A common refrain of those who support greater government control of health care is that free market capitalism just does not work in health care policy. It is like saying that the fundamental laws of economics do not apply. But the central problem of health care policy is that the basic laws of economics work only too well.

When companies get tax breaks to buy health care for their employees that the employees do not get at an individual level then there is an incentive to push compensation towards more coverage, generally meaning lower deductibles. We end up being over insured filing claims for small amounts. This drives up administrative costs.  Low deductibles isolate the consumer from the cost provided and reduce that pressure on costs.

When we buy insurance privately- such as auto, liability and home owner’s policy, we do just the opposite.  We buy the highest deductibles we can afford and we know that if we filed claims for flat tires and oil changes our auto policies would skyrocket.

When the government becomes the biggest buyer of health care through Medicare and Medicate and then uses that position to dictate lower prices two logical outcomes occur:  hospitals shift costs to the private paying patients raising health care costs, and fewer doctors choose to participate in the government programs.

When Obama Care mandated that even high deductible policies cover 100% of preventative care- a cost that I was previously willing to bear- then the costs of these policies went up. This is true with every mandate that has been push by both federal and state agencies.

Rules that prevent insurance companies from crossing state lines increases administrative overhead and reduce competition.

This is not to ignore that there are some facets of health care that propose a challenge. It is to say that the government policies have driven up costs, reduced accountability,  and without increases in quality.

Government policies have been used effectively to facilitate a dynamic market.  Our bankruptcy laws are designed to clear away the debris of failure to allow capital to be redeployed effectively and quickly.  Anti-trust laws were designed to keep large single players from preventing new competitive player from emerging.

Our health care laws and many other laws governing large institutions have gone in the other direction; propping up the older players with dominant positions and making it much more difficult for new competitors to enter the field.

Our policy has created a right in the minds of many health care consumers that is synonymous with not having to pay for health care.

Health care costs and economics do not go away because the government enters the field. There is some need to create common underwriting standards to achieve desired policy objectives.  A health insurance company should not be allowed to dropped an insured or substantially raise the rates if they develop a chronic disease after the policy is written.  And there needs to be some mechanism for insuring those with some underwriting considerations.

But the cost issue is better addressed by subsidizing coverage for those unable to afford it- not by inserting control and mandates throughout the system based on an elitist construct and decimating consumer choice.  The health insurance market it too large, too dynamic and too complex to dictate from a central bureaucracy without causing enormous dislocations, higher costs and lower quality.

Scott Gottlieb writes in The Wall Street Journal, The Doctor Won’t See You Now. He’s Clocked Out
ObamaCare is pushing physicians into becoming hospital employees. The results aren’t encouraging. 3/15/13

Excerpts:

ObamaCare’s main vehicle for ending the autonomous, private delivery of medicine is the hospital-owned “accountable care organization.” The idea is to turn doctors into hospital employees and pay them flat rates that uncouple their income from how much care they deliver. (Ending the fee-for-service payment model is supposed to eliminate doctors’ financial incentives to perform extraneous procedures.)The Obama administration also imposes new costs on physicians who remain independent—for example, mandating that all medical offices install expensive information-technology systems.

The result? It is estimated that by next year, about 50% of U.S. doctors will be working for a hospital or hospital-owned health system. A recent survey by the Medical Group Management Association shows a nearly 75% increase in the number of active doctors employed by hospitals or hospital systems since 2000, reflecting a trend that sharply accelerated around the time that ObamaCare was enacted. The biggest shifts are in specialties such as cardiology and oncology.

Once they work for hospitals, physicians change their behavior in two principal ways. Often they see fewer patients and perform fewer timely procedures. Continuity of care also declines, since a physician’s responsibilities end when his shift is over. This means reduced incentives for doctors to cover weekend calls, see patients in the ER, squeeze in an office visit, or take phone calls rather than turfing them to nurses. It also means physicians no longer take the time to give detailed sign-offs as they pass care of patients to other doctors who cover for them on nights, weekends and days off.

HKO

Please read the entire article.  This is not an unexpected result from a top down statist solution.  Health care, like any other business, is an organic system with interrelated parts that can not accurately be mapped out in a technical flowchart.  Just as scientific management proved inadequate to manage dynamic firms this same elitist attitude is grossly inadequate in addressing health care.  The small personable family doctor who actually cared about his or her patients is being legislated and regulated out of existence.

