The American Interest
The Middle East & Beyond
Published on January 9, 2013
What’s Wrong and How to Fix It, Part 7: Health Care

We must fix the health care system (and no, folks, we have not already done that).

If we can get the plutocrats back on their heels by cordoning off the impact of television on our moneyed politics, reforming the banking/financial sector and the tax structure, we might then be in a position to really and seriously get at our deficit problem. This problem, though it has many sources, is being driven now, and will be for the foreseeable future most of all, by rising health care costs.

The main reason health care costs are skyrocketing is fairly easy to understand, but almost no one who has not thought systematically about this—and here I include, apparently, nearly all of the presently incumbent American political class, with the possible exception of Senator Ron Wyden—seems actually to understand it. Here it is in a nutshell: Science and technology are rapidly expanding the range of diagnostic and treatment options, but without, as has happened in other areas of our economy, also enabling us to substitute capital for labor to make medical functions more cost-efficient. In medicine, no matter what sorts of diagnostic and care options may exist, highly skilled doctors, nurses, lab techs and administrators are still required to apply them. Machines or robots can’t substitute for people in medicine like they do in building cars, making steel or growing food. Highly rained human capital is very expensive, and this double-whammy—new options opened by bio-science and the need for skilled people to understand and apply it in clinical settings—is mainly what makes healthcare costs keep rising.

Of course, that’s not the only reason—just the main one. There are at least seven others I can count, virtually none of which were ever even mentioned in the pathetic excuse for a policy debate we had about this subject during Barack Obama’s first term.

First is demography. We are an aging population, not as much as some others, like Japan, China and the EU, but we are aging all the same in the sense that significant numbers of people are living a lot longer. And older people suck up far more medical care dollars than younger people. This is a structural factor; there’s nothing we can do about it. Some believe that this is only a temporary issue, because eventually the population pyramid will change its shape. It will change shape, indeed, but the presence in our societies of lots of older people compared to previous epochs is probably not temporary. It is, as I say, a structural factor.

Second is that the Federal government is responsible for about half of all medical spending in the United States, and the Federal government, for all the reasons described above, spends inefficiently. Because it is very large, its transactional costs are huge. And it has a knack for making them even hugher—the well-intentioned but, thanks to administrative/bureaucratic mission creep, counterproductive HIPAA “privacy” legislation being a key case in point.1 (In our “debate” on health care policy no one, as far as I could tell, mentioned HIPAA.) This is why going to a single-payer government system for national health care is such a very bad idea.  It would solve a lot of problems, true enough, but it would create costs that would dwarf the achievement.

Third is that large private insurance companies also manifest huge inefficiencies and transactional costs. And they are not entirely honest about how they go about their business. As everyone now should know, left to their own devices they cherry-pick and exclude.

Fourth is the near total disorganization of the capital-technical stock in medicine on account of the raw for-profit character of the industry. Some regions have too many machines and labs and some too few. Some regions, like Rochester, New York Minnesota, where the Mayo clinic is, are around 17 percent more efficient than the norm. We don’t need a national health insurance infrastructure in order to model and scale up the health care systems within the United States that have proven efficient. If we do that—learn from our successes and scale them up—we can mitigate the effects of our supply-push system, defined simply as “we have a machine, and to amortize its costs to our advantage we will use it whether it makes clinical sense or not.” We have an obsession with the technology and we ignore common sense, but both are pushed ahead by financial considerations that flow from the dominant for-profit model. There is no reason we cannot salary most doctors by year rather than on a fee-for-service basis by associating nearly all of them with group practices and hospitals. Indeed, we do this to some extent already, so again, we are not talking here about reinventing the wheel, but of scaling up what we already know works.

For the same reason, we are terrible at preventative care in this country. We actually don’t have a health care system but a disease repair system. Indeed, since government subsidizes the production of high-fructose corn syrup, which is in practically every processed food Americans buy, the government is essentially subsidizing diabetes, which is one of the most expensively debilitating condition there is. There are all sorts of cultural reasons why we virtually ignore preventative care, reasons which include how doctors are trained these days, but we do not have time to linger on this. Just note that preventative care isn’t lucrative and it doesn’t often require the use of fancy and expensive machines. Think about that for a minute, and you’ll reach your own conclusions without any further help from me.

