There are three problems that we face as a nation: lack of universal access to medical care, poor quality medical care for many people, and the high cost of medical care. The last problem is the most intractable. I propose a solution below.
First, we are the only industrialized country that does not have universal health care. Millions of Americans are going untreated for chronic medical conditions because they lack health insurance.
Second, although many people who are insured receive excellent medical care, many do not – and as a result of the fact that large numbers of people are uninsured or underinsured, the quality of medical care that Americans receive is, on the average, substantially lower than that of any other industrialized nation.
Third, Americans spend about twice as much on medical care as any other country in the world. Over the last decade the cost of medical care in the United States has doubled and over the next decade it will double again. Medical care now consumes over 16% of national income (which is double that of any other country) and this percentage is expected to rise to over 20% of our budget (both government budget and household budgets) by 2019.
There is no disagreement over the accuracy of these facts. Insurance companies, advocates for reform, and nonprofit research organizations all reach the same conclusions about lack of access, poor overall quality, and cost. See the studies and reports assembled at my website on health care financing reform.
What are the solutions? The bills currently before Congress reforming health care will make substantial progress towards achieving universal access. Once these reforms become fully effective between 94% and 97% of the population will have adequate health insurance. These bills also begin to address the issue of quality of health care. They contain a number of provisions intended to improve quality of care, including measures that would train more primary care physicians and increase their pay.
But the reforms being considered in Congress will have very little effect on the cost of medical care, and that is not only unfortunate, it is disastrous. If we cannot "bend the cost curve" down, our economy will be wrecked. Because of the high cost of medical care the national debt will soar and our manufactured products will become so expensive that they will be uncompetitive in the global marketplace. What happened to American automobile manufacturers will happen to the producers of every product and service.
What is the solution to the problem of cost? I see only one way forward. We must find a way to make long-term investments in people's health and health care. Medical costs will come down only when each and every person has a medical "home" where preventive care is practiced and chronic problems are efficiently and proactively managed. At present, anyone can visit the emergency room and receive treatment for a life-threatening injury, but what about the follow-up? Anyone can go to the hospital for a drug overdose, but where can we go to treat addiction? Patients can be brought in to an urgent care center because they in insulin shock or tachycardia or respiratory distress, but who is effectively monitoring and treating diabetes, circulatory problems, and asthma?
Under the current system, whether it is Medicare or private insurance, all too often the insurance companies or medical care providers work under short-term contracts. At our places of employment we sign up for health insurance one year at a time. Neither our insurers nor our doctors – and certain not our hospitals – have any assurance that the patients whom they care for today will be their patients tomorrow. Neither insurers nor physicians have any economic incentive to prevent health care problems from occuring over the long term. My health insurer, my physicians, and my hospital have no reason to make any investment that they will not reap the benefit of.
Let us consider a single example. We could save enormous amounts of money simply by creating a single electronic file of each person's medical condition and medical care that would be accessible to any physician, any hospital, and any pharmacy. This would reduce medical error and eliminate redundancy. (How many times have you related your medical history? How many times have tests had to be repeated because the results were not available? How many people are prescribed drugs that are inappropriate for their specific condition or that interact badly with other drugs they are taking?) But who is going to make that investment in information technology? Why should my insurer pay for that? If it does, it will have to raise its premiums, and another insurer that does not make this investment can submit a lower bid to my employer or the government and win the health insurance contract the following year.
The same is true for virtually any investment that would improve people's health over the long term. For example, we know that medical costs can be reduced if every person has a "medical home" – a primary care physician or clinic that provides preventive care and manages chronic disease. But why should insurers or health care organizations go to the expense of creating these medical "homes" if other companies can take their contracts away by not providing these services and thereby underbidding them?
As I see it, the principal barrier to bringing down the cost of medical care is the short-term horizon that insurers and providers are practically forced to adopt under the present system.
A government-owned medical care system like that of Britain or the Veterans Administration can afford to make these long-term investments in information technology and primary care because they know that they will have the same patients for the rest of their lives, and so it makes perfect sense to keep those people in as good health as possible. In that type of permanent medical relationship it would probably save money to build gyms and let people work out for free! Or to provide free programs to overcome addiction or prevent domestic violence or manage depression!
In the long run, the only solution to the problem of cost is to estabish some kind of long-term relationship between insurers and providers on the one hand and the patients they serve on the other.
My challenge to you – is it possible to create those incentives to invest in long-term health care in a system of private health insurance?
{ 4 comments… read them below or add one }
Professor,
Let me answer your challenging question in the affirmative. Yes we can. We can create incentives to promote long-term health care in a system of private insurance. It is already done in the life-insurance market. (Smokers and sky-divers pay higher premiums.)
But this would require treating health insurance as insurance and not as a cost-shifting mechanism. It would also require severing the tie between health "insurance" and employment.
As i have previously stated, the problem is that health insurance has come to be seen as an entitlement. This manifests inteslf in many ways.
First, health insurance is tied to employment. Although there may historical reasons that health insurance is viewed as a benefit to employment (which are reinforced by our present tax code), there are no logical reasons why this should be so. Automobile and homeowners insurance are not typically provided by employers. Reform that would allow the tax benefits of employer sponsored health insurance to be enjoyed by indviduals would be a large step in addressing this anomoly.
