I respectfully disagree with my friends and colleagues who believe that the recent financial crises will make it more difficult to reform health care. In fact, now that we’re socializing large chunks of the financial system, we may find it a lot easier to socialize health service delivery assets, too. You’ll know a federal health system bailout is around the corner when you hear someone say, "The hospital is simply too large to allow it to fail."
Let me explain.
In the past three weeks we’ve all become regulators. Amazing. Almost overnight the federal government, we the taxpayers, have taken ownership of Freddie Mac and Fannie Mae, financial organizations that own about half of the mortgage debt in this country. We’ve nationalized AIG, one of the world’s largest insurance companies, and we are now owners of a large share of several of the country’s biggest commercial and financial banking institutions, with much more government transfers anticipated in the coming weeks and months.
We’re doing this in order to restore balance to an economy that has been ravaged by unproductive, wasteful investments made by a hand full of powerful, unscrupulous people who have acted under the banner of the "free market," claiming it as the best way to secure economic growth and well being for the country and our population. Exposed now as a rogue ideology, its policies linked to the steady deterioration of the physical infrastructure of the country — our roadways, bridges, water systems, sewage plants, and so on — the mood of the country has dramatically changed and people are saying "Enough!"
The speed of this shift from tolerance of reckless and unregulated investment, to demand for close public supervision, is a signal that the game has changed and a new era has begun. In this new era, there could be spillover to other areas of the commonweal; people’s attitudes about how best to run health care could change quickly, too.
The parallels are obvious. We have a allowed a small cartel of wealthy and wealth-seeking individuals and organizations to invest enormously and in an unregulated manner in hospital, medical device, pharmaceutical, tertiary care, and sub-specialist work force expansions, at the very time when the basic health status and well-being of the country — the "infrastructure" not of concrete and steel, but of mind and tissue — has rotted away before our very eyes. We all know the drill: We spend twice as much on health care, but have half the quality, and a quarter of the well-being, of many other countries. Over a third of our population is obese, and most of the top ten causes of death and disease are related to killer lifestyles, the equivalent biologically of credit default swap derivatives.
The health care crisis is simply another man-made and unsustainable bubble.
Health plans have sold us risky and inflated paper, while the government has looked the other way, in effect leading us all to make bets on exotic and often counter-productive efforts to keep people alive at any cost. Private companies have in turn bet on the harvesting of disease via treatments that are expensive, risky, and often not even proven to be effective; or they have been allowed to skip past regulatory approval processes meant to assure safety. Read "Overtreated" by Shannon Brownlee if you have any doubt about the lack of value of much of the expenditures on medical research and care each year in the US.
In a manner that can only be described as awesome, the recent collapse of the financial system and the government’s response has proven there is nothing sacred about free market capitalism run by an army of greedy and windfall profiteering financiers. Neither is there anything sacrosanct or pre-ordained about a health care system that treats sickness as a source of profit and sick people as complex annuities that assure the wealth of health plan executives, procedural specialists, hospitals, and drug companies.
There is nothing, in short, written in stone that says we, the people, can’t decide to invest our health resources in primary care, in health promotion, and in wellness. It can and should be done. In fact, it makes no more sense to abide with a completely de-regulated health care system than it does to put up with a "free market" financial system. Both are bound to bring us to our knees sooner or later.
Will people see it this way? Will they act on this perspective? One thing is certain. We have seen the rules of the game change very quickly with respect to the financial industry. The reaction by the majority of the US population has been disbelief, anger, and fear, followed by new understanding of how we were all duped. Certainly, part of the anger is that of the drinker looking in the mirror the morning after with a bad hang-over: We’re all complicit and we must share in the blame. But the party’s over.
Let’s get on with the hard work of change that will be productive of reform our health care system. Our children’s health is too important to let ourselves fail.
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The most basic reform should be directed to primary care, particularly general internal medicine. With an aging population and only 10%-20% of those completing internal medicine residencies choosing to practice general medicine, medical care cannot be transformed without a sufficient number of general internists available to treat the chronically-ill.
