Reform Healthcare Culture and Politics First

Kurt Brouwer July 16th, 2009

This post is a guest column by Joseph E. Crea.  It was first posted on one of my favorite blogs, Bizzyblog, run by Tom Blumer.  After reading this, I emailed them because I wanted to do more than just post excerpts.  I received permission to post it in its entirety, so here it is.

Joe has written a persuasive call that we must first address political and cultural issues around our healthcare system before we can begin to make sensible changes.  Please read the whole thing and give it some serious thought [emphasis added]:

Reform Health Care Culture and Politics First (Bizzyblog, July 15, 2009, Joseph E. Crea)

Reform health care culture and politics first

Health care has been politicized such that many are convinced that the disease — misaligned social, market, and regulatory structures — can be cured by treating the symptom, high costs. When people speak of the need for “health care reform,” what they usually mean is “cheaper” and “government-run.” This is akin to treating lung cancer with cough medicine on the advice of Phillip Morris.

One quick test to evaluate whether or not the person with whom you are speaking has any clue about reforming the U.S. health care system is to evaluate their arguments. If they use any variation of the following myths (PDF), they have no idea what they’re talking about:

1. The U.S. spends twice as much per capita on health care yet our system is ranked 37th in outcomes. In reality, disparities in commonly cited nonspecific health outcomes–infant mortality, lifespan, etc.–have less to do with the health care system or how it is financed than the cultural, demographic, and genetic characteristics of the population it serves and the way the statistics are defined, collected, and reported. For example, when adjusted for violent crime and accidents, the U.S. life expectancy is actually the highest in the world.

2. Medicare’s administrative costs are only 2% compared to 20% in the private insurance market. This myth of government efficiency–an oxymoron–that perpetuates a false confidence in federally-imposed health care long since have been debunked. What the Medicare overhead calculation obscures is how efficient any insurer could appear if it only offered one product for one market segment in which everyone was mandated to buy it; which was prepaid and collected by someone else under penalty of law; reimbursed only 80% of a provider’s cost; did not have to survive solely on premia, investments, or make a profit; did not have to obey the various state regulations, but instead set its own rules; could not be sued; and much of its overhead functions, debt, and debt service were absorbed by its competitors and various other federal and state agencies. That is Medicare; and despite these advantages, this system is broke, and has been mismanaged to the tune of trillions in unfunded liabilities! In actuality, the cost-shifting of Medicare and Medicaid to private payers is 2½ times that due to the uninsured! Yet this is the system that is being held out as the model for the U.S. system of the future.

3. Markets don’t work in health care. On the contrary, market-based solutions work well in health care. The reasons are competition, price transparency, and consumerism. One example is conventional Lasik surgery where the price has decreased 30%+ in real terms with high satisfaction. Another example is medical tourism whereby mostly private providers in other countries offer medical procedures in accredited facilities at lower cost with equal or better outcomes. Because of this, many U.S. health insurance companies have or are considering programs to cover medical care abroad. Even the competition aspects of Medicare Part D have brought down premiums one-third from expected.

The way to think of health care systems is like cars. Those that want government-run health care are trying to advance the argument: “Why does a Mercedes E-350 cost so much more than a VW Beetle? They’re both cars!” This would almost be a reasonable argument if a Beetle health care system was acceptable to consumers, politicians, and trial lawyers in the U.S.

Health care reform is a cultural and political problem more than a medical or economic one. In Canada and Europe, they are getting no frills Beetle that gets you from A to B 90% of the time. That’s why their systems are cheaper, but that wouldn’t fly here. The American culture expects (or has been conditioned to demand) the best possible care (decreasing benefit) as soon as possible (increasing cost) paid by someone else (employer or government) and sues if the outcome isn’t acceptable (defensive medicine).

All health care systems ration care; but the results of rationing—more inconvenience, worse outcomes, and less choices–employed in more socialized systems would not stand in the U.S. Managed care cut costs well in the mid-1990’s. Real growth in per capita health care spending was cut in half with equivalent quality. However, politicians to this day decry the rationing practices that made it possible–gatekeepers, denials, and limited choices–yet hail as exemplary the more socialized systems for which these same practices are critical. If they were too problematic and impersonal for American culture then; what makes them agreeable now? If all we want is cheaper, the health care expectations of Americans (and trial lawyers) will need to change; but if we want better, it’s government policies that need to change.

Most government-run health care financing schemes in social democracies function because the citizens accept long wait times, high taxes, and the foregoing of marginally better but more expensive treatments as part of their social contract. Canada’s socialized health care financing system (insurance is a misnomer) is a point of pride; whereas, the U.K.’s true socialized system–government-run everything–is openly derided. Canada has  two significant advantages, however: those that choose not to accept prolonged waits for timely access to commonly available care can come to the States relatively easily; and it also can free ride off of our pharmaceutical and biomedical R&D and military. The latter is what allows the E.U. systems, both health care and economic, to function at all.

True health care reform is being inhibited by trying to force the square pegs of government and politics through the round holes of culture and economics. In order to fit, the corners will need to be carved by eliminating the general deadweight loss from government pass-throughs and redundant state and federal regulations along with tort reform. This would decrease the compliance costs and allow standardization, which would free up capital for health information technology and its efficiencies without assaulting the American culture.

Two good first steps would be to allow health insurance to be bought and sold across state lines and tax equity for individuals who buy nonemployer-base covergage. A third would be to set up an evidence-based “loser-pays” tort system for medical products and services. These reforms alone would decrease costs and free up the necessary resources (i.e. capital) for real system reform. Likewise, portability, competition, and consumerism would be promoted. The ultimate results would be lower costs for businesses, lower premiums for all, a decrease in the uninsured, and a higher-quality, cost-effective health care system.

Now that’s reform.

As we watch Congress cobble together a 1,000+ page document that most of our representatives and senators have neither read nor understand, I can only shake my head.  Common sense, such as that which can be found in this column by Joe Crea, is ever more uncommon it seems.

See also:

Healthcare Satisfaction vs. Congress

Healthcare Insurance: Hope & Fear

Could the top tax rate hit 60%?

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3 Responses to “Reform Healthcare Culture and Politics First”

  1. BizzyBlogon 17 Jul 2009 at 6:02 am

    [...] July 17: On Thursday, Kurt at FundMastery posted Joe’s column with permission. Thanks for the interest. Comments [moderated] [...]

  2. BizzyBlogon 17 Jul 2009 at 6:23 am

    [...] Kurt at FundMastery has posted Joe Crea’s column on statist health care that originally appeared here at BizzyBlog on [...]

  3. [...] When the following post recommended by WhiteCoat doc (http://www.fundmasteryblog.com/2009/07/16/reform-healthcare-culture-and-politics-first/) explains how the free market indeed does work for the medical system, are there, um, more [...]

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