June 30, 2008
Health Care Policy is Complex
The health care policy debate in America has been strangely quiet these past few months. One of the biggest lobby groups, AARP, has even quieted some of its local efforts. They are rightly afraid that a full-fledged debate on health care would seriously cripple some of their candidates this November. Here’s some background.
First, health care costs are rising rapidly. A huge amount of the increase is due to greater demand for the most costly services. These services include advanced end-of-life care, much more extensive neo-natal care, and high end elective surgery. Higher use of these services represents perhaps the largest single contributor to overall health care costs.
Second, we live in a bifurcated world of health care payment. There are those of us with insurance and those without. For those without health care insurance, a wide range of services are available. Hospitals cannot turn away patients in need, and so folks who need care can get it. Unfortunately, the care they get is usually in the wrong place (emergency rooms instead of doctors’ offices), at the wrong time (when they are ill). This makes it more costly, but since most folks without insurance don’t end up paying, there is little incentive to go to the right place at the right time for health care. Guess who ends up paying the bills for the uninsured?
Third, health care is already the most regulated industry in the U.S. It is the industry most subject to occupational and geographic monopolies. U.S. physicians have a ruthless and well organized mechanism for stamping out competition, either from foreign physicians or other health care professionals. Local hospitals defend their turf in ways no other regional monopolist would ever consider. Medicaid rules are arcane and ill designed and fear of legal action clouds even trivial medical decisions. All this raises costs.
So what can we do?
There are only three ways to cut down on demand for expensive health care services. The first is to let consumers make their own choices through the price system. These are likely to be tough choices for families. Second, we could have hospitals and insurance companies make choices for us. They do much of this already, and by limiting some procedures (such as extreme neo-natal care) or placing life-time caps on benefits. Third, we could let the government make the decisions (like no cancer treatment for anyone over 70). These choices will be tough, but the difficulty of the choice is an argument for individual, not institutional choice.
To fix the payment problem, we could make everybody buy health insurance. This won’t be easy since perhaps half the adults who don’t have health insurance cannot read and write. As for regulations, we could also force more competition in medicine. This would mean more doctors, more equitable licensing and more extensive use of physician assistants and nurse practitioners. We also have to reform the Medicaid and Medicare payment systems.
Fixing healthcare is not going to be easy.
About the Author
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