Solving The Health Care Crisis: Why Nobody's Solution Will Fix The Problem

You’d be hard-pressed to find anyone on the street claiming that there’s no such thing as a health care crisis in our country. It’s conversely very easy to find a lot of people proclaiming a solution to the issue, especially elected officials. The failing of these proposals, however, is the same failing of our personal health: we want to solve decades of neglect with a quick-fix pill or surgery so we can continue about on our merry way as we always have been.

I have yet to see a single proposal on the table that doesn’t call for more government involvement, more spending, and more regulation. Predictably, the Left calls for increasing funds for Medicare and Medicaid, the Right calls for more tax breaks, and both sides take up causes like importing cheap drugs from Canada or capping malpractice payouts for a medical malpractice attorney working any personal injury case. These approaches, however, use the same mentality of western medicine that keeps us sick our entire lives: treat the symptoms, not the cause.

Let’s start with looking at the Medicare prescription drug plan that recently passed through Congress and the White House. The goal of the bill was to reduce the costs paid for prescription drugs for those enrolled in Medicare. This does so, however, by more-or-less subsidizing the high cost of drugs for Medicare patients. The rest of us not on Medicare see absolutely no benefit, yet we will be paying well over $14B annually for this plan. This doesn’t actually reduce the cost of the medicine; it just lowers the out-of-pocket costs for one class of citizen while obfuscating the true cost to all of us.

Mitt Romney’s much-celebrated “universal coverage” plan in Massachusetts has similar flaws. The plan mandates that everyone carry health insurance and provides a pool of state assistance for those unable to buy it on their own. It’s supposed to save the state a ton of money in medical costs while ensuring that everyone can access health care. On the surface, it appears to live up to its promises. Upon closer inspection, it’s just another case of government trying to pay down the high costs of medical care instead of actually reducing the true cost. As with the Medicare prescription drug benefit, it ends up masking the true cost of health care and provides no incentive or mechanism by which prices are lowered for all.

Many people like to point to universal health care systems in other Western countries such as the United Kingdom or Canada. While everyone may be covered, it becomes readily apparent to many that this “free” coverage is exactly what you paid for. The quality of the care is lower, there are long waiting lists, and many people pick up private insurance anyway to fill in huge gaps in coverage. The proponents of a move to this kind of system somehow think that lowering the quality of care is fine so long as everyone has access, a rationale I can’t even fathom.

There’s significant debate as to what the causes of overpriced health care are. I’ve heard everything from big pharma to malpractice insurance to high turnover in the industry blamed for spiraling prices. To some degree, each of these is true. I believe we can reduce our health care issues down to the most basic of economic laws, supply and demand.

It’s no secret that drug companies are making a killing these days. Their slick ad campaigns have patients naming off medicine after medicine to their doctors who are often bewildered by the number of choices presented to them by drug company reps. Most of the new medicines coming out are only slightly more effective than the predecessor yet cost twice as much or more.

We also see problems with getting generics to market because of patent system abuse. Our current system allows pharmaceutical companies to re-patent a medication if they are able to re-purpose it for treating another ailment. It’s no small coincidence that these new uses are often found just as the old patent is about to expire. Our strong protections for intellectual property is what makes us such an economic powerhouse, yet there is a fine line between letting an inventor enjoy the fruits of their labor and allowing shameless profiteering at our expense.

The malpractice insurance debate has been masterfully spun into a “doctors versus lawyers” showdown by the insurance industry. Doctors claim that ambulance-chaser lawyers bring tons of frivolous lawsuits to court and sap the system of good doctors while lawyers claim that doctors are doing a poor job at policing their own. All the while, the insurance industry sits on the sidelines raking in massive premiums from the doctors and paying out very little to the lawyers. What we didn’t bother to notice is why the insurance companies needed all that new money.

You see, insurance companies invest the premiums they collect into stocks, bonds, and other investments to grow their assets in case of a claim. When the stock market tanked in 2001, the insurance companies took a bath and were dangerously close to the brink of failure. To cover their losses, they started increasing premiums citing “increased costs.” Instead of actually telling their policyholders “gee, sorry, we blew a bunch of your money gambling on stocks”, they chose to blame it on the lawyers, a group already reviled at large in society. In the process, they have successfully pulled off one of the larger industry-wide scams in the nation and continue to get away with it.

We can also thank greed for the massive turnover in the medical industry. There isn’t a state in the union that isn’t facing a nursing shortage and it doesn’t take long to figure out why. Back-to-back shifts, massive overtime, constant short-staffing and poor compensation all drive nurses out of the field an average of 5 years after they enter it. As more nurses leave, the problem only gets worse. The solutions to date have been to train more and more nurses, but this only leads us to a workforce with little experience in the industry with a high turnover rate. You can’t possibly build a quality workforce with those kinds of conditions.

The stress and malpractice costs drive lots of doctors into retirement as well. Many are switching their practices to a “boutique” where patients pay an annual fee to remain on the doctor’s rolls. Most limit the number of new patients they will accept. The biggest shortages we’re seeing are in the OB/GYN field, one critical to our entire population.

