Monday, May 16, 2005

What's Wrong With The Wacky Health Care System in the USA?

In another, private forum, Reductio had this to say:
Broadly stated, the problem appears to be that compared to other industrialized nations, we spend more and get less.

In round numbers (a few years old I think, and from my memory so take with a grain of salt please), the USA spends around $6-7 grand annually per capita on health care, Canada $4.5 grand or so, and Britain around $3 grand and change in US dollars. As I understand it, Britain and Canada (and just about every other industrialized non-US nation) have socialized medicine, with Britain's socialized version being widely regarded as dramatically underfunded, (making it hard to get a dentist). Britain also has a non-socialized private sector that cares for those who can pay, so not all of that very low spending level even goes to the government program.

Teeth pulling and extended MRI delays aside, Canada and Britain, and substantially every industrialized nation, have lower infant mortality rates and longer life expectancies than we do in the USA, while spending less than we do on health care, funding their expenditures primarily through taxation.

To the extent that we are not confident that the US government could successfully administer such a program, that belief just reflects an underlying distrust of our form of government. If every other governmental system in industrialized nations can successfully run such a program, but the USA can't, it can only mean that our system of government is somehow deficient - which I find disquieting, and would prefer not to believe.

I think part of the problem is the fanatical misguided belief in the USA that private markets are always efficient and that government programs are always wasteful. There are areas where well regulated private markets can perform nicely. But markets are almost never effective at broadly delivering a common good; it is simply not what they are designed for.

As to the causes of the current situation:
Private health insurance companies paying their employees (including CEOs) to add no value to the health care delivery process, but rather to deny care whenever possible, and refuse payment after the fact when care cannot be denied
outright. Also, they are paid to identify those who are likely to need care, and strip them of coverage. Like I say, the private sector is not so efficient at delivering broad common good; it does reward insiders (CEOs) and extract value from the process to deliver it to insiders and owners though. That is what markets are good at.

Drug companies also figure into the mix. In the USA we pay dramatically more for drugs than anyone else, and the recent transfer of collective wealth to the drug industry (also euphemistically known as the Bush Medicare prescription benefits plan) is just a particularly bad example. But more globally, the whole misguided free market thing comes into play here too. By not having a central negotiator for drug purchases that can enjoy monopsonic (or often legal price fixing) power, nor a list of independently tested and approved covered drugs ranked by cost and effectiveness, and a national protocol for administering them as part of a treatment regimen, we leave what should be sound medical decisions to the whims of the market. This is why the drug industry spends something like 40% of its operating expenses on MARKETING in the US. Yes, there is a tiny fraction spent on R&D, but almost half of the cost of the drug industry in the USA is due to marketing. Further, since only the most expensive drugs are marketed (even if better cheaper alternatives exist) and they are often marketed directly to consumers, generating uninformed end user demand, the cost of drugs in this country are further driven up, while the efficacy of treatment is driven down.

General care, which dramatically increases the common good, is considered commodity-like and undervalued by the market, while specialist care, which is really valuable when you need it, but adds less to the common good, is overvalued. So the market misallocates medical resources from a medical perspective, but allocates them appropriately from an economic return perspective. Which is what markets do.

So, is socialized medicine the answer? I don't know. Looking at our model vs. socialized medicine, ours seems to be ubstantially lacking. Of the models out there in the world, socialized medicine has a better performance. So I think it is worth considering, assuming we want our system of medicine to cost effectively deliver low infant mortality rates
and long life expectancies. If we want it instead to deliver large drug company profits and advances in cosmetic procedures and advertising strategies, we should stick with exactly what we have.

There may also be some better third way, but I have not seen it in operation anywhere.

I have occasionally wondered if a Government Sponsored Enterprise (GSE) in the health insurance industry might help, like Fannie MAE in the mortgage industry. If it is big enough to wield disproportionate market power, it can essentially set rates and protocols (like Fannie does) forcing the markets to move in the desired direction, without nationalizing the industry. If you make it big by putting all government employees on its plan, plus all Medicare and Medicaid, then create tiered plans say option zero, establishing a minimum coverage for all otherwise uncovered Americans (paid for by taxes), then different tiers for Medicare, Medicaid and government employees (with premiums paid for by the government). Then also offer those
plans to employers in the market. Some costs can be controlled by no need for marketing, exerting monopsonic and legislative powers to compel lower drug prices and require all practitioners to accept the payment schedule etc. Maybe a partnership approach to the higher tiers, where the basic plan is wrapped by a private provider, so the GSE can concentrate on basic cost-effective service provision. In fact a requirement for offering any insurance plan could be to wrap a GSE plan so that private insurers cannot simply poach the healthiest among us, but instead must offer a real benefit on top of the GSE plan in order to attract profitable business. Which gets us most of the way toward socialized medicine anyway.

Just a thought. It might be quicker and easier to just socialize.


Anonymous Anonymous said...

Antonius, are you a wearer of glasses? Did you leave some at our house? We found some and we don't know who they belong to. If they're yours, please let me know and we'll mail them to you.



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Anonymous Blue Cross of California said...

Great blog I hope we can work to build a better health care system as we are in a major crisis and health insurance is a major aspect to many.

9:48 PM  

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