reconstructhealthcare

Healthcare Facts and Figures: How much does it cost and how much can we save?

Welcome to the Reconstruct Healthcare Blog!

          In today’s article we take a look at the cost of healthcare today and what the growth of healthcare costs means for the next decade.

We remind you that any meaningful reform of the American healthcare system is entirely in your hands. 

          The premise of this Reconstruct Healthcare Blog is that the power to find a healthcare solution, one that works for all Americans, resides exclusively in the hands of you, the American people.  The first purpose of this blog is to educate you about why our healthcare system fails to meet the needs of all Americans. 

The second purpose is to solicit your commitment to become part of that solution.  (See the April 7th post of 2008 for a detailed list of specific things you can do to make a real difference.) We believe, in fact, that it cannot happen without your participation. Be a strong advocate for whatever healthcare solution makes the most sense to you.

         The third purpose is to introduce you to my book, Radical Surgery: Reconstructing the American Health Care System (see www.reconstructhealthcare.com).  Radical Surgery offers a uniquely American solution that will provide universal healthcare and prescription drugs to all Americans, at a price we can afford to pay and in a way that minimizes the role of government.

    You are, also, invited to tell your story or to pass the invitation on to someone else who has a story to tell.

 

Today's Article: 

Healthcare Facts and Figures

In the ten-year period from 1999 to 2009 healthcare expenses grew:

• From $1.2 Trillion in 1999 to an estimated $2.5 Trillion in 2009

• This represents an annual growth rate at 8.0 Percent

• During this same period the Consumer Price Index increased at an annual rate of 2.9 percent

• Had healthcare costs grown at the rate of inflation:

•  2009 costs would have been an estimated $1.6 Trillion, a cool $900 billion less than what we actually will spend.

• The aggregate savings over the 11 years, inclusive, from 1999 to 2009 would have been an estimated $4.5 Trillion.

• During this same period the population of the U.S. grew from 282 million in 1999 to an estimated 307 million in 2009.

• The average per capita cost of healthcare grew from $4,250 per person in 1999 to an estimated $8,140 per person in 2009.

• As a percentage of the Gross Domestic Product (GDP) healthcare costs grew: From 13.0 percent of GDP in 1999 to an estimated 17.6 percent in 2009.

• The average annual cost of employer paid health insurance was $13,000 while the average household income in the U.S. was $50,000. 

• This suggests that the full cost of health insurance, alone, both employer- and employee-share, represents approximately 25 percent of an average American family’s income.  Of course, this does not include deductibles, co-pays, and out-of-pocket expenses for covered care.

• The National Coalition on Health Care (NCHC) expects healthcare costs to rise at the rate of 6.2 percent over the next ten years.

In Radical Surgery: Reconstructing the American Health Care System, I show how we can, without resorting to “socialized medicine,” provide comprehensive healthcare and prescription drugs to all U.S. Taxpayers and reduce the growth of healthcare costs to match the Consumer Price Index. 

If we reduce the rate of increase in healthcare costs from the current rate of 8.0 percent to match the CPI at 2.9 percent, the accumulative savings over the entire period would be $9.8 Trillion.

If we could reduce the rate of increase from the National Coalition on Health Care’s projected rate of 6.9 percent to match the CPI, the accumulative savings would be almost $6 Trillion.

  

 Download Facts and figures chart

Is that level of savings worth checking out?

Under this proposal we would:

• Provide comprehensive healthcare and prescription drugs to all American taxpayers,
• Give Americans the freedom to choose their own primary care physician
• Return control of the practice of medicine to the primary care physician,
• Eliminate health insurance, managed care, Medicare and Medicaid,
• Rely on free market forces to drive both quality and accountability
• Limit the role of government to the very few things government does well.

Do Not Confuse Universal Healthcare with Socialized Medicine!

Today's Article:

 

Do Not Confuse Universal Healthcare with Socialized Medicine!