Also, note that doctors use the machines available to them, in part, to protect themselves from malpractice suits. This is the fifth factor. We do need medical tort reform, and again, this was virtually ignored during the Obamacare debate. Democratic politicians at all levels are very leery of offending trial lawyers, one of their core constituencies. But the excessive cost of malpractice insurance, while significant, lamentable and mostly avoidable with good policy, is not as huge as is often assumed.

Probably just as expensive overall is, sixth, the lobby for the pharmaceutical industry, a very powerful special interest that gets Congress to vote for all sorts of expensive favors. Not only are we over-lawyered and over-machined, we are also significantly, and very, very expensively, over-medicated as a result.

Seventh is a subject no one wants to talk about: religion.

In an age of older, more innocent (or, one might say, pure) religious belief, mortality was accepted as a natural fact of life. Aging was seen as not only inevitable but noble. We respected our elders and venerated them. Now most Americans run from aging and mortality like scared children. No wonder, then, that people today seize upon the possibilities of rejuvenation medicine in a way most of our forbears never would have. As already noted, upwards of 40 percent of all medical expenses in the United States are reportedly spent on very elderly or very ill people in the last 18 months of their lives—in other words, people who are not going to get better, as the term is generally understood. And a lot of that spending is on diagnostics, operations and treatments of dubious value to anyone except those who sell painkillers and medical machines. (Increasingly, too, disproportionate amounts of money are spent on those at the very beginning of life, including many damaged infants who will never lead normal, productive or independent lives.)

Of these eight factors, the first key one plus the other seven just listed, some are structural and some are contingent, meaning in plain English that there are some that policy can’t really affect much and others it can affect to one degree or another. We can’t, and shouldn’t want to, do anything about the key factor; there is nothing wrong and plenty right with paying for medical progress as a way to honor life and mitigate pain. We can’t do anything about demography either. On the other hand, we obviously can do something about the HIPAA disaster. Most of the other factors, too, are subject to influence by policy, but not to the same degree or with the same impact. Thus, a wise policy analysis needs to identify the inflection points that can make the most difference.

For example, if there were a way to use policy to encourage people to eat right, get exercise, get good sleep and enjoy emotional well being, that would solve most of our health care problems pretty quickly. We could bring core costs down dramatically as needs decline, and suddenly insurance premiums would become far more affordable. This really is the beginning of wisdom here: It is—how to say it?—stupid to worry about figuring a way to provide insurance coverage for the uninsured without thinking of ways to reduce the overall cost structure of health care. But to do that you have to understand and acknowledge where the escalation pressures actually come from. Not doing so reminds on of the proverbial drunk out late at night looking for his lost keys under the street lamp, not because he dropped them near there, but because that’s the only place where there is any light. The escalation pressures don’t come mainly from the insurance companies; they come from the culture—the scientific culture, the business culture, the political culture and the culture more generally. Unfortunately, it is simply not practical to think that any public policy silver bullet fix can make a major and reasonably quick difference across the board. There is no single technical or bureaucratic policy fix for our circumstances, certainly not fiddling with the insurance market.

Then we have to be honest about what is and is not possible politically. Can you think of policies possible in our Congress that would be effective in getting people to eat right, exercise, sleep well, and—the most wildly improbable of all—see to their emotional well-being? As already suggested in passing, we could perhaps stop subsidizing diabetes with agriculture subsidies, and we could ban or limit fast-food “restaurants” advertising their destructive so-called food on television, just like we no longer allow cigarette advertising on television. But that would be very hard to do. Beyond that, the policy kitty is pretty much empty. Want an illustration? When Mayor Bloomberg raised the idea of banning high-sugar soft drinks, people accused him of being nanny-in-chief—and in my view rightly so. People in a free society have a right to be idiots.

