Friday, August 28, 2009

How is the Health Care System Broken?

The phrase "We all agree that the system is broken" has become common in the health care reform debate. Politicians and commentators invoke it to show that we have a common value or belief that should compel us to desire reform. The phrase has been used to justify every type of reform on the table. But in truth, we agree on very little about this 'broken system.' We can't even agree on what 'the system' is and much less how it is broken.

Imagine a professional basketball team that has trouble winning games. They have defensive and offensive strategies that they prescribe to and develop a rotation for the players. Despite their efforts, they are not winning. The players come to an agreement. "This is not working. We need a change," they tell each other.

But what is not working? Some of them are referring to the defense. Some of them are referring to the offense. Some of them are referring to their player rotation. Little does the team understand, but several of the players are even referring to the sport of basketball. When they say it isn't working, it's because they want to give volleyball or soccer a shot.

Such is the situation in our country. People say the system is broken. But what they mean varies. Some are speaking of the health insurance industry. Some are speaking of the high price of health care. But we are surprised to find out that many refer to the American standard of economic freedom. They suggest that we ought to be playing a whole new game.

Like everyone else, I have my own opinions as to what is broken in the American health care system. I could write pages (I have written pages!) about interferences in the patient-doctor relationship, the money wasted on the insurance industry, and about how government and insurance involvement in the market create artificially high prices. But there is one 'system' that is definitely not broken. There is one 'system' that keeps the industry afloat despite all other missteps. That system is the American 'system' of a free market.

If we are more precise in our description of a free market, we cannot even call it a system. The free market is the state of the economy in a free nation. In a free market there is no government organization that coordinates buying and selling. There are no laws about how much of a product someone can buy or how much it can be sold for. The free market is the economic result of a nation recognizing the God-given, inherent rights of humanity. It is a natural state that allows the rise and fall of man based on his actions.

Anyone involved in the medical field can see that the above description of the market does not completely fit the medical industry. A huge part of health care really has become a government system. There are huge government organizations- Medicare, Medicaid, and even the FDA- that coordinate buying and selling. There are laws governing who can buy health care products and how much they can be sold for. There are laws in place that do not allow man to rise and fall based on his actions, but attempt to enforce a universal mediocrity. In these ways the medical industry has become a controlled system.

However, much of the medical industry is still free- it is not systematized. It is this part of the industry, the free market, that keeps all the rest afloat. The market responds and equilibrates when the federal government refuses to completely reimburse doctors for seeing Medicaid patients. The equilibrium is achieved by paying patients being charged more for their health care. The market responds to FDA regulations on the pharmaceutical industry that make the development of new, lifesaving drugs cost over one billion dollars per drug to develop. The market equilibrates as patients pay incredibly ramped-up prices to pay for the hoops drug-makers must jump through.

It is the free market, and not systematized government intervention, that has brought many recent cost-saving innovations to the market. Surgical centers are popping up all over the nation that perform surgeries at a fraction of the cost of local hospitals. Lower prices for healthcare are appear as midwives, physician assistants, and nurse practitioners become more available. They provide competition that also brings down the price of local doctors. Wal-Mart recently rocked the pharmacy industry by launching their $4 prescription plan, making hundreds of essential medications available for $4 a month. Competing pharmacies nationwide responded immediately by dropping their prices. These and many other occurrences in the free market have helped keep health care afloat despite all other system interventions.

So perhaps we do agree that the system is broken. It does need to change. It needs to release its death-grip on the medical industry and the free market. Sacred freedoms must be preserved and the market must be obstructed. If freedom of the market is preserved and enthroned, health care prices will go down. Patient access to doctors will increase. The poor will be able to afford health care. Health care will not just survive or stay afloat, but thrive.

Rusty Scalpel


Rusty Scalpel said...

From an email from Lucas Martin:

I enjoyed the read immensely.  Just a couple of comments.

Free Market and capitalism do no imply a lack of government involvement.  At the heart of capitalistic theory lies the principle of rational decision making, the idea that consumers, who have perfect information, will make decisions in a largely rational manner. 

