First, let’s get something straight. There’s a difference
between health INSURANCE and health CARE. The politicians and talking heads continuously
either conflate or misuse the terms. Providing healthcare insurance does
not mean providing health care. Conversely, health care does not necessarily
have to be linked to or paid for with insurance!
Oh and by the way, health insurance doesn’t (e)nsure health
any more than life insurance covers life. Both are tortured marketing labels
that have, over time, become universally but naively accepted.
Perhaps the most influential and lucid book ever written on
the subject of healthcare policy was written in 1986 by Joseph A. Califano, Jr.,
who, among other things, served as U.S. Secretary of Health, Education and
Welfare. The book is entitled America’s Health Care Revolution: Who Lives?
Who Dies? Who Pays? Califano, Joseph A. (1986) NY:Random House.
Although out of print, it can still be obtained through Amazon.
In plain language, Califano describes the various players, forces, complexities
and problems of the system. He too makes a distinction between health insurance
coverage and the delivery of health care.
Back in the 80’s the crisis was rapidly escalating cost
and how that was reflected as a percentage of Gross National Product. Califano
cited numerous drivers of the inflation, among them: an aging population, advancements
in medical technology and drug therapy.
But the biggest
driver of healthcare inflation and the root cause of all of the health care
delivery and payments system’s problems is intrusion into the doctor-patient
relationship.
Why? The answer is complex, but greatly simplifying the
story and the history, it all began in 1929 when Baylor University Hospital
initiated an insurance plan for 1,250 schoolteachers. Each teacher paid 50 cents
(!) a month and received up to twenty-one days of hospital care each year. In
1932 Blue Cross came into being, largely supplanting individual hospital plans
and by 1937 had 800,000 subscribers, which rapidly increased to over 6 million
by 1940.
Commercial insurers, who primarily wrote property &
casualty and life insurance policies, were initially skeptical, but with the
success of Blue Cross, entered the arena aggressively, taking the
not-for-profit characteristics of Blue Cross plans into the for-profit realm.
Fast forward to World War II, when strict price controls on salaries
and wages were enforced but there were little, if any controls on “fringe
benefits.” Corporate America, competing for qualified personnel, offered
better varieties of often ‘free’ health care insurance benefits to prospective
and existing employees in lieu of higher wages.
In 1947 the Taft Hartley Labor Relations Act opened the door
for unions to include fringe benefits like health care insurance plans in their
collective bargaining negotiations. That really put fuel on the fire.
Since neither companies nor the government wishing to hire
or retain employees could compete with each other on wages, they tried to outdo
one another on fringe benefits. Promises of lifetime healthcare insurance
coverage that paid 100% of the costs of health care for workers and,
eventually, their families as well, became the norm, and health care insurance quickly
moved from benefit to entitlement.
Guess what? Now, decades later, those promises are coming
due, with the cost of providing coverage to both workers and retirees not just
dwarfing original cost estimates, but now threatening our national solvency!
With the spotlight when Califano wrote his book on costs,
the solutions proffered by our benevolent federal government included greater regulation
and control over the system, which in turn, predictably, gave rise to “managed
care”, or what I refer to as “mismanaged care”. This not only added
to health care cost inflation by layering in an administrative bureaucracy but
more importantly, exacerbated the intrusion between providers and patients and
rapidly advanced the already existing “Triangular Health Care System”.
In no other industry or
system are the basic principles of economics more violated than in America’s
health care system. What the advent of insurance, whether purchased by an
individual, provided by an employer, or granted by the government (i.e.
Medicare and Medicaid) does is largely eliminate the economic discussion
between the provider of goods and services and the consumer of those goods and
services.
What’s pernicious about this system is that health care
providers are incentivized to do everything and anything for their patients,
whether medically necessary or not, and without concern for the cost. Since
physicians can prescribe and create demand for their services (“I want to
see you again in two weeks”), any attempts to reduce costs through price control
mechanisms are easily offset by what we’ve seen, i.e. more services rendered in
less time, and unavoidably, with reduced quality. Who hasn’t noticed that instead
of 15 minute time slots allocated to routine doctor visits, the norm is now 10?
What’s also pernicious is that consumers are for the most
part insulated from the basic economics of the transaction/interaction between them
and their physician, hospital, pharmacist, optician, etc. until a bill comes in
the mail for the “balance due, not covered by insurance.” Most people
naively believe that “more care” is “better care”. Thus,
the insulation further increases demand.
Whereas in most economic transactions there’s a bargain
reached between buyer and seller, in the Health Care Triangle there are two
bargaining activities: one between the patient/consumer and their insurance
company (or their employer) and one between the insurance company and the health
care provider. Again, the provider and the patient rarely, if ever, discuss cost.
In short, what insurance does is both intrude and distort
the normal business equation. It turns over, increasingly, the responsibility for
individuals’ health to Nanny, until now, the Left has abandoned all pretense of
requiring people to care for themselves, and the freedom to elect how to select
and acquire health care. Instead, they opt, as they usually do, for solutions like
“Medicare for All” which is not about delivering cost and quality
health care at all, but about CONTROL. (Come on over for a sit down and single
malt to have a different discussion about that
problem!)
So what can be done about this?
Due to ingrained and pervasive attributes, agendas and
conflicting motivations among the participants, this Gordian Knot with a Rube
Goldberg contraption on top will be very difficult to unravel. There is no
simple, sweeping solution. However, the long climb back up this slippery slope
starts with the application of free market principles, including both restoration
of the economic discussion between consumers and providers of health care and disclosure
and transparency among market participants.
Meanwhile, channeling Hippocrates, we need to stop doing harm. We must insist that legislators do the precise opposite of what they’re programmed to do…interfere. Rather, we need to legislate less, continue to relax or retract the straight-jackets being applied to the system and, carefully but decisively take away “nanny’s security blanket”, i.e. government hand-holding through regulation and tax extortion. Finally, we need to insist on personal/individual responsibility for HEALTH so that the need for CARE will be reduced. Only then can the inbred bureaucracies be successfully dismantled.
Health care is not just an art, or science, but also a
business. The more regulated it has become, the more inefficient, unfair,
arbitrary, expensive and messed up it has become, and the more intractable the
problems. The less regulated it can be made, the more individual responsibility
will be restored, the less demand there will be for care, the better its
quality will be, and the more equitable its provision will be.
