Actually Improving Health Care

Voters shape opinions along party lines that are often determined by their upbringing, or by single emotional issues such as guns, gays or abortion. These party associations then shape opinions for all kinds of issues such as health care, entitle
ments and fiscal policy. As a result, people who are passionate and knowledgeable about issues such as gay rights, the environment and abortion often develop equally strong feelings about unrelated issues that they don’t know much about, like health care; few issues are as confused and obfuscated to the electorate. Most people take a party line position on health care and why not, the two basic positions fit the dogma of the respective parties quite well. People either want reform and universal coverage, or they don’t. Sadly, each party relies on the ignorance of the electorate and uses disingenuous and emotional messages to shape public opinion. Each party accuses the other of spreading misinformation and each party is right.

Fortunately there is a good deal of common ground on health care that most people agree on. There are some things that are obviously broken and some things that work very well. As far as what is broken, America spends far too much of our national income on health care, about 16%. We spend more than double the average of other advanced countries on health care per person. For about 35 years, medical entitlement spending has outpaced GDP growth by 2.3%. Medicaid and Medicare, unless they are reformed, will literally bankrupt our country. There is little disagreement about any of this.

In terms of what works, American medical innovation is the best in the world. Some of our best innovations come from the Federally Funded NIH (National Institute of Health), some come from American private enterprise, and some innovation is imported. No matter where the innovation occurs however, America far surpasses other nations in our ability to bring innovation to market to help patients. The majority of marketable medical technology on the planet is developed in America. These technologies extend and improve the lives of sick people around the globe.

How do we continue to save and improve lives throughout the world, while also controlling health care costs? As long as patients receive limitless health care services at nearly no cost, the quantity of health care services demanded will exceed what the system can affordably provide. In order to reduce costs, patients need to have a stake in the cost of health care delivery. Without such a stake, lonely seniors will make weekly doctor visits because they enjoy the company. Patients and providers will over test, over treat and over use the system. Large copays are a good start, but even better are large copays that represent a percentage of the cost of services provided, 10% for example. 10% of a $200 visit is only $20, but 10% of a $500 visit would be $50. This would make health care consumers price conscious so that they would shop. If pricing mechanisms were allowed to work in this way, doctors would be forced to compete on price, quality and service, just like other businesses. Out of pocket costs could be capped, and copay percentages could be indexed upward along with people’s income in order to prevent too large of a burden from being placed on the poor.

While pricing mechanisms may be a good way to achieve savings for treatment delivery, preventative care should be encouraged as a way to reduce health care consumption and costs long term. Preventative care can be provided much more affordably than most treatments. The addage that “an ounce of prevention is worth a pound of cure” is correct, and should be institutionalized by differentiating services and putting incentives in place for people to seek more preventative care.

Massive savings could also be achieved by rewarding people for making healthy lifestyle choices. Obesity costs are nearing $100 billion per year for example. If insurance companies provided rebates at year-end for obese patients who showed progress in their body mass index, these costs would slowly be reduced, and our population would truly be healthier. Safeway has implemented these kinds of rewards and as a result, their health care costs have remained flat for several years while health care costs in general have soared.

The bill that’s currently on the senate floor does none of this and should therefore be rejected as reform. The Senate bill is being promoted as a way to “cut health care costs”. What the bill really does is increase health care spending by about $1 trillion over 10 years. Many experts think the real number will be closer to $2 trillion. The bill pays for this spending through cuts in other areas, and huge tax increases on the highest earners and small business owners who create jobs. This is not cost reduction, this is highly dubious deficit reduction and the citizens are being lied to about it. The alternative Republican version is not much different. It is in effect a watered down version of the same thing.

The bill currently under debate will also have the unintended effect of stifling medical innovation, and will reduce incentives to enter the field of medicine. Will innovators invest tens or hundreds of millions of dollars of capital to create new drugs or medical devices if they are not allowed to determine the price of their innovations? Will as many students be willing to assume tremendous debt and go through years of demanding education if the government will largely determine their compensation?

The bill on the Senate floor also puts mechanisms in place to enable price controls. History shows us that when costs are controlled by command, instead of by the market, other costs emerge such as waiting, lower quality care, diminished access to new technology, and trips to foreign countries for health care services. These non-financial costs keep the quantity demanded in line with whatever supply the government sees fit to allocate. Sadly, other non-financial costs include pain and suffering from treatable illness, and death. This is not hyperbole, just a stark observation from what has occurred in other nations that adopted similar plans.

One of the most egregious sins of misinformation is the number of uninsured Americans that is often quoted. 46 or 47 million is what we usually hear. Of this number, about ten million are not citizens and are in the country illegally. Nine million of this number earn over $75 thousand per year. Another 10 to 15 million opt out of employer programs for which they’re eligible, mostly because they’re young and healthy. There are also several million people who are eligible for government programs but have not enrolled. There is some overlap in these numbers, but by most estimates there are between 5m to 10m people who are chronically uninsured and have truly "fallen through the cracks". This is about 3% of the population, at the high end of the estimate. It’s also important to remember that we already have a program to provide coverage for the poor, Medicaid.

All of this begs the question of “why”. Why would our elected officials foist such an odious bill, with such massive costs, upon us? Politicians are different from us. Many have never had to worry about efficiency, effectiveness or profitability in the way that a business owner, or an employee of a for-profit company does. These are abstract ideas to politicians. Sure, some politicians have private sector backgrounds but these sensibilities evaporate when the realization sinks in that getting elected requires competing on the basis of making grand promises of lavish government services. Citizens, labor interests, corporate interests, local politicians and other special interests all have their hands out. Special interests not only drive the democratic process, but the legislative process as well. To get support to pass a bad bill, it must be made even worse by adding pork for each opportunistic special interest. The current bill is a henious monstrosity, a remarkable abomination that would make Frankenstein feel like a charming prince.

It is important that everyone shed the dogma of their party and views this legislation objectively. This bill must not pass. It is true that the government might succeed at distributing the health care pie more evenly. However, it will be a much smaller pie; it will taste bad and it will be extremely expensive.