For more of this crisis see my series of blogs on the subject at the URL above.
I propose that we use the consumerism model being employed by most health insurance companies as a basis for real universal healthcare. We can use this model to institute a true single payer national healthcare system without losing the benefits of a competitive free market. All preventative healthcare such as physicals etc. would be covered 100% as well as all families under the poverty level would be 100% covered. All families above the poverty line would be required to meet a yearly deductible via the proliferation of HSA’s (we could potentially explore the possibility of letting people access their 401k’s to either fund the HSA’s or pay for medical expenses). The deductible would be directly linked to the family size and income level. Larger families have a larger deductible as do wealthier families up to a cap. After meeting the deductible the single payer system takes over similar to a high deductible health plan. The national healthcare system will provide payment for standard prescribed services beyond the consumer’s deductible. Where I would differ is the consumer would still retain the option of using any additional funding in their HSA to pay for additional services, such as private service rather than public, advanced treatments etc. using tax free HSA money.
This strategy has multiple benefits including:
Everyone is covered and no one is forced to buy anything.
Regardless of income level all citizens are covered and able to receive the medical care they need. No one is unfairly burdened by being forced to pay for insurance they cannot afford. Medical costs will not be inflated to cover the costs associated with treating the un-insured.
Consumers become more engaged in their healthcare decisions. Lowered healthcare costs.
By voting with their dollars consumers will be better positioned to drive innovation and control medical costs. Similar to shopping for an auto mechanic or construction contractor the consumer will be allowed to research and seek out the best services for the greatest value.
The public will have a financial incentive to maintain their health.
The healthier you are the less you will spend on healthcare. Un-used HSA funds can be used to supplement retirement income should the consumers health and financial situation warrant it. Consumers who maintain a healthy lifestyle will be rewarded with a healthy, tax free, supplemental retirement income thanks to their careful planning and proper choices.
Consumerism creates open market entrepreneurial opportunities.
The competition for consumer dollars will create businesses and drive innovation. Along with the new businesses will come jobs and new opportunities for high quality low cost healthcare solutions.
Alleviates many of the known pitfalls associated with other national healthcare systems.
Through the melding of consumerism with national healthcare we can limit or remove many of the common complaints associated with other national healthcare systems. Long wait times for service will be limited by the competition for the consumer’s dollars. Stagnant medical innovation would also be eliminated via increased competition brought about via consumerism. By allowing those with the desire and means to do so to use HSA dollars to fund out of pocket expenses for advanced or un-orthodox treatments we can encourage and drive innovation that may eventually become the standard in the future providing an ever better quality of healthcare for all.
Obviously this is a very high level outline and does not get down deep in the weeds. I do feel however that this can be a very workable solution. The health insurance companies are clearly staking a lot in the success of this methodology to maintain profitability going into the future. If they can use this to be profitable, a not-for-profit single payer system should easily be able to break even without costing more to the consumer. Even if it is government run! J
I’m all for using profitability as a driving force where it makes sense to do so. In my opinion, health insurance simply doesn’t fit the mold. One of the easiest and most common ways for a health insurer to make a profit is to deny claims. With the need to make a profit, denying a claim is reduced to simply a way to make a buck. Remove the need to make a profit and the playing field changes. No longer is the person who needs an expensive transplant on the other end of the phone simply an income drain. Suddenly they are a person, a mom, a dad, a brother or sister and they need help. Life is too precious to be left to profitability.
Dear Bill S: I am working on a new blog post with Brian Klepper that will examine the possibility that health care is a speculative bubble about to burst. As you say, exposure of the riskiness of our health care investments may occur as a result of the credit markets’ instability spilling over into health care, especially hospitals using debt financing and endowment shrinkages due to the Dow’s plunge. I think there’s a lot of evidence that health care as a sector of the economy is not “recession proof” and we may see some sudden collapses. I share your concern that the public’s interest emerge as a very strong element of re-building. DCK
Some of the financial instability has spilled over into the health care sector, as hospitals lose access to debt financing and investment losses on endowments are tallied up. The “bricks and mortar” segment of health care will be particularly challenged by economic turmoil.
