The Latest on Health Care Reform

I think different people mean different things by "health care costs," because I didn't see any mention of costs in that Washington Post article at all. To me, it looked like they were talking about price.

When people start to really address costs, then I'll truly believe that prices might actually come down significantly.

If you want to know what costs are, look at uninsured people's medical bills. Insurance is about spreading that expense out among everyone who shares a pool, not reducing it. That's why no amount "health plan reform" (regulation, nationalization, etc of insurance) is ever going to really help reduce the fraction of GDP that we're spending on health care. Whether you pay it in the doctor's bill, your insurance premiums, your taxes, inflation from government overspending, or whatever, it's still going to be a staggering amount.

So fine, Washington, reform health plans if you want, because maybe the insurance market really does have some problems. But that pales in comparison to the problem that faces everyone -- both the well-insured and the uninsured: health care is expensive.

A hospital visit makes staying in the ritziest hotel room, hiring the most expensive lawyers, etc, all look cheap by comparison. Until this industry fixes its inefficiencies or technological backwardness or government-imposed overhead or whatever it is that is so broken, I just can't believe that the price of insurance will get much cheaper. And if insurance reform does make it appear to get cheaper, be suspicious because it's likely we've been conned.

If you look at the high cost of the uninsured, this is often because people without insurance postpone treatment until something is serious and then end up at an emergency room or other critical care type facility. And, many who are uninsured due to economic reasons then skip out on the bills, and these costs get factored into overhead of operating medical facilities, plus the additional cost associated with bill collection which goes nowhere. So, universal coverage will actually bring down the total percent of GDP spent on health care simply by bringing everyone into a framework where treatment can be done in an appropriate environment, and, ideally, before conditions become critical, and not pushed into the emergency rooms.

Beyond that, though, we do need additional serious improvements in overall cost reduction. Personally, this is why I've long been an advocate of a nationalized single payer system as one of the choices for health care. It can be placed in competition against private insurance, sure, but it needs to at least be an option for everyone. While many claim that government programs are inherently less efficient, I don't see how this is the case in health care. Just take a look at Richard Scrushy, former CEO of HealthSouth. His total compensation often exceeded $40M per year, no one working in the Medicare administration makes nearly that much. Of course, the claim is that superstar CEOs like this are worth it because of their ruthless drive to reduce costs and drive revenue. But did Scrushy do that? Well... he manipulated accounting practices and made the company look like it was making lots of money, something he's just been convicted of and fined $2.88B for. I don't think that really counts as driving overall system efficiency. Plain and simple, government sponsored health care should be run like a business, but run like a non-profit business. The $40M a year Scrushy was taking home could have been spent on actual health care. So, in the context of cost reduction, removing senior management compensation from health insurance cuts quite a bit of expense.

And, as you point out, insurance becomes more efficient the larger the pool of participants becomes, as this spread risk and achieves best possible outcomes at lowest possible per person cost. What could be a larger pool than the entire nation?

So far I remain fairly unimpressed with the health care plans floated because none of them provide a strong position for single payer health care, whether nationalized or provided through non-profits, as is done in Japan and Germany. Every other advanced nation on Earth has this, and they all have longer life expectancies and lower health care costs as a percentage of GDP. This seems like a pretty big clue that this may be the optimal system.

Germany, for example, spends 10.7 percent of their GDP on health care for a really world class system. It's not nationalized, but rather operated through a network of government sanctioned non-profits. On top of this, private for-profit companies provide upgraded health care packages, both as extensions of the standard systems or as a full coverage package for people willing to pay for luxury treatment, which usually involves quicker appointments, posh waiting rooms, and whatnot.

Japan uses a very similar system, and spends a little over eight percent of their GDP to do so. This is especially amazing given their legendary smoking rates and aging population. Despite this, they maintain one of the highest life expectancies in the world.

The US, on the other hand, has the lowest life expectancy of any advanced industrialized nation, and we spend over 15% of our GDP to achieve this. Clearly we're doing something wrong. I think a good place to start is to tell people like Scrushy that we no longer wish to pay them $40M a year to defraud investors.