The forthcoming issue of the Atlantic includes one of the most sensible and pragmatic articles on the health care debate you’re likely to ever read. After his father died of a hospital-borne infection, business executive David Goldhill began examining the health-care industry.
I’m a Democrat, and have long been concerned about America’s lack of a health safety net. But based on my own work experience, I also believe that unless we fix the problems at the foundation of our health system—largely problems of incentives—our reforms won’t do much good, and may do harm. To achieve maximum coverage at acceptable cost with acceptable quality, health care will need to become subject to the same forces that have boosted efficiency and value throughout the economy. We will need to reduce, rather than expand, the role of insurance; focus the government’s role exclusively on things that only government can do (protect the poor, cover us against true catastrophe, enforce safety standards, and ensure provider competition); overcome our addiction to Ponzi-scheme financing, hidden subsidies, manipulated prices, and undisclosed results; and rely more on ourselves, the consumers, as the ultimate guarantors of good service, reasonable prices, and sensible trade-offs between health-care spending and spending on all the other good things money can buy.
President Obama should appoint Goldhill his healthcare czar.
For those who don’t have time to read this excellent, but extremely long article (10,974 words!), I recommend John Schwenkler’s superb summary. Excerpt:
2. We treat “health insurance” and “health care” as synonymous, but they shouldn’t be. Understanding the purpose of health insurance as that of paying for all of our health care expenses is a quite recent phenomenon, and it has a lot to do with the post-WWII policy of subsidizing employer-provided health benefits, which quickly became the norm (and was mimicked by Medicare and Medicaid) and crowded out alternative methods of payment. Among others, one consequence of this is the vast amount of money we spend – $500 per person, as of 2006 – just to staff the insurance bureaucracy.
3. There is a massive moral hazard problem. Patients have little direct financial incentive not to request whatever expensive treatments they see on TV, and doctors have clear financial incentives to provide them. Combine this with a massive informational asymmetry, and costs spiral perpetually upward; individuals with health insurance (or “insurance”; see #2 above) spend nearly four times as much of other people’s money on health care than do individuals without it, and in many instances the attendant benefits are marginal at best.
4. We’re the only ones who can pay. Not the health insurance or drug companies, whose profits would fund our appetite for health care for less than half a year. Not our employers, who just take it out of our salaries (and the would-be salaries of our would-be coworkers). And wouldn’t some of that money be better spent doing something else?
August 17th, 2009 | 2:56 pm
[...] The Right Way to Reform Health Care – Joe Carter [...]
August 17th, 2009 | 5:27 pm
The comments on the Atlantic site offer a glimpse to the limits and contradictions of this article.
HSAs as promoted by the Bush administration are a Potemkin village of health insurance reform: by incentivizing the skimming of the lowest risk segments of the insurance pool into their own pool, they are at fundamental odds with the most fundamental tool of insurance, which is to aggregate those segments with high risk segments. The primary purpose of insurance in capitalism is risk management, not profit as such. There may be a derivative effect on profit down the line, but that’s not the primary point. Conflating profit and risk management is one of the problems in business models that have afflicted our economy in the past generation.
August 17th, 2009 | 6:55 pm
I am not fan of the Obama/Emanuel admistration but I have not seen any mention of Zek Emanuel’s idea concerning a voucher system for health care. Although we would run into the problem concerning abortion coverage (as we do with any government intervention) it would be a way to guarantee a basic level of healthcare but to maintain market competition. In addition those who have more could supplement with private insurance on top of the “basic” voucher.
August 17th, 2009 | 6:58 pm
Emanuel on the voucher idea:
http://www.pbs.org/now/news/315.html
August 17th, 2009 | 7:36 pm
Insurance already skims the lowest risk into their pool — government covers anyone 65 or older, anyone poor and unemployed (and more likely to get ill or injured), and anyone with a pre-existing condition that can’t get group insurance. Insurance companies can only do what they do because they already get half their costs paid for by the government.
Returning insurance to what it is best at — hedging against catastrophic cost — instead of making it a middle man on every transaction in the system would clearly cut costs. Making consumers of health care the direct buyers of health care would increase competition — as Chesterton said, the problem with capitalism is not too many capitalists, but too few.
It’s nice to see ideas like these thrown out in a major venue — maybe there is some tiny chance for a return to sense in the system.
August 18th, 2009 | 8:57 am
[...] at an excellent essay on healthcare, which the Democratic rhetoric will ignore because they are not really engaging in debate here, [...]
August 18th, 2009 | 8:58 am
[...] at an excellent essay on healthcare, which the Democratic rhetoric will ignore because they are not really engaging in debate here, [...]
August 19th, 2009 | 4:01 pm
The fundamental tool of insurance is not to aggregate low risk and high risk segments; it is to aggregate equal risk segments. The former is an instance of wealth redistribution; the latter is actually insuring people, at a price corresponding to the risk, against a rare event.
The article effectively shows the vast shortcomings of the current non-competitive system and the ways the federal government perpetuates and subsidizes excess and waste, and I take him at his word that he favors innovative and adaptable small businesses and competition, but he ultimately resorts to broad government mandates to enforce his vision, mandates which necessarily cannot deal with the nuance and dynamics of particular circumstances. Goldhill’s plan is, then, a less foolish version of the managerial technocracy that ignores the need for virtue and believes protocols and regulations can adequately solve our problems. He believes making citizens “more perfect consumers” would solve our healthcare crisis; but what if the consumeristic paradigm he is explicitly encouraging intrinsically undermines the virtues necessary for strengthening the common good (such as restraint for the sake of our neighbor) as well as the cultural conditions necessary for smaller-scale enterprise and competition?
That said, Goldhill is certainly headed in the right direction and the implementation of his policy would be an improvement over current proposals, though I believe it, too, is merely a bigger and better bandage that does not address the central problems of modern un-intelligibility due to a Gnostic loss of limits and scale.
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