*****

The point here is that since no significant policy fixes are available along such lines, we are brought back to the truth that, as with problems of equal access to decent education, health care issues amount to a series of what are essentially moral issues. Who deserves this treatment or that enhancement? What should a minimum level of care be, regardless of a person’s ability to pay, and who gets to determine that minimum? If the patient can’t pay, who should—and who gets to determine that? When should the concept of triage consciously kick in for the care of the elderly and terminally ill?

That last question brings us willy-nilly to Medicare. Any sensible analysis of the problem comes very quickly to the truth that our spending on the aged and permanently infirm is plainly unaffordable. Medicare, it is widely understood, is the single most out-of-control entitlement from the perspective of the Federal budget mess. Its likely growth path is so huge that it stands to swallow all other discretionary spending. I’m not advocating euthanasia or “death panels”; I respect the non-instrumental, intrinsic sanctity of all human life. But that does not mean we should use expensive machines and other scarce medical resources to keep such people alive at the expense of the health of others, which is, in effect, what we are doing. We are already doing triage; when we hook up a financially flush or well-insured 92-year old dying person to a bunch of expensive machines, we are in effect not using those medical resources in other, more sensible ways, but this is done indirectly enough that we simply are not forced to admit it.

At least we halfway understand this problem. Unless people write binding living wills, children and other relatives are extremely loath to “pull the plug”, and medical professionals are afraid of being sued if they do. Everyone who looks seriously at this issue is aware of this. But still, how dumb do we have to be not to realize that if insurance pools have to take into account that 40-50 percent of costs spent on people we know will never get well, premiums for younger and healthy people are going to be very expensive?

Obviously, these are controversial and fraught questions. At base they are moral, not technical or merely financial dilemmas, but we as a nation have refused to acknowledge that. That’s why we ended up with Obamacare, a deeply flawed, very expensive and probably unworkable first step that really skirts most of the health care problem set. We will probably never likely agree on answers to these questions at a national level, anymore than we’ll agree on abortion and same-sex marriage. If we try to create a genuine national health care system, we will be forced to answer such questions for all of America’s religious and regional communities at the same time. That is just asking for trouble; we know this because President Obama did, and what he got was trouble. And there’s plenty more where that came from if we stay on the path to nationalize the challenge.

What is so sad about this is that the Obama Administration did not pay this huge cost as a premium for really fixing the system itself, but merely for amending the insurance umbrella, mainly through a vast expansion of Medicaid. The insurance problem is symptomatic of the whole, but it’s still only a tiny fraction of what the problem actually constitutes. When people got in the habit of calling what has become known as Obamacare a “health care reform” I was dumbfounded. I was equally dumbfounded, and also irritated, during the first 2012 presidential debate when neither candidate discerned the distinction between what is causing costs to rise and how best to insure against them.2 At best, Obamacare attempted a solution for an inadequately functioning healthcare insurance market; it had little ambition to do anything about the sources of the health care cost-escalation problem itself. Those aspects of the bill that passed amount to little more than garnish on the salad course, not even close to the entree. Nor was the real issue ever whether the personal mandate was constitutional or not; it was that the legislation was several hundred degrees of separation from what we actually need to fix.3

Very likely, the core motive behind Obamacare had little to do with fixing the health care problem. By taking money away from Medicare and moving it to Medicaid, it functions basically as a class and racial redistribution mechanism in drag. Medicaid overwhelmingly benefits blacks and Hispanics; Medicare wildly benefits older white people, because that’s the verdict of current demographic facts. This redistribution effort may or may not be a good idea (I think it is justified on several levels), but we do ourselves no favors at this point by obscuring the real purpose and impact here. As some wag once said, “Should you read upon an enclosure with an elephant a sign saying ‘Buffalo’, believe not your eyes.”4

Whatever the motive, with Obamacare we have now saddled ourselves with what is sure to become a highly bureaucratized, inflexible and expensive management apparatus (not that the market-driven insurance model we had before was a paragon of efficiency) just really to solve a fraction of what is wrong with the system. Of course, first we need to work out just what the new system actually is, and that has proven very difficult so far.

