Both Sides Of The Health Care Debate Are Wrong

How American Health Care Killed My Father
David Goldhill, The Atlantic, September 2009, page 38

This article profoundly effected my views on the health care debate. I wasn’t happy with either side of the debate, but wasn’t sure how a better plan would look. It’s an extremely complex issue. I like David’s ideas very much.

When it comes to the current debate about health care/insurance reform the Republicans on the right are disingenuous, crazy and blinded by their hatred for a black president. The proposals on the left are merely Band-Aids and do not address, nor will they fix, the causes of our medical mess.

The problem is not just that millions of Americans lack health insurance. Nor will tort reform be enough to appreciably reduce costs. We need a new system; a new health care paradigm. Employer-provided health insurance creates job lock, and pay-for-service increases cost with no regard for outcomes.

In this brilliant article, David Goldhill proposes fundamental changes to the way we pay for medical care. He argues that we should create a system that will put consumers in charge of health care, and how that care is paid.

The most important single step we can take toward truly reforming our system is to move away from comprehensive health insurance as the single model for financing care. And a guiding principle of any reform should be to put the consumer, not the insurer or the government, at the center of the system. I believe if the government took on the goal of better supporting consumers—by bringing greater transparency and competition to the health-care industry, and by directly subsidizing those who can’t afford care—we’d find that consumers could buy much more of their care directly than we might initially think, and that over time we’d see better care and better service, at lower cost, as a result.

We should replace our current web of employer- and government-based insurance with a single program of catastrophic insurance open to all Americans—indeed, all Americans should be required to buy it—with fixed premiums based solely on age. This program would be best run as a single national pool, without underwriting for specific risk factors, and would ultimately replace Medicare, Medicaid, and private insurance. All Americans would be insured against catastrophic illness, throughout their lives.

Every American should be required to maintain an HSA, and contribute a minimum percentage of post-tax income, subject to a floor and a cap in total dollar contributions. The income percentage required should rise over a working life, as wages and wealth typically do.

All noncatastrophic care should eventually be funded out of HSAs. But account-holders should be allowed to withdraw money for any purpose, without penalty, once the funds exceed a ceiling established for each age, and at death any remaining money should be disbursed through inheritance.

All of the health-care interest groups—hospitals, insurance companies, professional groups, pharmaceuticals, device manufacturers, even advocates for the poor—have a major stake in the current system. Overturning it would favor only the 300 million of us who use the system and—whether we realize it or not—pay for it. Until we start asking the type of questions my father’s death inspired me to ask, until we demand the same price and quality accountability in health care that we demand in everything else, each new health-care reform will cost us more and serve us less.

Read the article and let me know–in the comments–what you think.

8 Comment

  1. Can’t say I could agree to “require” people to save for healthcare. But this proposal is a good step in the right direction. I agree insurance was not intended for day to day care, but rather to pay for catastrophic care. I advocate letting people purchase healthcare like they do any other service. We can lower costs by;

    • Allow people to shop for insurance across state lines.
    • Implement tort reform allowing doctors to pay lower insurance premiums.
    • Let people know what healthcare costs by encourage transparency in billing.
    • Reform Medicare and Medicare so that they do not artificially control prices.
    • Repeal government mandates placed on insurance companies.

    Whole Foods Markets has a great model for their employees. The company offers catastrophic health insurance and contributes $2500.00 cash annual to pay for day to day care. The balance rolls over year to year. Employees are encouraged to shop for and negotiate with providers. They are able to do so because they are paying cash for the service they get.

  2. A good step? This proposal goes farther than John Mackey’s “plan”. I think you have it backwards. That plan does nothing about job lock, insurance company profits, denials based on preexisting conditions, etc. It’s periphery reform, at best.

    What happens when someone wants to quit to start their own business? From which insurance companies do Whole Foods Markets employees get to choose their insurance?

    Doctors do not order excessive tests because they’re covering their asses because of potential malpractice suits. They order excessive tests because they are compensated for conducting procedures and tests. Tort reform won’t change that.

    David proposes eliminating Medicare and Medicaid and private insurance. If customers paid for all but catastrophic care they would naturally demand transparency and shop around for the best value (which isn’t always a lower price).

    I’m curious what you think of the information technology piece of the article.

    1. I’m not suggesting Whole Food Markets’ model is the solution. It simply demonstrates how healthcare costs can be controlled if you as a consumer take responsibility for it. Costs will decline if everyone asked their healthcare provider what their service costs. Whole Food employees are encouraged to shop around for the best price.

      I believe to reduce costs we need to move away from employer-provided health insurance. Health insurance should be personal and portable, controlled by individuals themselves. Employment-based insurance hides much of the true cost of health care and encourages over-consumption. It limits consumer choice, because employers get final say over what type of insurance a worker receive. People who don’t receive insurance through work are put at a disadvantage. And if you lose your job, you are likely to end up uninsured.

