Sunday, February 03, 2008

ABC's of Health Care Reform

Each of the candidates for President of the U.S. has a plan for fixing the country's health care crisis. They all claim to be "comprehensive," or "universal." Most of the plans involve the expenditure of large amounts of taxpayer money and/or the creation of another federal bureaucracy. Many of the candidates say the solution is to force everyone to have health care insurance.

I have little confidence in these solutions for two reasons. First, many of them have been tried before in other countries or in indvidual states, and they have not solved the problem. In some cases, they aggravated the problem. Second, none of the politicians has bothered to explain the simple, logical analysis of the problem that leads to his proposed solution.

So, I have done my own analysis, based mostly on personal observation and, in some cases, on admittedly anecdotal evidence. I offer it here, not as a case for my preferred solution, but rather to encourage all of you to make your own observations and conclusions.

The first step is to stand back and define the nature of this crisis, the biggest single characteristic that contributes to it. Ask three questions:

  1. Availability--Is our biggest problem a shortage of health care facilities and personnel? Probably not; people in most parts of the country have doctors and hospitals near enough to serve them.
  2. Quality--Are the available technology and the training of the providers substantially below that currently available throughout the world? Probably the opposite is true.
  3. Cost--Is health care reasonably priced so that nearly everyone can afford the treatments that they need? The answer is no; the cost of health care is so high that very few individuals can afford to buy it.

If we can agree that the cost of health care in the United States is the largest contributor to the crisis, then we must next look at the elements that contribute to the cost. I will be the first to admit that I do not have access to complete and accurate data on that subject, but presumably the folks who offer solutions do have that information. The question is: "If you or I spend one dollar on health care, what portion of that dollar goes to each of the components that make up health care? Specifically, the most obvious components include:

  • Wages of health care givers--doctors, nurses, orderlies, laboratory technicians, equipment repairmen, janitors, hospital and office administrative staff, etc.
  • Cost of facilities--hospital buildings, office rentals, diagnostic equipment, beds, gurneys, medicine cabinets, etc.
  • Cost of prescription drugs and other medications.
  • Cost of litigation and litigation for malpractice
  • Cost of health insurance to patients to defray the other costs of healthcare

My perception is that the first two are both necessary and probably reasonable. The third and fourth are necessary, but unreasonably high, costs that can be reduced through proper regulation.

A recent letter to the Los Angeles Times by Kaye Klem of Sun City, California, points out that, for the last item on this list, "...insurance companies skim off roughly one third of each health care dollar we pay on overhead, salaries for hundreds of...executives and profits for stock holders."

These insurance companies take our money and then make lists of reasons why they should not pay it out for health services. They try to convince us that as a bulk provider, they get a "negotiated discount" that is not availble to indivduals. In reality, hospitals and medical professionals would gladly accept a fair price for their services, regardless of who writes the check. Almost every one of us has encountered these problems after we have paid our insurance premiums and when we file a claim. The money that stays in the insurance companies does not buy us diagnosis or treatment; it goes to bureaucrats. When the cost of this "administration" becomes comparable to the cost of the actual treatment, the cost of personal health insurance becomes the problem that most urgently requires correction.

But some of our most prominent politicians have the audacity to propose that we all be forced to buy insurance from these companies, and further, that if an individual cannot afford it, the government should subsidize the premiums with taxpayer money. That approach does not solve the problem; it exacerbates the problem and perpetuates it, literally by fueling it with tax dollars. Is it possible that the political solution is being driven by an active lobby for the insurance companies?

By converting to a single-payer system, or to a system that involves a limited number of closely-regulated providers, we should be able to reduce that health care dollar we spend to eighty cents or less. Then many more people would be able to afford the insurance.

After that, we can analyze and improve the second and third cost drivers, high costs of prescription drugs and malpractice litigation, to bring the total cost of health care closer to the cost of the actual medical services. With this approach, both the medical professionals and their customers become winners.