With the election coming, a great deal of talk on both sides of the aisle revolves around healthcare. Various competing and not-so-competing plans have been thrown around, but they all fall into the politician’s practice of promising everything while not properly accounting for the tradeoffs and costs.
While I don’t profess to have all the answers, as this is really a product of several commutes worth of thinking about how a business-person would approach the problem of healthcare policy, I feel that the most logical place to start in devising a solution is to start with the complaints that we hear so often about healthcare:
- It’s too expensive. This is pretty clearly true, but is in and of itself not a problem. Why? First, it assumes that the quality of healthcare does not increase. If healthcare gets twice as good but the price only increases by 50%, then this would not be such a big deal. Secondly, it assumes that incomes do not rise as fast as healthcare costs do. If incomes tripled while healthcare costs doubled, then there would be no problem. However, while the quality of healthcare has improved due to improvements in medical science and American medical schools churning out batches of highly trained MDs, incomes have not increased as quickly as healthcare costs have making this a problem not so much of expense, but a problem of access. This access/expense problem is exacerbated by the fact that greater costs have made insurance companies and employers unwilling to bear the costs of paying for the care of individuals who suffer from terminal or difficult-to-treat conditions.
- Doctor-patient relationship has deteriorated. This is a vastly more subjective and complex issue than the one of expense. But, in a nutshell, this is a problem that is perpetuated on two levels: the first is at the level of managed care. It’s difficult to maintain a strong doctor-patient relationship when the actual “customer” in the transaction is an insurance company seeking to minimize cost rather than the patient him/herself. The second is at the level of medical malpractice. That medical malpractice premiums are shooting up is not a product of corporate greed on the part of the malpractice insurance companies, but that the number of lawsuits and the magnitude of damages claimed has increased.
This is, of course, a simplistic overview of the problems involved, but it outlines the key issues that a healthcare policy needs to start with. The era of managed care was a response to the problem of expense and access, but not only has it failed to completely control the problem of costs, it created and exacerbated the problem of the doctor-patient relationship.
A lot of people see the solution in a single payer system — a system whereby the government (presumably) would step in and regulate costs and quality in such a way as to arbitrate a balance between expense and damage to the doctor-patient relationship. Unfortunately, this sort of monopsony (a single buyer, rather than a single seller which is a monopoly), especially one run by a government, is rarely desirable for a number of reasons. Allowing politicians to either decide which care to withhold rarely takes into consideration the needs and interests of the people involved and may be worse than managed care in terms of damaging the doctor-patient relationship given the single payer’s supreme market power. The flip side, where the political process allows almost all medical procedures, suffers from the exact opposite problem whereby there will be no incentive for doctor or patient to control costs, leading to escalating costs which will be reflected in either a massive government deficit or a massive tax hike.
The private sector, while certainly with its share of flaws particularly with regards to access, however does a great job of increasing quality of care. Furthermore, it provides a wide range of flexibility in offerings which a single payer system run by the government does not. I don’t believe that most American doctors would wish to give up their private-sector salaries and autonomy to become government employees with regulated salaries and restricted freedom.
So, taking these into consideration, I’ve come up with four basic healthcare objectives that a healthcare policy ought to fulfill:
- All children should have healthcare. I don’t even see what moral argument one could have for depriving children, especially poor children, from having healthcare. They have absolutely no say in their economic situation. And, taking care of children today means reduced medical expenditures and increased quality of life in the future. There is thus a moral imperative and a preventive imperative in this principle.
- Doctors should be able to freely advise their patients on the best course of action, and patients should be able to take that advice. The great failure of managed care is its sacrifice of this basic principle. Doctors are medical experts. Medical decisions should be made by them, not by a government, by insurance companies, or faith healers. By doctors.
- Individuals should take responsibility for at least some of their medical expenses. The tragedy of commons says that when people don’t bear the cost of their bad actions, those bad actions proliferate. If individuals do not pay for healthcare to some degree, there will be no reason to control costs. The alternative is for an HMO or the government to step in, but this is not only undesirable for the reasons mentioned earlier but because it overrides principle #2 that doctors and patients should feel like they can trust each other and act on that trust.
- Individuals should not have to pay more than 1/3 of their income in healthcare costs. At the same time that we consider #3, we also have to consider that healthcare is a necessity, not a nice-to-have. Given the choice between death and poverty, most people choose poverty, but that they have to make that choice at all is a problem. The 1/3 number I give above is of course an arbitrary number which can be debated, but it strikes me that a fraction is ideal here, as the critical issue is not expense, but access.
Taking these four principles together, the healthcare policy I’d love to see is:
- The government assumes all healthcare costs for all children and students. This will be expensive, but given the moral and practical arguments involved, I feel this is wise. The government can mitigate the problems of monopsony by purchasing this care from private providers in bulk by means of auction and by giving parents the option to opt out and purchase comparable coverage elsewhere. This has the side benefit of being able to implement preventive measures in children, including vaccination (in loco parentis if necessary given the absolute catastrophe that the Thimerosal scare has been producing in uninformed parents) and better monitoring and treating of childhood obesity, eating disorders, and other public health concerns.
- Every individual is required to purchase catastrophic insurance which kicks in when healthcare expenditures exceed 1/3 of after-tax income for life-threatening conditions. This is to prevent the free-rider problem where the care of individuals without insurance are subsidized by the insurance of others. This insurance should be need-blind, in the sense that the providers should be legally bound to cover all patients regardless of the patient’s need. This is the central piece of my healthcare policy which targets the “access” problem.
- Institute a health savings account-like system which allows individuals to contribute pre-tax money, say up to 10% of their income every year, to a tax-free savings account which they can withdraw from to pay medical expenses. This sum can accrue over time. This restores choice to an individual on what doctor to see, what treatments to take, etc. and puts the responsibility of getting and paying for care on the individual up until some point. The 10% number is of course arbitrary (and can be flexible depending on if the individual has dependents) and there is of course the issue that an individual will save only up to 33% of their income, but this is a good start in restoring the patient-focus in the doctor-patient relationship by removing the potential for a third party to withhold or allow care for purely financial reasons and in combating the tragedy of commons which currently occurs because patients rarely face the full cost of their care expenses.
I’m not sure if this system is politically feasible, and it certainly has kinks to work out (i.e. how to transition to such a system, what the exact percentages should be, how do we deal with dependents/spouses, how do we deal with college students, what counts as “life-threatening”), but I believe I’ve created a system which does actually address the problems of access and worsened doctor-patient relationships while adhering to a clear set of objectives.