      Changing from employer to individual insurance will require changing the tax treatment laws. Current tax codes allow individuals to pay for employer based insurance before payroll taxes are deducted. A worker purchasing health insurance on their own does so with after-tax dollars. People should receive a standard deduction, a tax credit, or, better still, large Health Savings Accounts for the purchase of health insurance, regardless of whether they receive it through their job or purchase it on their own.

      We also need to introduce competition among both insurers and health providers. People should be allowed to purchase health insurance across state lines. State and Federal regulations restrict insurance companies from selling insurance across state lines as well as regulate what they are allowed to offer. Eliminating these barriers will force insurance companies to compete with one another.

      I can’t really speak for doctors who order excessive tests. I suspect it is really because of artificial price controls. Medicare and Medicaid pay for a fraction of the cost of providing care, which happens to be a large percentage of the healthcare market. Healthcare providers are forced to make up the difference by inflating the cost to us. I wouldn’t be surprised if that included ordering more tests than necessary.

      There is a need for tort reform? There sure is. A great example is my family doctor has stopped delivering babies several years ago. His reason; liability insurance was too expensive. Delivering babies was one of the great joys of his job. What a shame.

      I’d like to respond to your question concerning technology in a separate post. This is getting too long a reply.

      1. Tim, I agree with many of your points. I do not see any value in the insurance company as payer model. Where is the value?

        If my doctor cuts off the wrong leg should I not be able to receive punitive damages? Aren’t access to courts a fundamental American right? What specific reforms would you propose? It’s a bit too easy to blame the lawyers and suggest we have “tort reform”, without saying exactly what that means. Is the problem that there are too many malpractice suits or that liability insurance premiums are too high? Price, as you surely know, has almost nothing to do with cost.

        Instead of blaming the laws, courts and lawyers, why not blame the wealthy insurance executives and shareholders for inflating malpractice premiums?

        Why would patients ask their providers and “shop around” if they aren’t paying the cost of their care?

        I believe to reduce costs we need to move away from employer-provided health insurance. Health insurance should be personal and portable, controlled by individuals themselves.

        I completely agree that we need to disengage health care from employment, but why stop there? What is the argument FOR insurance at all? Why not jettison the insurance-company-as-payer paradigm entirely?

  3. Thank you Brent. This was an excellent and enlightening article. It’s unfortunate and unbelievable that this health care plan has not already been implemented. Think of all the problems it would solve and how much better off we would be. David mentions in the article that we are likely to get worse care in our current system where providers are more accountable to insurance companies and government agencies than to us. He also states:

    Every time you walk into a doctor’s office, it’s implicit that someone else will be paying most or all of your bill; for most of us, that means we give less attention to prices for medical services than we do to prices for anything else. Most physicians, meanwhile, benefit financially from ordering diagnostic tests, doing procedures, and scheduling follow-up appointments.

    It’s true–we’re mainly concerned with OUR portion (co-pay), rather than the entire bill. In a consumer-driven health care system it would behoove us to consider necessity, price, and value as we would for, say, a car, DVD player, or clothing. If we adopted this plan, much less money would be wasted on health care.

    David proposes some novel ideas. For example, if people paid a rising deductible from their HSA as they aged, they could cover their own end-of-life care. By abolishing Medicaid, the government could help lower-income families pay their catastrophic premiums or minimum HSA contributions. He brings up the importance of prevention, and suggests:

    Nutrition, exercise, education, emotional security, our national environment, and public safety may now be more important than care in producing further advances in longevity and quality of life.

    Spending on health care, by families and government, is crowding out spending on almost everything else.

    1. Thank you for your comment, Kirsten.

      The HSA requirement would not only allow seniors to pay the cost of their own end-of-life care, it would allow most everybody to pay most of their own health care costs throughout their lives. This would shift the cost onto the consumer, where it belongs. This would have the effect of creating real competition in health care and also stimulating health consumers to better educate themselves. If people wanted to spend their money on a new iPhone instead of a colonoscopy, perhaps they’d choose to eat a carrot instead of a Twinkie.

  4. When it comes to the current debate about health care/insurance reform the Republicans on the right are disingenuous, crazy and blinded by their hatred for a black president.

    That is stupid! It’s disgusting how everyone on the left claims that Republicans are racist because they don’t agree with Obama. I wouldn’t like what he is proposing even if it was coming from a white person (or purple, Asian, Indian, etc.). To suggest that all conservatives are racist is stupid and wrong. You should spend some time with a few Republicans before you start commenting on us all as a group. Oh yeah, and it’s republicans who want to protect your second amendment, not democrats. Are you a racist because you don’t believe in stricter gun control and therefore disagree with Obama?

    1. Hold on, Coward (Anonymous). I did not suggest all Republicans are racist. Did you read the article on which this post is based, or did you just Google “health care” and paste your drivel into every result?

      Should I embrace the entire Republican Party platform because I like to own a gun? Your logic is puerile and stupid.

      I don’t like what Obama is proposing, either. If you had read this post and my comments you’d know that.

      Either identify yourself and stay on topic or your comments will be removed.

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