Friday, September 04, 2009

Highly recommended article on the health/healthcare/health insurance debate

I completely agree with David Brooks' op-ed on what's wrong with the current healthcare reform proposals getting most of the attention in Washington: they don't go far enough. Specifically, they don't address the underlying incentives in our healthcare system that drive the costs up.

Brooks' piece pointed me to "How American Health Care Killed My Father" in this month's The Atlantic. If you're following the healthcare debate, if you're interested in improving healthcare in America, if you're interested in improving the health of Americans... I highly recommend the article.

In the first half, David Goldhill--whose father died after contracting a hospital-acquired infection--deconstructs all of our assumptions about healthcare and health insurance and puts forward a credible explanation for why our current system is so dysfunctional.

I’m a businessman, and in no sense a health-care expert. But the persistence of bad industry practices—from long lines at the doctor’s office to ever-rising prices to astonishing numbers of preventable deaths—seems beyond all normal logic, and must have an underlying cause. There needs to be a business reason why an industry, year in and year out, would be able to get away with poor customer service, unaffordable prices, and uneven results—a reason my father and so many others are unnecessarily killed.

Like every grieving family member, I looked for someone to blame for my father’s death. But my dad’s doctors weren’t incompetent—on the contrary, his hospital physicians were smart, thoughtful, and hard-working. Nor is he dead because of indifferent nursing—without exception, his nurses were dedicated and compassionate. Nor from financial limitations—he was a Medicare patient, and the issue of expense was never once raised. There were no greedy pharmaceutical companies, evil health insurers, or other popular villains in his particular tragedy.

Indeed, I suspect that our collective search for villains—for someone to blame—has distracted us and our political leaders from addressing the fundamental causes of our nation’s health-care crisis. All of the actors in health care—from doctors to insurers to pharmaceutical companies—work in a heavily regulated, massively subsidized industry full of structural distortions. They all want to serve patients well. But they also all behave rationally in response to the economic incentives those distortions create. Accidentally, but relentlessly, America has built a health-care system with incentives that inexorably generate terrible and perverse results. Incentives that emphasize health care over any other aspect of health and well-being. That emphasize treatment over prevention. That disguise true costs. That favor complexity, and discourage transparent competition based on price or quality. That result in a generational pyramid scheme rather than sustainable financing. And that—most important—remove consumers from our irreplaceable role as the ultimate ensurer of value.

I found myself persuaded by just about every point he made. To summarize, here are a few of those main points:
  • Healthcare isn't the same thing as health... a variety of factors (medical care, nutrition exercise, our environment, etc.) all impact our health. And health is one of multiple factors that determine our overall happiness and satisfaction with our lives.
  • Health insurance isn't the same thing as healthcare. Goldhill emphasizes the fact that health insurance is different from every other kind of insurance: you don't expect to submit a claim for your gas expenditures on your auto insurance or your electric bill on your homeowner's insurance. Health insurance has somehow come to be the principal way we pay for all healthcare expenditures.
  • The moral hazard of paying for so few of our medical costs directly leads to distortions in how medical care is priced and consumed.
  • We live under the illusion that someone else is paying the bill for our medical care... but there isn't anyone else to pay it. Ultimately we are paying these huge costs ourselves.
  • Even with its leverage in setting prices, government has done a poor job of controlling healthcare costs.
  • There's little competition in the healthcare industry which results in high costs and high profits. And government regulation has tended to maintain the status quo even as technology and consumers' needs have changed.
  • The fact that someone else--an insurance company or the government--is paying the bill results in a strange system where the person receiving medical care isn't the true customer.
  • Because of all the structural oddities of our healthcare system, technological advances often increase costs rather than lower them as they do in other industries.

In the second half of the article, Goldhill proposes a plan for making fundamental changes in how we pay for healthcare in America. While I was less persuaded by his specific plan, I do agree that without dealing with these systemic issues, reform is unlikely to produce much in the way of significant savings or healthcare improvements.

MEANWHILE, BACK IN WASHINGTON... the Washington Post reports that Obama will be laying out more specifics next Wednesday and that some Republicans still see a chance for bipartisan reform (as long as the scope is much more limited than what Democrats have proposed).

David Brooks reminded me of why I walked neighborhoods for Obama: some problems are serious enough that only bold solutions will suffice. Healthcare is one such issue; a few Band-Aids aren't going to cure what ails us.

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