On Health Care


An example of California hospital signage

Image via Wikipedia

Steve Gillmor invited me on the new Gillmor Gang at Building 43 yesterday. The topic was health care. I enjoyed the discussion which even included live music. I've avoided posting anything here about my thoughts on the health care debate, but since I've said them on the Gillmor Gang, I thought I'd better get them out in writing too.

First things first:

  • We're long past the point where keeping the current sytem is an option. It's unsustainable and broken. We need to reform the health care system.
  • The current employer supported model doesn't work for small businesses, the self employed, or the unemployed and doesn't do anything for our country's innovative competitiveness.

So, reform we must, but what kind of reform?

Any economic system, our current health care system and the proposed ones included, is a mechanism for rationing scarce goods. Heath care is a scarce good and so it must be rationed in some manner. The quesion is how will we ration it and who will make the choices? When something is rationed, by definition, someone won't get all they want or even need. Let me emphasize again: this isn't an argument for the current model--it's broken and is rationing health care irrationally.

At my core, I don't trust or want the government making those rationing decisions. Not trusting the government to ration properly doesn't make me incompassionate or evil. Trusting the government to do it doesn't make you good or moral. Government rationing isn't the definition of compassion & goodness.

And I don't buy the argument that "everyone else does it this way" means that it's right for America or even the best way to do it period. How many of the wonder drugs of the last two decades were developed in countries with government-run and managed health care systems? I thought so. We may be losing more than we intend by making that switch.

We have a sort of universal coverage now: anyone can drop by an emergency room and get treated--at great expense to the rest of us. The problem with this kind of "universal" coverage is that it's expensive, unevenly administered, and often too late or too little. We have to do better than this.

But the choice isn't between a government-run health care system and a let-the-poor-die-in-the-streets system either. The current system is heavily influenced by government--perhaps too much, but most certainly in the wrong ways. Any realist would conclude that we're going to have the government involved in health care. But more to the point: if the current system is broken (and it is) we broke it. That means we can fix it.

Lastly, before I give you my suggestions, as Rob La Gesse pointed out yesterday, any engineer knows that making large wholesale changes to complex open-loop dynamic systems (like the health care system) is a sure way to take a broken system and make it worse. If you're a programmer, you'd never program like that. We don't have to make public policy like that either. Refactoring 18% of the economy with one large bill is just plain nuts.

So, with that, here are a few changes we could make that I believe would go a long way toward rationalizing the health care system and give us real data about what the next steps should be:

  • Eliminate the tie between employment and insurance - having special rights related to insurability tied to whether or not someone has a job is just insane--not to mention a disincentive to innovation.
  • Eliminate pre-existing conditions - this is a common way for people who could otherwise have insurance to be denied insurance for the things they most need insurance for.
  • No rejections - everybody should get coverage.
  • Transparency - people should know what decisions are being made about their coverage, their plans, by who, and for what reasons.
  • Tax parity for individuals - either give everyone the same tax breaks or elimnate them for everyone when it comes to buying insurance and paying for health care expenses.
  • Rational incentives - let's create a system where doctors are reimbursed for care rather than procedures.
  • Portability (between jobs, plans, & states) - insurance that isn't portable between jobs, states, or different plans creates regional monopolies and this reduces competitiveness.
  • Build payer-payee networks - Health information networks can help reduce cost and increase transparency. The law should actively require patient access to the health data about them on these networks in clear, easy-to-understand terms.
  • Promote and incent HSAs combined with high deductable insurance plans - I've known people who do this and I think it holds great promise if people start it when they're young. It doesn't help those already in trouble with health care costs or health problems.

I don't pretend to think that these suggestions will solve the whole problem, but I think they go a long way toward properly setting incentives and getting more people covered. I also don't claim to have all the answers. There are probably good, simple ideas not on my list that someone who knows more about the health care industry than I could propose.

What you didn't see on this list is a requirement that everyone pay the same price (as some of my friends have advocated). There's a good reason for that. Go back to my point that any economic system is used to ration scarce goods. If everyone pays the same price, then you're not using price to ration health care and consequently you're using something else (time to live--literally, influence, rules, etc.).

This is the thing that those who advocate one price for all fail to be specific about. If everyone pays the same price, then there's no incentive for individuals to limit health care consumption. Since there's not an unlimited supply, something else will have to limit consumption. If you tell me what your plan is for limiting consumption, then I'll tell you whether or not I agree with it, but to simple say "one price for all" without fixing the obvious problem of over-consumption is not intellectually honest.

Having said that, I need to point out that this is one of the greatest failings of the health care system we've built to this point: health care is rationed in an irrational way: by whether or not you have a job, by whether or not you had insurance before, and by arbitrary rulings by unaccountable bureaucracies inside health insurance companies.

The proposals I've made are aimed at creating a system that is more fair and has incentives properly aligned with public sentiment. I'm sure I got some of them wrong. I'm sure you don't agree with me. So, feel free to write your own blog post about what your plan is. Be sure to give specifics about how your plan will ration health care.