The health care debate is in full bloom and so it's time to write about it and, I hope, get some discussion going. From what I've seen though, on the news this week, I'm skeptical that any real healthy discussion is going to take place for two reasons.
The first reason is because this issue is revealing just how addicted we are, as a nation, to our political categories, and the vilifying of whoever our opposition might be. We vilify through sound bites, as Sarah Palin has done by talking about an imaginary death panel
who hold the rights to live or die in their power. We vilify through implying that Obama's health care logo
has it's origins in Hitler's Socialist Party Logo. These stupid accusations and associations don't help the conversation at all. Such comments make it difficult for many to even listen to the very good and important things that the pro-free market people have to say.
Secondly, and related, it's increasingly clear that the average American wants sound bytes, rather than doing the hard work of digesting the complexities of this issue. For those inclined though, to do that hard work, I'd recommend this very lengthy article
, written by a life long Democrat whose first hand negative experiences with the health care industry have led to his thorough study of the problems, and his worthy, decidedly pro free-market proposals. If you've no time to read the whole article, please read the bullet points and quotes, at the very least, before commenting.
This conversation is important, not because we want to become like Europe or be different than Europe (or Canada), but because health care is consuming more of our resources every year, resources not used for other things. The path is unsustainable, even for the insured, let alone those who are losing their homes or dying because they have no insurance. What are some of the major issues? Pour a cup of coffee... this is long post. But please read... it's important!1. Health Care isn't Health or Happiness
Medical care, of course, is merely one component of our overall health. Nutrition, exercise, education, emotional security, our natural environment, and public safety may now be more important than care in producing further advances in longevity and quality of life. (In 2005, almost half of all deaths in the U.S. resulted from heart disease, diabetes, lung cancer, homicide, suicide, and accidents—all of which are arguably influenced as much by lifestyle choices and living environment as by health care.) And of course even health itself is only one aspect of personal fulfillment, alongside family and friends, travel, recreation, the pursuit of knowledge and experience, and more.
Yet spending on health care, by families and by the government, is crowding out spending on almost everything else. As a nation, we now spend almost 18 percent of our GDP on health care. In 1966, Medicare and Medicaid made up 1 percent of total government spending; now that figure is 20 percent, and quickly rising. Already, the federal government spends eight times as much on health care as it does on education, 12 times what it spends on food aid to children and families, 30 times what it spends on law enforcement, 78 times what it spends on land management and conservation, 87 times the spending on water supply, and 830 times the spending on energy conservation. Education, public safety, environment, infrastructure—all other public priorities are being slowly devoured by the health-care beast.
2. Health Insurance isn't Health Care
After explaining why health insurance is so obviously important as a means of protecting one from going bankrupt because of catostrophic illness, Goldhill writes, "...health insurance is different from every other type of insurance. Health insurance is the primary payment mechanism not just for expenses that are unexpected and large, but for nearly all health-care expenses. We’ve become so used to health insurance that we don’t realize how absurd that is. We can’t imagine paying for gas with our auto-insurance policy, or for our electric bills with our homeowners insurance, but we all assume that our regular checkups and dental cleanings will be covered at least partially by insurance. Most pregnancies are planned, and deliveries are predictable many months in advance, yet they’re financed the same way we finance fixing a car after a wreck—through an insurance claim. Comprehensive health insurance is such an ingrained element of our thinking, we forget that its rise to dominance is relatively recent. Modern group health insurance was introduced in 1929, and employer-based insurance began to blossom during World War II, when wage freezes prompted employers to expand other benefits as a way of attracting workers. Still, as late as 1954, only a minority of Americans had health insurance.
3. the Moral Hazard Economy
Every time you walk into a doctor’s office, it’s implicit that someone else will be paying most or all of your bill; for most of us, that means we give less attention to prices for medical services than we do to prices for anything else. Most physicians, meanwhile, benefit financially from ordering diagnostic tests, doing procedures, and scheduling follow-up appointments. Combine these two features of the system with a third—the informational advantage that extensive training has given physicians over their patients, and the authority that advantage confers—and you have a system where physicians can, to some extent, generate demand at will.
Do they? Well, Medicare spends almost twice as much per patient in Dallas, where there are more doctors and care facilities per resident, as it does in Salem, Oregon, where supply is tighter. Why? Because doctors (particularly specialists) in surplus areas order more tests and treatments per capita, and keep their practices busy. Many studies have shown that the patients in areas like Dallas do not benefit in any measurable way from all this extra care. All of the physicians I know are genuinely dedicated to their patients. But at the margin, all of us are at least subconsciously influenced by our own economic interests. The data are clear: in our current system, physician supply often begets patient demand.
4. There's no one else to pay the bill
"...Let’s say you’re a 22-year-old single employee at my company today, starting out at a $30,000 annual salary. Let’s assume you’ll get married in six years, support two children for 20 years, retire at 65, and die at 80. Now let’s make a crazy assumption: insurance premiums, Medicare taxes and premiums, and out-of-pocket costs will grow no faster than your earnings—say, 3 percent a year. By the end of your working days, your annual salary will be up to $107,000. And over your lifetime, you and your employer together will have paid $1.77 million for your family’s health care. $1.77 million! And that’s only after assuming the taming of costs! In recent years, health-care costs have actually grown 2 to 3 percent faster than the economy. If that continues, your 22-year-old self is looking at an additional $2 million or so in expenses over your lifetime—roughly $4 million in total.
