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http://www.theatlantic.com/doc/200909/health-care
It's a really long article and worth the read.
Here's some excerpts:
It's a really long article and worth the read.
Here's some excerpts:
First, we should replace our current web of employer- and government-based insurance with a single program of catastrophic insurance open to all Americansindeed, all Americans should be required to buy itwith 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.
Proposals for true catastrophic insurance usually founder on the definition of catastrophe. So much of the amount we now spend is dedicated to problems that are considered catastrophic, the argument goes, that a separate catastrophic system is pointless. A typical catastrophic insurance policy today might cover any expenses above, say, $2,000. That threshold is far too low; ultimately, a threshold of $50,000 or more would be better. (Chronic conditions with expected annual costs above some lower threshold would also be covered.) We might consider other mechanisms to keep total costs down: the plan could be required to pay out no more in any year than its available premiums, for instance, with premium increases limited to the general rate of inflation. But the real key would be to restrict the coverage to true catastrophesif this approach is to work, only a minority of us should ever be beneficiaries.
How would we pay for most of our health care? The same way we pay for everything elseout of our income and savings. Medicare itself is, in a sense, a form of forced savings, as is commercial insurance. In place of these programs and the premiums we now contribute to them, and along with catastrophic insurance, the government should create a new form of health savings accounta vehicle that has existed, though in imperfect form, since 2003. 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. Our current methods of health-care funding create a use it or lose it imperative. This new approach would ensure that families put aside funds for future expenses, but would not force them to spend the funds only on health care.
What about care that falls through the cracksmajor expenses (an appendectomy, sports injury, or birth) that might exceed the current balance of someones HSA but are not catastrophic? These should be funded the same way we pay for most expensive purchases that confer long-term benefits: with credit. Americans should be able to borrow against their future contributions to their HSA to cover major health needs; the government could lend directly, or provide guidelines for private lending. Catastrophic coverage should apply with no deductible for young people, but as people age and save, they should pay a steadily increasing deductible from their HSA, unless the HSA has been exhausted. As a result, much end-of-life care would be paid through savings.
Anyone with whom I discuss this approach has the same question: How am I supposed to be able to afford health care in this system? Well, what if I gave you $1.77 million? Recall, thats how much an insured 22-year-old at my company could expect to payand to have paid on his and his familys behalfover his lifetime, assuming health-care costs are tamed. Sure, most of that money doesnt pass through your hands now. Its hidden in company payments for premiums, or in Medicare taxes and premiums. But think about it: If you had access to those funds over your lifetime, wouldnt you be able to afford your own care? And wouldnt you consume health care differently if you and your family didnt have to spend that money only on care?
For lower-income Americans who cant fund all of their catastrophic premiums or minimum HSA contributions, the government should fill the gapin some cases, providing all the funding. You dont think we spend an absurd amount of money on health care? If we abolished Medicaid, we could spend the same money to make a roughly $3,000 HSA contribution and a $2,000 catastrophic-premium payment for 60 million Americans every year. Thats a $12,000 annual HSA plus catastrophic coverage for a low-income family of four. Do we really believe most of them wouldnt be better off?
Some experts worry that requiring people to pay directly for routine care would cause some to put off regular checkups. So heres a solution: the government could provide vouchers to all Americans for a free checkup every two years. If everyone participated, the annual cost would be about $30 billiona small fraction of the governments current spending on care.
How would the health-care reform thats now taking shape solve these core problems? The Obama administration and Congress are still working out the details, but it looks like this generation of comprehensive reform will not address the underlying issues, any more than previous efforts did. Instead it will put yet more patches on the walls of an edifice that is fundamentally unsoundand then build that edifice higher.
The Government Is Not Good at Cost Reduction
Every proposal for health-care reform has featured some element of cost control to balance the inflationary impact of expanding access. Yet it goes without saying that in the big picture, all government efforts to control costs have failed.
