Thursday, June 18, 2009

Fusion, Not Fission: The Coming Health Care Conflagration in Washington

There is little argument over whether we need to fix health care.  Americans spend more money on health care than we do on anything but rent or mortgage... and in some cases more.   Over 45 million people - 1 in 7 Americans - do not have any coverage at all.  The large number of uninsured causes a feedback loop in the system, because they land in our emergency rooms and thus drive up the costs for everyone else.  Regulatory and administrative inefficiencies infect the system, and actuarial tables driving a completely for-profit system are almost as predatory as the loan-sharking interest rates coming from the credit card companies.

These costs represent a 20-pound ankle weight on the economy.  It drags the economy down in the form of the 45 year-old entrepreneur who has to buy private insurance and goes bankrupt because a pre-existing condition flares up - only after paying $1000 per month before it did. It drags the economy down in the form of the retired auto worker whose policy is an order of magnitude more expensive than the UAW or the automakers ever dreamed it would be when the labor deal was struck in the '60s, building a $1000 "legacy cost" into every American car and saddling the Big 3 with a tremendous competitive handicap.  The employer-based system is suffocating small businesses than cannot afford to give the benefits we have become accustomed to. 

My friend, Brett, once asked semi-rhetorically:  if our system is better, why do no other countries in the developed world use our system?  The answer, of course, is that once a socialized medical system develops, it is very hard to change to a private system even if you wanted to; the health insurance industry is one with extremely high barriers to entry.  But Brett's point is well taken.  While I am by no means advocating a move to socialized medicine, it is fair to point out that most of western Europe and Canada as well as Japan and South Korea have lower infant mortality and longer life spans than we do.  While there are clearly other variables at work, too, and it would be inaccurate to fully attribute these numbers to the health care system - we have higher rates of poverty compared to these countries, which is related to the issue, and our lifestyle is more sedentary due to our reliance on the automobile, which is not - the fact still remains that people living under socialized medicine are living longer.

The truth is, if you are among the wealthier people in America and you have a "Cadillac" insurance policy, you will get the best health care in the world.  We have massive redundancy in medical technology and availability of specialists (and as a result, we each pay for a higher percentage of each X-ray machine or opthamologist than they do in countries with socialized medicine.)  50-70% of the country gets health care that is comparable to what you get in other developed countries.  But our averages are dragged down by the sizable (and growing) segment of society that gets no health care at all.  

My friend, Eric, a moderate conservative, said, quite simply, that for a country as productive and prosperous as ours is to have so many people without basic health care is completely unacceptable.  The problem is, to many Republicans this is acceptable.  Forgetting for a moment the moral tenability (or lack thereof) of a position that actually accepts leaving people behind, there's a pragmatic issue at work here: this high a percentage of uninsured makes taking care of them in emergency rooms far more expensive for the rest of us than simply providing them with basic health care would be.

The free market, which exists for profit, will not care for anyone who cannot afford to pay unless it were simply mandated that they must provide free insurance to a percentage of those who cannot afford it.  That will never work, so all that's left is the government - which means you and me, as a community - to step in and make sure that our fellow citizens have basic health care.

This, of course, is odious to true conservatives who believe in small government and want the government to stay out of our day-to-day lives as much as possible (unless you're a gay person who wants to get married, in which case conservatives want government to be just small enough to fit into your bedroom.)  It's even more odious to Republicans who, despite their rhetoric, have governed in anything but a conservative manner and now simply fight anything proposed by a Democrat for the simple reason that it came from the other side.

It is at this point where the true ideological tension between the liberal and conservative viewpoints comes to loggerheads.  And the ultimate answers, as I will explore, will require a departure from ideological entrenchment and a recognition that some problems require both a liberal and conservative component to reach a solution.

Health insurance providers - and the Republicans who have been elected with the money their lobbyists raise - are rightfully concerned about the government getting into the health insurance business.  A competitor that is not in the business for profit can always undercut the prices of companies whose businesses require black ink on the bottom line.  And regulations like forcing an insurance company, which lives off actuarial tables, to then ignore pre-existing conditions represent an artificial drag on a provider's bottom line.  

Make no mistake:  the government getting involved with providing health care for those who can't afford to buy into the private, for-profit system and also ratcheting up regulations on the industry at large does represent the government tinkering with the free market system in this sector.  It is also a fair argument that centrally controlled government bureaucracies are rarely ideally efficient and don't necessarily yield the best product or provide it at the lowest price. 

