Editor’s Note: This article is part two of a two part series illuminating some of the most significant challenges (and solutions) in American Healthcare. Read part one here.
The most popular argument for “universal healthcare” seems to be that everyone else is doing it, so the United States needs to get with the program, join the rest of the civilized world, and cover everybody. A noble goal, indeed. Certainly, wealthy and compassionate societies find ways to help the destitute and most disadvantaged—but a cursory investigation of the way our healthcare and health insurance systems function, and the ways in which Medicare operates, indicate “Medicare for All” plans like we explored in Part I simply aren’t viable.
So that leaves us with a choice between a system that is slowly bankrupting us and a system that will either bankrupt us, put a bunch of healthcare professionals out of business, or severely limit your choices. If we really want Medicare for All, it would entail taking the people’s money and wasting it to the tune of $440 billion each year on ineffective care that hurts people. If we want Medicare for All, it would mean continuing to throw money at a wasteful, uncoordinated system that focuses on treating sickness and doesn’t reward prevention. If we want Medicare for All, it would involve using public money (your money) to penalize preventative care, bankrupt the country, and put us in an economic vise. Maybe it’s just me, but none of this sounds very good. Is there another way?
One idea for improving healthcare in America, grounded in economic reality and market processes, includes addressing pharmaceutical drug costs by reforming patents. Right now, pharmaceutical companies spend on average $4 billion and 12 years to bring a new drug from a research and development lab to market. Given drug patents only last 20 years, from the time it actually hits the market, companies have just 8 years to recoup their costs and turn a profit. Logically, this causes prices to be higher than they might otherwise be. Extending drug patent timeframes would allow companies to spread out their profit margin over more years, lowering prices.
Additionally, we could address hospital and physician waste by allocating resources to what works. The data shows good primary care drives improved health outcomes by preventing illnesses as opposed to simply treating them. We can fix primary care by getting insurers out of the business of covering routine primary care. In so doing, we eliminate the moral hazards and perverse incentives involved in any third-party payer arrangement that drive up the costs of primary care. The costs would fall to the point where they could be paid for out-of-pocket. By fixing primary care, we fix the rest of the system. Anything out of the scope of primary care could be covered with fundamental catastrophic insurance. What I mean by this is we would get health insurance back to being insurance.
Insurance is something you use in an unexpected, unplanned event or catastrophe, like when you get cancer, or you’re in a car wreck and need $100,000 in bone trauma plates. It’s not like you expect your car insurance to cover oil changes and basic wear-and-tear, so why should health insurance? Everything else (preventative care), your oil changes and tire rotations, could be out of pocket, subsidized by an employer, or (if you’re destitute) subsidized by the government. That’s it: Everybody’s covered. And yes, employers do have a role, and competition among insurance companies and healthcare providers has a role.
In my proposed system, quality is what you’re paying for. When we bring insurance back to what it’s supposed to be (a hedge against unforeseen disaster) and emphasize preventative care as a routine out-of-pocket expense like we do with pretty much every other aspect of our lives, we get price transparency, and the functioning price signals needed for a market to allow competition. These elements are what has brought down costs in many other aspects of our lives and are what our healthcare system so sorely lacks today.
People keep saying healthcare is different. Well, it is in some sense, at least it is in America today. Of any developed country in the world, we pay the most for the least. If we stop treating healthcare like it’s different, stop making it different, we can have a system that provides efficient, high-quality, and truly caring care at every price point to everybody.