How We Can Be Healthy, Wealthy, and Wise

imagesEach month’s employment report tells us which economic sectors show job growth. And usually leading the pack is healthcare.

What’s wrong with this picture?

Maybe that healthcare costs are eating us alive, and ever more jobs in healthcare is a symptom?

A growing healthcare sector is not per se bad. Once, we needed most people employed in farming just to feed us. Improved agricultural productivity freed them to work instead in factories, producing other goods, making us richer. Then industrial productivity gains freed many of those people to work in services, making us richer still. One such service is healthcare, which improves our lives, so if we choose to spend more on that, fine.

But – there are some big buts. First, regarding productivity, the health sector’s record is atrocious. Whereas greater productivity enabled us to shift manpower out of agriculture, then manufacturing, and now even many non-healthcare services, in contrast healthcare employment continues to rise because healthcare is a productivity sinkhole.

Second, my phrase “choose to spend” is misapplied when it comes to most healthcare. images-1Instead healthcare spending is an out-of-control juggernaut carrying us along, with a high proportion going to proliferating tests and procedures because providers get paid not for results but for tests and procedures, useful or not; and to end-of-life care (or torture?) we can’t seem able to limit, even though it doesn’t add real value.

Steve Brill had a much-noticed Time magazine piece recently, examining what determines healthcare pricing. The answer, too often: whatever providers think they can get away with. And that tends to be a lot, because actual recipients of these services aren’t normally who pays. Often government pays, or else insurance. This is a big reason for poor healthcare productivity; there’s no incentive for it.  And so, again, it’s not that we, as a society, are choosing to spend ever more on healthcare.

In fact, we have gotten into a bizarre mindset that we shouldn’t have to pay for it at all – that it should all be “covered” (so someone else pays). images-2Worse yet, that “someone else” is not paying for it either, because government is borrowing a big chunk of the money (since we’re willing to pay neither our medical bills nor the taxes to cover them). This will blow up in our faces. Another reason why the seemingly cheery monthly healthcare sector jobs report should give us pause.

I’ve said this before: the root problem is that healthcare doesn’t work like a market, where customers shop for services. Lefties like to mock free-marketeers as supposedly believing the market solves everything. Well, in healthcare we see how the lack of a market screws up everything. A market wouldn’t solve it all, but sure would solve a lot. The tragedy of Obama’s “Affordable Care Act” is its doing nothing about this fundamental problem – so it certainly won’t make healthcare “affordable” for us as a nation.

The Economist recently reported on a new phenomenon in Britain: private for-profit walk-in health clinics providing basic services like gynecology, dentistry, pediatrics, etc., with the (non-reimbursable) charges clearly advertised upfront. Originally started to serve Polish immigrants particularly, now they’re expanding as many other customers flock to them,

images-3Why would they? After all, Brits famously get treatment free through their sacralized National Health Service. But the answer is obvious. People must prefer the expeditious, personalized, non-bureaucratized care they get by paying at these clinics. It really tells us something when you can actually make money competing against a free service!

I was glad to read this, because I’ve often thought this very kind of thing would be great for America – clinics in shopping malls where you can just walk in and get basic care, for a reasonable fee, bypassing the whole insurance and governmental quagmire. We do have some like this, but not enough. If it became widespread, we’d be a lot more healthy – and wealthy – and wise.

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8 Responses to “How We Can Be Healthy, Wealthy, and Wise”

  1. WhamaJama Says:

    “Someone else pays.”

    I am surprised that you are apparently unaware that a central provision of the Affordable Care Act is to ensure all individuals are now aware of the cost of the health care they are being provided so they can make precisely the informed choice you suggest, and I agree, is so important (http://www.nytimes.com/2013/01/30/health/to-open-eyes-w-2s-list-cost-of-health-plans.html). For the first time all individuals will be informed of exactly what the coverage they purchase directly or indirectly is actually costing them or their employer.

    You then cite The Economist in saying that the market improved the delivery of healthcare in Great Britain by providing general practice services which apparently are not well provisioned under British healthcare. You appear to conclude that the “lefties” predilection for single-payer healthcare services is eroded by this finding.

    I believe that the left generally prefers a single payer system to our current system of market-based provision of optional medical insurance plans backstopped by emergency room care that is free to the patient but very costly to society provide. These insurance plans compound the inefficiencies relative to a single payer option by adding administrative costs and additional layer of profit-seeking to the provision of health services that do not appear to add much value. The market that would be disrupted by a single payer system is that.

    However, neither our current system or that envisioned by the Affordable Care Act envisions a single provider system. People would be free to choose any provider for health care, even voodoo, under a single payer system. Whether your insurance provider (under the Affordable Care Act), or the public health system (under a single payer solution), would pay for any particular treatment would ultimately depend on its medical efficacy. Voodoo may not be recognized as effective treatment, but people would be free to choose it.

