Healthcare Reform

jwatte's picture

Politics. I often try to stay away from it in writing, because it'll come back to haunt you later. However, at this point, what I hear and read about healthcare reform makes me sad. But first, let me set the stage:

I'd classify myself as a fiscal moderate and a social libertarian. I believe we need government to run the parts of society that we simply can't run on our own, and to manage risks and externalities that the market is incapable of managing. However, I don't think government should have anything to say about choices that individuals make, as long as they do not impose force, coercion or damage to any third party. I'm opposed to the kinds of labor unions that elevate mediocrity to a lifetime goal. I think people should have the right to practice any religion they want, or no religion, on their own free time, but the use or imposition of religion in public space should be curtailed, if for no other reason that because it's impossible to satisfy all religions at any one time, and favoring one over the other is wrong.

I'm not a communist. I don't think government should run everything. I don't want to tax the rich to the point where they're unable to "grow the pie" for everyone. I also don't want to cut taxes purely for my own benefit (as I'm in an above-average tax bracket) -- I truly want our system to generate the best incentives for everyone to strive for their own improvement and the improvement of our collective society at the same time. Where there are cases where those two goals differ, I think the best solution would be to change the incentives until they are aligned. I'm also not a right-wing conspiracy member. I don't listen to talk radio, I don't rave against the political straw man of the day, and I don't think that my views on specific topics are worth enforcing on everyone in general.

So, what's wrong with health care reform? Don't we need it? Of course we do. However, we don't need anything like what the federal Congress is currently debating. Any of the proposals, Democrat or Republican, will solve almost exactly the wrong problem -- or, at least, solve the problem in the wrong way.

We have two problems that really need to be solved:

1) The working poor cannot afford health insurance at all, at any cost. The guys who wash your dishes, flip your burger, pack your grocery bag and (if you're affluent enough to afford a maid service) clean your home. The total cost for a family plan for health insurance can be $1,500 or more. For some people, that's almost their entire paycheck!
Now, some people believe that health care, just like, say, getting your hair cut, or buying a car, is something that you earn, rather than deserve. I think that opinion is very short-sighted, because if that burger-flipper doesn't feel at ease going to the doctor, he might instead go to work when he has a sniffle. Whether that's allergy, a cold, or tuberculosis, you really wouldn't know, but at a nationwide healthcare level, that really matters! Health is an area, kind of like roads, where we are all inextricably linked, whether we like it or not.

2) The cost of health insurance is going up. As part of leadership at my current place of work, we look at 10% higher health premiums every year, and we can't necessarily afford to provide it for our own employees, even though we want to. Each year, we instead have to shave off a little bit from the coverage. Personally, I've seen the co-pay for my (highly effective!) migraine medication go from $10, to $20, to $40. Of course it's in the company's best interest that I don't have a migraine, because I work a lot better when I don't -- yet, the insurance company, that the company pays to keep me healthy, does not prioritize this.
We already spend more than twice what any other nation spends on healthcare, and the outcomes we get are no better. In fact, on average, there are several other countries that have better health outcomes than the US, spending much less. This is inefficient, and we need to fix it!

The main part of the solution is simple. We see it in virtually any other "first world" industrialized nation. It's called "Single Payer." Single Payer means that everybody pays a premium into a common pool to get coverage, and all health care providers then get paid out of that pool. As long as withdrawals are lower than payments, it's all good! Also, because it's a single payer, in a single shared system, common problems today like some insurance companies not paying for certain doctors, not having any coverage when you travel out-of-state, and other such irritants would be largely eliminated.

If we had a single payer system, then the "competition" we currently see among health insurance companies would go away. That might be a danger -- except, right now, it's the insurance companies that are gouging us two times as much as any other nation, while not delivering any better care. I don't see health insurance companies, in their current form, as part of the solution -- their only interest is to perpetuate the problem for as long as they profit from it.

