Maybe the problem is we have too much healthcare?
Yeah – that’s right. I said it. Congress, the White House and every cable TV pundit is talking incessantly about the need – no the right – for free healthcare for everyone. Although no one is saying it, let me tell you why that’s a very bad idea, and how we can fix it.
The root cause of our entire healthcare crisis comes down to a single factor: society not understanding the hidden costs of healthcare. Simply making the costs transparent will revolutionize our healthcare system, save tens of billions of dollars of waste and change our personal behavior regarding our health.
Unfortunately, the well intentioned but misguided Obama proposal does exactly the opposite. Costs are further hidden, waste will abound and those truly needing healthcare will be added to a long line.
To put it in economic terms, our healthcare system should be called a market failure. That sounds disparaging, but simply means that the system isn’t working. I can go to the doctor anytime I want for ten bucks but the doctors makes $100. The $90 differential is a surplus for the doctor, paid for by the insurance companies. I place $10 of value on the visit so am quite non-chalant about the whole thing. The doctor places a value of $100 on the 10 minute visit so he has an artificially huge supply of people willing to come in for a visit. Multiply that by a couple hundred million people and you see where I’m going.
What would happen if we only paid 10% for cars or food or vacations, with other monolithic entities paying the rest. Costs would skyrocket and inefficiency would abound just like with healthcare.
So, here’s a summary of the problems with our HMO based healthcare system as I see it:
The personal responsibility is taken from the individual. If I had to pay $100 every time I saw the doctor and pay the true amount for the prescription, I’d have to make different decisions. I’d eat healthier. I’d exercise. I’d need to make sure that going to the doctor was rare.
Too much authority on your healthcare is given to others. The insurance company, HMO or government decide which doctor you can or can’t see (based on if they carry that insurance), or what diagnostic tests you should get
Drugs are too convenient of an alternative. If you had to pay $110/month out of your pocket for Lipator (the average cost) and consequently give up cable television or going to the movies, you might say to the doctor, “No, that’s not going to work. How can I adjust my diet to control my cholesterol?” That ultimately is far more beneficial and costs nothing. When the cost is covered by insurance, you don’t get a chance to make that cost/benefit analysis in your head.
People have no idea how much they’re paying for healthcare. According to the Medical Expenditure Panel Survey in 2008, the average premiums you pay are $4386 per individual or $12,298 per family per year. You pay that. Either through deductions in your paycheck or forgone wages that your employer has to pay to the insurance company rather than you. If you have a job that pays for family insurance, you should be making $1,000 more per month. Per month!!
So, about now, you’re being indignant thinking healthcare is a right and shouldn’t be touched. C’mon – it’s a service just like anything else. We’ve just escalated it to this untouchable status.
Here’s my humble solution.
- Eliminate artificially low co-pays on doctor visits. This is what specifically caused the market failure. You won’t be paying more. Remember, you pay over $1000 per month for your family. Do you spend over $1000 on Doctor visits? Making this cost transparent will change decision making and put parents and individuals more responsible for a healthy lifestyle.
- Reduce the subsidization on prescription drugs. Drugs are too accessible and always cause other problems. They can be a life saver, but also can sap the life from you. People must feel the pinch buying their prescription drugs as they would for anything else. As an aside, for some insane reason, the grocery store Wegmans gives out free antibiotics. I just wanted to say that.
- We need universally available emergency and catastrophic heathcare and well-visit checkups for everyone. Period. Whether you’re a Fortune 500 CEO, plumber, homeless man or even if you’re one of those Cable TV pundits. Keep the employer supported model (greatly discounted without the copays) with associated tax benefits for the employer. For others, Medicare will be expanded, again only for emergency, catastrophic and well visit checkups.
How will I pay for this? No, I haven’t gone all Obama there. The immense cost savings from asking people to pay for the routine will offset the non-routine costs and covering all Americans.
I know this is a gross oversimplification. And raises additional questions. But – it’s a start – a dialogue that no one is having now.
It comes down to transparency. People just need to understand what they’re paying and they’ll make the decisions in their best interests. By fixing the market failure we’ve created, we can will be on our way to a healthier population.
Hi Chris,
Great article! You should forward a copy to your local and state politicians (just be sure you make it their idea!).
The last line in ‘The Second Most Beautiful Girl in the World’ is a masterpiece! Well done!
The blog address discussed during our call on Wednesday is http://www.alifebeing.blogspot.com. Thank you for your time that day.
Your friend,
Doug
Interesting points, Chris! I agree that costs need to be more transparent. Now, there is so much overtreatment and overtesting, and as patients, we never have to think about it! Everyone should take some ownership in their health. But a problem is, as I have seen over and over in poor communities, making things like seeing the doctor more expensive, it may prevent unnecessary treatments,and encourage people to stay healthy on their own, but it will absolutely prevent also early treatments. Waiting until you just can’t possibly wait anymore due to the cost (which could easily happen if money is a daily stress) can lead to severe illness, to the point when it’s so much more costly to treat. Also, the best way to get people to eat healthier is to make healthy food available and accessible. Compare the food available in a poor neighborhood vs a wealthy one. It’s really hard to eat healthy in the ghetto! And if it’s too dangerous to go outside, it is pretty difficult to exercise! Point is, it’s a very complicated topic. I’m fine with a segment of the population driving porsches while others take a bus, but I don’t want to live in a world where a segment can have premium health care and others can’t afford basic treatments. The answer? There’s a reason I’m not in politics…
Good point Sarah. I think we agree on your statement that people need to take more responsibility for their health. I’m not sure how you could mandate through the government healthcare bill that there should be more healthy food in every neighborhood. It’s a good idea, just can’t think of how the president and congress could do that. Maybe the answer is through education regarding health?
You remove the corn subsidies- the subsidizing of foods produced by high fructose corn syrup make junk food so artificially cheap, while fruits and vegetables are incredibly more expensive, as well as lower quality in poorer neighborhood. The reason? Corporations make tons of money with processed food. There’s only so much you can do with a fresh apple to increase it’s value. Farmers don’t have the lobbying power of Nabisco. You can teach people all you want, but until it’s practical for them to make the changes, it will be a futile effort. There are some changes in neighborhoods like East Harlem- grants for small vegetable stands with affordable, quality food- it’s making a big difference. These systemic changes are necessary to make a sustainable impact on the obesity epidemic, which, with the resulting diabetes, heart disease, etc, is sure to drain our entire health care budget. This is not specifically related to the health care bill, but I think should be taken into consideration when deciding how to spend money in terms of long-term health of our nation.
p.s. Great forum for “mullering over” topics!
Very good point on the corn subsidies. There’s probably no worse food on the planet than processed high-fructose corn syrup. It shows how government intervention can really disrupt the free market. Corn is also being used for the Ethanol myth rather than feeding people. I agree that we’re getting far from the healthcare bill, but if people are naturally healthier, there’s much less need for expensive healthcare. Interesting ideas. Maybe you should attend one of the town hall meetings on the subject!
We should go together!!