23 April 2020

"The problem is the problem," part two: paying for health care

Maybe it takes a public health emergency of pandemic proportions to expose the full absurdity of how the USA pays for health care.

Somewhere in the back of our minds, we probably always knew this, but three factors related to the COVID-19 pandemic have made this a strategic moment to pay fresh, urgent attention.
  • The client base of the U.S. health care system, as this emergency makes clear, is 100% of the population.
  • One person's health crisis is potentially everyone's concern.
  • A health crisis is now adding trillions of dollars of expenses to the federal budget (never mind the states!), with no compensating new income.
Health care in the USA has mostly been left to the marketplace, unlike schools, police and fire protection, public libraries, the census, and highways. Even Medicare, which may have been the most dramatic exception to this rule, is fragmented and partial enough to leave plenty of room for private vendors to fill the gaps.

Health care's dependence on the free market is based on a myth: the relationship between an independent consumer contracting with an independent professional in the community to provide medical services in times of need. Although cash was usually expected, it was certainly not unheard of for doctors (maybe especially in rural areas) to be paid by barter. A doctor might treat two or even three generations of a family.

This mythical doctor had no priority other than your health. Lobbyists for this classic system fiercely defend our right to choose our doctors and build congenial relations with them, per this heartwarming myth. I know doctors who, even today, try to honor this private-contract fee-for-service model and the ideals of individualism and human-scale medicine embedded in it.

Continuing with our private-contract model: when your requirements went beyond home treatment and the equipment in the doctor's bag, you might have spent time in a local hospital, another part of the myth. In the old days, the hospital was little more than a glorified dormitory, a very clean place where doctors and nurses could separate, treat, and monitor you more efficiently. The doctors, nurses, and support staff were the heart -- and the main expense -- of the hospital. Operating rooms were not dramatically different from other rooms, maybe with better lighting. A new hospital could be built for around the same cost as a school. The point is, the business model for health care was modest, local, sustainable.

The onset of medical technology and the pharmaceutical revolution changed everything but the myth. I'm very grateful for these developments -- they have saved many lives and may someday save mine. However, the costs of these fantastic machines and lifesaving medicines have rendered the old private-contract business model completely null and void.

Into the breach came a new intermediary between client and doctor -- the health insurance companies. As with all insurance, their purpose is to share costs across a large enough population that individual cost spikes can be spread over the whole pool of participants as well as over time, making individual costs predictable and manageable. For that, the insurance companies must charge enough to cover those costs, plus a reserve, plus their own salaries, benefits, and administrative costs, capital expenses, directors' fees, stockholder dividends, audits and fraud prevention, lobbyists, taxes, and so on.

Insurance companies, inevitably, also have different priorities than the rugged individualist doctor: to increase income and decrease expenses. To this end, in many cases you must choose a doctor or clinic from their list, and you and the doctor must justify certain procedures against a list of what's customary. You must not exceed the hospital-stay standards they set. Your monthly premium for this may be as much as 25% or more of a typical middle-class after-tax salary -- even more if prescriptions, dental care, and eye care are included. If you are lucky, your employer will pay most (but not all) of this, so think carefully about moving to another job.

Have I set up the scene accurately? My purpose isn't to tell you things you already know, but to zoom our focus back to two important points that have never changed:
  • Health care costs money.
  • We all need health care sooner or later, or our families do. It's an inelastic demand.
The USA pours 18% of our GDP into health care. (2016 figures.) Among wealthy countries, the nearest anyone comes is Switzerland, which devotes 12% of its GDP to healthcare, despite Switzerland's having a median age of over 42, compared to the USA's median age of 37.6. More generally, the average amount spent on healthcare per person in countries comparable to the USA ($5,198) is half that of the USA ($10,348). Despite these outsized levels of expenditure, most American patients spent less time in the hospital for similar conditions and procedures than patients in other countries. Outcomes were not dramatically better in the USA; they were marginally better for some situations and marginally worse for others. Financial outcomes (with attendant stresses!) were, of course, incomparably worse: half a million bankruptcies per year ... in a normal year.

In the USA, the last big debate about this state of affairs was the leadup to the Affordable Care Act. However, then and now the debate usually focused mainly on improving existing arrangements, not on the basic problem: how to connect every person with the affordable health care they will inevitably need. And, too often, "reform" meant preservation of the allegedly crucial role of the health insurance industry.