Whenever the words universal healthcare are printed or spoken, what most Americans read or hear is socialized medicine and this is one of the reasons why it has been so difficult over the years to create a groundswell of support for the former.

“Universal healthcare” is not synonymous with “socialized medicine.”

If you don’t believe me, run this simple experiment.  If you are with a crowd of people of ten or more, ask how many of them believe that all Americans should have access to quality healthcare?  In the several dozen times in which I have done this, I get an affirmative response of ninety percent or better.  On more than one occasion, I have had one hundred percent of the people respond “Yes,” all Americans should have access to quality healthcare.”

Now, ask that same group the question, “how many of you would be in favor of a system that relied on our government to provide healthcare?”  In every case in which I have asked this question, at least ninety percent have responded, with great passion, that “No, they would not be in favor of such a system.” Clearly, Americans have an aversion to the idea of “socialized medicine.”

Please listen very carefully!  We can have a system in which all Americans have access to quality healthcare without relying on our government to either deliver healthcare or manage its delivery.

I repeat, “Universal healthcare” is not synonymous with “socialized medicine.”

Please visit my website at www.reconstructhealthcare.comand learn about my book, Radical Surgery: Reconstructing the American Health Care System.  In doing so you will discover a uniquely American healthcare reform solution that:

• Will provide all Americans with access to high quality, comprehensive healthcare and prescription drugs at a price the American people can afford to pay,

• Gives all Americans the right to choose their own doctor and, just as importantly, the right to change physicians if they loose confidence in their original choice, 

• Returns control of the practice of medicine to the physician, 

• Changes healthcare from a transaction-driven system to one that is relationship-driven, 

• Allows us to bring the cost of healthcare under control, 

• Uses free-market principles to drive both quality and accountability, 

• Eliminates health insurance, managed care, Medicare, and Medicaid, and 

• Limits the role of government to the very few things government does well.

    

    What you will discover is that we can have it all.  We can continue to have the best physicians, the best hospitals, the best nurses and other ancillary professionals, the best technology and the best medicines.

    All it requires is that we apply a little American ingenuity to the problem.

    Please share this message with the people on your contact list and encourage them to visit both www.reconstructhealthcare.comand The Reconstruct Healthcare Blog. 

    Most important of all, encourage the people you know and love to write letters to their elected representatives expressing their point of view about this most important issue.

 

A Case For Prepaid Healthcare!

A Case for Prepaid Healthcare!

Just because something didn’t work the first time doesn’t mean it was a bad idea.  If you are reading this you are challenged to open your minds before rejecting a promising idea that did not succeed the first time it was tried.

The HMO model introduced the concept of prepaid healthcare and broad public sentiment would tell you that it failed miserably.  In truth it was the HMO concept that failed; prepaid healthcare was just unfortunate to be viewed as part of the HMO experience.

            As we have suggested throughout this blog and in my book, Radical Surgery: Reconstructing the American Health Care System, the problem with our healthcare system today is the middleman, whether that be health insurance, managed care (HMOs and PPOs), third-party administrators, Medicare, and Medicaid.  If we are truly committed to providing universal healthcare, what value can possibly be provided by organizations that exist entirely to restrict access to care to only those people who are covered by a health plan and to limit care to only those services that are covered within that plan.  Then, there is the fact that, depending upon whose estimates one considers, that anywhere from twenty-five to forty percent of healthcare expenditures go to pay for the middleman.

            The health plan outlined in Radical Surgery is a prepaid healthcare system that provides comprehensive medical care and prescription drugs to all Americans.  It is vital that the reader understand why we believe that prepaid care is critical to the model’s success.

            Under the HMO model prepaid care did not work for several reasons. 

The first had to do with a level of reimbursement that was inadequate.  Essentially the capitation rates that were paid to providers were such that the provider could make money as long as the patient was healthy.  When patients were sick, however, the level of reimbursement created great financial pressure on the providers.  As a result there were, indeed, providers who withheld care in order to avoid the associated cost.  There is substantial research to show that such occurrences were no more prevalent, however, than excess utilization common in the FFS model.  Some would argue that they were substantially less prevalent but that doesn’t change the fact that under- and over-utilization are equally bad for the patient.

