Just a quick observation about the healthcare debate that will soon heat up in the wake of President Obama's speech to Congress...
The politicians getting all the attention are missing three-fourths of the healthcare issue. (Might that be intentional?) Healthcare is a four-legged stool, but they're only talking about one of those four legs:
Remember six months ago, when almost all of us were wishing for the price of gasoline to drop? Well, it dropped — but I haven't seen any dancing in the streets as a result. Reason: A global depression is what made it drop.
Lesson: Let's be careful what we wish for.
Now we get a do-over regarding what we're wishing for. This time it's health care. And, based on the lesson we learned the hard way on gasoline prices, I'd like to submit a "clarification" of our wish regarding healthcare. Why? Because, as I said, the current mantra is about cost, cost, cost -- and in my judgment, cost is one-fourth of the issue. The other three legs of the four-legged healthcare stool are quality, availability, and innovation.
So, here's a comparison: First is our current wish, as the politicians have constrained it. Second is how I'd amend our wish.
1. Our healthcare wish, as it stands:
2. How I would amend our healthcare wish:
(a) affordable for all Americans, with...
(b) no increase in waiting lines, and...
(c) no decrease in the quality of care, and...
(d) no decrease in the pace of innovation."
We got burned on our gasoline wish. Fool me once, shame on you; fool me twice, shame on me.
Mention healthcare reform to any libertarian/conservative/perhaps Republican and they bring up moral hazard or wealth redistribution or death of personal responsibility.
Well, how about a Made in AmericaTM solution. There's absolutely no evidence that public AND private healthcare, working in tandem, will decrease quality of care/increase waiting lines/decrease innovation. Those who can afford a higher quality of care can still buy the best doctors and best care (why would they disappear in a public system; are conservatives afraid doctors will put altruism ahead of money?) But all Americans would have basic care (GP visits, specialist referral on diagnosis by a GP). Now the solution to cost overruns is giving physicians a *wide* latitude and training on managing costs. These are the smart individuals and perfectly capable of turning away hypochrondriacs. They can and do make tough choices about who to save and who to let go. If a patient wants better there's always earning more money.
Moral hazard is especially irritating; for there to be a moral hazard an individual has to alter his behavior based on less perception of risk, and if everyone could access some form of basic healthcare regardless of income there would be no incentive to work less because the superior private care would still be available as a massive incentive.
The solution to moral hazard for most welfare is giving *everyone* some form of basic care, and arguably in the current system there is *more* moral hazard for (people work less to access Medicaid) than in a single payer basic system. A system where everybody can theoretically benefit is better than an intrusive government who categorizes individuals based on arbitrary criteria.
Of course there's always the idea that everybody should be on their own, the least moral hazard. But if conservatives want this then they should be honest and say abolish Medicaid and Medicare rather than keeping the current system which is worse than any universal or purely private system. And of course, moral hazard is an abstract concept which depends on an individual altering his behavior with less risk; its entirely plausible that most individuals seek the best possible health (the boom of the alternative medicine industry) regardless of any available government support.
Posted by: beancounter | 26 February 2009 at 10:51
Steve - you'll never make a politician. You can't fit that wish onto a bumper sticker, or make it into a cute sound bite. Too bad, 'cause I like it.
Dear Bean - I can't believe your "let's do both" system doesn't violate (b), (c) and likely (d) of Steve's hypothesis.
If the quality of care was really the same, we wouldn't need to systems. Even our current government systems have waiting times and lines (see the VA), and given the price pressures via the current "Medi" systems on price, innovation just about has to suffer.
Posted by: leeds88 | 26 February 2009 at 12:32
From what I understand, the first problem we will run into with the more health care we subsidize is the increase in wait time. One of the reasons health care is so expensive is that there is little disincentive to use it, even with private care. It needs to be more expensive at point of service so people have to weigh the benefits and decide if it is worth it to them to shell out their own cash to get care. I'm not saying make it so people can't afford it, just that it costs more than $10 to initiate $100 or more of care. Since we don't feel the upfront costs, demand is artificially inflated. This would be exasperated even further if people received care for free. That's too much demand for what supply is available, and that causes rationing with long lines instead of rationing using personal choice.
Posted by: Mike H | 26 February 2009 at 16:14
Fantastic! Excellent post.
Posted by: AlmostChosen | 26 February 2009 at 18:05
"I can't believe your "let's do both" system doesn't violate (b), (c) and likely (d) of Steve's hypothesis."