For example, if, according to rules announced by the IRS on December 30, 2012—more than two years after the bill’s passage—employers are going to cope with the law by narrowing benefit definitions to full-time employees and exclude their families, then Obamacare could end up leaving more people under-insured, if not uninsured, than before the law was passed.5 If employers don’t do this, or if the rules are changed to make it illegal for them to do so, no small number of small and medium-sized businesses will capsize from the vastly heavier costs—and then, of course, no one who used to work for those companies will have health insurance from that source.

Seeing how the new rules incentivize businesses to minimize or drop insurance coverage for dependents, several attentive reporters asked whether Federal subsidies would be available to allow spouses and children to buy insurance from the new exchanges that states are supposed to set up. The Administration would not say; it “reserved judgment”, which I interpret to mean that these folks never actually thought this through, and now find themselves in a real pickle of their own making. The pickle looks basically like this: If such subsidies are made available, they will break the bank; if not, the number of under- or uninsured will rise relative to the pre-law period. Even if subsidies are made available, we could have a situation for a great many families where the main breadwinner has one policy, the spouse another and the children yet another, all with different rules, forms, deductibles and the like, and at a substantially higher overall cost—as if the American transactional system for health care isn’t complicated enough already. In short, we seem to be witnessing a full-frontal public policy disaster in the making before our very eyes.

The best that can be said for Obamacare, assuming it survives its own administrative birth, is that it makes the insurance market more accessible for those who have heretofore been shut out of it, and that’s good, but the price tag for it will probably break the bank, and that’s not so good. The claim that we can add tens of millions of people to the health care system who cannot afford its market costs and not add costs for those who have been affording them never made sense. Yes, it’s true that we already pay when those without health insurance show up at the ER, but that is but a small fraction of the costs we can expect to pay when these new entrants have access to the entire health care system. And now the promise that no one and no family that was happy with its health insurance plan would lose or have to change it also looks either like a lie or, more likely, an unintended falsehood as the headache-inducing effort to define the law into practical rubber-meets-road form has gone forward.

The last thing we should have done is to add gratuitous transactional costs to our medical system, but that’s what we did. Instead of wasting just 30 percent of what we spend of such transactional costs (vastly higher than in other advanced democracies), we might make it to 35 or even 40 percent now as costs grow exponentially with the size of the system, possibly going soon from a mere $750 billion each year to a cool $1 trillion in money tossed down a well with no bottom.

*****

Besides, there is a much better way to deal with the insurance aspect of the problem. The Wyden-Ryan Bill would still be a big improvement over the Obamacare method, which relies on government getting its own spending under control.6 But we can do even better than that.

Given that a big chunk of the reason for high premiums concerns how much we spend on old or very ill people who will either remain chronically ill or die, the solution is to divide the insurance pool into a “normal” part and an “intensive care part.” If we price standard care premiums without “intensive care” medical interventions, they would fall dramatically. We can deal with the “intensive care” aspect by creating a secondary insurance market, which is well known in other domains, such as the housing market.

Indeed, in about 34 states there already are state-managed high-risk insurance pools, so the idea is not new. But existing programs are very limited in scope, applying only to those with pre-existing conditions not insured by an employer and who are too young for Medicare. Some of these arrangements have worked well, others poorly, but all have been limited by the high premiums they charge. My idea is to vastly expand the secondary insurance market, and to make it state-regulated rather than state-managed, by limiting how much Medicare will pay for ballooning end-of-life expenses. How would that work?

Everyone would be guaranteed a basic and decent level of care no matter what, and if we insist on doing this sort of thing on a national as opposed to a state-by-state level (though I don’t recommend it) we could do that. In my view, we should also make basic health care for all children (including prenatal care) basically free—that’s a wise investment in our society’s future. We should also be more willing to pay more, depending as well on people’s ability to pay, for health problems that are not caused by irresponsible behavior like smoking, excessive alcohol intake, diabetes-level overeating and so on. But however we create incentives for healthy behavior in the insurance remuneration scale, everyone should be able to purchase additional insurance to cover the possibility of trauma, chronic illness or the ravages of old age if they like. The younger and healthier the buyer, presumably the cheaper the supplementary insurance package would be—low risks equal lower costs, just as in every other form of insurance known to mankind. That would reward prudential behavior—a good thing in and of itself.

