A Recipe for Reform

<< Back to Part I:  How Insurance Works
<< Back to Part II:  How Medical Insurance Was Broken
<< Back to Part III:  Medicare

“Reality is that which, when you stop believing in it, doesn’t go away.”
– Phillip K. Dick

In this last installment I’d like to propose some solutions for policymakers, for doctors and for patients.  My recommendations may be quite politically naïve, in that they are currently unpopular and are not likely to gain favor with politicians.  But I believe they are economically sound.  Popular opinion is fickle, but economic fundamentals are eternal.  So the ideas will wait for an eloquent politician to popularize them, and in the meantime we will race in the opposite direction.

Recommendations for Lawmakers

The employer tax deduction for health insurance should be abolished. This action by itself would have a major positive impact, untying insurance from jobs and unburdening companies from crushing healthcare costs.  Companies would go back to giving employees salaries and employees would do what they already do for houses, cars and food: they would shop around.  Healthcare spending would plummet, so doctors’ lobbies and hospital lobbies are against it.  (Another reason I’m not in the AMA.)  Patients would buy cheap catastrophic policies and get rid of their expensive “everything’s covered” policies, so the insurance companies would oppose it.  But patients and taxpayers would be much better off.  Who represents them?

Most importantly this change would shift the debate from the mirage of universal coverage to ensuring the availability of high-quality affordable care.  Getting everyone insurance isn’t the goal (unless you’re an insurance company).  Getting everyone many choices of healthcare with reasonable prices and good quality is the goal.  We should watch the universal coverage experiment unfold in Massachusetts very carefully before we spring this model on the nation.  Early observations suggest that everyone there is insured and no one can find a doctor.  I hope Part II of this series convinced you that insurance for routine care is the problem, not the solution.

A public debate should be reopened about the justification for Medicare. Why should age alone guarantee government sponsored insurance regardless of income or assets?  Remember, there is already another program (Medicaid) for the indigent and the disabled.  Any effort to limit Medicare benefits will be vigorously opposed by senior-citizen lobbies and by doctors’ and hospital lobbies.  And enough people depend on it currently that simply abolishing it would not give current beneficiaries time to make alternate plans.  My suggestion is that the age for Medicare eligibility should be increased by one year every two years.  That way, no current beneficiary ever loses benefits, but as time goes on the age for enrolment would creep ever higher.  So a current 60 year-old will not be able to enroll until the age of 70, and a current 40 year old will not be able to enroll until he reaches 90 (and will have plenty of time to budget for his health expenses).

In 1965 the first generation of Medicare beneficiaries never paid into the system.  They were already retired and their benefits were supported by the working employees of that time.  Conversely, there will have to be a generation which pays the payroll taxes for Medicare, but never gets the benefits, a generation which makes the financial sacrifice to phase out a destructive and unaffordable program.  Should we accept that burden, or pass it to our children?

Recommendations for Doctors

To the extent that each doctor can afford to do so, doctors should remove themselves from contracts with insurance companies, especially with Medicare. This would force doctors to adopt business practices that are standard in other service industries: transparent reasonable prices, attentive customer service, and competition with other doctors on both quality and price.  Doctors who opt out of Medicare save Medicare money, leaving more money for those with fewer options.

Doctors should donate some of their time to caring for indigent patients.

Doctors should not join physician lobby groups which aim to increase or maintain spending on healthcare.

Recommendations for Patients

To the extent that each patient can afford to do so, patients should buy catastrophic (i.e. high deductible) insurance and pay for routine care themselves.

Retirees should not join lobby groups which aim to increase or maintain spending on Medicare.

The national tide appears to be favoring taking ever more dollars and options away from patients and giving them to insurance companies or to the government.  This promises to worsen the problems we learned about in the previous sections.  Treating patients as customers is the only path forward.

“Facts are stubborn things; and whatever may be our wishes, our inclinations, or the dictates of our passions, they cannot alter the state of facts and evidence.”
– John Adams

———————————————————————————-

Notes and Sources:

I owe much of my understanding of how insurance companies and doctors could function in free markets and how the healthcare marketplace has been corrupted to an article written in 2001 by Milton Friedman, the Nobel laureate economist, How to Cure Healthcare.  Though its conclusions may not be popular I have not seen its ideas convincingly refuted.  I recommend the article to anyone who wants a more detailed understanding of the economics of American healthcare.

