Saturday, May 7, 2016
- One central issue is EMTALA, which is a law from the 1980s that requires hospitals and ERs to provide life-stabilizing treatment to anyone who walks in the door, regardless of ability to pay. That in and of itself is a fine idea, but the law was created without putting in place a proper way to fund the cost or ensure accountability, which is why shit spiraled out of control. A major problem is that perhaps the highest abusers of this system are drug addicts, who by this law are entitled to expensive emergency medical care every time they show up at the door, but who have a disorder of the mind that is not fixed by repeated emergency medical stabilization. So it’s a very, very expensive band-aid put on the wrong wound. Some ERs have lowered costs by going beyond the minimum required by law and providing extra services to these people so that they don’t have so many expensive medical crises, but the only way to truly lower the cost for society is to make this approach financially incentivized by policy, because right now it's still profitable for hospitals to just "treat" the same homeless drug addicts over and over again and send the bills to Medicaid. This is not only wasteful, but it's creating an artificial demand that is driving up costs for everyone just by simple market mechanisms. (Update 5/21/16: It turns out that there is a disincentive in place to address this problem; Medicaid won't pay for readmissions within a specific time period.)
- In WWII, the federal govt put caps on salaries in the private sector so that more people would be motivated to join the military effort. In response, private companies began to entice employees through a loophole: benefit packages that fell outside of the salary restriction. These benefits included healthcare, so this was the origin of employer-sponsored health insurance. Because of this arbitrary reason, health insurance has been linked to employment ever since. This has distorted the public perception of health insurance; rather than being a commodity to be purchased like anything else, it is wrapped up in value judgments about a person’s worth to society due to their ability or lack of ability to work. It is also seen by many as something that should be free because it was given to them “for free” by their employers in the past. However, it should just be viewed as a commodity.
- The expectation of free healthcare is unreasonable. Yes, healthcare is sometimes necessary to sustain life, but that doesn’t mean there is a moral prerogative to make it free. There are other things that are even more essential for sustaining life--food, for example--but there isn’t an outcry about the ethics of farmers who sell food for profit. There should definitely be a direct cost for obtaining healthcare so that the costs of providing it are met, the supply is not abused, and the doctors have a reason to get out of bed at 5am to do their jobs. Paying for healthcare leads to a certain degree of personal responsibility that is a good motivator for healthy habits. As with food, there should be a public safety net in place to prevent poor people from being completely screwed. However....
- The actual costs of healthcare are too high and too obscure. There is currently not a real free market where you can shop around for specific services and get an estimate of costs before going to the doctor. The main reason for this is that providers and insurance companies (and govt payers like Medicare) have gotten locked into a set of prenegotiated prices that are complete bullshit, and the real costs (which are much, much lower than what's billed) are kept secret so that one party can’t question another party’s pricing. This ends up preventing free market competition among providers. A few upstarts are trying to get around this, but there are big barriers. (Check out the Oklahoma Surgery Center's totally transparent, free market approach to see how radically different it can be.)
- Nowadays, people pay for everything, including routine healthcare and preventive stuff, through their insurance company, which means that the transaction is guided by the aforementioned bullshit secret prenegotiations. This is one of many downsides to the ACA. There is no reason to involve insurance in healthcare expenses that you can expect to have. The whole purpose of insurance is to pool resources to hedge against unexpected and rare catastrophes. Your tetanus shot is not an unexpected catastrophe, and it's certainly not rare; everyone gets it on a schedule. You're insurance isn't even paying anything for it; you're paying for it all, plus an administrative fee due to the cost of going through your insurance company. Whether we have a fully private or fully public system, everyone's going to pay for tetanus shots throughout life. These expected costs should just be paid for out of pocket like any other commodity that you’d buy to make your life better. By analogy, when you drive a car, you buy insurance to cover accidents, but you don't buy insurance to cover gasoline costs because you already know you're going to have to pay for gas. When you involve insurance in every transaction, the costs are obscured and driven up, and furthermore doctors end up reimagining patients’ problems to fit the diagnostic codes provided by medicare/insurance instead of personalizing the diagnosis and treatment.
- There is a “standard of care” in medicine that forces people to choose between either no treatment or the best treatment. There is no option for mediocre, cheap treatment, which would actually be beneficial to the people who currently opt for no treatment. In reality, though, there ends up being a lot of mediocre treatment delivered through unnecessarily expensive channels because no alternative exists. This is another side of the obscure pricing system in healthcare. It's also a consequence of the threat of malpractice, which is the primary force driving doctors to uphold the standard of care, at least on paper.