See, the beauty of it is it doesn't according to American standards.
According to American standards, as long as a small subset of the population has excellent care for example how the media bragged about Bill Clinton's medical care, then healthcare is excellent. Now apparently healthcare needs reform because of millions of uninsured, so my plan solves that problem.
Technically you're right of course; waiting lines will be increased if only because private doctors will be working for the public system (doctors will still be private practitioners by the way not government employees.) But since Americans already consider healthcare excellent as long as the wealthy can skip the queue, my scheme is gold.
Besides its the only way to sell any healthcare reform. I happen to believe in a single payer system, but that won't sell in America. And perhaps it shouldn't -- one problem with healthcare is the more doctors you put in an area the more people go. Humans have an insatiable need for health. So medical care can suck up the entire budget if you let it.
Posted by: beancounter | 26 February 2009 at 20:17
Excellent post. I guess I would give the prez the benefit of the doubt and infer that he intended the a) thru d) caveats, but I concur with your clarification.
The idea of moral hazard is lost on me. If someone gets sick or pregnant, they will get care sooner or later. The doctor and staff may not get paid, but the patient will get the care regardless. If you pay the doctor and staff, then you are more likely to have the patient get care sooner.
When care is provided later it often is more expensive and can have huge consequences... no hazard for the doctor since he can bill even more! The hazard in not giving full access is that people will delay necessary care. We'll all pay eventually.
Full access to free contraception, to take just one example, would likely reduce the burden of unwanted pregnancies and increase high school and vocational graduation rates, which would in turn increase work force productivity, etc...
An ounce of prevention...
Posted by: Grodge | 26 February 2009 at 21:22
Steve,
It seems to me that everyone has attacked the healthcare cost problem from the wrong angle. I think the fundamental problem is too many patients (with money) chasing too few doctors, nurses, and specialists. Producing more lab equipment and hospital beds is easy, but there is a shortage of medical professionals everywhere. If the government just subsidizes costs for people (creating more patients with more money) then it will only exacerbate the problem and drive (real) costs higher (shifting even more wealth toward the people who work or invest in that sector).
Instead, I've thought of a market-based solution that will lower real costs, lower unemployment, and thus increase the GDP and tax receipts all at the same time...
We should use deficit spending to fund educations for more doctors and nurses. The funding could be given out on a competitive basis to people from all walks of life. Some applicants would be people who are currently unemployed. People who choose to leave other jobs will create job openings for others who are unemployed. Schools could easily increase the number of seats if there are more students ready to attend who have tuition money in hand. The end result would be significantly increasing the supply side of the equation. Hospitals would face lower costs because there would be less competition to hire doctors/nurses, and they could increase their capacity.
The funds could come in the form of loans, securitized and sold to the public as special "Health Care Bonds." People would probably be less averse to that, compared to just giving grants and paying for the interest on the new debt through general tax receipts. Either way, the real economic cost is zero. Tax receipts would be higher since previously idle human capital is being employed - thus raising the GDP.
What do you think?
Posted by: timwalsh300 | 26 February 2009 at 21:26
A few more thoughts on that...
1) On second thought, subsiding costs for patients and shifting more wealth toward the healthcare sector could signal to people that they should look more seriously into becoming a doctor or nurse. Indeed, I think that has already been happening for a while. But it seems like a roundabout way of solving the real issue - making things worse before they get better.
2) Anytime you increase the number of doctors or nurses, you will inevitably water down quality a little bit - assuming that the people with the greatest talent for being a doctor are already working in that field.
Posted by: timwalsh300 | 26 February 2009 at 21:30
I think your observations that goals should include more than cost - i.e. quality, customer service, continued innovation - are well said. Healthcare is a very emotional issue, but one for which we have no workable definition that is specific enough to use effectively.
When we say that "Healthcare should be affordable for all Americans" that implies that sooner or later we must define what the term Healthcare means. If anyone wishes to explore that subject, you can begin by looking online at the coverage Medicare provides and through government reports, you can approximate Medicare spending. Medicare is subsidized for many in several ways - tax funds paid by most working Americans prior to their eligibility for coverage, higher monthly premiums for "wealthy" particpants, and higher charges to privately insured patients by medical service providers to make up for lower Medicare payments. The point is not to advocate or oppose, but to say that as in Medicare - someone will have to decide what is covered for whom. If we move to one large "risk pool" that includes all Americans, then subsidies will have to be determined by someone deciding how much of the individual's average income can be allocated to Healthcare Costs, and how much tax revenue will be required to subsidize the balance. These are large and complex questions, and unfortunately will likely be settled by persons without much knowledge of the subject.
