A Waste is a Waste: Straight Talk on Health Care

Arguments about health care are quite contrived as the true victims, the citizens, are but a pawn in this epic power struggle.  Private health care is broken and without salvation.  Big business, drug companies, HMO patient mills, unscrupulous doctors, greedy trial attorneys, weak willed patients, profiteers, government regulation, associations and insurance companies so big only the supernatural could deter them have proven that purely acting in self-interest is not the solution to the health of an entire nation.  Government care is not the answer.  Insurance companies are not the answer.   Best medical practices and forced procedures based on limiting liability make health care a one size fits all solution, that fits few and satisfies even less.  

Our incentive structure awards drug dealing, surgery, and treatment.  Prevention is a profit killer.  The sicker we as a nation get, the better the doctors, drug companies and suppliers get paid.  That said, the insurance business is so cash strapped due to high competition and failure of the healthy,  the tough and those who cannot afford insurance to insure, that denying legitimate claims is a best practice to remain solvent.  

If markets work, why does this one not?  It doesn't work because the interests of the parties are not transparently aligned with respect to one another to create efficient equilibriums.  For instance, auto insurance works because there is no party that "wants" to get into an accident.  In medicine, the patients wants to be healthy, the insurance company wants the patient healthy, the doctor profits more as a patient's health negatively progresses, but the suppliers and drug companies only are rewarded when a patient is sick.  Now, once someone actually becomes sick, the patient benefits from the best care, the doctor profits from the most severe procedure, the insurance company benefits from the least expensive fix possible ( with "no fix" being the most beneficial) and the drug company only benefits with  a drug induced treatment. 

 As a result no solution can be derived in addressing the individual participants.  The solution must result from creating strategies and tactics that result from consistent adherence to a common goal.

Here is the goal of our Nation's health care: a healthy population, who has the opportunity to eat preservative-free and unaltered foods, drink clean water, breathe clean air, who exercises and takes care of themselves and rarely reaches a level of sickness where a doctor is necessary.   

Our goal is broad, sweeping and unapologetically in stone.  All strategies and tactics that serve to fill our goal shall address the smaller issues underneath our goal, but never contradict our goal.  Now that we have a goal we ALL can agree on, let us write our strategies to reach that goal and fill in those strategies with our tactics.  Simple stuff when you remove ideology and special interests, huh?  

The Healthcare Tax

There is so much argument surrounding health care and the future of the health care system in the United States that it is a difficult venture to take a stance.  Those for a capitalistic health care system argue that government involvement would stifle creation of alternative and new medicines as well as limit care among other things.  Those in favor of a government provided basic health care system argue that it is immoral to deny health care to any person and that the corresponding standardization of the industry will lead to better overall care.  One thing both sides can agree on is that the current system is dysfunctional and inefficient.

Assuming, the American is not a teacher, police officer, politician, in the military or a public servant who receives tax payor sponsored health care as a function of employment, the following is a depiction of the current system at work.  

Since the health care system in the United States is neither capitalistic nor universal, both sides are provided the luxury of blaming the other for the atrocious care available at a premium price.  If one is not poor enough to qualify for government health care, he or she is faced with bills for care that are unaffordable.  It is not uncommon for medical billings to include $25/Tylenol charges and $7,000 diagnostic surgeries (such as a biopsy).  Hospitals, Urgent Care Facilities, and private practices claim they are on the brink of insolvency and must charge exorbitant amounts to cover the costs of the uninsured who cannot afford medical attention. 

The current alternative for Americans is to purchase insurance at levels upwards of 15-20% of their take home pay monthly with $2500-$3000 yearly deductibles on co-pays and hospital bills with most preventative care excluded from coverage.  For families, the cost of an average HMO policy is over $500/month with a responsibility to pay up to $5000/year on deductibles before reaching an 80% coverage.  Year after year, the costs to remain insured rise. As those costs rise, the numbers of uninsured rise and system becomes more strained.  In fact, many Americans who are the most sick are denied coverage and deemed uninsurable forcing them to either attempt to deceive the system by lying on applications for coverage or becoming a ward of the health care system flooding the emergency rooms of hospitals.

