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Monday, July 27, 2009

Having Your Healthcare and Eating it Too (Long Version)

I have an abstract version of this blog available here.

The media narrative about health-care tells you that it is government vs. the private sector, and it misses the real crucial element: the individual patient.

As I write this, my Father is currently lying in the hospital, suffering from Leukemia. He has been there 39 days. He did not have health insurance. He was dependant on a state Cobra plan that he had through my Mother who was a state employee. But he lost it just a few months ago in a divorce, when my Mother left him after 34 years. He couldn’t get new health insurance at an affordable price because he had diabetes. The Leukemia set in only 3 months after he lost his insurance. I’ve come to understand that healthcare, like life, is a tough issue, but there is an answer.

I believe the best solution would be based on the idea of empowering individuals over both the private sector and the government. My Dad is the perfect example of the failures of both political parties and their empty rhetoric and false dichotomies. They say they need our money and decision-making power to help us, but instead they simply make us helplessly dependent.

The basic theoretical problem with our healthcare system, is that we want to have a system that has all the benefits of both a government-run (single-payer) and free-market healthcare system, but not the detriments of either. As the saying goes, "we want to have our cake, and eat it too." Unfortunately, we cant.

In other words, we are trying to 1) make sure everyone who needs healthcare is never denied (the benefit of a single-payer system); but 2) still keep in place the natural “free-market” barrier to healthcare of monetary costs, which:

• puts downward pressure on healthcare costs,
• prioritizes who receives treatment (according patients who are willing to pay - thus reducing the long lines of single payer that undermine their system),
• encourages preventive-health measures,
• provides a profit-motive for innovation, and
• leaves in place a natural modernization cycle (Government programs never go out of business, and frequently fall into a state of irreparable stagnation – governments are built not to embed policies, not update them. This is why the Soviet Union was an industrial powerhouse under Stalin, then soon fell way behind in the 1960’s. This is what is currently happening with our banking system: the government is preventing it from going through a modernization cycle.)

Comparing the Two Orthodox Ideas (Hint: Both Are Wrong)
The picture painted for us is Democrats vs. Republicans, with Democrats supporting government empowerment, and Republicans supporting private sector business empowerment.

The government system has its benefits – that's why Americans would prefer to have Canada’s system for routine care. The lines are long and care is rationed by a bureaucracy, but its relatively simple for patients and is tax-payer subsidized.

However, the free market system has its benefits too – that’s why people from the socialized countries come to the U.S. and pay when they need more than routine care, or don’t want to wait in long lines, or when innovators want to try new ideas.

The Current System
Currently, we have a hybrid of the two and that is where many problems arise from. The country is trying to retain all the benefits of the free-market system, while undermining the free-market operation at every turn by subsidizing care. Subsidies drive prices up and quality down. My Dad has to pay for his own care – meaning he has to pay a price created by subsidies. Furthermore, he does not have the bargain power of an insurance company. In other words: his price is driven up by subsidies and billion-dollar insurance companies who can negotiate for lower prices.

Frankly, the idea that either system would have substantially less problems than the current system, is naïve. What is particularly naïve is somebody having trouble paying for their healthcare and saying, “if only the government would just pay for me, then it would solve all our problems – you know, just like they solved all our problems in retirement, banking, energy, national defense ect!”

People who think this way do not understand the ripple effects caused by such policies. A perfect example of "unintended consequences" is the hundreds of thousands of people who have died in the last two years, due to U.S. subsidies of corn for ethanol. Reason TV did a documentary called “Silly Senator: Corn is for Food,” which chronicled the effect of the U.S. subsidies. The subsidies raised the world price of corn – whenever we raise the price of corn even a fraction of a percent, thousands of people will then be unable to afford any food at all.

Where to Go From Here
The best idea out there right now that the Congress might actually pass without screwing it up, is to make all health-care related expenses tax-deductible. This would at least keep some market principles in place, while allowing for at least some monetary relief. Plus it lowers taxes!

The real problem is not theoretical, but practical. The system is run by human beings. Adam Smith, the father of modern economics said, “It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own self interests.” His insights into human nature are instructive.

Self interest and incentives drive humanity. Although hundreds of variables will influence any human institution, you can always bet on certain things. First, is that there will be greed. When someone acts in their self-interest, to the detriment of others, it is greed. This includes patients, doctors, nurses, hospitals, governments, bureaucrats and private companies alike. The greed is what prevents us from ever having a perfect system.
So how do we deal with greed?

Both the government single-payer and the free-market private sector will act in their self interest, and greedily at times. The government cannot police the greed of the private sector, over 300 million Americans, plus foreigners. This is flat out impossible and the question will always be: who’s policing the police? The government has shown clearly that it cannot police itself. So who then, does the policing of greed.

The answer is that the individual must have this power for any system to work. Every individual must be able to make a dent if he or she is not receiving the care they deserve. To set up this situation, patients must pay for their care and have the option of leaving for another provider.

The only way to keep the system honest is to harness the power of the individual. I think the best way to do this is through a voucher system available only for extreme cases on a case-by-case basis. Such a system would have to be crafted well, and somehow survive the greed of the U.S. Congress. The main idea would be to 1) put providers back into the shoes of a service industry that has to meet the high demands thereof and; 2) put patients back into the shoes of customers who have a right to bring their business elsewhere.

The system is riddled with other specific problems, but this direction would be the best way to go. Believe it or not, the U.S. actually has an incredible health-care system; the problem lies in our horrible health-insurance system. The goal is to fix the insurance system, without undermining the quality of health-care.

Problems with the President's Plan
President Obama’s idea is to simply create a government competitor. The first problem with this that this is essentially the way the system already works. Secondly, it does nothing to fix the problem that individual patients are powerless to pursue their own self-interest within the system; while the government, providers of care, and insurance have enormous amounts of power to pursue theirs.


fckujjb said...

Not a bad commentary, coming from a soulless douchebag. You actually care about others enough to comment on things like healthcare? You mean to suggest that you care about anything, outside of your own egotistical range? Wow... Who knew?

Try to stick to subjects you really know, JJB. Like screwing people over. You're an authority on that; aren't you?

And good luck, against all of your competition. You're going to need it.

fckujjb said...

Ps. Don't bother responding to the first comment as I don't plan on reading the "clever" response you'll undoubtedly try to send. I don't have time or patience for your stupid BS, Counselor.

Lady Liberty said...
This comment has been removed by the author.
jordan said...

“Any fool can criticize, condemn and complain and most fools do.”
--Benjamin Franklin

fckujjb said...

And any idiot can take try to sound witty using someone else's words. Why don't you try sounding like "you" next time.