It would be a good idea, too, to make prospective life insurance benefits transferrable to intensive-care medical costs, as well, if that is possible. So Harry buys $500,000 worth of term life insurance and has been paying the premiums for years, but he gets sick and together he and his wife Sadie decide to withdraw some of the prospective death benefits to pay for current medical care costs. If the same insurance company handles a person’s secondary health insurance and life insurance policies, it would be a lot easier to imagine such an arrangement being both effective for the consumer and still profitable for the company. My wife and I are in our early sixties right now, and if such a deal marrying up life insurance and secondary health insurance were available it would be attractive to us. If to us, why not to many others?

Obviously, not everyone who wants more than the basic minimum of insurance would be able to afford much or all such additional coverage as they desire, especially those who wait too long to shop for it. But so what? A lot of people want a new Cadillac to adorn their driveway (if they have a driveway) or a swimming pool in their back yard (if they have a back yard) and cannot afford it. No one expects the government to just up and give them the car or the pool, do they (let alone the driveway or the back yard)? But insurance companies, if they are not price-fixing and are in genuine competition with each other, can be expected to design products at attractive rates. That would make the products more attainable and allow more people who want more than the basic, government-guaranteed coverage to have it, or at least to have some of it.

To some this may seem hard-hearted, but such people have to face the fact that wrestling with tradeoffs is a normal part of life. Health care isn’t the same as a Cadillac or a swimming pool, to be sure, and I sympathize with the view that health care is a right no less than, say, public education. I sympathize on the basis of the same principle that guided the introduction of poor laws in Britain in the 18th century. But that right can’t be unlimited because it then impinges on the interests and, arguably, the rights of others. If we could have solved the problem of insurance coverage for poor people who wanted coverage for themselves and their kids but could not afford it by creating a secondary insurance pool for “intensive care” patients, that would have been a much better solution than the one we’re likely stuck with now.

Why didn’t the Administration consider this approach? This is not, as they say, rocket science. If I could think of it, surely people who roam this area of public policy for their day job also could think of it—again, especially considering that some states already have a roughly similar and improvable deal in place. I don’t know why the secondary-insurance option never emerged as Obamacare was being developed and debated. But it’s not too late, perhaps, to consider it now.

Given the nature of the problem—which, again, is as much moral and cultural as technical or administrative—it is also one best handled at the state level. To think there is a one-size-fits-all solution on a national level is delusional. It represents the “will to a system” of social engineering that every sensible philosopher and observer has warned against. The solution to intrinsically difficult problems like health care costs is not often made easier when its scope is made larger. This is so obvious that, under ordinary circumstances, it should not need to be explicitly pointed out. But evidently we are not living in ordinary circumstances.

There is another reason we need now to recognize and deal with the moral and political aspects of our healthcare problem: These problems are going to get worse. There is already a troubling blurring trend between what is medically necessary and what is merely desirable. For example, drugs originally developed for legitimate therapeutic reasons, like Viagra, are now used for essentially recreational and enhancement purposes. It is also becoming harder to distinguish some minor surgeries and physical therapies justified for physiological reasons from elective cosmetic surgeries. But the real looming problem concerns the impact of genetic engineering and a new era of man-machine interfacing. Alas, we don’t have time or space for that discussion now.

Past Entries:

Part 1: Introduction, and Globalization/Automation

Part 2: Political/Institutional

Part 3: Corruption/Plutocracy

Part 4: Television and Politics

Part 5: The Financial System

Part 6: Tax Reform

Notes:

1See the revealing essay by Jeff Drummond, “Privacy Parts”, The American Interest (November/December 2006).