For the trained economist, the resulting scenario is quite clearly an agency problem.  Much like in the scenario of public broadcasting, many take advantage of benefits for free, or "free-riding," while those who choose to pay cover the total costs.  In other words, an incentive to cheat exists as people recognize that by not insuring themselves they can still receive care.  At a minimum those uninsured settle their medical bills for far less money than what insureds pay, or avoid paying medical bills at all by bankruptcy protection or collection settlements.  As more people cheat, whether by choice or by necessity, the costs  to those who choose to insure grow exponentially as the medical industry charges higher costs to compensate for those whom they treat without compensation.  

Some Americans further believe that illegal immigrants also take a toll on the hospitals as they pay no taxes and carry no insurance.  While an identifiable target, 50% of American citizens pay no taxes and carry no insurance, so such points are taken, but not overwhelming.

The system can be summarized by "the few, or the insured, carrying the many, the 'un' and/or the under insured."  If one thinks about it, doesn't this sound familiar?  Ah yes, it resembles the American tax structure.  In fact, most insureds have health insurance costs taken directly out of their paycheck like taxes and the charges are taken out prior to State and Federal Taxes.  Further, the majority of the premiums and co-pays paid by the insured is not for the sole benefit of the insured, but rather for the benefit of the system as a whole.  Hmmmmmmmm, a payment directly taken out of a citizen's gross pay for the sustenance of  a common good or service. Yep, it's a tax, no doubt about it.

The biggest problem with this tax is that every year more people opt out of paying it, causing the tax to increase on those left who can actually afford it.  Worse yet, this tax has a massive profit margin built in for its "government," the Providers and Groups, who have an incentive to deny or reduce care to those who pay them to increase profits.  The collateral damage is directly focused on the hospitals who suffer to the point of insolvency as the growing class of uninsureds pile into emergency rooms that cannot turn them away.

While I shall not provide my reader with the solution because I believe solving this problem is quite simple and the solutions are plentiful once the issue is properly clarified, I urge the reader to weigh the following facts.  In the United States, many citizens don't see a doctor for preventative or procedural care due to costs.  Most citizens, won't even consider seeing a medical professional when sick.  Only when a health problem reaches a significant level of severity will the average American seek any medical care.  When a medical problem has reached the level of severity deemed appropriate by the average American to seek medical care, the treatment necessary is usually far more costly than it would have been at an earlier stage. 

Over thirty percent of health care costs and efforts are administrative fees associated with collecting and tracking payment from insurers and the government.  The United States is not even in the top ten in health, but it ranks number one in health care costs.  Health care costs are causing businesses to shutter and our competitive advantage in the world  to erode.  Finally medical bills cause more bankruptcies to our battered consumer than any other cause.

In closing, please consider that a dollar spent on health care has a worse multiplier effect than a dollar sent to the public sector in the form of taxes.  If a dollar spent at a local retailer shall lead to 8 dollars spent before that dollar is completely spent, health care, like taxes hovers in the low 3s as a multiplier because of all its sunk costs.  Once we as Americans admit that those paying for health insurance are simply paying a tax and that dollars spent on health care (like taxes) are less beneficial than other types of spending, we have begun down the path to a solution that benefits all.  Whether we eliminate insurance altogether in a purely capitalist structure forcing medical providers to charge fees in line with society's ability to pay, or induce a standardization of costs for the industry (i.e. 5 cents for a Tylenol, 10 cents for a bandage etc.), or create a single pay medical provider to eliminate the billing waste- the solutions are endless.  While some are more meritorious than others, the system chosen at a very minimum should force medical providers to focus on preventing serious illness as a manner to reduce costs and provide better care; as well as, protect the sanctity of life for all as priorities.  

One last thing, the argument that doctors and pharmaceutical innovators will leave the United States should a capitalist, standardized or a universal payor solution lead to lower pay for such persons is without substance. Where are they really going to go to find a higher wage than the United States?  Oh that's right, there is no where.