IEET > Rights > HealthLongevity > Economic > Vision > Staff > Mike Treder > Technoprogressivism
Health Care Good, System Bad
Mike Treder   Mar 11, 2010   Ethical Technology  

You can make an argument that the quality of health care in the United States is as good as anywhere in the world (if you can afford it)—but the system we use to allocate and pay for that care is obviously broken and needs to be fixed.


I received a call earlier this week from a freelance reporter who writes for a health care blog, and we had a long conversation about the ills of medical insurance in America.

One thing I emphasized to her is the fallacy of conservatives repeatedly claiming that “the U.S. health care system is the best in the world!”

Yes, the care that is provided here is quite good. Expensive but good. Very good, but really expensive.

By now, anyone who’s been paying attention (or paying insurance premiums) knows that health care costs in the United States are out of control.


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Costs keep going up and up and up—and yet our results, overall, are comparatively mediocre.


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It should be obvious and beyond dispute that something needs to change. And we can put that argument into terms that not only are morally compelling but also make good sound business sense.


Three reasons why the U.S. system of employer-provided, for-profit health insurance should be replaced with something better:


1. It places American companies at a competitive disadvantage.

In virtually every other major industrialized nation, the cost of providing medical insurance to individuals is borne by the state rather than by employers.

What this means is that U.S.-based companies, faced with paying for most if not all of their employees’ health insurance premiums (which includes both active and retired employees) are at a severe disadvantage. They are on an uneven playing field when it comes to competing for market share with companies from other nations.

It is a testament to American business that our trade deficits are not worse than they already are. If that burden of covering employees health care costs were to be removed, it could provide a huge boost to the U.S. economy and potentially make a big difference in reducing unemployment.

2. It forces insurance companies to make no-win ethical choices.

By its very nature, any for-profit business will try to maximize its bottom line. Nothing wrong with that. A company’s first responsibility is to its owners and/or shareholders. That’s how capitalism works, and in most cases, for most kinds of business, it works just fine.

If a company doesn’t focus effectively on making a profit, it will go out of business. The profit motive is generally a positive aspect of a capitalist society. It makes companies compete, work harder, try to please their customers, and excel at what they do. So far, so good.

But when it comes to medical insurance, that goal of maintaining and increasing profits—an ethical responsibility that every company owes to its stakeholders—can run smack up against other ethical priorities related to the well-being of the company’s customers, its insured.

To make more money, an insurance company may need to reduce costs. That might require dropping customers who are costing too much—taking too much out of the system—in favor of those who are healthier and don’t need the benefits. It could mean deliberately denying service for people who are in need. Sometimes it results in misleading if not outright dishonest practices: misinformation, obfuscation, delay, complexity; anything to slow down payouts and cut down on claims.

I’m not justifying such tactics on the part of insurance companies, but I also think it’s not fair to blame them entirely for doing what for-profit entities have to do. Here in the United States, we have put those businesses into the untenable position of making decisions about ethical matters that are in conflict with one another. Either way, they can’t win.

3. It causes the greatest harm to the weakest among us (and ends up costing more in the long run).

The whole theory behind medical insurance (or, indeed, insurance of any kind) is to reduce costs by sharing risks. By spreading out the burden of paying for insurance roughly equally over everyone, we can guarantee—we can insure—that no single individual is met with catastrophic costs in the event of a major misfortune. This works fine, as long as everyone contributes and everyone is covered.

In our present system, however, many people aren’t covered and some people don’t contribute.

The way it works now, those who face the least risk—the healthiest and the richest—are the ones most desired for coverage by for-profit insurance companies. That just makes sense: healthy, successful people can afford to pay higher premiums and, at the same time, are less likely to require large payouts. They are the ideal customers for profit-based insurance enterprises.

And what that also means, of course, is that those who can least afford good insurance and those who are most likely to require significant coverage—the poorest and the least healthy—are the last people that for-profit insurance companies want to take on as customers. They get weeded out and end up either uninsured or, at best, inadequately insured.

All of which leads to the poor and the unemployed in America making excessive use of public hospital emergency rooms for all their medical needs. And this, unfortunately, is both the most expensive and the least effective form of health coverage that we could provide for them. But it is what our present system has driven them to.

The poor and the weak get sicker, and taxpayers end up paying far more than we should to help get them well again. It’s not right, ethically, and it’s also quite foolish economically.

The point of this article is not to offer or promote any specific solution, although I will say it seems clear to me that some sort of single-payer plan, e.g., expansion of Medicare, makes the most sense in the long run. But what I want to convey today is that our current way of doing things here in the United States is not only morally dubious, but also downright bad business. We can do better, and we should.

Mike Treder is a former Managing Director of the IEET.



COMMENTS

Those life expectancy/health care cost graphs drive me nuts.  Correlation doesn’t mean causation.  In fact, it makes more sense to turn the graph around—it isn’t that more dollars spent yield longer lives, it’s that longer lives require more money spent.  IOW, it isn’t medical spending that drives life expectancy.  There are many social, cultural and demographic issues that drive life expectancy (and health care costs), many of them related to the “inalienable” rights that many Americans cherish.

If you can accept that higher health care costs don’t necessarily drive life expectancies, even in other countries, you start to approach the problem differently.  You might ask: What *should* we expect for our extra health care dollars?

I’m someone who doesn’t believe that the profit motive is a bad thing in health care insurance, but it certainly has to be better regulated than it is now.  Health insurance companies are not just “insurance” companies, they are major cost and benefit managers.  In fact, the profit motive has arguably led America to do better in those areas than other countries have done.  Other government-run systems come to American health insurance companies for advice on their programs.