So what can we do to fix this big mess? How can we lower the cost of medicine without destroying its quality, reducing the workforce, or unnecessarily involving the government? The answers are the kind of things that nobody wants to hear: it’s going to take an upheaval in the way we produce and consume medical care spread over a decade or two.

The problems with our patent system must be resolved. We cannot allow the limitless, frivolous and arbitrary extensions of patents that we have been allowing. I’m sure that drug manufacturers will howl at how we’ll be destroying innovation, but since when is a 10% improvement in performance for twice the cost considered innovation? If you tried to spin those kinds of numbers as revolutionary in the technology sector, the press would laugh you out of your CES booth before The Register came up with a snappy headline to describe your miserable failure.

Doctors need to take charge of their malpractice insurance through cooperatives. Doctors know each other, and they know who’s responsible and who isn’t. It only makes sense for them to be in charge of the insurance that protects good doctors from honest mistakes and rejects bad doctors who have no clue what they are doing. There also needs to be investigations into the malpractice insurance companies to expose their constant lying about “greedy lawyers.”

As much as I hate them, unions seem to be the only recourse for nurses to get proper working conditions. (I feel the same wa
y about most IT workers; just look at how EA abused their employees.) It’s hard to justify being unable to hire the appropriate staff when hospitals are regularly posting healthy profits. Sadly, the industry-wide collusion is what keeps market forces from sending poorly-run hospitals into bankruptcy while rewarding well-run ones. It’s hard to trust-bust too since there’s such a high burden of proof.

The biggest change that needs to happen is reducing the cost of doctors. Why should a GP be required to have a PhD and 10 years of interning to tell me that I have high blood pressure and I need to exercise more? Why can’t we see someone with a bachelor’s for our basic ailments? As a market, we’ve enforced the notion that we want the Cadillac of doctors but scream bloody murder when it’s not at Kia prices. You don’t rent a backhoe to dig a hole for your new petunias, yet that’s what we do in medicine.

Doctors in the current system deserve to make lots of money. They often sacrifice 12+ years of their lives and hundred of thousands of dollars in tuition and deferred earnings to get where they are. I don’t fault them for charing $150 for a basic visit that takes 15 minutes of their time; they’re highly trained professionals that earned that right. What I don’t like is that I can’t go see a guy with a bachelor’s degree and good gut instincts that, while just as good, would cost significantly less money.

It all boils down to this: the free market isn’t allowed to do what it does best, marrying supplies and demands. While we can lay a lot of blame at the feet of government intervention, we can lay just as much on anti-competitive behaviors within the medical industry and our own inability to take care of ourselves or choose a proper level of care. (Raise your hand if you’ve ever taken the minimum dose of a medication. That’s what I thought.) The solutions to righting these problems take more time than we have attention span. (The vogue thing to do politically these days is to declare something a failure before it has had any time at all to succeed. Part of this problem is that most “solutions” are sold as quick or instant.)

Can we do what it takes to fix our health care system? Yes, we can. Do we have the guts, perseverance and fortitude to do it? I’m not holding my breath.

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17 Responses

  1. Kristi says:

    “What I don’t like is that I can’t go see a guy with a bachelor’s degree and good gut instincts that, while just as good, would cost significantly less money.”
    You sort of can. My family goes to nurse practitioners (master’s degree). It’s kind of like doing instacare instead of the ER. Only my insurance doesn’t reward me for doing that. But I can’t complain. I have the best insurance in the state (nevermind our income is below poverty).

  2. Shannon says:

    “Many people like to point to universal health care systems in other Western countries such as the United Kingdom or Canada. While everyone may be covered, it becomes readily apparent to many that this “free” coverage is exactly what you paid for. The quality of the care is lower, there are long waiting lists, and many people pick up private insurance anyway to fill in huge gaps in coverage.”

    I don’t know a lot of things, but I’m curious who says that Canada’s health care is of a lower quality? I mean sure, wait lists are ridiculous if you need certain types of surgeries or transplants and what not, but on a whole is there some sort of proof that the quality of our health care is lacking?
    Don’t get me wrong, I don’t want to give Doctors up here too much credit as it’s my opinion that you can pretty much convince a doctor in both Canada or the US of whatever condition you want them to think you have. They generally ask symptoms which you could look up and then just want to prescribe you pills. Quite convenient for junkies I suppose but that’s about it.

  3. Bill Fox says:

    You can’t legislate health or health care. The best plan I’ve seen is a two part plan. #1 you allow people to have tax free health savings accounts that they contribute to from the day they start working. These accounts roll over from year to year if not used and become the property of the willed (into their health accounts) after they die. (if any is left) #2 we get catistrophic health care. Lets say $5000 deductable(per individual). This could be obtained cheap and by the time the person got old enough to have the catastophe there should be sufficient to pay the deductable. Also you would need to let direct family members use some of their account for another family member IF they so desire. We do have to remember that there is no constitutional right to have health insurance just a right to PURSUE happiness. I have seen national health 1st hand in England and I know I don’t want their system.