Would you have guessed these numbers were so large? If not, you have good cause: only a quarter would be paid by you directly (and much of that after retirement). The rest would be spent by others on your behalf, deducted from your earnings before you received your paycheck. And that’s a big reason why our health-care system is so expensive."
5. The Government is NOT good at cost reduction
"...Cost control is a feature of decentralized, competitive markets, not of centralized bureaucracy—a matter of incentives, not mandates. What’s more, cost control is dynamic. Even the simplest business faces constant variation in its costs for labor, facilities, and capital; to compete, management must react quickly, efficiently, and, most often, prospectively. By contrast, government bureaucracies set regulations and reimbursement rates through carefully evaluated and broadly applied rules. These bureaucracies first must notice market changes and resource misallocations, and then (sometimes subject to political considerations) issue additional regulations or change reimbursement rates to address each problem retrospectively."
This lengthy section of the article explains that our heatlh care industry is, properly, one of the more heavily regulated industry. I say properly because it's of some value to know, for example. that your doctor has proper training, and that the equipment being used in your hospital is sterile. However, the reality is that the regulatory system is prone to enact laws authored initiated by lobbyists with the intent to kill the competition. Goldhill shares several examples of this, including a congress enacted moratorium on starting small clinics that specialize in one form of surgery. Killing the competition, as we all know, has the effect of elevating costs.
Here's an example of how our health care providers refusal to talk about prices stifles competition: "...Eight years ago, my wife needed an MRI, but we did not have health insurance. I called up several area hospitals, clinics, and doctors’ offices—all within about a one-mile radius—to find the best price. I was surprised to discover that prices quoted, for an identical service, varied widely, and that the lowest price was $1,200. But what was truly astonishing was that several providers refused to quote any price. Only if I came in and actually ordered the MRI could we discuss price.
Several years later, when we were preparing for the birth of our second child, I requested the total cost of the delivery and related procedures from our hospital. The answer: the hospital discussed price only with uninsured patients. What about my co-pay? They would discuss my potential co-pay only if I were applying for financial assistance. Keeping prices opaque is one way medical institutions seek to avoid competition and thereby keep prices up. And they get away with it in part because so few consumers pay directly for their own care—insurers, Medicare, and Medicaid are basically the whole game. But without transparency on prices—and the related data on measurable outcomes—efforts to give the consumer more control over health care have failed, and always will" 7. On the technology front...
We live in a culture where the production of new technologies eventuates in increased productivity and eventually, a decline in prices. Thus do DVD players today cost one tenth of what they cost when they first came out. But in the health care world, the lack of competition makes this nearly impossible. For example..."...health-care technologies don’t exist in the same world as other technologies. Recall the MRI my wife needed a few years ago: $1,200 for 20 minutes’ use of a then 20-year-old technology, requiring a little electricity and a little labor from a single technician and a radiologist. Why was the price so high? Most MRIs in this country are reimbursed by insurance or Medicare, and operate in the limited-competition, nontransparent world of insurance pricing. I don’t even know the price of many of the diagnostic services I’ve needed over the years—usually I’ve just gone to whatever provider my physician recommended, without asking (my personal contribution to the moral-hazard economy).
By contrast, consider LASIK surgery. I still lack the (small amount of) courage required to get LASIK. But I’ve been considering it since it was introduced commercially in the 1990s. The surgery is seldom covered by insurance, and exists in the competitive economy typical of most other industries. So people who get LASIK surgery—or for that matter most cosmetic surgeries, dental procedures, or other mostly uninsured treatments—act like consumers. If you do an Internet search today, you can find LASIK procedures quoted as low as $499 per eye—a decline of roughly 80 percent since the procedure was introduced. You’ll also find sites where doctors advertise their own higher-priced surgeries (which more typically cost about $2,000 per eye) and warn against the dangers of discount LASIK. Many ads specify the quality of equipment being used and the performance record of the doctor, in addition to price. In other words, there’s been an active, competitive market for LASIK surgery of the same sort we’re used to seeing for most goods and services. The history of LASIK fits well with the pattern of all capital-intensive services outside the health-insurance economy."
8. A Way Forward
It's difficult to offer a representative quote for this part of the article, but you can read this part here. The summary though, would be to suggest that if we were to make health care MORE of a free market reality rather than less, we'd all be better off. However, the author goes on to also declare that there's a great need for us to address the fundamental moral issue of accessibility for low income people. If both of these truths are taken into consideration, at least two truths become clear:
First: the current proposal will fall terribly short of achieving real cost saving reform
Second: any proposal that will ultimately work must stand outside both the socialist and capitalist paradigms that are presently driving this conversation. Of course, this latter truth is in keeping with all that God proposed when He spoke to Israel about economics in the Old Testament. That system defied categorization in that it was terribly pro-private property, pro-wealth creation, and pro-communitarian sharing of responsibility for the poor, whom Jesus said we would, "always have with us".
Until we can free ourselves from party loyalties and sound bites, we're going to be a stuck on a treadmill.
I welcome your thoughts...