What does the preservation of this intermediary organization, which has already broken the "sacred" tie between client and doctor, cost us? Read this article on billing and insurance-related (BIR) costs, and additional administrative costs beyond BIR, and see what number leaps out at you.
In a 2003 article in The New England Journal of Medicine, researchers Steffie Woolhandler, Terry Campbell, and David Himmelstein concluded that overall administrative costs in 1999 amounted to 31 percent of total health care expenditures or $294 billion—roughly $569 billion today when adjusted for medical care inflation. A more recent paper by Woolhandler and Himmelstein, which looked at 2017 spending levels, placed the total cost of administration at $1.1 trillion. [See original for footnotes.]
If we let the problem be the problem (thanks, Bob Gill), we will ask how much it would cost to provide adequate health care to everyone. If that raw intention shorn of all other agendas would cost less than $1.1 trillion to do so, let's soberly consider what it would take to get those savings -- and how to advocate for those solutions. In most comparable countries, the government organizes access to health care, just as it organizes or collaborates on every other universally-needed public service with high barriers to entry.

(What do I mean by "high barriers to entry"? This definition of what governments should do, and not do, is what differentiates single-payer health-care financing from "socialism." Everyone needs clothes, but the government need not get involved with clothes -- the market can support innumerable private vendors. Same with food, but of course emergency situations may need some government intervention. Utilities such as electricity are often a public-private collaboration. Many other requirements or discretionary purchases can easily be met by the open market, with the government doing no more than is necessary to ensure public safety and discourage fraud. In general, government confines itself to managing public services that are at a scale of cost and volume simply beyond the capacity of the free market. To the extent that millions of people in the USA simply cannot afford the care they need, we are spending $1.1 trillion to administer a fragmented and unsustainable system.)

If we let the insurance industry lobbyists define our "problem," we will be warned that "someone must pay, after all" ... and we will be confronted with the awful prospect of ... higher taxes. We're not supposed to shine the same light on the "tax" that private insurance imposes on us, nor the relative efficiencies of our existing U.S. government insurance program for civilians, Medicare. (The difference in administrative costs may not be as great as Bernie Sanders asserted, but it would be substantial.)

If we reduced the roles of private insurance, would we then face the prospect of thousands of unemployed insurance employees and impoverished stockholders? Some of those employees could presumably work for Medicare or whomever the new administrators would be. In any case, the problem isn't "how to keep a system in place for the sake of its current beneficiaries," but how to connect every person with the affordable health care they will inevitably need. Every argument in favor of keeping today's broken system depends on not asking that overriding question. Is this the right question, and is now the teachable moment?

The word "taxes" does not intimidate me, nor should it. Taxes are simply the amount we pay to cover the promises we made to ourselves and each other, through our legislators. Don't like those taxes? -- Don't make those promises! (Or replace the legislators who enacted them.) If you suspect that taxes are spent inefficiently or corruptly, that's a separate problem to be investigated and corrected, not an excuse to avoid contributing to the public good.

One theological point. Some conservatives will question whether or not it is specifically government's responsibility to make that connection between every person who needs health care, and the doctor or pharmacist who can help. I see it slightly differently. It is our responsibility as fellow humans and fellow citizens to make sure that connection happens. The government is simply the mechanism; our values are the driver.

Of course, that too is an arguable point ... maybe we should just focus on our own family and everyone else can go to hell. For Christians, of course, that's a completely unsustainable argument, but the coronavirus crisis also tells us that it's also an epidemiologically flawed argument.

How Congress made sure that health insurance companies would not suffer in the current unemployment crisis.

Jan Wood on a sturdy faith:
One consequence of times like this is that it strips away the facades of our lives — individually and as a nation. It moves us past the particularity of our theologies to the bedrock question: how does God work in times like these?
Stassa Edwards on dancing through our bad year. (Thanks to @Mepaynl at Christianity Today.)

Nancy Thomas on how a Quaker retirement community is facing the pandemic.

Spencer Wells reviews Jon Kershner's John Woolman and the Government of Christ.

Jeanne Stevenson-Moessner reviews Gene Fowler's Church Abuse of Clergy.

Lincoln's Bible comments on Donald Trump and his relationship with the USA's intelligence community, which (she says) knows much more about him than he would want to admit ... and they would want to admit.

Chuck Berry sings the blues.


Bruce said...

Good summary of the situation, Johan.

Johan Maurer said...

Thank you!