Posted by
Ryan Hawkins on Tuesday, October 13, 2009 11:00:00 PM
I recently read an article by T.R. Reid of the Washington post that discussed successful healthcare models in other countries. The conclusion on U.S. Healthcare was this:
" In many ways, foreign health-care models are not really "foreign" to America, because our crazy-quilt health-care system uses elements of all of them. For Native Americans or veterans, we're Britain: The government provides health care, funding it through general taxes, and patients get no bills. For people who get insurance through their jobs, we're Germany: Premiums are split between workers and employers, and private insurance plans pay private doctors and hospitals. For people over 65, we're Canada: Everyone pays premiums for an insurance plan run by the government, and the public plan pays private doctors and hospitals according to a set fee schedule. And for the tens of millions without insurance coverage, we're Burundi or Burma: In the world's poor nations, sick people pay out of pocket for medical care; those who can't pay stay sick or die."
Its also fair to point out that Burundi & Burma don't have Medicaid while America does. The reality is if you get sick in America and go to hospital, they will treat you first and bill you later...America isn't inhumane in treating the sick...(but that is part of why healthcare costs so much.) The article also points out (and this is a big problem) that the U.S. system forces 700,000 Americans per year into bankruptcy while the systems of Japan, Germany, and Britain force no one into bankruptcy.
My reading of that article led me to conclude that Japan's system is far superior to all others. Unfortunately (and this next point is omitted from the earlier-referenced Washington post article) many economists predict the Japan model is unsustainable. A recent analysis by the consulting firm, McKinsey & Co., concluded that Japan's demand for medical care will triple in the next 25 years and that the current healthcare system will need major changes to handle that demand. I don't know enough about Germany's or Britain's system to comment on those, but if those countries had it perfect then we'd certainly hear more politicians raving about those countries' flawless systems. There are certainly pros & cons with every country's system, including the U.S. system - which brings me to my next point.
What's the U.S.' Problem???
A lack of affordable insurance isn't the problem in America - it is only the symptom of a much larger problem. What then is the much larger problem?
How about the care itself? Forget the insurance, I am talking about the costs of prescriptions, treatments, the medical equipment, the doctors, & the hospitals. Efforts to bring about insurance reform are misguided and will ultimately be ineffective because those efforts don't address the sky-rocketing costs of the medical care/treatment. Allow me to illustrate: suppose you have been tasked with filling an Olympic size swimming pool with water. Your only means of getting the water is a small, square 1/4 measuring cup. Obama comes in and offers to fix the problem by giving you a much more stream-lined oval-shaped 1/4 measuring cup. Did he fix anything? Similarly, the current plans of the Obama administration (and the democrat-controlled congress) do nothing to address the real problem and rein in healthcare costs--their reform efforts seek only to tweak the insurance conduit and the manner in which those ever sky-rocketing healthcare costs are passed on to taxpayers/employers/insurance companies. Healthcare costs will continue to sky-rocket and subsequent government officials in a newly created level of bureaucracy will be left searching for ways to balance their "new" healthcare budget. As we have seen with every other government entitlement program, those officials won't know what they are doing and they will irresponsibly rack up unprecedented new deficits and continue to mortgage away America's future.
What about all the money those insurance companies make?
I most certainly don't believe that the profit motive of insurance companies in the U.S. is the problem. After all, if an insurance company can provide a service by offering me access to healthcare and they can do so at a lower cost than I could achieve on my own...then what's the problem if the insurance company makes a little money as they provide me that service? Am I not still better off than I would have been otherwise? (If not, then the insurance company does not have a sustainable business model and it will be bankrupt very soon.) Besides, providing a service and making a profit is simply the American way, and just about every American business in every industry makes its profits doing that very thing.
If the insurance company gouges its customers then its competitor will come steal the customers away. (Unfortunately, the U.S. system does need to break down some of the regulatory barriers among the states if we want insurers to truly compete with each other. That level of competition is in the best interest of Americans and that will do wonders to lower the cost of insurance and increase its availability for more Americans.)
Can the Current U.S. System be Salvaged?
I suggested some of my solutions in the previous post, most of which are directed at containing healthcare costs themselves - which (unlike insurance reform) are the problem, not the symptom. A large part of the healthcare problem goes back to simple supply & demand economics. If we had more hospitals, doctors, and nurses then our supply of healthcare would be sufficient for the demand. If the demand were not artificially inflated by an ever-increasing population of illegal immigrants, then supply & demand would have a greater likelihood of maintaining some level of balance. Allow me to further illustrate: if a city of 1,000,000 people only has one doctor that can perform MRI's - and if daily demand for MRI's in that city is enough to keep 50 doctors busy, you'd better believe the price of those MRI's is going to get very expensive. On the other hand, if that same city had 300 doctors that could perform MRI's then chances are, those doctors who can perform the MRI's at a lower cost are going to take all the business from those who can't...the competition brings down the cost of the MRI because it increases the supply. In either of these scenarios, Obama could gather all of the insurance reform in the world and it will have no impact on the price of that MRI as long as the supply/demand are out of balance. In fact, of all the insurance systems currently being discussed -- a fully private insurance system is probably the only insurance system that puts any pressure on the demand side of the equation to keep the costs down. Conversely, universal insurance coverage will put a spike in healthcare demand, which will put further pressure on supply and further accelerate the healthcare inflation we are already experiencing.
The true socialist would then say we need price ceilings on medical care, which is another thoughtless quick fix. If I am the MRI doctor described above, and the government imposed a $300 price ceiling on my MRI's, then the demand spikes right back up and I won't have enough hours in the day to meet the demand. I will either use cost shifting to raise my prices in other areas that aren't subject to the ceilings or I will venture out of the MRI business into something more profitable. Either way - anyone who wants an MRI is going to have to get in line and wait.
Any Specific Solutions?
Any measures that can be taken to lower the cost of medical care are worth examination. Barack Obama dismisses tort reform because he doesn't seem to believe frivolous law suits are a drain on healthcare resources. Regardless of what his opinion is and regardless of his factual inaccuracy, tort reform is--at very least--an attempt to treat the problem - not the symptom. Thus - tort reform should be given far more attention anything in the realm of insurance reform. (By the way, improving technology in every other industry tends to lower the cost for that industry. Can you think of any reason why improved technology hasn't lowered the cost of healthcare? I'd venture to hypothesize that the current tort laws and the malpractice costs of frivolous law suits offset all the cost reductions of improved technology.)
Unfortunately, the ideas on bringing down the costs of medical care are not quick fixes. We can't flood America's healthcare system with 10 million new doctors overnight. We can, however, invest in doubling the size of America's medical schools. We can further eliminate some of these barriers to the supply of medical care in the U.S. (Although it probably isn't humane to deny care to an illegal immigrant who shows up at a hospital needing treatment, it is humane to step up our border enforcement so that we can at least limit the drain on our healthcare resources that comes from illegal immigrants.)
What will all of this accomplish? Well, since I have said many times that insurance is merely the conduit for passing on healthcare costs to the recipients - the do the math: if the cost to your insurer comes down, doesn't it make sense that your insurance premiums will become more affordable too? (If not, check with a competitor...competition keeps price gouging in check.) We still need insurers to cover pre-existing conditions and we still need insurance to be more available and affordable to all Americans, but those are minor tweaks compared to everything congress is currently discussing. If we can lower the cost of medical care itself, private insurance (not government insurance) will become more affordable and more available. That's the American way to fix it.