Sunday, August 16, 2009

Three ideas on how to cut healthcare costs

Some thoughts on a better "healthcare reform is teetering on the edge of failure".

#7: "It is my opinion that the main cause of increasingly higher health care costs is the American Public. We want it all, we want it now, and we don’t want to pay for it. It’s that simple."

While I agree that Americans will not tolerate a system of rationing, as odious both to our freedom and our health, I disagree that we have to resign ourselves to an expensive healthcare system and that the American Public is to blame.

There are 3 structural issues, and 3 structural fixes:
1. The American public is not in favor of defensive medicine, which sucks up a good amount of medical costs, and is a result of over-litigious actions against doctors. Solution: Medical tort reform.
2. The 'we dont want to pay for it' statement actually should state that 'we do not pay for health costs directly as we do with other goods'. only a fraction of healthcare costs are direct payer. What IS the way to go is to get more direct payment of medical costs and move away from kitchen-sink style health insurance. If people have to pay a portion of health costs directly, they will act more like rational consumers and less like kids in a candy store. Solution: Allow 'bare bones' health insurance, allow getting health insurance across state lines, have 'healthcare savings accounts.'
3. We choose to have healthcare to cover diseases and the 'frontier' of research has been to grapple with more and more challenges. We've made great progress, but the 'cost' of progress in healthcare is a rampup in how much we spend on care, from expensive neo-natal care to kidney dialysis. In short, technology got us into this fix, and an entirely different set of technologies could be used/applied to greatly reduce the cost of healthcare delivery. Remote diagnosis (imagine getting a consultation by videophone), leverage nursing, posting prices, standardizing medical data, reducing the overhead of hospital stays, less invasive procedures. The list of possibilities is endless. Solution: If we directed some of the $40 billion the NIH spends to the challenge of "reducing direct medical costs", we could fundamentally change the medical cost equation with new technologies targetted at medical care cost reduction.

Rationing is NOT the way to go, as it merely supresses rather than fixes the cost drivers in healthcare. Moreover, rationing doesn't work on economic principles; decisions of bureaucrats have been proven to be less effective than price action, competition, and choice. This and other bureaucratic solutions will end as failures. Instead, we should focus on tort reform, recasting healthcare in more direct payer ways, and technologies for low-cost medical care. THAT will solve the problem.


Anonymous said...

What I saw in Britain was that the National Health Service paid for the ordinary things that most people used, which gave them the illusion that "The government take cares of us." [Remember, they were British, so collective nouns are treated as grammatical plurals] However, for the minority who got really ill, there were less generous options. I saw charitable collections to pay for veteran care, others to pay for advanced care for serious illness, to pay for research, which we also have, e.g. American Cancer Society. It's a useful fact to keep in mind as we do comparisons, which I understand the British are beginning to resent.
Michael Adams

Anonymous said...

So, what kind of healthcare reform would really work? - Here are some free market ideas that would be a good start: - First, we need to start thinking of insurance as insurance, and not as some scheme to offload routine medical expenses. Insurance is what you buy in case of an unlikely catastrophe, and your annual physical, for example, is neither unlikely nor catastrophic. We need to make it legal for insurers and their clients to reach their own agreements about what risks will be covered. - Second, we need to end the relationship between employment and insurance. The tax code should be altered to end the advantages of employer-based coverage. I should warn you in advance that this will cause many people's rates to climb, as they currently enjoy a discount for being in the same group as healthier co-workers. When the employment grouping ends, people will be insured on the basis of their individual risk. Yes, it's more expensive -- but it's a lot more honest. - Third, expand HSA's. People need to be able to invest for their future healthcare needs. Growing old is not a risk -- it's a fact of life. You can't insure against it, but you can certainly plan for it. - Fourth, define a low minimum standard of care. This one has all sorts of elements -- authorize nurses to set broken bones, for example, or to perform sutures and other procedures. A nurse is not an MD -- but she does know when you need one, and that's the important part. Midwives can deliver babies, as they demonstrate millions of times each year. Basically, we need to set slightly lower expectations. If the public option would deliver a lower standard of care -- and it would -- then that same level of care should at least be legal in the private sector. - The goal is to create an effective, affordable bottom tier of care -- below the standard of care that most people currently receive. It's not care you'd want -- but if you needed care you'd welcome it. It would be an acceptable level of care for someone on welfare. Meaning that we would phase this in to replace both Medicaid and Medicare. There would be means-testing: You'd have to be poor to get this care subsidized. And care delivered under this standard would be exempt from "pain and suffering" damages. - It doesn't make all healthcare cheaper -- but at least it does make cheaper care legal without making excellent care a thing of the past -- or of privilege.