2The best discussion on this is Peter S. Heller and Barbara Opper, “Big Problem, Wrong Conversation”, The American Interest (January/February 2010).

3That said, I still have trouble parsing Chief Justice Robert’s determination that the personal mandate is essentially a tax—unless one defines the word “tax” so broadly that it means everything, and therefore nothing. A tax is a percentage of something (income, a sale’s price…something) one is obligated to pay presumably on behalf of financing some public good. A tax doesn’t obligate one to purchase a particular product or service; it’s just a percentage of what we choose to buy of our own free will. Even the Social Security tax we pay doesn’t buy us a specific service as such; it works like an old-age insurance pool. The personal mandate does obligate an individual to purchase a product, namely an insurance policy, or to pay a fine for refusing to do so. The purchase price is not a percentage of anything, and the fine is not a percentage of anything either. I fail to see, therefore, how the personal mandate can justifiably be termed a tax. But then, I am not a lawyer.

4Just by the way, the wag was Alexi Tolstoi, in a book called Kosma Prutkov.

5This is complicated (shocking, I know). The rules apply to companies with fifty or more full-time employees, and the coverage offered much cover dependents, but not spouses. The legal obligation to make the coverage affordable, however (defined as no more than 9.5 percent of wages), applies only to the full-time employee, not to dependents. So a company could offer a family plan that is wildly unaffordable and still be within the letter of the law. Another reason for destroying the IRS. See Robert Pear, “Employers Must Offer Family Care, Affordable or Not”, New York Times, December 31, 2012.

6See the analysis in David Brooks, “The Policy Verdict I”, New York Times, October 9, 2012.

  • jim

    The Mayo clinic is in Rochester, MN, NOT Rochester, NY.

    • Daniel Kennelly

      Fixed. Thanks!

  • frank r

    Health care costs are not “out of control”. Rather, we are undergoing a change in consumption patterns from make-work involved with suburbia (granite countertops, McMansions, clothes and automobiles that are discarded for fashion reasons rather than because they don’t serve a useful purpose as protection from the elements or transporation) to make-work associated with the medical-industrial complex. Make-work is essential, because there simply isn’t enough real work to go around and the alternative to make-work is to put the excess workers on the dole, which is bad for morale, or exterminate or jail them, which is obviously not an option anyone in the mainstream is likely to propose. So make-work it is. The great advantage of healthcare makework is that it doesn’t consume a lot of scarce natural resources. It’s almost pure labor. Contrast with the defense-industrial complex (another big source of makework) which is extremely expensive in terms of natural resources compared to labor. Suburbia is also quite resource intensive. Leisure is even less resource intensive than medicine, but the leisure society concept of generating makework was grounded due to our puritanical instincts. There’s also the paper-pushing economy–lawsuits, financial products, edumacation–but Americans are tiring of that. Myself, I’d prefer the R&D makework economy (light on resources for biology and the social sciences, though not for physics) to either the healthcare, leisure or paper-pushing forms of makework. But some form of makework is essential.

  • Mark Jamison

    Yes, we have a medical cost problem, ours are more than twice as much as the average in the industrialized world with results that are middling. The problem isn’t Medicare or Medicaid or government systems that are generally significantly more administratively efficient than private plans.
    The problem is that we’ve created legal and structural frameworks that protect high costs. How about allowing free trade in medical services? A heart bypass operation in Thailand costs about a third of what it does here with results that are actually better than average. Yet our government systems won’t pay for out of country care and our private insurance systems don’t take advantage of those opportunities.
    And lets look at patent protections for the pharmaceutical industry and the medical devices industry. The system of rents established by the patent system contributes significantly to our medical bills. The economist Dean Baker has done some significant work in these areas.
    Finally, tort reform is necessary, not so much because of out of control malpractice premiums or out of control judgements but because the fallacy of “defensive medicine” gets used to justify a whole lot of testing and procedures that are really just churning for fees. Let’s take away that excuse and work to establish some best practices standards for treatment and we can cut into the inefficiencies of the fee for service model which is a profit model not a care model.

