A Modest Health Care Proposal

Photo by: nmfbihop

The American health care debate has gone completely off the rails.  The Right, ostensibly in defense of small government, is acting as if we have an option to not address this issue.  Meanwhile the Left is unable to present a coherent vision.  Even worse disinformation is flying from all directions and it’s difficult to have an informed opinion.  It could easily make a person tune out this conversation.

Why You Should Care About the Health Care Debate

One of the biggest reasons that you should care is that unless you’re on Medicare, you’re already footing the bill of socialized medicine.  Medicare is socialized medicine and right now about 27% of the population is on some form of government health care.1 If you’re not one one of these programs, every dollar of over-consumed or overpriced affects you personally.  However, the situation becomes much more untenable in the near future.  By 2030 it’s estimated that twice as many people, 80 million, will be on Medicare and in the meantime the population will not have grown nearly be nearly as much, bringing the percentage of people on Medicare to 22%, without any other government programs considered.2 Then you consider how many people are being added to Medicaid and other government programs due to the economic downturn and you can see the problem growing.  Unless you’re for abolishing Medicare, and that’s not a very popular view, you probably need a solution to the demographic bomb that’s headed our way.

I’ve already covered that we have high costs and outcomes that don’t justify the expense in America.  Almost any method to cover people’s medical bills is going to have a component of “socialism.”  Quite simply, those who are older or have chronic illnesses are terribly expensive to insure.  We know these people are going to have health problems.  Insurance at that point isn’t really providing insurance but simply giving them money for their health care.  If you want people who are older or have chronic illnesses to be able to get healthcare if they aren’t rich, others are going to have to pay for it.

If you’re healthy right now, you should care about healthcare because you’re subsidizing those who aren’t.  If you’re not healthy you probably already do care about healthcare reform.

A Modest Proposal

I thought I’d put out there what I consider to be a reasonable proposal and see what my readers think.  If I were going to address the situation in this country here would be my plan: (more…)

1. As Private Insurance Declines, Medicare and Medicaid Pick Up the Slack – WSJ.com [↩]
2. Medicare Beneficiary Demographics [↩]

Why Everyone’s Wrong About Fixing Health Care

Photo by: Bolshakov

Like most debates in this country, the health care debate has gone into the weeds.  People, regardless of their point of view, spout disingenuous arguments to further their cause.  Critics suggest that simply providing insurance for everyone will make everything “fair,” while their opposition makes arguments for the continuation of a broken system.  While I have a healthy skepticism of the government’s ability to solve most problems, it seems that there are telling factors that suggest that the status quo is not just unsustainable, but catastrophic.

Why Do We Need to Do Anything?

Before we move forward, this is a question many believe remains unanswered.  Why do we presuppose that something is wrong with the American medical system?  The most basic reason is that we spend more money to get worse outcomes.  While there are areas in which we excel, ultimately we spend almost double that of most industrial nations, but our infant mortality rate, for example, is signifcantly worse than almost all other Organization for Economic Cooperation and Development (OECD) member countries.1

Additionally the care and cost in America are widely uneven.  Interestingly they go hand in hand.  The Dartmouth Atlas of Health Care studied the issue nationwide and found almost a threefold difference in health care costs and an inverse correlation between costs and outcomes.2 In other words, the more I’m spending, typically the worse care I’m getting.  All of this suggests that we’re wasting a lot of money, and we need to figure out why.

Perverse Incentives

The fundamental problem in American healthcare boils down to one simple issue: perverse incentives. A perverse incentive is one in which those who are creating the incentives are creating unintended and typcially counterproductive effects.  They are essentially creating their own negative consequences.  As we’ll see almost every component of our system is rife with these types of incentives:

Overconsumption

The opponents to changes in the system constantly raise the “grim” visage of rationed care.  Americans fear loss of control when they look at other countries in which residents have to wait for procedures, even though those countries generally have better health outcomes than does America.  However the flip side to a lack of rationing tends to be overconsumption.

Everyone in the current system has an incentive to allow patients to over-consume medical attention.  Assuming a patient has insurance, it really costs him or her very little out of pocket to get an MRI — even when the doctor may consider it largely unnecessary.  Meanwhile the doctor typically makes money because the patient gets an unnecessary MRI.  The insurance company is likely indifferent as they have already priced their insurance plan assuming this kind of over-consumption.  In the end, we’ve spent considerable money on this MRI and no one’s health is any better.

As the Bear Mountain Bull points out, the structure of many current insurance plans is likely to cause overconsumption.  Because the patient has no “skin in the game,” they opt for procedures that are very unlikely to be useful.  All kinds of diagnostic tests can be taken on the assumption that it’s “better to be safe than sorry,” without taking the cost into account at all.

The Way America Rations

Even as we show such aversion to rationing, America has a different kind of rationing that is far more insidious.  In an extremely perverse incentive, the number of doctors in the United States is decided upon indirectly by the American Medical Association.  That is, current doctors decide how many new doctors there should be.  In the 90’s, despite the oncoming wave of baby boomers reaching old age, the AMA somehow decided that there were going to be a glut of doctors and actually recommended to cut the number of internships available.3 Much of the current shortage now can be attributed to this decline in the number of doctors.

It is rarely in the best interest of the consumer for the provider of a service to decide how many people should be allowed to provide that service.  Even providers with the best intentions are likely to err on the low side.  That doesn’t even take into account those who may be intentionally self-serving and trying to increase demand for their services. (more…)

1. OECD Family Database – Infant Mortality [↩]
2. Dartmouth Atlas of Health Care – Health Care Spending, Qualty and Outcomes [↩]
3. USA Today – Medical Miscalcuation Creates Doctor Shortage [↩]