The Major Obstacle To Serious Health Care Reform

posted at 5:28 pm on July 14, 2009 by Doctor Zero
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After watching the fuel-air bomb Steven Crowder dropped on socialized medicine this morning, I thought it might be a good idea to discuss what sort of reforms would be desirable in our health care system. The public certainly seems to be in the mood to do something about it. I hope they come to understand that Obama’s socialist proposals are the exact opposite of what needs to be done.

It seems to me that people want four broad improvements to health care:

1. Greater availability: People want easy and convenient access to medical resources, ranging from primary care to emergency services. No one wants to spend hours in a waiting room, or days waiting for a physician to become available for treating acute illness. Advances in medical technology have made early diagnosis increasingly crucial – severe problems can be treated with lower cost, less discomfort, and higher success rates when caught early. Life can be greatly extended, and its quality improved, if the elderly have ready access to medical care. Our society also has an admirable concern over the availability of health care for the poor.

As the Crowder video illustrates, greater availability will never be a benefit of socialized medicine – quite the opposite. A government-run health care system will inexorably, unavoidably, inarguably lead to rationing and longer wait times for treatments. This will not only make people unhappy…. it will kill them.

2. Reduced cost: Health care costs are extremely high, and they have been rising for decades. Naturally, consumers wish to pay less for care, including the business consumers that provide health insurance as a benefit to their employees. Nationalizing health care does not reduce costs, although disingenuous liberals sell it to the public that way. A public health care system hides costs in the tall grass of the massive federal tax system, and converts explicit costs paid directly for care into hidden costs, such as higher unemployment. If nothing else, consider that if the medical industry is nationalized, roughly one-seventh of the economy will transform from tax-generating private businesses into tax-consuming government programs. How do you suppose the government will make up that lost revenue?

3. Improved technology: As with every other product, consumers wish the quality of medical technology to continue improving. These improvements naturally lead to reduced costs, but only if companies have the incentive to make big investments in research and development up front. The government will never have such incentives, in the sense private industry does. The public has become accustomed to steadily improving medical technology, so they don’t complain about it very much… but that will change, if they get a taste of the stagnation that would inevitably follow nationalization of the health care industry.

4. Enhanced ownership: People are nervous about their health insurance being controlled by their employers, and worry about losing coverage if they lose their jobs. This makes promises of universal health care sound appealing… when, in fact, they should be absolutely terrified at the thought of the government controlling their health care. The mythology of the “entitlement” as something that you have a “right” to, and which can never be taken away, is particularly dangerous in the health care debate.

Each of these Four Goals influences the other. Improved technology helps to reduce cost, which in turn increases availability, and makes direct ownership of health insurance more practical. Enhanced ownership makes people more likely to shop for competitive coverage and benefits, driving down cost and increasing availability, as more affordable and specialized medical services are offered, in the hopes of attracting customers. The objective of serious, market-based health care reform should be to create a system in which the relationship between the Four Goals can be mutually beneficial, eliminating external factors that prevent them from interacting with each other in a positive way.

In the interests of symmetry, here are four ideas to advance such a system:

1. Get rid of Democrats: As any doctor will tell you, one of the largest contributing factors to the high cost of health care is malpractice insurance, coupled with the legal costs of fighting malpractice suits. The precise dollar value of excessive malpractice cost is a topic of much dispute, but it’s a sizable amount, particularly in regions where slippery lawyers like John Edwards can become millionaires by hitting the “jury jackpot.”

There is absolutely no way to implement tort reforms, of the sort Bobby Jindal is noted for advocating, while Democrats hold power in Congress or the White House, because the Democrat Party is wholly owned by the trial lawyers’ lobby. No reform proposed or allowed by Democrats will run counter to the interests of the trial lawyers. The Democrats are also completely enraptured by the promise of nationalized health care, which they believe puts invincible political power within their grasp. They will never provide any constructive input to policies that would move that ultimate brass ring forever out of reach. Therefore, Democrats have got to go, before serious health care reform can be enacted. If that sounds nakedly partisan, well, it is… but who made it that way?

