Markets in Health Care

Some people sing the praises of markets, and some don't. Some say that we need a free market for health care, and some say we've tried that and it doesn't work. Well, we've got markets for health care, but they're not what you might think.

The first market is for health insurance. The providers are the big insurance companies and the customers are companies that employ people. The customer wants to pay as little as possible and so if a provider charges too much, they go to a different provider.

The second market is for health care. The providers are doctors, clinics, hospitals and so on, and the customers are the big insurance companies. The customer wants to pay as little as possible and so if a provider charges too much, they go to a different provider.

Notably absent from those two markets are you and I.

I want a market where I am the customer. Which health care reform bill provides that?

Banning Compensation Decreases Supply

In the United States it is against the law to buy and sell human body parts. As a result many people who need an organ transplant die before a donated one is available.

In Canada, it is now "illegal to pay donors for sperm." As a result there is now a shortage, and sperm is being imported from the United States.

Is profit really worse than shortages that lead, in some cases, to death? I don't think so. People should be allowed to sell their body parts, pre- or post-mortem. It would solve many problems and save many lives.

How about instead you just give me my $12k?

A friend said something insightful in a recent email:

Imagine if someone tried to sell you the current system. They're going to take $1000/mo, $12k/year out of your paycheck. No, you don't have a choice. You then STILL have to pay a portion of your doctor's visits, basic procedures, and so forth, sometimes adding up to several thousand more dollars each year. And you have no control over what these services cost, or what your bill will be. Most of the time they can't even tell you that, and you just have to cross your fingers until the bill comes. Who would voluntarily choose THAT?

How about instead you just give me my $12k, and I'll buy my own insurance that covers catastrophic costs? I'm liable for the first... oh, let's pull a number out of the air... $12k of expenses (less the premium price), and if I don't have to go to the doctor for anything more than a yearly physical, I can just pocket the unused money. I can ask a clinic, "how much does this cost?" and they can tell me a single, nice, simple number. And if I don't like their price, I can shop around for a clinic that can do it for less. Can I have that? A $12k-deductible health plan can't cost that much, anyway. With the rest of the money my wife and I can tour Europe for two weeks every summer.

Insurance vs Welfare

The current health care debate mingles insurance and social welfare. With insurance, the majority pays in more than they receive in benefits; payers hope that the bad thing being insured against (car accident, house fire) never happens. With retirement-oriented welfare such as Social Security, every participant expects to eventually become a beneficiary. Into which category should we place health care?

Both insurance and social welfare are only fiscally viable when a large number of people are paying in and a small percentage of people are receiving benefits out. Social welfare retirement systems around the world are headed for disaster as birth rates decline; what is now becoming clear is that health insurance is in the same boat, as more and more people expect to get more out of the system than they put in to it.

Realistically, even with crushing taxation (in the case of public insurance) or skyrocketing premiums (in the case of private insurance) a majority of policy holders will never be able to get more out of an insurance system than they pay in. Since that's the case, it should be possible for the majority to stop buying health insurance and start paying their costs out of pocket, and from a certain point of view that's true: health maintenance costs for a healthy person, such as a yearly check-up, don't add up to very much. Unfortunately the majority of people are not healthy; lots of us have ongoing medical conditions that require treatment, such as my asthma and seasonal allergies, or my friend's diabetes, or someone's kidney dialysis. Eventually almost everybody gets some chronic issue because we all grow old. What started out as health insurance has turned into a way for all of us to pay for ongoing care for, well, all of us.

There's an anarchist fantasy that says that we should all be able to pay for all of our care out of pocket. That's unachievable, but some of the steps that we could take in that direction would make things better for everyone. I think that will be the focus of my next few posts on this topic.

Health Care Proposal

It would be nice if there were enough rich people, or enough rich + middle class people, to just tax them to pay for health care reform, but there aren't enough: take a look at our declining tax revenues and declining birthrate and extrapolate into the future. So I have a different proposal:

Have a national referendum on the topic of health care reform, and keep track of who votes "yes". Tax those people extra, and divide up the proceeds into health care vouchers to distribute to everyone.

It won't pay for gold plated braces, but people need reform now, right?

Health Care Supply

Lately I have been reading lots of stories about a constrained supply of health care. In some countries, people have to wait for a long time for procedures. In the United States, there are often long waits in emergency rooms. A recent trend has been doctors declining to serve Medicare and Medicaid patients for financial reasons. There is a growing shortage of general care physicians in the United States, and there has been a shortage of nurses for years now. Ultimately, the cost of nonexistent health care doesn't matter.

There's no easy way to correct these problems, but there are two areas where conditions can be improved: providing health care can be made to be easier, and providing health care can be made to be more profitable.

Currently there are many hurdles to providing health care. There's lots of schooling, there's lots of paperwork, and there are many complicated laws that must be complied with. Some of these things can be simplified, but few people are even trying. Taxes on small (or all, or health-care-related) businesses can be reduced or eliminated. Requirements can be streamlined or eliminated. And so on.

There exists in the minds of some the idea that profit is objectively bad. On the contrary: profit, as a motivator, is much preferred to several popular alternatives, such as power and lust. (I prefer to avoid having to provide sexual favors in order to receive health care.) Profit is a more effective motivator, taken across the entire population, than altruism. Attempts to make health care less profitable inevitably decrease the number of health care providers.

The opposite is also true: making health care more profitable will result in more organizations competing for your health care dollars. More competition will lower costs. More providers will lower wait times.

What do I care if a doctor, or the CEO of a hospital, is filthy rich? I care about getting a quality product at a good price. If someone can figure out how to make their customers (patients) happy while simultaneously turning a profit, let them.

Health Care Price Discrimination

A law should be passed that does two things:

1. Prohibit the government from setting prices of medical procedures and care, as it does now
   
2. Prohibit medical providers (doctors, hospitals and so on) from charging different amounts to different customers for the same procedure, as they do now
   

This law would have both positive and negative effects. Positive:

• Prices would more accurately reflect true costs
• Uninsured people would not pay artificially inflated prices
• It would be easier for everybody to shop around to find the best prices . . .
• . . . which would drive prices down
• Providers would not need to turn away Medicare and Medicaid patients in order to stay in business
  

Negative:

• Insurance companies would not be able to negotiate for group discounts (which aren't really discounts; the "normal" price the uninsured (don't) pay is increased and the "discount" is the previous "normal")
• The constitutional basis for regulating prices federally is shaky (I realize that Congress disagrees)
• Medicare and Medicaid would need new methods to determine what procedures to pay for
  

Have I missed any?

Health Care Problems

Health care is an area where the title of this blog is especially true. It would be nice if there were a simple solution that would make everybody, or at least me, happy. There are a plethora of proposed solutions, but none of them are simple, and all that I have seen or heard of have significant flaws.

When approaching a controversial topic involving government action, it is best to start by identifying the high level problems that we would like "reform" to address. Here's a partial list:

• I can't afford advanced procedures
• my ordinary health maintenance costs are increasing
• there's a growing shortage of doctors and nurses
• it's annoying and sometimes difficult to find in-network health care providers
• it's annoying and sometimes difficult to deal with paperwork

All we have to do to fix all those problems is adopt my ideology!

Just kidding. It's not that simple.