When you think about it, many of the dollars that are paid out by health insurance companies aren’t really for “insurance” (which is something you typically buy for major catastrophic financial events) but are transfer payments between the healthy and unhealthy for non-catastrophic health care costs.  There ought to be a different term for what health insurance companies do, because they are unlike any other segment of the insurance industry.

To me, the current administration has the right idea: a national exchange in which everyone has to buy health insurance, with community rating by the insurance companies.  That minimizes the “underwriting competition” between firms and emphasizes their ability to negotiate contracts with providers, manage provider delivery systems and also manage individual high-cost cases.  And the profit motive might not only be appropriate, but socially desirable in that scheme.

But the quality of care could also be so much better, if we really aligned the economic incentives appropriately (including an overhaul of FDA regulation).  The measure of a health care system shouldn’t be life expectancy, it should be quality of life.  I know it is most urgent to get people covered who currently are not, and will support almost any reform now that will accomplish that.  But as soon as we’ve made that change, a much deeper overhaul should be undertaken.  Proper emphasis on prevention of illness is only the tip of the iceberg, compared to the potential for life enhancement.

Is there a grave risk a universal healthcare system could become too bureaucratized, as Medicare and Medicaid are today? That too much funding will wind up going to the administrators rather than the clients?

1. The statistics are misleading and you need to get them correct before moving on.
—1a There are not as many millions of people in the US who want health care and can’t afford it as have been represented by statistics.  When you eliminate those who actually have some eligibility for coverage but don’t use it and those who make the decision to not purchase it when they can afford it, you are left with only a few millions (maybe 4-5m) who cannot get the health care they need.
—1b Representing the quality of health care with life expectancy numbers is not correct.  The size and makeup of the population group determine those numbers far more than the health care system.  Japan is represented by one of the highest life expectancy numbers.  Japanese who live in the US show the same life expectancy.  This suggests the differences are created more by culture and lifestyle, than the health care system.
—1c 3% of total health care cost goes to the insurance companies.  Representing them as evil gougers does nothing to solve the real problems.

2.  Our drugs are expensive because we do more R&D work in this country and have more government regulation (for valid safety concerns) than any other country.  The rest of the world can sit back and let us do the heavy lifting and reap the benefits when cheaper generic versions of drugs become available later.  It’s a simple choice to balance safety against cost and decide how much safety and what level of state of the art drugs we are willing to pay for and not willing to pay for.

3.  The drug issue is a good analogy for the rest of the health care system.  It IS the best in the world and we are constantly demanding both more of it and higher levels of care than any other system in the world.  It is mostly this demand that is driving the costs up.  All we have to do to lower costs is reduce the quantity and quality of tests, drugs, private rooms and all the other “frills” that we take for granted.  We don’t want to do that, but that’s the hard truth.

4.  The Democrats solutions: Coverage mandates (make the pool larger, cover pre-existing conditions, expand Medicaid) will increase coverage spread (which is not a major factor - see statistics above) but will continue to drive the costs up.  More government control inevitably introduces more waste and reduces free choice.

5.  The Republicans solutions:  Open market competition, reducing fraud and waste, and tort reform may help, but they are not the driving issues pushing our costs up.  The driving issues are our lifestyles and our demands of our healthcare system.

6 The Mayo Clinic has done studies and implemented solutions that appear to work, to both increase the quality of care and to cut costs at the same time.  They have concentrated on the quality of results instead of quantities of tests, procedures and drugs. 

7.  Getting both the patient and the doctor to focus on quality of care means taking on more individual responsibility.  This is normally accomplished best by free market principles, not more regulation and government intervention that decreases the sense of personal responsibility and initiative.  Education is a key factor.  We could probably get more “bang for the buck” by teaching our population to eat more like the Japanese than any other single factor suggested in the current health care reform debates.

Right on-target comment. Right now—and no longer being progressive I go by today, not the tomorrow that recedes into the future—there are far too many irresponsible people who would use universal healthcare as a life support of sorts. I know dozens of itinerants who don’t take care of themselves because the prospect of medicare & medicaid paying their bills until they become hopelessly ill (at which time they go into assisted living and, later, into a nursing home) is comforting even if it lessens their lifespans. It is surprising how many undeucated, even by contemporary educational ‘standards’, exist. Many don’t know the rudiments of nutrition. Utterly shocking is the libertarian interest in having the state pay the medical bills of those they care about, even though libertarians claim to detest the govt. So it was no surprise to me that “healthcare” (a euphemism meaning most people DO NOT take care of themselves and require govt assistance in perpetua) would come to such a parlous state: “when we get sick from poor nutrition, smoking, drinking, and dope, the state will take care of us until we die, at which time our funeral benefits will be paid for”. ‘Healthcare’ is a monument to unaccountability, at this time; and again, I go by now, the inertia is omnipotent. Today when people say they hate big government they mean they want those outside their circle of family & friends to die, so they can get funds for healthcare even if many don’t need the funds at all, and even if their bookkeeping is merely complicated by the infusion of govt funds to no real net gain. And that of course is general, practically global: “I hate big guvmint except for the funds from big govt that keep my grandparents alive even if they have hundreds of thousands or millions in assets & disposable income”. We can all now see that people care more about the status of themselves and those close to them than they do about their own health. So the unaccountability will continue another decade or so; who knows what will happen after that; I’m a futurist no longer and haven’t the foggiest notion of what will occur in the next decade—let alone after that. And as long as libertarians and Repuglicans ae involved in h+, I have no intention whatsoever of being involved and letting those rightwing hypocrites manipulate me in any way. It has been a long joke—but the joke is now OVER.

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