  • Jim.

    Q: Who deserves this treatment or that enhancement?

    What does “deserving” have to do with it? Once you start thinking like that, there are no good answers. So you can’t start thinking like that.

    Q: What should a minimum level of care be, regardless of a person’s ability to pay, and who gets to determine that minimum?

    Whatever level of minimum care is achievable from charity supported by voluntary contributions.

    If you don’t think this is enough, give more (of your own) money to charity, and encourage others to do the same.

    Q: If the patient can’t pay, who should—and who gets to determine that?

    The aforementioned charities, up to the limits of their funds.

    Q: When should the concept of triage consciously kick in for the care of the elderly and terminally ill?

    If they can’t pay and neither can the charitable organizations, they don’t get whatever treatment is in question. If they can, their funds (will naturally) go to finance the non-recurring costs of the development of whatever treatments they’re receiving, and eventually the cost of those treatments will drop so that more people can afford them.

    This is a financially sustainable health care system. Any other system either a), breaks the bank, or b) puts questions of life and death in the hands of human agents, where that power does not belong.

    Fortune and misfortune are better ways of deciding these questions than giving them to power-corruptible humans.

    Clue, guys: Making more promises to more people isn’t going to bring costs down. ObamaCare was a mistake, as are all utopian Universal Care plans.

  • Mark Mosley

    Great Article. Very insightful. I might add that many physicians and mid-level providers have no idea of the charges they incur for the patient . We are as a group undereducated on issues of cost and even on the magnitude of medical benefit and harm. We tend to blame a lot of this on protecting ourselves legally. But we forget that you protect yourself legally by talking (and documenting), not by testing. We would be amazed how how little much of medicine helps and how much is charged for this unnecessary medicine. This is an area we can take ownership and actually change.

  • bub

    It seems to me that a huge part of the problem is that no one in the health industry has to publish prices for procedures. You can’t look up a price list for anything and shop around for the best deal. Go to the hospital and they have every incentive to perform a walletectomy on you because if you have insurance you aren’t going to pay directly for it. I think a great amount of the problem is that providers aren’t required to publish prices for procedures or prices for billable hours. If you can’t price compare, then you can just about guarantee that you will be fleeced.

  • Dustin Blake

    Great article. While a single payer system would not solve the underlying social causes of healthcare cost increases (awful diets, lethargy, ETC) it would reduce the administrative costs and the paperwork to a massive degree. I keep coming back to the fact that all other wealthy nations spend less (as a % of GDP) on healthcare and get better results. as far as policy goes single payer seems like a logical first step.

  • Mark Hammer

    One thing that has been eroded over the last ten years is consumer based pricing system. Ever since Medicare began to set prices for various treatments and procedures according to resources consumed, haggling at various committee meetings, and, lately, by edict, there is no true consumer testing of the utility placed on specific medical services. Without this kind of pricing/utility-knowledge the bureaucrats can’t know what the public really wants. Instead the decisions at best are made by doctors and public health officials. At worst and, in reality, they are made by rent seekers and true-believers of various persuasions.
    If a significant number of Americans had to pay for medical care out-of-pocket, the resultant “shopping” would force provider price-listing and negotiation, drive down drug prices, eliminate wasteful and unnecessary procedures and tests, and probably reduce the size of the attendant medical care establishment by about 50%. It is the government’s payment for close to 50% of medical care that provides a subsidy to the consumer and forces a phony pricing scheme on the providers.
    The government subsidy is badly misapplied. The top 25% should probably receive no subsidy while the bottom 25% would probably need complete subsidy. This kind of approach has the potential reduce the total government subsidy substantially, while using the market based pricing information to allocate services in the subsidized sector in a way that reflects what consumers really want.
    What happens if consumers don’t want the right things, e.g., preventive care? This is the province of public health officials. Let them do what they always have done…try to convince people to take better care of themselves and want the right things. Confusing public health issues with treatment of disease sounds like a great idea to policy types, but in practice it makes a mess.