Instead, we would have to provide competition on the provider level. The best way of doing that is to pay for outcomes, rather than procedures. We could have competing health provider organizations, that get paid a maintenance fee by the single payer when you decide to join their particular network. Additionally, if you are diagnosed with some illness, a set amount might be paid when and if you recover. While this may still incentivise over-treatment (diagnose something, and them immediately declare victory!) I believe that proper oversight could make this system work well. Set the per-illness amount low enough that there's no real profit in it, and you avoid most over-treatment. You could perhaps even vary these amounts yearly, according to some formula based on actual use last year.

Wouldn't the maintenance organizations then just pocket your money and have no incentive to treat you at all? Well, no -- if you're not happy, you can pick up and join another network. It might even be possible to allow additional payments, on top of the single payer payment, for additional benefits within certain networks or plans. In effect, the current insurance system would turn into a guaranteed-issue, tax-financed competitive HMO environment. Kaiser would still be there, as would Blue Cross, Humana, or whatever other organizations are there. They just wouldn't negotiate with each company or individual separately -- they'd negotiate with the single payer, for all of us, at once.

Then we get to "what do we get for our money"? With a single payer, we can pretty much just decide how much we want to pay for health care (X % of GDP), and set the contribution level to that amount. The various provider organizations would then compete for providing the best possible care for whatever the set fee-per-person is. Rather than defining benefits and competing on price, you set a price and compete on benefits. If we could tie outcomes to some additional reward, this would quickly make the companies focus on cost-effective treatments, and weed out very expensive treatments of more dubious efficacy.

Also, if you're poor and uninsured, but walk into a hospital with an acute problem, the hospital will treat you to save your life and limb. If you can't pay the bills, it'll go into the surcharges that everyone with coverage are paying. The problem is that treating a condition in the ER is on average six times as expensive as treating it in a doctor's clinic. And for certain conditions, like hypertension, diabetes etc, managing the condition is a lot cheaper than treating the end result (blindness, limbs falling off, heart attack, etc) -- not to mention giving the patient a much better quality of life. If nobody had to fear going to the doctor, we could probably cut a fair bit from our healthcare spending just by fixing that current inefficiency.

Note that there is no law against providing additional benefits for additional money. New treatments that are experimental or low-efficacy might still be an option, if you have money -- and this means that there are more options open to you if you're rich. (Big surprise there!) I don't think healthcare is about social justice, though -- I think "equality" and "justice" cannot actually exist -- I think healthcare is about our shared common future. In that context, providing the highest bang-for-the-buck health care through a single-payer system is the way to go. Yes, there will have to be regional adjustments, age adjustments and other kinds of adjustments, but it certainly cannot be any worse than it already is.

So, what do we do with the working poor, or those without a job? Ideally, the system is set up to cover any legal worker or resident. Workers then pay a fee into the single payer system as a percentage of their income. At that point, it pretty much works like a tax. However, it already is a tax -- we spend an insane percentage of our GDP on healthcare already! The difference is that the current tax is extermely regressive. Everyone pays a fixed cost per month for coverage. However, that fixed amount means a lot deeper bite to the clerk making $36,000/year (50% of the paycheck!) than it does to the manager making $108,000/year (17% of the paycheck!) I'm simply proposing that we set the level at the level we want to spend at, and everyone pays the same percentage of their income. (In this, I think all kinds of income should be included -- you'll need healthcare no matter whether you make your money selling bonds, farming the land or stamping out widgets in a factory).

In the end, there will always be treatments that we, as a society, cannot afford. Suppose grandma is on her death bed, but there's a treatment that can prolong her life by two months. The treatment costs a million dollars, and your retirement account plus the equity in your house totals a million dollars and twenty cents. Talk show hosts talking about "death panels" act as if they would mortgage their house and sell their future to give grandma another two months of suffering. Personally, I think that almost everybody, when actually placed in that situation, would not. I'll stand up and say it now: That is a treatment that would not be worth it to me in my current situation -- and my net worth is a lot less than a million dollars. The mechanism of putting a specific amount of money into the single payer system, and then letting providers compete for providing care at that level, will automatically give us the level of care we're willing to pay for. If we want more, then we'll vote to raise the required payment.

Single payer. It's the way to go. It's a requirement to actually solve the problems we need to solve: covering everybody, and getting more bang for less buck. Start there, and then figure out how to make it work!