The second reason had to do with the fact that patients of HMOs were essentially captive except for annual enrollment period.  In other words, dissatisfied patients could not exercise a consumer’s prerogative to select a new plan and, within the HMO, all providers were subject to the same utilization guidelines.   

Third, not only were patients captive, there was no direct accountability.  Patients could complain to their providers but all the providers could do was forward the complaint up the line to policy makers within the HMO who were insulated by layers and layers of bureaucracy.  In most cases the providers, whether physicians, institutional, and ancillary providers felt as helpless as the patients with respect to their ability to influence policy.

            There are three mechanisms for providing and paying for healthcare services.  The most predominant mechanism is fee-for-service.  As we have pointed out, the inherent flaw in the fee-for-service model is that the interests of the patients and providers are at odds and it is a conflict of interest that cannot be resolved within the logic of fee-for-service.  Good physicians are concerned about preventive care but the demands of practice make it impractical to devote any significant attention to it.  Of course a FFS system provides no incentives to provide preventive care.

            The second mechanism is one in which physicians and other providers are employees of the government and they are paid a salary to care for patients.  In the

US

the public health service and the military healthcare systems are examples.  Many of the European healthcare systems also provide nation-wide examples of this form of care in which all citizens are eligible for and receive healthcare.  The problem with these national models has to do with issues such as rationing and sub-standard care although both are debatable.  What are lacking in such systems are incentives for innovation.  As dedicated as the healthcare professionals may be they have an employee rather than an ownership mentality.  With all of the criticism of the free market economy it does reward excellence and innovation.

            The last mechanism, and the one for which we are an advocate is prepaid care.  The system proposed in my book, Radical Surgery, eliminates the middleman so that all revenues flow directly to providers.  The system has built in incentives for providers to focus on prevention, find innovative solutions, and keep people healthy.  Because all of the revenue goes to people who provide care, providers receive sufficient revenue to be successful even when people are ill; when patients are healthy providers enjoy even greater financial success.

            No system is perfect and it is inevitable that a few providers will cut corners in order to improve profitability.  Unfortunately, human nature is what it is.  What is different in this plan is that providers are directly accountable to patients with no distant bureaucrats to whom they can deflect the blame for questionable utilization practices.  In addition, patients are free to change physicians at will.  Physicians who provide substandard care, who cut corners, or provide poor customer service will be abandoned as quickly as restaurant will be abandoned if they develop a reputation for bad food or poor standards of cleanliness.

            Because providers are all independent entities they must be competitive in order to succeed financially thus incentives for preventive care, innovation, and excellence are inherent in a prepaid healthcare delivery system. 

 

So, What Have You Done? Have You Done Anything?

So, What Have You Done?  Have You Done Anything?

So, let’s tally up.  Since you’ve been receiving the Reconstruct Healthcare Blog, what have you done to help bring about universal healthcare.  And, be honest.

• How many letters have you written to your congressional representative and senators

• Have you written any letters?

• To how many people have you forwarded your invitation to visit the Reconstruct Healthcare Blog?

• Have you forwarded it to anyone?

• How much effort have you made to understand HR 676, Medicare for all?  How about the proposal offered in Radical Surgery: Reconstructing the American Health Care System?

• Have you made any effort at all?

• How many people have you invited to share their healthcare horror stories on the Reconstruct Healthcare Blog?

• Have you invited anyone to share their story?

• If you’re waiting on one of our presidential candidates to fix the healthcare crisis in America, have you taken the time to really understand what they are proposing?

• How many presidential candidates in your lifetime have promised to improve healthcare or reduce healthcare costs?

• Is there any reason to think Senators Obama and McCain will be any more successful than the candidates of previous elections?

• When are you going to accept the fact that you are as much responsible for bringing about a healthcare solution as anyone else you know?

