As referenced in the title of this post, the Atlantic magazine has an article that I believe is the best that I’ve read regarding health reform in the United States. The article is long, but 15-20 minutes of time to garner some great insight into this debate is probably not a bad investment. The entire article can be found here.
For those who just want a quick take on the article (and are planning to read the whole thing later), I’ve excerpted a few particularly salient paragraphs. For those ideologues, who aren’t interested in facts or debate, you can just skip to the bottom and start posting.
I will start with one piece of information from the article. From the time you begin work at ~22 years old until the time you die, a minimum of $1.77 million will be spent on you, your spouse, and your two minor children’s health (much more if your spouse also works). That is an amazing number in itself.
The operating premise of the article can be summed up in the following quote which is found near the end of the article:
But let’s forget about money for a moment. Aren’t we also likely to get worse care in any system where providers are more accountable to insurance companies and government agencies than to us?
I couldn’t have said it any better myself. The author of the article, David Goldhill, starts with a bit of background about healthcare evolution in our country, but then shares the following so that the reader understands Mr. Goldhill’s particular point of view…
I’m a Democrat, and have long been concerned about America’s lack of a health safety net. But based on my own work experience, I also believe that unless we fix the problems at the foundation of our health system—largely problems of incentives—our reforms won’t do much good, and may do harm. To achieve maximum coverage at acceptable cost with acceptable quality, health care will need to become subject to the same forces that have boosted efficiency and value throughout the economy. We will need to reduce, rather than expand, the role of insurance; focus the government’s role exclusively on things that only government can do (protect the poor, cover us against true catastrophe, enforce safety standards, and ensure provider competition); overcome our addiction to Ponzi-scheme financing, hidden subsidies, manipulated prices, and undisclosed results; and rely more on ourselves, the consumers, as the ultimate guarantors of good service, reasonable prices, and sensible trade-offs between health-care spending and spending on all the other good things money can buy.
The housing bubble offers some important lessons for health-care policy. The claim that something—whether housing or health care—is an undersupplied social good is commonly used to justify government intervention, and policy makers have long striven to make housing more affordable. But by making housing investments eligible for special tax benefits and subsidized borrowing rates, the government has stimulated not only the construction of more houses but also the willingness of people to borrow and spend more on houses than they otherwise would have. The result is now tragically clear.
So bi-partisan manipulation of the housing market to make home-ownership easier led to a financial disaster because people and businesses spent more than they would have spent if left to their own choice. How does this play out in healthcare? Again, to Mr. Goldhill:
Insurance is probably the most complex, costly, and distortional method of financing any activity; that’s why it is otherwise used to fund only rare, unexpected, and large costs. Imagine sending your weekly grocery bill to an insurance clerk for review, and having the grocer reimbursed by the insurer to whom you’ve paid your share. An expensive and wasteful absurdity, no?
The average insured American and the average uninsured American spend very similar amounts of their own money on health care each year—$654 and $583, respectively. But they spend wildly different amounts of other people’s money—$3,809 and $1,103, respectively. Sometimes the uninsured do not get highly beneficial treatments because they cannot afford them at today’s prices—something any reform must address. But likewise, insured patients often get only marginally beneficial (or even outright unnecessary) care at mind-boggling cost. If it’s true that the insurance system leads us to focus on only our direct share of costs—rather than the total cost to society—it’s not surprising that insured families and uninsured ones would make similar decisions as to how much of their own money to spend on care, but very different decisions on the total amount to consume. [emphasis is in original article]
OK, so insurance is a problem the way we have it structured — to pay for everything, versus just catastrophes. However, those greedy insurance company profits ought to be used for everyone’s benefit. Wouldn’t that be a major plank in solving the problem, Mr. Goldhill?
For fun, let’s imagine confiscating all the profits of all the famously greedy health-insurance companies. That would pay for four days of health care for all Americans. Let’s add in the profits of the 10 biggest rapacious U.S. drug companies. Another 7 days. Indeed, confiscating all the profits of all American companies, in every industry, wouldn’t cover even five months of our health-care expenses.
So, if it isn’t the rapacious greed of capitalists and investors, how do we pay for our health? Where will we get the $$$?
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.
So, today there is between $1.77 million and $4 million that will be spent on us health during our lives. Why is it spent so poorly?
The government regularly tries to cap costs by limiting the reimbursement rates paid to providers by Medicare and Medicaid, and generally pays much less for each service than private insurers. But as we’ve seen, that can lead providers to perform more services, and to steer patients toward higher-priced, more lightly regulated treatments. The government’s efforts to expand “access” to care while limiting costs are like blowing up a balloon while simultaneously squeezing it. The balloon continues to inflate, but in misshapen form.
I think that the balloon analogy is a fantastic description. We all want our healthcare “balloon” to be a nicely shaped balloon, but what we’ve got is a freakish looking monstrosity that no self-respecting child would want tied to their wrist. What are some of the results of this misshapen form?
[A]lthough the population is rapidly aging, we have few geriatricians—physicians who address the cluster of common patient issues related to aging, often crossing traditional specialty lines. Why? Because under Medicare’s current reimbursement system (which generally pays more to physicians who do lots of tests and procedures), geriatricians typically don’t make much money. If seniors were the true customers, they would likely flock to geriatricians, bidding up their rates—and sending a useful signal to medical-school students. But Medicare is the real customer, and it pays more to specialists in established fields. And so, seniors often end up overusing specialists who are not focused on their specific health needs.
Since government bureaucrats are not medical innovators nor do they use the entire system, they don’t know what the tens of millions of Americans want in their health care. So, the government can only fund what it knows — missing huge parts of the market, driving up costs in one place, and under-providing services in another.
What if we just went to a single payer system? We could standardize payment information, lower marketing costs, and direct more dollars into the system, right? [This is not my opinion, just a literary device to get to Mr. Goldhill's next point]