Mark Steyn writes The Doctor Won’t See You Now in The National Review, 12/14/12.

Excerpts:

So good luck retaining any meaningful doctor-patient confidentiality in a system in which more people — insurers, employers, government commissars, TSA Obergropinführers, federal incentive-program auditors — will be able to access your medical records than in any other nation on earth.

No foreigner can even understand the American “health care” debate, which seems to any tourist casually surfing the news channels to involve everything but health care. Since the Second World War, government medical systems have taken hold in almost every developed nation, but only in America does the introduction of governmentalized health care impact small-business hiring practices and religious liberty, and require 16,500 new IRS agents and federal bonuses for contributing to a national database of seat-belt wearers. Thus, Big Government American-style: Byzantine, legalistic, whimsical, coercive, heavy on the paperwork, and lacking the one consolation of statism — the great clarifying simplicity of universal mediocrity.

As I wrote a couple weeks ago, Obamacare governmentalizes one-sixth of the U.S. economy — or the equivalent of the entire French economy. No one has ever attempted that before, not even the French. In parts of rural America it will quickly achieve a Platonic perfection: There will be untold legions of regulators, administrators, and IRS collection agents, but not a doctor or nurse in sight.

HKO

Once the bureaucrats take root in the system then struggle becomes like a victim caught in a spider web.  This is why doctors and patients will choose to exit the system, offer concierge medicine, and develop other relationships.  Health insurance has become very expensive and so restrictive that one can conceivably spend tens of thousands of dollars out of pocket and still pay premiums of ten thousand dollars a year.  And the government’s solution to this is to force everyone to buy it.

The premise of the very need for health care reform of the nature of the Patient Protection and Affordable Care Act (Obamacare) is based on flawed analysis and myths.

Myth #1

Access to health insurance is synonymous to access to health care. Plenty of the uninsured get access to health care from numerous sources. This is not to say that our health insurance does not need reform, but it is false to assume that those without coverage do not get access to quality health care.

Myth #2

The number of uninsured is grossly exaggerated.  For years we heard about 45 million uninsured. Yet when he heralded the passage of his signature bill President Obama claimed that thirty million would now have coverage.  Did the mere passing of this bill reduce the uninsured by a third?  In fact the 45 million number was inflated by those that could afford to buy insurance but chose not to, uninsured non citizens (are we responsible for everyone in the world who comes here having health insurance?),  prisoners, those temporarily uninsured (between jobs) and those who currently qualify for government insurance programs but do not apply for them.  The actual number of chronically uninsured may   be around ten million.   Would it not be easier to just provide them with either a policy or a voucher to buy one of their own choosing and not interfere with the preferred choices of the other 95%?

Myth# 3

The high costs of health care in America is due to greedy and malicious intent on the part of the medical industry and the insurance industry.

As William J. Baumol noted in The Cost Disease, the escalating price of health care is a dynamic of the increase in productivity in other fields.  While we may be paying a higher percentage of our of GDP in health care cost, it is not necessarily a bad thing, since the increase in productivity and the decline in the percent of GDP we pay for other necessities like food and transportation provide us with the means to pay for these higher costs.  And we can not discount how much an increasing array of mandates and regulation have also increased our health care costs.

Myth #4

For the higher price we pay for health care we get an inferior product compared to the rest of the world.

In our collective gut we know this is not true.  We have made some choices that increase our cost, such as the high percent of our health care cost that we spend for our elderly and the extent we will strive to save the high risk premature infants.  In fact the big difference in the infant care statistics is largely distorted by the way we account for premature infants as live births.

But even the countries that have nationalized health care  have  encountered escalating costs.  Their efforts to control costs have led to longer waiting periods to get essential care.  In What the world doesn’t know about health care in America, Scott Atlas writes for Fox News, 11/19/12:

• Cancer screening: Confirming OECD studies, Howard in 2009 reported the US had superior screening rates to all 10 European countries (Austria, Denmark, France, Germany, Greece, Italy, the Netherlands, Spain, Sweden, and Switzerland) for all cancers. And Americans are more likely to be screened younger, when the expected benefit is greatest. Not surprising, for almost all cancers, US patients have less advanced disease at diagnosis than in Europe.