Isn’t it about time you did something even if it is nothing more than a click of your mouse?

What are you waiting for?

Medicare for All: Better than Nothing but Far from the Best Solution

 

Medicare for All – Better Than Nothing But Far From the Best Solution.

It’s difficult to be an advocate for universal healthcare and speak against House Bill 676, “Medicare for All.”  Although unlikely to pass, this bill is the closest we have come to providing a solution for the millions of Americans who are unable to get health insurance coverage, which effectively makes healthcare unattainable.

While this legislation would, indeed, give all Americans access to healthcare, it fails to address many of the problems of the American healthcare system.

            Medicare, itself, is unpopular with providers.  Providers, whether physicians or institutions, consider the reimbursement schedules under Medicare to be woefully inadequate.  The CEO of a large group of family practitioners said that, under the current reimbursement schedule, primary care providers cannot sustain themselves on Medicare alone.  We already see family practice residency programs struggle to attract young doctors as an increasing majority of young physicians show complete disdain for primary care.  Implementation of Medicare Model will only diminish, even further, the attractiveness of primary care. This has enormous adverse consequences for our healthcare delivery system as a specialty-dominated environment means ever higher levels of fragmentation of care and equally higher costs.

            A Medicare system continues to rely on the fee-for-service model which perpetuates a zero-sum billing game that rewards all providers for increasing billable encounters, technology, tests, and supplies.  Under Medicare, healthcare remains a transaction-driven industry.  Fee-for-service also provides an inherent disincentive for prevention and education. 

            A Medicare system also perpetuates the siphoning of healthcare dollars away from the people and institutions that deliver healthcare to patients resulting in what can only be described as a sophisticated, Twenty-First century form of featherbedding.  It is a simple concept.  If we truly intend to give all Americans access to comprehensive healthcare, what possible value does a third-party intermediary provide to the process of providing care to patients?  Remember that Medicare like health insurance, managed care, and Medicaid exist only to restrict access to care to those who are eligible and limit care to only those procedures that are covered.

Americans show such complete disdain for the any of the European models of socialized medicine that we don’t realize that all “Medicare for All” does is provide a less efficient form of socialized medicine.

            Let’s step back and think about what we would want if we could have the perfect system, realizing, of course, that there is no such thing as a perfect system.  We would want:

• Universal access to care and prescription drugs for Americans,
• A relationship driven system in which providers are directly accountable to patients
• A system that provides incentives for preventative care and educating people to choose healthy lifestyles
• A system that shifts the emphasis back to primary care and away from specialty care
• A system that provides incentives for innovation, effectiveness, and efficiency
• A system that preserves the strengths of the American healthcare system that includes the best physicians, ancillary professionals, facilities, technology, and research.

Such a system is possible if we are willing to shed our assumptions and prejudices and apply a systems-thinking approach; and then design the system from the ground up to do exactly what we want it to do.

            My book, Radical Surgery: Reconstructing the American Health Care System, is an attempt to take the inherent strengths of the American healthcare system and re-engineer the system to do what we need it to do.

            The undeniable truth is that we will not find a solution to the American healthcare dilemma until the American people get excited about a new idea and then stomp their feet unrelentingly until our elected officials feel compelled to act on our behalf.  Whether or not Radical Surgery provides such an idea is up to you, the reader, to decide.  At the very least the book will challenge conventional wisdom.  Why not take a look?

 

 

If They Want Your Vote, Demand That They Listen!

Make them Listen!

Whether you support Barak Obama and Joe Biden or John McCain and Sarah Palin, it is your duty to stomp your feet and make certain that your candidate hears about your point of view with respect to health care in America. 

As as happened so many times in the past, healthcare is a topic of much talk but will the reality in 2009 be any different than it has been in the inaugural year of any recent American President?  I guarantee you the answer will be the same unless you not only stand up and be counted but also do everything within your power to make sure everyone you know also stand up to be counted.

Please read my most on April 7, 2008 and do your part.

