Monday, October 29, 2012
They're All Wrong on Healthcare
Throughout this campaign season we have been hearing the healthcare debate, but I have yet to hear any candidate propose a plan to really reduce the cost. All they talk about is insurance, as if that will fix the problem – make healthcare insurance more affordable and the cost of service will somehow stabilize? Just refuse to pay the doctors and hospitals any more and we will continue to get the same quality and availability but for less? As I have pointed out many times before, concentrating on insurance not only won’t fix the problem, it’s part of the problem.
Health insurance acts as an information barrier and fosters a less competitive environment. We don’t have grocery insurance, or insurance to help us buy cars, gasoline, or houses. Imagine shopping to pick up your groceries for the week. None of the items are marked with prices either on the cans or on the shelves. You don’t know how the prices compare to the store down the street, which you are not allowed to shop at anyway because they are “out of network.” When you check out, you are told to pay $20 and the rest will be submitted according to a card you showed at the door. Months later you will find out if you owe anything based on some secret negotiation between the store and an entity chosen by the government or your employer to provide your insurance. Included in your bill may be extra charges for services you don’t recall receiving, but if the insurance pays for it you don’t bother to dispute it. On the other hand, if the store doesn’t use exactly the right codes in billing, you could be surprised with charges you didn’t expect and then have to fight it out with both parties, possibly enlisting the services of an “advocate” to help sort out the mess. (By the way, there are currently 13,000 healthcare codes, increasing to 68,000 within 2 years.)
Would getting more people into a system like this bring down the cost of apples, milk or steaks? Of course not!
In the past I have listed areas that must be addressed to even scratch the surface: Insurance Design, which inhibits open competition and communications and can encourage people to make more frequent visits; Innovation, with no control over how much new technology/treatment makes financial sense (and we want it all.); Lack of Open Competition, competition among providers not among insurers; Convoluted Billing and Coordination Issues; Inconsistent State Regulations; and Fraud.
Here’s another – the risk of legal liability leads to over-testing, automatically driving up costs. According to this report: “In a recent anonymous survey, orthopedic surgeons said 24% of the tests they ordered were medically unnecessary. This kind of treatment is a form of defensive medicine, meant less to protect the patient than to protect the doctor or hospital against potential lawsuits.” Additional tests mean not only additional costs but also additional risks to the patient.
So why do politicians keep harping on insurance? Perhaps the real problem is too big to tackle or perhaps the degree of critical thinking needed to solve it would not play well with the voters. In any case, the way we are headed, there's little hope for improvement.