However, as the number of decisions increases, the ability of the consumer to have perfect information regarding a product decreases.  Proof of this is found in consumer behavior and is used by economists to explain why some consumers pay so much for goods that are available for less elsewhere.  The role of government is to level the playing field where appropriate to maximize perfect information on behalf of the consumer. One way they do this is through setting standards, minimums that products must meet to ensure they provide basic levels of care and satisfaction.

Certain industries have worked to muddy the waters by creating products that are so complex they are virtually incomparable.  Have you ever shopped around for health care?  It is virtually impossible to compare plans and come out with any sense of which is "better".  As profit margins shrink the plans only get worse, with additional items thrown in and taken away at a whim. (The credit card industry falls into the same category).Lets look at your lawnmower example.  Imagine that you could not physically mow your lawn for medical reasons, and had to have one (or the city would cite you for having a crappy lawn).  The lawnmowers you meet with all present you with complex mowing agreements.  They can change the rates they charge at any time, can decide what is dropped from the service (nope, weed eating is no longer covered), and can break their contract with you on a whim.  In fact, sometimes after paying the lawnmower man they wont even do the work.  After you have hired them you cannot use their services until after 12 months have passed because you planted the lawn before you hired them.  Plus if you plan the wrong kind of grass, or if you lawn has certain common weeds, they will not mow it (but still collect premiums).  They will only mow the lawn when the grass is two feet tall and the city is threatening with a ticket (no preventative care mind you).  Plus when you sign the contract to have the lawn mowed, you must choose a mower from our list, whether it is appropriate for your type of lawn or not.  Plus, if you simply pay for someone to mow it for you and do not go through one of their contracts, you must pay them significantly more.  That is the industry as it stands. It is not, in any way shape or form, capitalism.

The insurance industry is not in fact capitalism.  It is very much the opposite.  There is no incentive to make rational decisions regarding healthcare.  Those with insurance have much higher rates of consumption, because in most cases the out of pocket cost to the consumer is the same, regardless of the doctor they see.  Cost of health care continues to skyrocket in part due to the negotiations of insurance companies, who hold the doctors and service the balls so to speak.

Rusty Scalpel said...

Continued from an email from Lucas Martin:

The sad thing is that most of the increase in health insurance comes in two areas. The first is administrative expenses. Thats right, our dollars are going to pushing papers to negotiate the increasing complexity of the plan, not because doctors are charging more. The second area is end of life care, most expenditures in health care occur on individuals who pass away within the next six months (this is not a value statement one way or another, simply an observation).

Proof that insurance does not help costs can be found by looking at procedures that are not covered by insurance companies...cosmetic surgery. Since consumers are paying for it out of their own pocket, they shop around. Doctors are more competitive, they need to be to attract the consumer, they develop cost saving techniques and increased skill to attract consumers. The net result is that the cost of cosmetic surgeries has decreased, while the quality and quantity of the services has increased. This, is true capitalism.I agree one hundred percent that the presidents plan is stupid, for many reasons. What I don't agree with is the approach of the attack, namely trying to use the insurance industry as a capitalistic enterprise when that is far from the case. The industry needs to represented as it is, a form of socialism, with a smattering of capitalism mixed in. The nature of the beast requires governmental intervention (as perfect information and capitalism demand).

Anyway. My two bits. I enjoyed the read, and the mental workout.

Rusty Scalpel said...

From an email from Dave Ader:

To be brief, I admire you expressing your opinions. I think that some of your opinions on political economy are flawed. The most important of which is about the free market. We don't live in a free market economy. We never have. There has never been a nation that follows a free market economy. Never. Regardless if you think the free market is the way to go or not (I'm not arguing whether capitalism is good/bad etc), we don't live in a free market. Maybe the health care troubles (if they exist at all) would be improved in a free market, but we don't have that as an option, and it is unlikely that we will. I personally don't care about the health care debate- we all die. You asked for feedback, so I thought I would share. My advice: in your writing, be aware of the rhetoric that you use about political economy. Its just as easy to be swept along with the liberal tide of socialism as it is to be swept along with the tide of neo-liberal rhetoric on the benefits of the free market.