Remember to words of Jane Goodall, "the most important thing people can do for the future of the world is to realize that what they do matters."

 

Why Does Our Healthcare System Fail, Part 6

The Sixth and Final, and Most Important Reason Why Our Healthcare System Fails!

 

           

            In the first five articles in this series exploring the reasons for the failures of the American healthcare system we have asserted that the system is fundamentally flawed. 

            We also believe that there is an increasingly pervasive hopelessness among Americans.  The problem of health care seems overwhelming.  The system itself is vast and seemingly incomprehensible to many Americans.  This article and the Reconstruct Healthcare Blog are intended to be a message of hope.  We can fix our healthcare system in such a way that all Americans can have access to comprehensive medical and hospital care and prescription drugs at a price our nation can afford to spend without sacrificing the incredible strengths of the system.

            What we must understand, however, is that the system cannot be repaired using incremental changes in response to the symptoms of the systems failure.  What is required are systemic changes in the very rules through which the business of health care is delivered.

            This brings us to the sixth and final, and most important reason why the American health care system fails.

            The system fails because we have abdicated our responsibility as citizens.  This reality is, in fact, the reason for so many of our problems as a society.  As individual citizens we have become complacent and apathetic about this and other social problems facing our society.  We have allowed a mindset to develop that suggests to us that we are powerless, that these problems are too big for us.  Instead, we wait for our elected representatives and other governmental officials to solve it for us.

            We have forgotten one of the most fundamental truths of a democratic society.  We have forgotten that, as citizens, the power to chart our own course, to achieve our own destiny, to solve all of the problems facing our nation resides exclusively in our hands.  If we choose not to act, if we choose to abdicate responsibility, we have no one to blame but ourselves.

            The next time you complain when you see the cost of a medical or hospital service or a prescription drug for a member of your family, ask yourself, “What am I going to do about it?”  The next time you hear about a friend or neighbor who lost their job and cannot afford to pay for COBRA to extend their health coverage don’t just shake your head in disgust of disapproval, accept responsibility to do something.  The next time you hear about someone who is denied access to the care they need for their very survival, or for the survival of a member of their family, accept responsibility.

            As a people we have become so focused on our rights and entitlements we have forgotten that freedom must be balanced by responsibility.  The question is no longer what are “they” going to do about it, the question is what are “you” going to do?!

            What can you do?

 

1. Learn more about the uniquely American solution offered in Radical Surgery: Reconstructing the American Health Care System
2. Support the

   United States

   National Health Insurance Act (HR 676)
3. Investigate other proposals for universal health care and then support the one that makes the most sense to you.

  

Remember, the single greatest reason why the American healthcare system fails is because people just like you have not been prompted to action!

 

 

Why Does Our Healthcare System Fail?

Why Does Our Healthcare System Fail? (Part 5)

Earlier, we mentioned that the American healthcare system has evolved from a relationship-driven system to one that is transaction-driven.  As we noted, this evolution was spawned by the fee-for-service model in which providers are rewarded for providing services to patients.  The billing and payment system, in a complex universe of third-parties, has become a zero-sum game in which providers, insurers, and third-party administrators compete with one another for a share of the healthcare revenue stream.  While the system drives the business side of medicine it has also been a force in driving changes in the way medical services are provided.

            Over the years we have seen healthcare delivery gravitate from a system that was heavily skewed toward primary care, through a general or family practitioner with whom patients have a relationship, to a system in which the role of specialists is elevated. 

            More and more pressure is placed on primary care physicians to refer more sophisticated treatment to physicians who have specialized expertise in increasingly narrow medical venues.  This adversely affects both patient/provider relationships and the cost of medical care.