Why? One reason is a fixation on prices rather than costs. The government regularly tries to cap costs by limiting the reimbursement rates paid to providers by Medicare and Medicaid, and generally pays much less for each service than private insurers. But as weve seen, that can lead providers to perform more services, and to steer patients toward higher-priced, more lightly regulated treatments. The governments efforts to expand access to care while limiting costs are like blowing up a balloon while simultaneously squeezing it. The balloon continues to inflate, but in misshapen form.
Cost control is a feature of decentralized, competitive markets, not of centralized bureaucracya matter of incentives, not mandates. Whats more, cost control is dynamic. Even the simplest business faces constant variation in its costs for labor, facilities, and capital; to compete, management must react quickly, efficiently, and, most often, prospectively. By contrast, government bureaucracies set regulations and reimbursement rates through carefully evaluated and broadly applied rules. These bureaucracies first must notice market changes and resource misallocations, and then (sometimes subject to political considerations) issue additional regulations or change reimbursement rates to address each problem retrospectively.
As a result, strange distortions crop up constantly in health care. For example, although the population is rapidly aging, we have few geriatriciansphysicians who address the cluster of common patient issues related to aging, often crossing traditional specialty lines. Why? Because under Medicares current reimbursement system (which generally pays more to physicians who do lots of tests and procedures), geriatricians typically dont make much money. If seniors were the true customers, they would likely flock to geriatricians, bidding up their ratesand sending a useful signal to medical-school students. But Medicare is the real customer, and it pays more to specialists in established fields. And so, seniors often end up overusing specialists who are not focused on their specific health needs.
Many reformers believe if we could only adopt a single-payer system, we could deliver health care more cheaply than we do today. The experience of other developed countries suggests thats true: the government as single payer would have lower administrative costs than private insurers, as well as enormous market clout and the ability to bring down prices, although at the cost of explicitly rationing care.
But even leaving aside the effects of price controls on innovation and customer service, todays Medicare system should leave us skeptical about the long-term viability of that approach. From 2000 to 2007, despite its market power, Medicares hospital and physician reimbursements per enrollee rose by 5.4 percent and 8.5 percent, respectively, per year. As currently structured, Medicare is a Ponzi scheme. The Medicare tax rate has been raised seven times since its enactment, and almost certainly will need to be raised again in the next decade. The Medicare tax contributions and premiums that todays beneficiaries have paid into the system dont come close to fully funding their care, which todays workers subsidize. The subsidy is getting larger even as it becomes more difficult to maintain: next year there will be 3.7 working people for each Medicare beneficiary; if youre in your mid-40s today, there will be only 2.4 workers to subsidize your care when you hit retirement age. The experience of other rich nations should also make us skeptical. Whatever their histories, nearly all developed countries are now struggling with rapidly rising health-care costs, including those with single-payer systems. From 2000 to 2005, per capita health-care spending in Canada grew by 33 percent, in France by 37 percent, in the U.K. by 47 percentall comparable to the 40 percent growth experienced by the U.S. in that period. Cost control by way of bureaucratic price controls has its limits.
In 2002, the U.S. had almost six times as many CT scanners per capita as Germany and four times as many MRI machines as the U.K. Traditional reformers believe it is this rate of investment that has pushed up prices, rather than sustained high prices that have pushed up investment. As a result, many states now require hospitals to obtain a Certificate of Need before making a major equipment purchase. In its own twisted way, this makes sense: moral hazard, driven by insurance, for years allowed providers to create enough demand to keep new MRI machines humming at any price.
But Certificates of Need are just another Scotch-tape reform, an effort to maintain the current system by treating a symptom rather than the underlying disease. Technology is driving up the cost of health care for the same reason every other factor of care is driving up the costthe absence of the forces that discipline and even drive down prices in the rest of our economy. Only in the bizarre parallel universe of health care could limiting supply be seen as a sensible approach to keeping prices down.