This points to a second and more fundamental problem. Health insurance is not really insurance as that term is understood in other contexts. Rather it is, in many respects, an elaborate (and unnecessary) system to shift costs to other parties. When my car requires an oil change or a brake job, I do not consult my auto policy to see whether my mechanic is "in network". When my home needs a new coat of paint, I do not struggle with my homeowners policy to determine my "copay". Yet for the most routine medical expenditures, we have created an army of clerks and accountants to process payments and forms. This is ludicrous. I obtain automobile insurance to guard against large losses, not to cover routine maintence. Health insurance should operate the same. It should insure against catasrophic losses, not routine dental checkups.
This change alone would result in great savings as it would do away with the cost of processing insurance claims for routine costs (as opposed to creating a new federal bureaucracy, which can only add to costs). It would also nullify the debate on whether any reform bill should cover elective abortion The answer is "no" because it would not cover any elective procedures. I don't have to pay for your abortion and you don't have to pay for my face-lift.
Third, we need less government involvement, not more, in the actual detail of policy language and mandated coverages. Such involvement simply feeds tha idea of entitlement. Beyond clearing the field for competion and providing the same tax advantages discused above, the government should get out of the way.
Government can help by allowing insurance companies to sell across state lines. This will increase competition (which will drive down costs for the Professor) and increase choice. Aren't we all pro-choice on this issue?
In short, if individuals owned their health insurance policies, and health insurance operated more like insurance rather a perk of employment, then you would be able to establish long term relationships between providers, patients and insurers. You would also create the incentives to focus on the long term rather than the immediate.
For the most part, I believe Quidpro has offered an excellent response to the Professor's challenge. Here are my thoughts on one aspect of the challenge:
RE: "Health insurance should operate the same. It should insure against catasrophic losses, not routine dental checkups."
What we need is a two-level system of neighborhood preventative/maintenance healthcare programs that are prerequisites for coverages for non-routine losses that would be covered by true insurance policies. If you don't inspect the brakes and change the oil at prescribed intervals, your extended policy won't cover your blown engine or caliper replacements. Allow employers to offer access to hmo(?)-styled programs while requiring everyone purchase a blanket plan for catastrophic health events. That sticky 'pre-existing condition' situation may have to be limited to genetic disorders being covered by some sort of government option. Right or wrong, all other conditions may have to be considered 'preventable' and covered by the same rules as smoking and skydiving for risk management premiums.
I believe that automated process can do much to reduce the cost of health care delivery. This will decrease employment in the health care delivery system, an anathma to the politicians, but is effective in cost reduction. Another aspect of health care cost analysis relates to looking at the different populations who are served by the system. I maintain that there are large portions of the population who are well served by the current system, and who are not overly expensive to care for. I believe that it would be good to start looking at the different segments by cost and make determinations about the health of the system based on that more granular analysis.
Just a people pay for health clubs now, it may be that the health clubs could ally with the HMOs and provide health tracking for the government, with the clubs and local government recreation facilities receiving a subsidy for doing that.
If we really are committed to solving this problem, perhaps we need to take a step back, walk around the problem, roll it over a few more times, weigh it, and run some models based on more than just cost – like supply, demand, and benefit. I agree that lack of universal health care is the problem that MUST be addressed – but I doubt that a government administered model (GAM) is the way to do it. In a GAM, the taxpayers ultimately bear the risk and cost. I worry about the incentive to innovate and provide better care in a GAM. I worry about the cost associated with continuation of the enormous insurance bureaucracies (EIBs). After all, the ultimate goal of the EIBs is to make money – they have shareholders after all, folks. For EIBs, patient care is good provided that the care adds to the bottom line. Yes, EIBs are good at moving and distributing risks and costs, but relying on them helped get us to this point of present urgency. And EIBs have so much money and resources at work in Washington – what's a well-intentioned Senator or Rep supposed to do to filter through all the BS (technical term).
The health club references in the posts above struck me. If you belong to a health club and the health club has other locations in other areas, you can often use a facility affiliated with your home club for free or a nominal charge – provided you paid your dues at your home club. No enormous bureaucracy or government agency needs to get involved. Memberships or subscriptions to clubs are available at reasonable rates, too. Activities at the health club are directed toward serving the needs of each individual, as the individual needs or wants. Individuals can choose what club they want to belong to. Perhaps a young unmarried professional might choose a Bally's or Gold's Gym. Perhaps a family would choose a YMCA, JCC, or local community rec center?
What if Americans did not have to deal with government or EIBs to get reasonable cost health care? What if Americans could simply buy a subscription from a local health care provider network for, say, a 3 – 6 year term (sounds like a car loan)? Why not even consider the possibility of a lifetime or 30 year membership financed by the local network with the help of a local bank? If the Fed or state government wants to get help, it could license and regulate local health networks. This structure may incent local networks to really deal with efficiency issues and focus on providing the best care possible by enabling them to take a longer term view of their business processes, which incent them to shift cost structures from short to longer terms – perhaps resulting in cost savings in addition to benefits. Oh, and this structure would eliminate the EIBs and reduce government involvement, thereby achieving additional cost savings and mental health benefits for providers and their accountants.