            In most instances, when a primary care physician refers a patient to a specialist the primary care physician’s role in the ongoing treatment of his or her patients is significantly diminished.  Not uncommonly, patients with significant health issues may see multiple specialists.  Sometimes these physicians are bringing their specialized expertise to deal with complex problems in which the specialists must work together but it becomes increasing less likely that the primary care physician will remain involved in a meaningful way.  Not uncommonly, multiple specialists are involved in aspects of a patient’s healthcare that are unrelated to that with which their colleagues are concerned and they may have little or no contact; with the emphasis on “no contact.”  Often there is an inverse relationship between the diversity of care and the level of its coordination. 

            As we all know, specialty care is more expensive, which increases the financial rewards to specialty docs which, in turn, adds to the attractiveness of a specialty practice relative to primary care.  It also contributes significantly to the cost of care and this prompts more investment on the part of insurers in pre-certification and other utilization control methodologies, adding yet more cost.  There is also a corresponding increase in the business opportunities for third-party administrator’s et al.  It is a self-perpetuating upward spiral.  The financial rewards that accrue to physicians who develop new and exciting treatment protocols are immense.  These clearly add to the quality of care patients receive but they also result in substantial increases in the cost of those services.

            A relevant question is: does this gravitation for specialized medicine contribute to higher quality of care and the answer is an ambiguous yes and no.  The level of expertise is clearly higher and in the more complex medical problems the quality of care can only be described as extraordinary.  The tradeoff is a system that is proving less and less able to meet the needs of the population as a whole and costs that border on outrageous.

            In Radical Surgery: Reconstructing the American Health Care System, we offer a system that re-establishes the primacy of primary care.  Furthermore, the priority shifts to management of the total care of patients in an environment in which specialization exists in the context of a coordinated plan of care.  Many physicians will respond that they don’t want the responsibility of managing the total care of their patients.  This is symptomatic of a system in which the demand for goods and services is driven by sellers rather than buyers.

 

Why Does the American Healthcare System Fail

Why does our healthcare system fail? Part Four

      The fourth reason why our healthcare system fails to meet the needs of all Americans is because a significant chunk of the price we pay for care goes to third parties and other intermediaries that provide no direct care to patients.  It is estimated that aggregate healthcare costs comprise roughly one-sixth of our Gross Domestic Product that, for 2008, is projected to be more than $14 Trillion.  In other words, we spend an estimated $2 Trillion dollars on healthcare and still fail to meet the needs of almost 50 million Americans.

      Estimates of the percentage of healthcare expenditures that go to activity that is not associated with direct care of patients, vary from as low as ten percent to as high as thirty-five percent.  Many of the lower-end estimates fail to take into full account the dollars spent by providers in the process of billing patients and third-parties.  

      Add up the full cost of administering Medicaid and Medicare, health insurance, managed care companies, and other third-party administrators; add the profit margins of the non-governmental entities in each of these categories; and then, add in the cost of billing these entities on the part of physicians, hospitals, and other providers.  Then, add the costs incurred by employers in managing the process of selecting coverage for their employees and then handling all of the administrative costs associated with providing the coverage.  For the many employers who elect to be self-insured, include the cost of selecting and then managing the relationships with the third-party administrators who will process and manage the claims of the company’s employees.

      Keep in mind that we are over-simplifying an incredibly complex set of equations.

      The average cost of care for all 290 million Americans is about $7,000 per person per year.   If we choose to be conservative and assume that the cost of indirect care is twenty-five percent, or $500 Billion, that leaves $1.5 trillion that goes to pay for direct care, reducing the average expenditure per person per year to $5,170.  Few, if any of those dollars, however, go to the fifty million Americans without health coverage.  (In effect, the $1.5 Trillion spent on 240 million Americans raises the average expenditure to those who actually receive healthcare to $6,250

        If we could eliminate the drain of $500 billion dollars currently spent on non-providers, so that those dollars are actually spent on direct care of patients, we could easily care for the 50 million Americans who currently lack health coverage.  In doing so, the entire $2 Trillion would reach all 290 million Americans and our average cost per patient per year would rise to almost $7,000. 

