Archive for October, 2009

Demolition Derby

Hey, everybody’s weighed in on healthcare, so here’s my 2 cents.  With all I’ve been bottling up about this topic in recent months, it’s well past time for a core dump.


Obama and congressional leaders are driving healthcare reform off a cliff, with each fighting for control of the wheel.  The Far Right has bailed out of the car altogether.  All this back and forth on healthcare is making me ill.  And here I forgot to pack my Dramamine.

Can somebody please crack a window?

Time to realign our wheels.  Let’s start with a few principles that I think nearly everyone can agree to:

  • Some basic level of healthcare should be available to everybody
  • Good health should be as affordable as possible
  • People need to see the costs of healthcare firsthand, so they can make valid choices.
  • The course of care should be determined by doctors and their patients, not insurance companies, lawyers, or governments.
  • Nobody should have to pay for someone else’s avoidable healthcare costs (smoking, overeating, failure to take medication, etc.)

This all sounds very simple and reasonable.  However, we keep bumping up against some “inconvenient truths” (sorry, Al).

  1. Healthcare is not a right, any more than good health is a right.  Using this kind of language just inflames opinions.  It stinks that people get sick, die, and/or have no healthcare.  But that doesn’t elevate it to a human right.
  2. It’s insurance, people.  It’s a bet.  Nobody who wants to stay in business will stake a game with crappy house odds.  Which is why pre-existing conditions are rarely covered.  This isn’t to say they shouldn’t be, only that we have to recognize the high cost and the limitations of insurance markets to do so.
  3. “Seeking profits” is not a dirty phrase.  I’m not sure how, even in the light of Wall Street’s recent fall from grace, it has become one.  Profit making isn’t evil, and those who do it well should be rewarded for it.
  4. Comparisons with other countries and other health systems are mildly flawed at best, and invalid at worst. They deal too much in averages over large populations.  There are also many cultural, demographic, diet, and lifestyle differences that skew comparisons.  Any system we import will make some people worse off.  Is it any surprise then, that there’s opposition to the specific reforms being discussed in Washington?
  5. Insuring more people will cost more money. From somebody–maybe not you, maybe not me, but someone for sure.  But as long as it’s the other guy it’s fine, right?
  6. Life isn’t fair. I expect my children to have trouble learning this concept, but I take it as a given from adults—and yet I’m frequently disappointed.  The rich will always find a way to buy better healthcare, just like they buy McMansions.  And they should be allowed to, frankly.  It sucks for most of us, but that’s the way it is.
  7. On the other hand, healthcare eventually has diminishing returns. You can sink millions into prolonging life for only a few months.  That doesn’t make much sense for a society.
  8. People who oppose what Obama and Congress are doing are not evil or stupid. They just disagree.  They have different frameworks, different expectations, different needs.  And most do not oppose reform, as many want to claim.  They simply oppose the current proposals on the table.  These people are not sheep being led by Limbaugh and Beck (well, most aren’t) any more than anti-war liberals were the tools of Bin Laden under Bush.  Those who opposed Iraq were not treasonous.  Nor are those who want a different healthcare system than Nancy Pelosi’s vision horrible, selfish people.

Reconciling these truths with our principles is, of course, the crux of the difficulty.  It’s not made any better when we ignore reality, however.  Here’s my two-point prescription for lowering costs:

  1. Increase competition among insurers.  People speak of this quite often, but without any discussion of why there is no competition.  And no, I do not think a public option helps.  Those that believe a public option will not raise the costs of private insurance need to take a closer look at Medicare.
  2. Make consumers feel the true costs of their choices.  Or as Duke University’s Clark Havighurst calls it, “restoring price tags.”  When we make healthcare prices look cheap (through employer-provided insurance), and actually become cheap (through subsidies), the consumption of healthcare rises, as does its total cost.  Econ 101, folks.

Current congressional proposals do neither of these two things, and that is why many people oppose them.