However the determination of the basic plan is determined, I would hope that optional coverages would be allowed. As a small example, I personally think that annual physical exams are useful, that dental care is worthwhile, and that eye exams are a good idea. Medicare pays for none of the above, with the exception of one physical exam when you enroll.
There is also the issue of needs differing by age group. For example, I would maintain that early pediatric, dental and vision care is extremely important - but how much, and who decides?
If we are to provide innovative, high quality, timely and cost effective Healthcare for all, I would maintain that it will be best provided by private businesses - with regulatory oversight of the basic plan. Nothing in my experience or in looking at the experiences of other countries would lead me to believe that the government can provide medical services effectively, and that is the approach that is increasingly likely if one size has to fit all.
Posted by: Jerry McInvale | 27 February 2009 at 09:06
Why is it that all other commodities manage to maintain high levels of availability, quality and innovation without pricing themselves above most consumers' ability to purchase them? All except for health care products and services?
No, I'm not talking about open heart surgery here.
Why is it that all discussions which start off with "health care costs too much" never, EVER address the reason for the exorbitant costs - costs that are so completely out of whack with other commodity expenses? The discussion never, EVER broaches the subject of how to bring costs down but, rather, always heads down the doomed path of how to cover the costs (no matter how ridiculously high they go) so that, ostensibly, everyone can "afford" the very best health care available. This seems like a futile exercise in unreal perfection. I think the sooner we get a handle on that, the sooner we'll recognize why commodity health care products and services have increased - at multiple times the rate of inflation - beyond most individuals' ability to pay for them without insurance.
Ever wonder why State employees typically get such great medical coverage? Why are most people enrolled in group medical insurance plans administered at the employer level rather than at a municipal level? People typically change jobs far more frequently than they change their residence. And even the smallest towns can take advantage of actuarial group sizes that would dwarf most companies' - not to mention the fact that most already maintain plans for their own municipal employees, and already possess the mechanisms for billing residents (e.g., property tax, sewer/water tax, etc.). Also, towns go bankrupt and/or out-of-business at rates far, far lower than most companies.
Why does a month's Nexium Rx cost $400? Why does a month's Ambien Rx cost $300? Conversely, how is it that a hospital radiology department can afford to offer a Calcium Score (CT Radiology) exam for only $99? Why are only two of these marketed direct-to-consumer? Answer: the first two are covered by comprehensive health insurance. The third is not.
How have we reached a stage where a cardiologist bills $428 for a twenty minute consult and then complains - with a straight face - when s/he's only reimbursed $298? What's the justification for a general practitioner's twenty-minute fee of $345? And how does she justify prescribing over $5,000 in diagnostic tests and seven different pharmaceuticals for everything BUT the one issue presented to her for diagnosis? Unfortunately, these are not exceptions, they are the rule. Answer: health care product and service consumers care about only one thing - the amount of their co-pay. They are - have been trained to be - completely oblivious to the actual costs of their own health care.
The mechanism responsible for exorbitant health care costs is comprehensive health care insurance (CHCI).
CHCI companies have a vested interest in allowing the costs of health care products and services to increase and no incentive at all to keep them down. Simply put: in a business model where all cost increases can be passed on to the customer via rate increases, higher medical costs equate to increased cash flow, which only increases their bottom line. This fundamental conflict of interest (at least with respect to the consumer) is at least a part - likely most, and possibly all - of what's driven health care costs higher at multiple times that of inflation while quality has decreased, generally. Essentially, the commodity economics - the economics that keep quotidian costs down and quality up in other consumer areas - are completely confounded by CHCI.
As currently managed by health insurance companies, this mechanism is kept moderately efficient through those companies' need to stay financially solvent. The federal government, however, sees itself limited to no such restriction, as we have seen. If you think the costs of health care are high now, just wait until we turn control of this completely broken CHCI mechanism over to the 111th Congress. If you think we have 'nanny-state', 'we-know-what's-best-for-you' laws now, just wait until everything you do can be seen as potentially increasing the cost of health care as funded via the government.