      Now recall our discussion about the purpose for which all third parties exist.  If our intent is to provide comprehensive care to all Americans, what purpose do Medicare, Medicaid, health insurance, managed care companies, and third party administrators serve?  Don’t these entities exist to restrict access to care to only those people who are eligible?  Don’t these organizations exist to limit care to only those procedures that are covered by a plan or policy?  Under a universal healthcare system any dollar that is siphoned off to non-providers is a dollar unavailable to pay for care for people who need it.  To continue to perpetuate this unnecessary extravagance is nothing more than featherbedding to an absurd degree.

      As well-intentioned as they are, proposals for single-payer systems will certainly reduce but will come nowhere near eliminating the costs of these middlemen.  Whatever the perceived inadequacies of the Canadian, British, French, or the other government-provided healthcare systems of other developed nations, they at least eliminate most unnecessary payments to people who do not directly support the provision of medical care to patients.

      In Radical Surgery: Reconstructing the American Health Care System, we have offered a solution that eliminates the middlemen while also substantially minimizing the role of government in the healthcare delivery equation. 

Why Does the American Healthcare System Fail?

Why Does the System Fail, Part 3

        Contrary to conventional wisdom, the failures of our healthcare system cannot be attributed to the free market system run amok.  Rather, the problems with health care in the U.S. occur because the complexity of the system, and its convoluted logic, inhibit the ability of free market forces to influence health care.

       

        In a free market system, knowledgeable buyers are both willing and able to purchase goods and services that meet their wants and needs.  These buyers assess the perceived value of those goods and services and make a purchase only when they are satisfied that the transaction is a fair exchange of value for value.  The purchase decision is the exclusive domain of the customer.  Even when buyers rely on brokers and other intermediaries to assist them with the purchase of more complex products and services, they retain full control of the purchasing decision.  The buyer even determines whether there is sufficient value to justify the cost of such third-parties. 

       

        Sellers will continue to offer products and services for sale only when they consistently earn an acceptable return on their investment.  In a free market there is real and immediate accountability.  Unless buyers are satisfied, they will take their business elsewhere and sellers will be successful only when they can consistently provide more customer satisfaction than their competitors.  The free market is also unforgiving and sellers who cannot compete do not survive.

       

        Prices in a free market, even when partially regulated, are driven by supply and demand. 

       

        In the American healthcare system, it is the sellers who determine what medical services their patients will purchase and it is only when those patients are uninsured that their ability to pay is even taken into consideration (see the post on November 20th of 2006 for a more on the subject of the economics of our health care system). 

       

        The overwhelming majority of healthcare transactions are handled for patients by intermediaries that the patients did not choose and over which they have little or no control.  Prices are driven by a cost-based reimbursement process that few patients understand.  It is a system in which sellers choose the services that will be provided to patients and are reimbursed by the third parties according to complicated schedules that are negotiated, apart from the patient, by the providers and intermediaries.  The intermediaries, after adding in their administrative costs and profit margins, then pass those costs on to patients and their employers in the form of premiums in amounts that are more dictated than negotiated.

       

        In spite of what insurers and other third-parties will assert, there is little or no accountability because patients have little or no recourse if they are unhappy with either the quality or the cost of the services they received.  Similarly, providers are not subject to the rigors of free-market competition, creating a system in which both the weak and the strong providers survive.

       

        The problems in healthcare are not that providers make too much money, although strong arguments suggest that they do, rather the problems exist because the incentives reward the wrong behavior.  The problems in health care are not that health insurance and managed care companies are driven by an insatiable hunger for profits rather that these entities exist at all.

       

        If we are truly committed to the idea of universal health care, what value do health insurance, managed care companies, Medicare and Medicaid provide.  Don’t these entities exist to limit access to care to only those patients who are eligible?  Don’t these entities exist to limit care to only those procedures and treatments that are covered by the particular policy provisions for which the patient and/or his or her employers have paid?

       

        Everything we have of value in this country, including our freedom, has been made possible by a healthy free market environment in which innovation and excellence are rewarded.  Why are we so quick to conclude that the free market is bad for health care?