Some ideas I’d like to see debated and perhaps included in any useful healthcare reform proposal:

  • Separate insurance from health.  Health insurance is about making decisions on the amount of care, not the cost of delivering it.  If insurance has any impact on healthcare cost at all, it’s to distort it.  So stop linking the two and acting like each is the solution to the others problem.
  • Separate employment from insurance.  This is where both sides have taken their eye off the ball.  This tie between insurance and employment is also the biggest reason there is no competition among insurers at the retail level.  But delinking is the surest way to (a) insulate people against simultaneously losing their job and their healthcare—surely something that ought to be top of mind these days—and (b) get people to see the true cost of their care. Interestingly, this was tried in 2007.  The Wyden-Bennett bill (otherwise known as the Healthy Americans Act) would have effected this separation.  But it was supported by only 13 other senators.  For once big labor and big business actually agreed on something—that this bill wasn’t good for either of them.  It would have been great for you and me.
  • Let insurers write insurance across state lines. It is ludicrous that policies are different state to state.  Free the market.
  • Enact tort reform.  I’ve never seen anyone credibly claim this is a leading cause of higher costs, but it is clear that defensive medicine is at least a contributing factor to the rise in prices and the number of unnecessary tests.  So let’s keep this on the table.
  • Pay for solving healthcare problems, not for procedures.  I don’t hire a plumber to turn a wrench; I pay them for fixing my leaky faucet.  Yes, bills are usually itemized, but I want results, not activity, when I think of my health.
  • If this means putting more doctors on salary, then fine. And any doctor that’s truly better at keeping people healthy should be paid a higher salary.  This system, while imperfect, works just fine in the business world, where outstanding performers (including some of those Wall Street masters-of-the-universe) are justifiably payed very, very well.  [By the way, why is it that many of the same people that want to rate doctors (who admittedly have only some control over the outcome of their work) are aghast at the concept of rating teachers (who have a similar amount of control over education outcomes)?  Food for thought.]
  • Quit hiding subsidies, and let the market determine prices. Most of what Congress is doing boils down to a shell game to hide or ignore costs that they want the government (read: us) to cover.  But don’t force unnatural rules or prices on the market directly.  Let it do what it does best, then let people decide for themselves what level of funding from the government is appropriate.  Policies to cover pre-existing conditions are justifiably more expensive.  Some people can’t afford even basic insurance.  Forcing everyone to carry insurance sounds reasonable and will help cover some of that cost.  But recognize that this will all be expensive, and can’t be magically carved out of insurance company profits, no matter how “evil” or gargantuan you think they might be.
  • Insure for catastrophic health problems only, and leave the relatively minor stuff to be paid out of pocket (or through supplemental insurance).  This isn’t that far removed from auto insurance, where people can choose policies that cover the really bad stuff, but pay for minor things themselves.  Including things like hangnail treatment (for example) in mandatory government-managed health insurance is a sure road to skyrocketing costs.
  • Encourage both people and insurance companies to focus on preventative care. As a nation, we can’t solve our issues if we don’t stop abusing ourselves, with poor eating habits, smoking,  sedentary lifestyles, drugs, etc.  And at the end of the day, if we can achieve real competition among insurers, the smart ones will see it pays to make preventive care (annual checkups, for instance) mandatory, and to include it in basic insurance coverage, lowering costs and improving health for everyone.

Look, none of this stuff is original, and none of it is rocket science.  But we’re letting politics steer us away from real issues and valid solutions, instead taking us down a dead-end road.

Getting this right is far more important than scoring a political victory for either side.

Instead of arguing about what to do, we should be past that already, and debating the transition issues by now.  That road will have enough potholes as it is.  No need to play bumper cars with the country in the process.

Demolition Derby 15

Otherwise, as David Brooks said in today’s NY Times (in an essay I wish I’d been good enough to write), we’re headed for health insurance reform, not health care reform.

Disclosure: I hold no position, either long or short, in any stocks mentioned here.

AddThis Social Bookmark Button


October 9, 2009 at 3:17 pm 1 comment

Your Host

Scott J. Berry, NY area

Business advisor, analyst,
technology executive, and
general man-about-town.

Here's my bio.


Seeking Alpha Certified iStockAnalyst