This is a problem government has no incentive to fix. Quite the reverse. Our elected "representatives" made their goals clear long ago: project the false notion that they care about the average citizen in order to garner votes / political power. There are no altruists left in our government who actually care about the quality or cost of health care. And their behavior these past ten years demonstrates that any perception to the contrary is pure self-deception.
http://www.agoyandhisblog.com/fixing-the-health-care-problem-by-2015/
Posted by: goy | 27 February 2009 at 10:46
More is spent per capita on healthcare in the United States than in other industrialized nations. Also there is one fact you anti-government folks ignore which makes me think your study of the issue is shallow at best. That is, physicians need not be government employees under a single payer system, and neither do prescription drugs need to be covered. The whole idea behind single payer is to remove bureaucracy and red tape, remove overlap, streamline and have physicians who are *private* practitioners bill the government for what they deem are necessary services. Choice is even maintained -- patients who feel they are getting insufficient care could conceivably switch to another *private* physician.
Now, if you believe that physicians will act greedy and scam the system, then come out and say so. If you think research and development will be harmed, say that too. If you think there's a moral hazard, say that too. But big scary government is an invalid concern, because nobody is proposing making them government employees.
The facts are this: the US spends more per capita on healthcare than any other industrialized nation, I believe twice as much as those which offer healthcare to all their citizens. It is also a fact that Americans are the most obese and have the most heart disease. Americans are not healthy. These are facts that can't be washed away by ideological fear-mongering. I am willing to accept that the USA could never adopt a single payer system due to cultural differences (why I advocate a public/private dual system), but let's not kid ourselves. Single payer is superior.
Posted by: beancounter | 27 February 2009 at 14:45
I agree the physicians need not to be gov't employee, but will they be coerced into it, viz-a-viz who pays them...
Single payer is superior for who?
The Washington Post's Ceci Connolly wrote recently, "Obama aims to make a 'very substantial down payment' toward universal coverage by trimming tax breaks for the wealthy and, SQUEEZING PAYMENTS to insurers, hospitals, doctors and drug manufacturers."
If gov't is able to "squeeze" payments..ie. you're reimbursement or payment...doesn't that essentially make you a gov't employee?
The aim is to make a national health care system directed and controlled by the government...call it single payer or whatever you like, but realize that it's an infringement on someone's personal liberty.
Posted by: glass_half_full | 27 February 2009 at 15:15
Well I can certainly respect give me liberty or give me death.
As long as an individual is consistent with his dislike of big government then I am happy. If someone views national healthcare as big government, they should equally consider a large military as big government. Military is the most overt, direct method a government can use to infringe on personal liberty. Legislation barring such use will never stop a determined dictator: see Caesar.
But I digress. My point is I see numbers such as cost, waiting times, numbers of uninsured, numbers of baby boomers, number of overweight Americans as facts. All people will get sick eventually. Rather than play an abstract personal liberty card, or predictions of increases in waiting times, conservatives should come up with their own alternatives to address these problems (and if they can't think of any way that doesn't involve more tax or more deficit then they aren't thinking enough).
Posted by: beancounter | 27 February 2009 at 20:48
beancounter, try reviewing the U.S. Constitution.
"Large", "medium" or "small", the federal government is given authority to raise armies and maintain a navy. There is no discussion therein regarding national healthcare. The word 'health' doesn't even appear.
Posted by: goy | 28 February 2009 at 00:12
Steve,
You used the dreaded "D" word in your post. Intentional?
Posted by: Bob | 28 February 2009 at 08:38
Bob,
Just getting a jump on it; looks as if that's where things are headed. Check the headline in today's WSJ: "Economy in Worst Fall Since '82."
Posted by: Optimist123 | 28 February 2009 at 08:42
Mr. Goy,
I do not question the need for existence of the military, just the need for existence of a large military. If you support the right to bear arms in order to defeat a tyrannical government, the obvious conclusion is the Federal military should be as *weak* as possible so untrained peasants can defeat it if necessary. It is also obvious that a larger military is bigger government.
By the way the word Welfare is in the beginning of the constitution, and it is even capitalized.
You compared prescription drugs to a diagnostic test. A more direct and simpler mechanism than the one you propose is pharmaceutical companies want to make a larger profit. You also declare that State have "great medical coverage" compared to private health, and the most obvious mechanism is the one you already propose: larger actuarial group sizes spreading risk. But you turn around and blast that same mechanism despite admitting it's "great medical coverage." I also disagree that most commodities are priced in an affordable range for most Americans. Most Americans cannot afford a house (even on credit) and I consider large capital projects such as nuclear power, roads and so on to be forever beyond the individual consumer.
Posted by: beancounter | 28 February 2009 at 09:50