    And, now, thanks to the left’s persistence and intellect of Republicans like Bob Dole and Mitt Romney, who developed, supported and successfully implemented precursors to the Affordable Care Act, we will all know exactly what we pay for health care so we can from hereon choose plans that best suit our needs, or lobby our employers to ensure they are buying plans we want at a reasonable cost. Because we pay, not someone else.

  2. rationaloptimist Says:

    Thanks for your comment. Actually, the prices that you say everyone is now aware of are the prices of INSURANCE — NOT the prices for medical services themselves. And THAT is the problem.
    (Prices for insurance were never difficult for people to know, though when folded into employee compensation many people were admittedly oblivious to it. However, try to find out in advance what the charges will be for your heart-bypass operation!! (Or even a routine colonoscopy) They’ll never tell you. And that doesn’t change under Obamacare.)
    So while we may have market competition and customer shopping around for INSURANCE, we still do NOT have it for health services.
    What I think the British story shows is simply that many people are not happy with government-provided healthcare — i.e., “single payer” (a euphemism devised to muddy the reality of government provision) — and they’re willing to PAY for services they could get “free” from government. That takes the shine off the idea of “single payer.”

  3. WhamaJama Says:

    If that is what you meant, then you should similarly bemoan the current system of requiring auto insurance. It is an inherent aspect of insurance that you cannot know for certain in advance the cost of damages you may incur (will you collide with a bicycle or a Rolls Royce, will you scrape the paint or kill someone?) and instead you pay for coverage, subject to government prescribed minimums, to provide the level of coverage you are most comfortable with. That is what we now have in medical care.

    To baldly state this lack of medical pricing transperancy is a “tragedy of Obmacare” is simply histrionic. As a casual observer of the national debate and a concerned citizen, I followed the discussions as best I could and I did not encounter any deliberations on the benefits of requiring greater clarity in the pricing of medical procedures. While clearly beneficial, it is not as though one side demanded greater clarity and another ignored that view or disagreed, it simply wasn’t part of the discussion. Congress could write that law now if it desires.

    Finally, you appear indifferent to the benefits of the dynamics of the new law. Now that everyone is required to have coverage, insurers and the public are in a better position to evaluate the cost of that coverage and much more inclined to ask the questions about cost and efficacy you and I agree are important. Frankly, it is as though you use the problems with the old system to try to skewer the new one.

    Yes, things will be different and despite your apparent skepticism, they likely will be better in spite of your apparent reluctance to entertain that possibility.

  4. rationaloptimist Says:

    Pricing transparency not part of the discussion? It most certainly was. There were many cogent advocates for this, but it’s true their point was largely ignored, mainly because it would have required reforms far too radical, as opposed to the baby steps we ultimately wound up with.
    But the analogy to car insurance is hardly apt. True, you may not know what kind of health crisis OR car crash you’ll have. But in the latter case, you can shop around for the work, and get an exact price quote in advance (as I did just recently for a repair close to five figures). That’s how a market works. It’s not how health care works, and that’s a key reason why costs are out of control. Read Brill’s article.

  5. WhamaJama Says:

    We will have to disagree on the suitability of the auto insurance analogy. But, sure you can buy a fender one place and the paint another, but when you’re hit by bus you can’t wake up in the ICU and present your price demands: “Here I have this all worked out. Please buy my oxygen from County General, and my MRIs from St. Mary’s, and my anesthesia from Dr. Jones, and my acetaminophen from Wal-Mart.” And, come on, putting aside a catastrophe, you can certainly shop for your medical procedures. Whether you get a firm price at a fixed quality depends on a lot of factors but there is one payer who has worked out what they consider the appropriate price for specific services that refuses to be charged a dime extra, and that is the federal government in the provision of medicaid and medicare. This is probably the major reason progressives so adore single payer.

    I agree problems occur when you don’t ask the price or as you suggest won’t because you believe the providers have your best interests at heart and are reluctant to question them. Cleary, there are some weird dynamics when it comes to your health. But, that is changing. One positive of the debate has been that more people are asking questions about their health care and its cost. Just as you have in this post.

    Finally, we have a market based system in the United States and it has failed us miserably, or stated differently the health care system in the United States in overwhelmingly owned, controlled, and operated by the private sector. We pay it more for purely administrative costs than other developed economies and receive overall poorer care. The market here and its private sector owners are a failure.

  6. rationaloptimist Says:

    “Private sector” does not mean “market.” Indeed, what we have in USA is the worst of both worlds — all the detriments of the private sector without its redeeming feature of market economics. That is precisely the problem.

  7. ppicentralclaims Says:

    wonderful post..

  8. grqezedvq@gmail.com Says:

    While we spend where it’s prudent (on work wardrobes, for example), we don’t spend a lot on other things.

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