Questionable business decisions (e.g., community hospitals going after high cost/high margin specialty lines and competing head-to-head with academic medical centers) by non-profit institutions with “insulated” executives are now being challenged.
Regulators are viewing financial distress as a rationale for direct intervention in their governance, using licensure as the “stick” to drive change.
Just as in the financial services sector, those with sufficient capital and good business acumen will win here.
My concern is whether their incentives are aligned with those of the public interest, namely, to improve access, affordabilty and quality of health care. This is not necessarily the same as a profit-maximizing business model in health care.
Dear Easy: I wondering out loud now, but what will happen if due to financial instability large hospitals and medical staff groups are taken over by a city, a state, or even by the federal government, e.g. by CMS. Seems pretty far fetched right now, but so did nationalization of AIG a few weeks ago.
I’m not at all sure that the normal insurance schemes as structured in the US right now would remain intact in such a situation. Or, let me put it another way, suppose the tax payers were more directly responsible for health care costs for nearly everyone? Literally, by default.
Notice how quickly the excess spending on the expensive parties for AIG execs became a cause celebre right after the taxpayers were transparently paying the bills? Bam! Right away. Might the excesses on parties for health insurance execs suffer the same fate?
Just wondering. DCK
“the government still cannot afford to cover everybody.”
Who did you have in mind to leave out?
It is amazing how quickly these bailouts and take overs have been performed by our government. And yes you are correct with these large chunks already being taken over it would be much easier right now. However, the government still cannot afford to cover everybody. Just look at the medicare issues set forth this week alone.
http://www.EasyToInsureME.com
tcoyote, you might be interested to know that Tom Delay was active at the Republican Convention hoasting an entertainment event with HIS new lobbying company. As Tom Delay would like to say, “The reports of my death are greatly exaggerated.”
As for multi-party states, I agree that too many creates chaos, but a couple of extra does keep the main parties in check. Not to extoll Canada’s system too much, but there they have a mainly three party system with the Green party nipping at the edges. It produces minority governments from time to time which forces co-operation and consensus. The fact that Ron Paul was not allowed in the Fox News Republican Debate shows the extent to which the present power brokers are afraid of new ideas – not that I support all of what Ron Paul says, but he is no kook. Here in NC the requirements for a third party getting on the ballot are so burdensome that it’s no wonder we keep doing the same things expecting different outcomes. Each election causes the parties to get the same issues from their closets and re-package them for an electorate who seem eager to vote for the same failing policies – in the “hooray for our side” circus atmosphere.
To Peter, note well the fate of Newt Gingrich and Tom DeLay. Eventually the demagogues overplay their hands and end up being ground up for dogfood.
There are those who would “serve” the labor unions and plaintiffs’ bar, so it isn’t just corporations who buy influence. Their time will come if the Democrats get enough votes. The two Congressional parties are like warring mafia families fighting over tens of billions in spoils. When either is ascendant, they get greedy and then you can purge them.
It is tempting to advocate multi-party government until one thinks of Italy and Israel, whose factional divisions have completely crippled these governments. Even with those reservations, I think we need a third political party to keep the other two honest. Our founding fathers warned us about the political parties, and when you see how hard it is to take constructive action in crises, you realize how wise they were.
Great comments, all. Ideas are very powerful, and what I’m trying to say is that the idea that leaving social good to the un-regulated “free market” is now dead. It is dead because we now realize that it leads to increasing inequality and injustice. And that is self-contradictory in a democracy.
I’m also saying that we are likely to see the rise of a new idea, namely that capitalism can only work when leaders put in place and monitor rules that fairly reward the middle classes upon whose working shoulders the economy rests. And that there’s a reason “health” and “wealth” vary by just one letter.
The point that “we have seen the enemy, and it is us,” is well-taken. I get it. Note my reference to hang-over.
But it is also true that there are wealthy and powerful among us. It is also true that when these people act in a way that steadily increases their own wealth and power, when they advance ideas to enrich themselves at the expense and impoverishment of those less powerful, we have the right to put them aside and choose new leaders.
