Now that the health care reform debate has gone into overtime, I feel like I need to make one more last-ditch argument. Fortunately, at least one person has made all my arguments for me: David Goldhill's cover story in the September 2009 issue of The Atlantic ("How American Healthcare Killed My Father") says practically everything that needs to be said.
Goldhill is extremely forthright with his motivations, which I especially like – he lets you know right away that his study of healthcare is the result of seeing his father die of a preventable hospital-borne infection. But despite the personal tragedy, his article is remarkably free of emotional charge. He doesn't attack anyone, or blame anyone, but rather lets his critique rush unerringly to the glaring absurdities of the business structure of American medicine:
- Paying for all healthcare with insurance is patently absurd. The whole nature of insurance is to spread out the risk for unusual disasters, not to provide for day-to-day, predictable expenses. He writes: "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?" By making someone other than the consumer responsible for healthcare costs, we systematically create a "moral hazard" in which neither doctors nor patients have an incentive to limit costs, as well as using an extremely expensive, inefficient system for payment.
- America got its current system of employer-provided health insurance by accident. It was the result of a wage freeze during World War II that encouraged companies to offer non-wage benefits. But having someone else pay for all your healthcare was not a conscious goal of American policy . . . at least, not until people got used to the idea that "someone else" should pay for their health care.
- The consumer is the ultimate protector of quality and value. Is it any wonder that we get poor customer service, poor quality, and astronomical cost when we have removed ourselves as the primary purchasers of health care? Doctors, hospitals and drug companies all serve their customers as well as they can – it's just that we, the patients, stopped being their customers long ago. Now the insurance companies and the government are their customers.
- Competition is the most natural, responsive way to lower costs. In a competitive environment, technology tends to make things cheaper; in a non-competitive environment like our current healthcare system, it only makes things more expensive.
- The cure for American healthcare: mandate cheap high-deductible health insurance to cover medical emergencies, and then use Health Savings Accounts to cover day-to-day medical care. Make the patient the primary payer of medical costs again, and they will naturally seek the best balance of quality, value, and cost. Fund the care of the poor directly. Use government power to mandate visibility into the cost and outcome of care.
Goldhill's entire analysis would fit nicely into one of the Freakonomics books, since he is merely pointing out what Levitt and Dubner took as the central thesis of their pop-econ books: "People respond to incentives." Everything that has happened to American healthcare is clearly the consequence of distorted economic incentives. From this perspective, it should be clear that ObamaCare will only give us more of the same distorted incentives, cementing in place the illusion that "someone else" is paying for our healthcare, while letting the healthcare beast continue to devour our national economy.
Goldhill's article is refreshingly full of common sense, especially when you compare it to other popular studies of American healthcare, like Atul Gawande's high-profile article in the New Yorker ("The Cost Conundrum", June 1, 2009) which Obama publically praised. Gawande confronted overwhelming evidence that high costs of health care were driven by doctors' and hospitals' financial incentives to overtreat and overcharge . . . and still he is utterly dismissive of the power of competition. "Any plan that relies on the sheep to negotiate with the wolves is doomed to failure," he quotes one doctor. I see it as a sign of doctors' arrogance that they find it impossible to think of themselves as a commodity that can be shopped. Consumers might not "haggle over the price as if he were selling a rug in a souk," as Gawande puts it . . . but if a hospital down the road offers the same surgery for $20,000 less, don't you think that's going to influence the patient's choice? Especially if it's $20,000 of the patient's own money?
Gawande had another New Yorker article ("Testing, Testing", December 14, 2009) that compared the healthcare industry to agriculture, and suggested that healthcare might undergo a revolutionary change similar to the "green revolution" through government sponsored experimentation similar to what the USDA did for farms. The article was a lengthy apology for the Democratic health reform proposal, which did not have a clear plan for cutting costs but did have lots of pilot programs that would hopefully find new ways to cut costs. I find it utterly disingenuous to suggest ObamaCare is a set of experiments, when the core elements of the plan – guaranteed issue, mandated levels of coverage, wimpy personal mandates – have already been tried in several states, and were colossal failures in every instance, driving up costs and exhausting state budgets, while hardly making a dent in the number of uninsured. You can't position yourself as an experimenter when you ignore the results of the experiments.
Speaking of experiments, I have run the high-deductible insurance and Health Savings Account experiment for myself and my family . . . and it works. I protect myself from debilitating debt from medical emergencies, but I also function as a smart consumer. I spend half of what I used to on insurance, and lower overall medical costs by at least 20% by questioning bills, tests, and procedures. And all of it – insurance and medical costs – could be entirely covered by my FICA taxes, if the government only let me keep that money.