2. Separate routine care from catastrophic insurance: The sudden, soaring cost of catastrophic care can destroy a patient’s finances. The logical approach to guarding against such a catastrophe is to purchase insurance. A small premium is paid on a routine basis, so the insurance company will cover large, unexpected costs. The insurance companies make money by collecting these small premiums from many customers, producing revenue far beyond the cost of paying claims by the relatively small number of customers who become seriously ill.

Why provide such a simplistic review of the way insurance works? Because that’s nothing like the way health “insurance” works today. We expect our insurance to pay for routine diagnostics, simple treatment of minor illness, and even elective procedures. This destroys the normal system of incentives for insurance companies, and separates patients from the true cost of their treatments.

The cost of catastrophic coverage would, logically, become much lower if insurance companies were allowed to apply normal actuarial calculations to set the price, and relieved of the burden of managing the vast constellation of non-critical services currently lumped under the umbrella of “health insurance.” On the other hand, routine services would become more affordable if providers could sell them as routine maintenance plans, the way you can get discounts for buying automobile maintenance plans. There is plenty of competition for those auto plans… as I suspect there would be for free market, privately owned health maintenance plans. This would also have the benefit of thinning out the crowds in hospital waiting rooms, as many of those people are seeking services that could be performed on a regular schedule, at smaller clinics.

3. Provide employer and government assistance through tax breaks: One of the bombs waiting to go off in socialized medicine schemes is the tidal wave of demand that would be unleashed by “free” health care. If you think Canadian health care is horrific after watching that Crowder video, just wait until such a ramshackle system is applied to a country with ten times the population.

Government can only manage demand by restricting supply – in other words, rationing. Free markets control demand through price. The obvious result of this principle is raising prices as demand outstrips supply, but this runs counter to our health care reform goals. A more subtle interpretation of the relationship between price and demand is to shift the demand, by giving the consumer an incentive to spend his money on something other than health care. This leads to the Medical Savings Account concept, in which tax-fee payroll deductions are accumulated in a savings account – fully vested and completely owned by the patient. At the end of the year, if these dollars are not spent on health care, citizens can use the money for anything they want.

4. Produce more doctors: Increasing supply of a product brings down the price, and provides greater availability. America has a huge demand for medical services, and it’s only going to increase, as more life-saving and life-extending treatments become available. The supply of doctors has not been rising to meet this demand. In fact, this article from the Top Colleges blog quotes a New York Times study that says the number of medical school graduates has been essentially flat since the 1980s. Top Colleges also says that supply will fall between 125,000 and 159,000 short of demand by 2025, and that’s without factoring in the potential effects of nationalized health care.

How do you improve the supply of doctors? You certainly don’t want to lower the standards for certification. The medical industry will always have very high standards of entry for new providers. Nationalizing health care would inevitably reduce the supply of doctors, by making a medical career less attractive. Subsidizing medical educations is not a good free-market option… if the government does it. In a more capitalistic system than the one we have today, private medical companies might want to increase their scholarship programs, as an investment to produce more health care providers.

The Top Colleges article includes this interesting bit of information:

There are some obstacles standing in the way of increasing the number of people admitted to medical programs, however, as the number of eligible candidates is limited. After all, students must be able to demonstrate their knowledge in the physical and biological sciences, which is measured by the Medical College Admissions Test. Another problem is a lack of availability of residency openings. Currently, there are about 1,000 teaching hospitals available, with each having a limited amount of space available for residents. These limitations are largely in place due to the fact that Medicare pays for the residency training and available paid slots through the program have been frozen for over 10 years

So, one of the big holdups in creating enough doctors is a lack of residencies, due to… government-run health care.

I’m all in favor of health care reform. Let’s get the Obama plan into a trash bin where it belongs, remove the major obstacle to serious reform represented by his party, and get to work.

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