I’m very much agreeing that we, the people, can decide our own fates, about the banking system, and about health care, too. DCK
Well ray, if you watched 60 Minutes last night you’d see is WAS because of the unregulated “free” market, and if there was any regulation there was no oversight to apply the regulations. Investement “insurance” was sold as “swaps” instead as insurance – why, because insurance is regulated and swaps are not. No one even knows the size of this (Shadow) market, but apparently it is about $60 Trillion. How much of a dent do you think a $1 Trillion bailout will have? Who do you trust now?
You can get an idea of how stupid, incompetent and dishonest Wall Street was/is here, and see why they do not deserve to be unsupervised like any felon.
http://www.cbsnews.com/video/watch/?id=4502673n
David, if the history of Congress is any indication then we will also need a meltdown of healthcare before any “restructuring” will take place. If people think that not getting their money from a financial institution is bad, then how about not being able to get healthcare – unless you have wads of cash because no one will want to lend you money. Think Henry Paulson will also bailout hospitals not able to collect their bad debt?
“We’ve just got that same dearth of problem solvers, the same ascendant polarizers, in health care that we’ve got in the rest of our political system.”
tcoyote, from what pool are we going to draw from in a two party system gerrymandered to keep either “tweedledum or tweedledee in power and doing the bidding of corporate America?
I have to agree with Ray on this one. Who is this “free market” that deserves so much blame? The free market is us. While it sounds good on paper and in a political campaign ad, we can’t chalk all of our problems up to greedy hospitals, insurance companies, etc. To do so would be a continuation of a distraction that has been delaying real reform for a very long time.
I’m sort of with David McM and ray, David K. Believing in “free markets” is no more a rogue ideology than believing in “socialism”. We’re not all Swedes now, because our financial sector got out of control and we’re not all Democrats either. We’re Americans, a breed given to bizarre enthusiasms, frequently naive optimism and tolerant of a far higher level of inequality than other societies. What’s broken down here is the middle, that breed of pragmatic “solve the problem” politicians and voters who create solutions to our problems.
I was not persuaded by your first essay into unsustainable metaphorism in this space, nor by this one. This is not a cartel driven health economy, nor is it a bubble. And the “government” is not going to fix the problems you identified. We’ve just got that same dearth of problem solvers, the same ascendant polarizers, in health care that we’ve got in the rest of our political system.
They are, for example, the people who created the phony Jerry Springer like fight over S-CHIP reauthorization and the very same “let’s blame the other guys while our house burns down”: wackos to defeated the first House attempt to recapitalize our financial system. It’s the wackos both on the left and right who are going to kill us, David, and until we drive them out, we’re not going to be able to address the obvious health reform challenges you listed. They are going to drive President Obama crazy.
Pure capitalism, like pure socialism, is not a workable model. The notion that everyone should just get their own health insurance because its their own personal “responsibility” is a bit naive. At the end of May, I suddenly lost my job unexpectedly. I was unemployed for several months, so unable to obtain health insurance. I finally found a job but it was a “consultant” type position that paid well but requires me to obtain my own individual health insurance plan. I was planning to do so next month when I got my first paycheck, but guess what? I got sick last week. So I had to pay out of pocket for some basic health care. I was stuck with having to pay big bucks out of pocket with very few options to turn to. This is a trivial example of how lack of health insurance affects people. Anyway, health care shouldn’t be a “driver” for the economy because it produces nothing. It should be something backed by the government, like military protection.
Your argument depends on the premise that the financial system collapsed because of the free market. But in reality the financial market was not a free market, but a mix between capitalism and socialism. There was government regulation in many forms, most notably in the federal reserve system, which is a non-free-market institution.
So if we want to figure out what actually happened to the financial system and why, we need to stop this reflexive blaming of the free market, and look at the details.
THAT’s the real hard work that people need to be doing.
Our financial markets are currently on par with a trauma patient. Interesting, healthcare is just below the surface as one of the key drivers of our entire economy.
Time to ponder.