The counter-argument to this position is that welfare has not made people not want to work.  People still prefer an honest day's work for an honest day's pay... and the government doesn't pay well.  Just as televising sporting events has not diminished people's desire to attend games, there will always be a balance between taking a lesser product you can get for free or a better product that is worth paying for.  The innovation and entrepreneurial spirit of the free market and the American worker that the GOP so aggrandizes will need to find a way to install new efficiencies in the system that will allow private insurers to simply offer more for the money in the same way computer manufacturers selling a fully commoditized product continue to offer more powerful machines for less money as competition has squeezed every ounce of margin out of the sector.

And this gets us to the crux of the argument:  we need to find an equilibrium between a lucrative medical field incentivizing many of our best and brightest to be doctors and design wonder drugs and high  powered medical equipment, yet still take care of of the people who won't be able to afford it when they do.  Never is the precept that any developed society is a public-private partnership more evident than right here. GOP rhetoric aside, the free market is not a secular religion.  It's simply a mechanism - one organizing mechanism of society, one of several including government and community and charity.   It's not a panaceaWe need both the private sector and the government to get it done.

Does this mean that the medical field will be less lucrative than it has been?  Perhaps.  

A close friend is an OB/GYN.  He works four days a week, 46 weeks a year, and while he takes his turn on call which sometimes robs him of most of a night's sleep and constrains some of his weekends, he also never works past 5 on any of his four days in the office.    And while he's not in the top 1% of wage-earners that just gets hammered by the new income tax system, he's one of the few percent who didn't get a tax break.  He worked hard through medical school and residency and does his job well.  This isn't a question of whether he "deserves" his lifestyle.  If we're going to venture into that territory, we'd ask why a utility infielder makes more than a first grade teacher.  Rather, it's a question of whether someone as intelligent and driven and talented as he is would still go into medicine if it paid 20% less, or required him to work 5 days a week and be open for business into the evening like many other professions.  

It's a question of how much less lucrative medicine can be and still make it worth it for private capital to fund truly palacial state-of-the-art hospitals.  Where is that equilibrium point?  We aren't sitting on it now, but we need to find it.

We also need to find some other common-sense fixes that remove the friction from the system.  Just a few examples:

-Why does there need to be a Blue Cross/Blue Shield of Illinois, Blue Cross/Blue Shield of Ohio, Blue Cross/Blue Shield of New York, Blue Cross/Blue Shield of Florida, etc...?  The same 
administration is repeated over and over again for no good reason.  John McCain, in a rare moment of lucidity, had removing the regulatory restrictions here positioned prominently in his health care plan in order to open up competition nationwide, and I think he was right.

-Tort reform.  We need to drive down the cost of malpractice insurance so that doctors not only can recoup that margin and pass it on the patient, but also so doctors don't practice "cover your arse" medicine that involves ordering often-unnecessary tests that cost real money.  Tort reform does not necessarily mean capping malpractice awards, either - an issue I admit I am torn on.  It might be enough to make bringing a malpractice suit all the way to court more difficult by finding a way to screen out the nuisance suits or those without the proper merit.  Negligence does not need to exist for a mistake to be made, and we can't have the whole system twisted into knots if a doctor cannot practice without ever making an error or misjudgment.  However, a patient whose life has been changed dramatically for the worse does need to have some recourse if that change was brought about unnecessarily.

-Pharmaceutical patents.  A big part of why drugs are so expensive is because the companies need to spend almost as much on marketing as research and development.  If you have just spent $100 million developing a wonder drug, you can't let the second company to develop a similar drug eat away at your market share before you have made back your sunk cost.  So you give out case after case of free samples and branded chum and send doctors on junkets and advertise ad nauseum on TV.  If pharmaceutical companies could be assured of keeping that patent until they have at least nearly made back their nut, marketing costs could be dramatically deflated.

-Electronic medical records.  We need to streamline the bureaucracy and cut out a lot of waste.  The challenge here is a technological one, establishing standards in the way there are wireless internet or cellular phone standards, allowing all systems to talk to each other.  This is an enormous mountain to climb.  But Bobby Jindal's dad said Americans can do anything.  So how about we get this one done and get on with making a better hybrid car?

Both sides in Washington are gearing up for battle and will soon be locked and loaded and ready to fight over what is perhaps our most thorny and complex problem.  The left is going to want the government to aggressively step in and work on the system and fill in the gaps.  As with all things since our new President was inaugurated, the right will object and then adopt a deficit-hawkish stance and hold Obama to a standard to which they never held Bush (or themselves).  

The mess will not get untangled unless leaders on both sides emerge from behind their ramparts and recognize both the liberal and conservative approaches will need to be applied in concert on this one.  Neither method when applied alone will fix the problem, and it's not a compromise, but rather, a synergy between the two that is necessary.  Fusion over fission will be needed to provide the power here.

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