A more thorough description of the American healthcare system and how to fix it is in Dr. David Gratzer’s book The Cure: How Capitalism Can Save American Health Care which I reviewed two years ago.

The fact (in Part III) that Medicare costs doubled every four years between 1966 and 1980 is found on the Wikipedia article on Medicare which has some other important but little-known facts about Medicare.

You can learn more about the effects of Massachusetts’ universal health insurance program in this Wall Street Journal Health Blog post: As Insurance Coverage Increases, ERs Get Busier and in this Wall Street Journal editorial: National Health Preview, The Massachusetts debacle, coming soon to your neighborhood.

Posting will be on hiatus for two weeks and will resume the week of July 13.

Dr. David Gratzer is a psychiatrist who has worked both in Canada and in the United States.  His first book, Code Blue: Reviving Canada’s Health Care System, was an award-winning prescription for the long waits and poor satisfaction currently plaguing Canadian patients.  In his current book, The Cure: How Capitalism Can Save American Health Care, Dr. Gratzer turns his attention to the troubles of the healthcare system on our side of the border.

Dr. Gratzer is certainly no apologist for American medicine.  He is quite frank about the problems we face, from skyrocketing costs, to the number of uninsured, to the increasing regulation of medical practice.  But Dr. Gratzer also trumpets the enormous achievements of American healthcare.  As he documents, nowhere in the world is one more likely to survive breast cancer, less likely to wait a long time for elective surgery, or more likely to spend more than 20 minutes with one’s doctor.

Ironically, faced with our current challenges American politicians increasingly look to Canada and to Europe for inspiration, even as Canadian and European governments are struggling with the consequences of their government-run healthcare systems.  Dr. Gratzer highlights the serious challenges in these countries, and how they are trying to inject competition and incentives into their healthcare models.

The Cure is a well researched and very readable analysis of what’s wrong with our healthcare system, and how to fix it.  Our nation tends to reject political extremes and is suspicious of revolutionary change.  The government-sponsored healthcare reform proposed by President Clinton’s administration met with widespread resistance.  On the other extreme, the Nobel Prize winning economist Milton Friedman in 2001 proposed a free-market reform of healthcare that would have eliminated government’s role in medicine.  Friedman’s plan would be politically impossible in the current climate.  Compared to these two extremes, Dr. Gratzer’s prescriptions are quite moderate, and therefore potentially achievable.  His proposals include adding competition to Medicare, reforming the FDA, and allowing patients to buy health insurance from other states.

For anyone interested in healthcare from a national point of view, The Cure is mandatory reading.

Tangential Miscellany:

I wish you a very happy Independence Day!

In November I wrote about an important study in the Annals of Internal Medicine that demonstrated the effectiveness of an antibiotic for the symptoms of irritable bowel syndrome (IBS).  Dr. Mark Pimentel, the author of the study, is the director of the Cedars-Sinai Medical Center Gastrointestinal Motility Program.  Last year he published a book outlining his theories about the cause and treatment of IBS:  A New IBS Solution.  After reading my post about the Annals article, he kindly asked me to review his book.

The cause of IBS remains mysterious.  Dr. Pimentel makes the astute point that when the cause of a disease is unknown, it is very frequently initially presumed to be psychological.  A generation ago, stomach ulcers were thought to be due to emotional stress.  (They are not.  They are almost always due to a specific bacterium or to anti-inflammatory pain medicine.)  Heart attacks were thought to be more common in patients with the “type A” personality.  (They are not.)  The assumption that IBS has primarily psychological causes has stigmatized IBS patients, and has misdirected researchers away from potentially useful diagnostic tests and treatments.

Dr. Pimentel’s central theme is that bacterial overgrowth is a major cause of IBS.  Bacterial overgrowth is a condition that occurs when bacteria that normally live in the colon (large intestine) move into and colonize the small intestine which is normally free of bacteria.  Small intestine bacterial overgrowth can be diagnosed by testing for specific gasses in exhaled breath, and can be treated with antibiotics.  In language aimed for the general public, Dr. Pimentel summarizes the evidence supporting this theory, and details the protocol used at Cedars-Sinai to manage IBS.  The book is also peppered with patient testimonials which help put a human face on a medical problem that is frequently very miserable.

The ideas in A New IBS Solution are an important breakthrough in a very common disease for which treatments up until now have been only marginally effective.  I will certainly recommend the book to all of my patients with IBS.