncertainty, many investors decided to remove their (remaining) funds simply to stop the discomfort of an unknown future.
While we all dread the anguish of downward market fluctuations and wonder daily what it is store for our dwindling nest eggs, no one can change the fundamental truths of investing: risk and uncertainty. Yes, experts can advise us and help us assess varying degrees of risk among options, but no one can guarantee the success of our investment decisions, no matter how well informed.
If the world of financial markets is this uncertain, should investors be less involved in the decisions about where they place their money and how much risk they assume? One could easily argue that the average investor is not capable of making good decisions. So, should we all find a seasoned stock broker to make decisions for us, independent of our personal circumstances and preferences? After all, they are the experts—right?
What about letting someone else make decisions about our health?
There is more of a parallel between managing financial assets and health assets than most of us would like to believe. Would it surprise you to know that of more than 1,100 medical studies conducted on new treatments or therapies between 2006 and 2010, 92% were labeled unreliable (1)? Or that 75% of new treatments in the past 20 years provided no clinical improvement (safety, efficacy or compliance) over existing treatment (2)? Or that scientists conducting medical trials admit being pressured or influenced by the sponsors or manufacturers funding the research (3)? Or that the popular press (or researchers themselves) often exaggerates research findings to make the study results more compelling (4)?
And this is just the part of standard medical practice that has been studied; a large part has never been investigated carefully at all. By some estimates, over half of what is accepted as the “right” course of treatment has no scientific basis; rather, they’ve simply became customary based on anecdotes and traditions passed on over time (5). Almost every week we hear of a study that disputes, updates, or flat-out reverses a medical “fact” proving that a standard practice has no proven basis (6).
To be fair, the presence of uncertainty does not imply a failure of medic
This is a very thought-provoking post by Wendy Lynch, as it draws an analogy between investing and health care. We're all investors and we all need health care. So how much do we need to know, and how involved should we be in decisions affecting our financial and physical well-being? Lynch provides a compelling answer.
This discussion has implications for us as consumers of health care and as insurance professionals. The end goal of insurance is to restore the person who suffers a loss to the same position or condition she was in before the loss. Consequently, much of the property-casualty insurance claim dollar goes toward paying for (hopefully) effective medical treatment. The answers to the questions Lynch raises in this post have a great influence on just how effective that treatment will be.