  4. Jesse says:

    Shannon: Well, the Ontario Medical Association cites a tremendous “brain drain” of Canadian doctors to the US. This is a big factor in your huge shortages of doctors, and a shortage of personnel is a major factor in quality.

    Bill: I love HSAs. If my employer offered me an HSA, I would go for it. I’m convinced that those savings accounts coupled with the high-deductible health insurance plans you cite can save you a lot of money in the long haul and put you in charge of deciding how your health care dollars are spent. Employers would probably be able to save a lot of money too, meaning much greater coverage.

  5. Bill Fox says:

    the current problem with HSA’s is that if you don’t use it during the year you lose it. That is no way to run a railroad or for that matter an account

  6. Shannon says:

    I understand your point but I don’t fully agree that a shortage of doctors equals a lesser quality of care. I think that simply effects the quantity of care. When you receive medical treatment in Canada it’s top notch, the waiting is really the only issue and that’s more of a government budgeting issue where they don’t want to spend money on hospitals and simply close them, it’s not really the health care system itself that I’m aware of. The question I do have is are the doctors leaving Canada because they will be better paid in the US and is that a result of how health care is handled there as far as insurance and what not?

  7. Jason says:

    Me like healf care.

    Ive nothing intelligent to post here.

  8. Kristi says:

    I get really torn on health care. It’s when the inner socialist in me comes out. While I prefer the idea of a market driven system, it’s hard for me to fathom that with healthcare, unless it’s based on income. The bottom line is that we need the lower paid workers for our society to function. I don’t really care what the constitution says, it used to say I couldn’t vote, I still think they deserve some form of healthcare. I haven’t seen (or thoguht of) any plans yet that will benefit everyone. But Jesse, I think you’re on the right track with questioning why we need to see an MD for a strep test and prescription of antibiotics.

  9. Bill Fox says:

    do you have any idea what Canada’s tax structure is. The reason there is a brain drain is because in order to pay for this system the taxes are outlandish and a lot of the higher income people including Dr.s choose not to live under those conditions of Socialism. In spite of the large amount of tax, they still don’t have the money to get the job done. You say its the quantity of the care. Without quantity you get what you have up there and that is the people having to come down here for treatment. When your sick your sick, you just can’t sit around and be told to wait your turn.

  10. Jesse says:

    Uh… the HSA I’m thinking of *does* let you roll the money over from year to year: HSA

    The “use it or lose it” plan you’re thinking of is a medical FSA (Flexible Spending Account) or “cafeteria plan”. Find more here: FSA

  11. Shannon says:

    “Do you have any idea what Canada’s tax structure is.”
    I think I have a rough idea considering I pay about 50% in taxes. There’s nothing like a 3000 dollar a week paycheque that you only see 1800 of.

    I’m glad you pointed that out though, because I often hear a lot of Americans wishing they had our health care but they don’t realize the taxes we pay. I’ve always said I’d much rather pay a couple hundred a month for a health plan over the 100 a month we pay plus all of the taxes.
    I just didn’t realize the whole tax issue was why doctors were leaving. I’m surprised that most of the employable country hasn’t left if that’s the basis for heading south.

  12. Bill Fox says:

    I guess mine must be an FSA then. Have the Feds chosen to make HSA’s (the non use it or lose it type) be tax deductable. I have heard W saying that we ought to have them but I haven’t heard of anything being done

  13. Jesse says:

    With the taxes and cost of living you’d think more people would be leaving California too, yet some crazy people choose to stay. 😉

    The HSA was expanded with the Medicare Prescription Drug, Improvement, and Modernization Act which passed on December 8, 2003. Prior to that, HSAs were limited to the self-employed and businesses under 50 employees as a sort of pilot program.

  14. Reach Upward says:

    Thank you for pointing out the fact that our health care problem is multifaceted and quite complex. There is no simple solution. You also note that most of the ‘solutions’ implemented or even discussed only exacerbate the problems in the long run.

    I’m concerned about your suggestion to unionize nursing. Unions have their place, to be sure. They help draw attention to serious problems. They help raise the issue to a boiling point where it must be addressed. However, unions don’t necessarily lead to good solutions to those problems. And once the big problems they were initiated to address have been tackled, unions often cause intractable problems — because their main purpose has evaporated and yet they seek to survive. It’s just the nature of the bureaucratic beast.

    I’m not saying that nurses (and IT workers) shouldn’t have better conditions, but unionization may not be the right answer — unless it has some kind of sunset provision.

  15. Jesse says:

    A sunset provision on unionization? That smells like awesome to me. I’d be all for dissolution of the union once it has fulfilled its purpose of contract negotiations.

  16. Bill Fox says:

    California does have a problem with people leaving. I guess that why in spite of our tremendous influx of illegals we are not growing that fast. I also will leave Ca some day and taxes, although not the only reason, will be a contributing factor

  1. December 14, 2016

    […] already written at length about what we can do to try and drive the costs of health care down. If we look at how Europeans with their “ ehic” have managed, maybe we can learn a […]

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