- But with all of that said, there is a fundamental challenge to creating a truly open, free market healthcare system: there is a lot of uncertainty at every step of every transaction, much more so than in other industries. How can you really estimate the cost of treating a sore throat when the diagnosis/treatment may range from A: transient virus/no treatment needed, to B: immune deficiency secondary to leukemia/months of expensive treatment needed? Also, there are problems with creating a truly consumerist, a la carte style of healthcare delivery in which patients choose or refuse specific treatments, since it takes many years to actually learn the full range of diagnostic and treatment options and their consequences and how they work together. But most importantly, healthcare may be the only industry in which the customer might be unconscious when the purchasing decision is made, and the customer might not live long enough or be fit enough to work in order to pay for the service. This is where insurance, healthcare savings accounts, and advanced directives have traditionally come into play, and they will continue to serve this role in any possible system.
Taking all of this into account, here are my ideas on how to improve the industry:
- Conceptually divide healthcare into the expected services vs the unexpected:
- Expected services include preventive care and treatments for common conditions that affect a lot of people as they age (pneumonia, diabetes, hypertension, osteoporosis, short hospital stays, pregnancy, etc); these should be paid out of pocket, either with personal savings or money put into a health savings account. We have to get real: everyone is going to have something wrong with them eventually, so everyone should just directly save up and pay for these unavoidable expenses instead of going through a convoluted, expensive, and unnecessary insurance process. These common services should have clear and transparent prices. Importantly, there should be an expanded range of delivery options, creating a free market of services ranging from the current standard of care delivered by highly trained physicians, PAs, and nurses to new models of basic care based on lesser trained, lower paid providers who follow preset diagnostic algorithms and rely on cheap labs and assembly-line style workflows in order to either choose a basic treatment or direct patients to higher levels of care as needed. This way, everyone can get basic care through a system that is sustainable and adaptable.
- Unexpected services include major things like emergency trauma surgery, long hospitalizations, cancer at a young age, etc. This is what insurance was designed for. With the expected services covered by out-of-pocket expenses, the cost of insurance to cover unexpected catastrophes would be quite reasonable. To make sure people pursue the right path of treatment, there should be an integration between the different levels of care, with emergency rooms in close proximity to urgent care centers and other primary care providers, and a coordinated triage system so that patients can be given an informed choice about which level is most appropriate for their present condition and what the costs and risks of each are likely to be. With facilities in close proximity, in the event that a condition is more serious than originally believed, it would be easy to bump them up to the next level of care if desired. To make this work, patients would need to be given a choice about the general level of care and cost they are willing to accrue, with the choice being made at the time of purchasing insurance. Insurance plans should be available that give people discounts for waiving expensive (but potentially life-saving) care in advance, with the option available to upgrade later at a higher cost if desired.
- It makes sense for expected services to be paid for by individuals, with public health services and some tax-based subsidies used to ensure that everyone gets preventive and basic medical care. A free market offering various levels of quality and styles of delivery would bring down prices of the essential medicines and labs that are common to every practice in the system, so the amount of subsidies required would be acceptable to everyone and universal healthcare would be feasible. The biggest healthcare expenses--the end of life expenses--would be handled by individuals paying into an expensive insurance plan and saving money in advance for their own care, or they would be minimized through advanced directives signed as part of the contract for a lower cost insurance plan by patients who just don't give a shit about their health, or are willing to waive certain heroic measures in order to cut costs, or just don't want to live their last days out in a nursing home or ICU for any reason. To end current abuses, EMTALA could be reformed with a "crying wolf" clause that limits the number of free rides given at ERs, and channels "frequent fliers" who are drug addicts into involuntary detox programs with psychiatric support and primary care follow-up. (However, I suspect that there would be major political resistance to reforming EMTALA from the hospitals that are profiting from it.)
- The unexpected services would be covered mostly by insurance and personal health savings accounts, with just enough tax subsidies to ensure that everyone is guaranteed decent, but not indefinite, end of life care if they fail to prepare. As is true now, people are free to solicit charity from friends, family, community, and fund-raising websites to cover the costs of extreme circumstances that go beyond these two levels of the safety net. This mechanism would allow society at large, rather than secret "death panels" or insurance bureaucrats, to determine whether someone should get heroic, long-shot treatment that they can't already afford. Federal and private funding for clinical trials (ie cancer) would also support a good deal of long-shot treatment, as it does now.
These changes would use free market mechanisms to make healthcare delivery more efficient and cost effective, with fewer moral hazards, greater individual accountability, and less inappropriate spending.
But to put things in perspective, the benefits of efficiency are minuscule compared to the benefits that would be achieved by eliminating the junk food, drugs, and especially cigarettes that are causing the majority of today’s and tomorrow’s disease. If those went away, universal healthcare would be so easy and affordable that we would accomplish it without even trying.
The real benefit of the system I'm proposing is not its efficiency, it's that it puts a lot of responsibility on individuals for financing their own healthcare. That is the most powerful motivator to get people to stop eating shit, drinking shit, smoking shit, and sitting on their asses, and that's why a free market health system with lots of direct out-of-pocket expenses, minimal insurance and subsidies, and a range of affordable basic health services would actually make the country a lot healthier in the long run.
(And maybe fixing EMTALA.)