• Preventive care for heart disease and stroke:  Wolf-Maier reported treatment of diagnosed high blood pressure, the focus of preventing heart failure and stroke, was highest in the US (53%), lowest in England (25%), then Sweden and Germany (26%), Spain (27%), Italy (32%), and Canada (36%).  In 2010, drug treatment was higher in the US than all European countries, including Austria, Denmark, France, Germany, Greece, Italy, Netherlands, Spain, Sweden, and Switzerland. In 2011, nearly 70% of Britons with known hypertension were left untreated.

Cholesterol-lowering statins significantly reduce the risk of stroke. Of patients with high cholesterol in 2007, 88.1% of US patients received medication to control it, compared to only 62.4% in the ten European nations. In 2010, the US had the highest use of cholesterol-lowering drugs among all countries, including Australia, Canada, Denmark, France, Italy, Japan, Netherlands, and Spain.

From the facts, Americans enjoy unrivalled access to health care— whether defined by access to screening; wait-times for diagnosis, treatment, or specialists; timeliness of surgery; or availability of technology and drugs. And, gradually, Europeans are circumventing their systems. Half a million Swedes now use private insurance, up from 100,000 a decade ago. Almost two-thirds of Brits earning more than $78,700 have done the same. But what might really surprise those who assert the excellence of nationalized insurance systems is that throughout Europe, from Britain to Denmark to Sweden, when faced with their inability to deliver timely access, the government’s solution is increasingly to enable access to private health care.

Read more: http://www.foxnews.com/opinion/2012/11/16/what-world-doesnt-know-about-health-care-in-america/#ixzz2D5r8Vv5q

HKO

In response to the unacceptable waits under European health care they are moving to private insurance such as ours.  What is that telling us?

There are much needed reforms worth considering, but the encroachment on the individual market choices is a step in the wrong direction that does not address the the real problems we face.  WE could start by getting a more realistic picture of what the problem is…. and what it isn’t.

Greedy insurance companies, health care providers, pharmaceutical companies, and doctors in 10,000 square foot mansions make convenient targets for the escalating health care costs.  One could also fault intrusive government regulations and mandates and a few may actually credit the higher costs with the fact that health care quality has increased enormously, in spite of the myths and propaganda to the contrary.

Even if the government thinks its heavy hand can overcome these cost drivers without sacrificing the quality of care, bending the curve- to use its lingo, the market is so complex that it will not likely deliver the quality of care without incurring enormous costs elsewhere.  But what if the changes the government seeks to invoke at great cost to our purse and our liberty have nothing to do with the core of the problem?

This is addressed in The Cost Disease: Why Computers Get Cheaper and Health Care Doesn’t by William J. Baumol and others.

The less obvious reason for the rise  in health costs care  may lie in the enormous increase in the productivity of the rest of the economy.

As productivity in the manufacturing and service sectors has allowed for increases in the pay of those workers, pay in the more stagnant sectors has kept pace to some degree to avoid undesirable discrepancies.  But productivity in “craftsman” like sectors like health care and education is still delivered on a relatively personal basis and is thus unable to take advantage of the cost savings of improved labor productivity.  When productivity was low this discrepancy was not a problem.

A cellist in an orchestra can only play so fast and can perform only so many concerts a day. Increases in productivity will never be able to apply to all economic sectors equally.  While this may seem bad when you examine only a single sector, it is not a bad thing when you examine the overall economy.

The good news is that while health care costs (and education and performance arts costs) continue to climb, our ability to pay the higher costs also improves as a result of our higher total overall productivity.  It is not a crime to pay a higher percent of our disposable income in health care because we spend a much smaller percent of our income on other areas like technology and food.

This does create a problem, however, for the poorest Americans and some form of subsidy is probably necessary. But I would argue that this does not justify a wholesale restructuring  of the entire industry.

Those countries that have subverted their health care market to government control are experiencing the same increase in health care costs.  It is not because of lack of effort but the cost disease will persist in any country where there is a natural increase in the gap between the growth in productivity between the stagnant and non-stagnant sectors of the economy. It is less of a problem in poorer countries with lower overall productivity, but the quality of healthcare in those countries also suffers.  Equal or free access does not mean better quality.

The problem is not that free markets do not work in health care, the problem is that free markets work so well in the rest of the economy.  Efforts to frustrate consumer choices and drive costs down by dictate will either make costs go up or quality go down.

We can not get a better cure for our health care problems until we get a better diagnosis.