Absolutely.
Typically I try to make a point using either a personal story or using the facts on the ground. Let’s use both. First the facts.
Facts on the ground:
- Our current health care system will bankrupt America [Over $35 trillion in unfunded Medicare & Medicaid expenses]
- Despite spending the most in the world, we don’t get the best care for our money [Massive inefficiency]
- Nearly 50 million Americans lack health insurance typically resulting in an expensive public burden or in personal bankruptcy
- Current system prevents small business creation, and due to rapidly rising costs, harms business in general
- Insurance companies standard practice is to deny insurance to people who may have a pre-existing condition and look for any reason to terminate coverage of people who become sick
So why is our system so messed up?
I’ll give you one reason:
Because we have a severely distorted, non-functioning market for health care.
What do I mean? Take almost any other industry in America, from buying a car to buying bread at the supermarket. We have plenty of choice, variety, and have seen quality improve over time while costs have come down. This is exactly what’s supposed to happen in a market. Competition forces companies to do things that will give them an edge: quickly respond to the will of the consumer, improve product quality, and lower costs. Why don’t we have this in health care?
Costs, usage, and relative benefit are completely invisible to consumers which prevents any kind of rational behavior. While health care costs have risen dramatically over the past few decades, most of us haven’t noticed because our employers pick up the tab for our insurance policies. When we use healthcare, we have no idea what the costs are of: our visit to the doctor, those x-rays, that prescription, or anything else. It’s like a credit card that we don’t have to pay for. To be fair, when everything is essentially “free to you”, it’s actually perfectly rational behavior to not care whether or not you actually need something, since someone else is paying for it. So, in a sense, consumers are behaving rationally. It’s just strange since it is the opposite of how you make every other decision in your life.
Insurance companies compete based on 1) how well they can pick the healthiest patients and 2) how effectively they can deny paying for treatments or canceling insurance for sick patients based on technicalities. There is no current incentive for insurance companies to compete with each other to make more profits by figuring out how to deliver health care more efficiently to save more lives. Instead, they all seek to enroll the healthiest patients possible (to maximize dollars in) and deny as many claims as possible and end coverage to people with costly illnesses (to minimize dollars out).
Pharmaceutical, medical device, hospitals, and other health care providers innovate based on “more!, newer!, better! (and always more expensive!) and rarely, if ever, on price. Since consumers have no visibility or vested interest in price we get constant innovations in things such as imaging machines that are marginally better than their replacement but costs hundreds of thousands of dollars to replace. This also holds true for new pharma treatments that address niche diseases that costs hundreds of thousands of dollars a year– a guaranteed, unsustainable path.
Almost a third of all medical dollars go to pay for administrative costs. In a true competitive environment, such as retail, companies such as Wal*Mart make driving down these costs their primary focus. Given that we do not have a real free-market healthcare system, these costs rise unchecked adding to costs without any benefit other than employing people to push paperwork.
The list could continue for several pages: defensive medicine, excess treatment enriching unethical providers, insurance can’t effectively compete across state lines, etc. But all of these go back to the lack of an effectively structured marketplace for healthcare where the end user acts rationally in their own interests, and in doing so creates the most favorable outcome for the system as a whole.
So what do we do about it?
Make healthcare more like every other efficient part of the American economy: create a working marketplace.
I see two ways of doing this.
1) Put consumers in control. Give consumers their health care dollars in a special account (HSA) each month and allow them to use them for most services. This would mean prices would be clearly displayed for office visits, xrays, pharmaceuticals, etc. If you need more than you have in your account, you can “go negative” and borrow against future contributions. If you have an emergency (say, a brain tumor), your emergency insurance would take over and cover it. Think of it like your car. You pay for your oil changes, when you need to change your fuel pump, or even need a new transmission but if you get into a bad car accident, well, that’s what you have insurance for. Patients who are severely disabled and have other constantly emergent conditions would belong to a special government administered emergency plan. Putting consumers fully in charge makes health care like every other part of the economy. A well-written detailed article covering this idea located here at The Atlantic.
2) Make insurance companies compete. Less drastic is to bring a functioning marketplace to the insurance system instead of end-user health care. Ron Wyden, Senator from Oregon has been a leading (if lonely) proponent of this plan to go to a voucher based system allowing true consumer choice in health care. The gist is that you have the option of a voucher to choose a health plan from the insurance exchange based on your needs and costs. If you choose a plan that is below the value of your voucher, you get to keep some of that savings. Insurance companies now existing within a functioning marketplace will look to create plans that compete on both price and quality. Comparative effectiveness (across all patients, which of the competing treatments resulted in the best result for the patient) and the like will be used to reduce costs and boost success rates. This will likely also see a movement to bundling vs a broken pay-per-service model in a world where rescission (dropping sick patients because they are sick) and denying coverage for pre-existing coverage, will speed the transition to competing on new factors.
Of all the paths forward, doing nothing is not one of them. We must get costs under control or we guarantee that we will hand over a bankrupt government to our children along with many preventable deaths. A properly functioning health care system (translated: marketplace) is essential to a sound economic foundation.
The facts speak for themselves, but the personal side never hurts:
To run for Congress, I quit my job. Acting responsibly, I applied for a “catastrophe” insurance policy (I pay the first $5K in medical expenses before insurance kicks in). I was certainly surprised when Humana told me they think I have a pre-existing condition and needed medical records. Years ago I had pain in some of my joints and went to see my doctor and a rheumatologist. After many tests, they both didn’t see any cause and concluded it would go away on its own. Sure enough, it did. In the preceding 3 years, I’ve been to the doctor no more than 2 times total. Yet, I was notified that this potentially qualifies as a pre-existing condition. I rolled my eyes, told them that I had no conditions, but said I would play along. They needed medical records, which I was happy to sign to release. Yet, a month passed with no contact. Long story short, I applied for an Anthem policy through an agent (I explained the above history and, this time, that I was running for Congress) and was quickly approved. Putting it nicely, I told Humana they could cancel my pending application. Aside from previous bouts with annoying paperwork, insurance had always been something distant and off my radar. Yet, at a time when they are under attack for their behavior, it was “nice” to see some of the companies (I guess I can only speak to Humana) are still competing by denying coverage for pre-existing conditions. Especially, in my case, for one that never actually existed.
So, yes, I believe we absolutely need health insurance reform. Isn’t bankrupting America, inhibiting entrepreneurship, harming our global competitiveness, and being the leading cause of personal bankruptcies enough to prove that something is wrong? What do you think? Why are you for or against health insurance reform? What concerns you about what you are hearing? Let’s hear it in the comments.