John C. Goodman is the president of the National Center for Policy Analysis. His brilliant essay on the incredible depth, the cause, and the cure of our health care mess can be found
here. I'll excerpt the
cure part of it here:
Cleaning Up the Mess
The only sensible alternative to relying on a welfare state to solve our health care needs is a renewed reliance on private sector institutions that utilize individual choice and free markets to insure against unforeseen contingencies. In the case of Medicare, our single largest health care problem, such a solution would need to do three things: liberate the patients, liberate the doctors, and pre-fund the system as we move through time.
By liberating the patients I mean giving them more control over their money—at a minimum, one-third of their Medicare dollars. Designate what the patient is able to pay for with this money, and then give him control over it. Based on our experience with health savings accounts, people who are managing their own money make radically different choices. They find ways to be far more prudent and economical in their consumption.
As for doctors, most people don’t realize that they are trapped in a system where they have virtually no ability to re-price or re-package their services the way every other professional does. Medicare dictates what it will pay for, what it won’t pay for, and the final price. One example of the many harmful effects of this system is the absence of telephone consultations. Almost no one talks to his or her doctor on the phone. Why? Because Medicare doesn’t pay a doctor to talk to you on the phone. And private insurers, who tend to follow Medicare’s lead, don’t pay for phone consultations either. The same goes for e-mail: Only about two percent of patients and doctors e-mail each other—something that is normal in every other profession.
What about digitizing medical records? Doctors typically do not do this, which means that they can’t make use of software that allows electronic prescriptions and makes it easier to detect dangerous drug interactions or mistaken dosages. Again, this is something that Medicare doesn’t pay for. Likewise patient education: A great deal of medical care can be handled in the home without ever seeing a doctor or a nurse—e.g., the treatment of diabetes. But someone has to give patients the initial instruction, and Medicare doesn’t pay for that.
If we want to move medicine into the 21st century, we have to give doctors and hospitals the freedom to re-price and re-package their services in ways that neither increase the cost to government nor decrease the quality of service to the patient.
In terms of quality, another obvious free market idea is to have warranties for surgery such as we have on cars, houses and appliances. Many are surprised to learn that about 17 percent of Medicare patients who enter a hospital re-enter within 30 days—usually because of a problem connected with the initial surgery—with the result that the typical hospital makes money on its mistakes. In order for a hospital to make money in a system based on warranties, it must lower its mistake rate. Again, the goal of our policy should be to generate a market in which doctors and hospitals compete with each other to improve quality and cut costs.
We won’t be able to make any of this work in the long run, however, unless we pre-fund the system. Today’s teenagers are unlikely to receive medical care during retirement if they must rely on future taxpayers, because taxpayers of the future are unlikely to be agreeable to living in poverty in order to pay their elders’ medical bills. This means that everyone must start saving now for post-retirement health care. I would propose that everyone in the workforce put a minimum of four percent of his or her income—perhaps two percent from the employer and two percent from the employee—into a private account, invested in the marketplace, that would grow through time. These private accumulations would eventually replace taxpayer burdens.
In summary, if health care consumers are allowed to save and spend their own money, and if doctors are allowed to act like entrepreneurs—in other words, if we allow the market to work—there is every reason to believe that health care costs can be prevented from rising faster than our incomes.
The Market in Action
Let me offer a few examples of how the free market is already working on the fringes of health care. Cosmetic surgery is a market that acts like a real market—by which I mean that it is not covered by insurance, consumers can compare prices and services, and doctors can act as entrepreneurs. As a result, over the last 15 years, the real price of cosmetic surgery has gone down while that of almost every other kind of surgery has been rising faster than the Consumer Price Index—and even though the number of people getting cosmetic surgery has increased by five- or six-fold.
In Dallas there is an entrepreneurial health care provider with two million customers who pay a small fee each month for the ability to talk to a doctor on the telephone. Patients must have an electronic medical record, so that whichever doctor answers the phone can view the patient’s electronic medical record and talk to the patient. This company is growing in large part because it provides a service that the traditional health care system can’t provide. Likewise, walk-in clinics are becoming more numerous around the country. At most of these clinics a registered nurse sits in front of a computer terminal, the patient describes his symptoms, and the nurse types in the information and follows a computerized protocol. The patient’s record is electronic, the nurse can prescribe electronically, and the patient sees the price in advance.
We’re also seeing the rise of concierge doctors—doctors who don’t want to deal with third-party insurers. When this idea started out in California, doctors were charging 10-15 thousand dollars per year. But the free market has worked and the price has come down radically. In Dallas, concierge doctors charge only $40 per employee per month. In return, the patient receives access to the doctor by phone and e-mail, and the doctor keeps electronic medical records, competes for business based on lowering time costs as well as money costs, and is willing to help with patient education.
Finally, consider the international market for what has become known as medical tourism. Hospitals in India, Singapore and Thailand are competing worldwide for patients. Of course, no one is going to get on a plane without some assurances of low cost and high quality—which means that, in order to attract patients, these hospitals have to publicize their error rates, their mortality rates for certain kinds of surgery, their infection rates, and so on. Their doctors are all board-certified in the United States, and they compete for patients in the same way producers and suppliers compete for clients in any other market. Most of their patients come from Europe, but the long-term threat to the American hospital system can’t be denied. Leaving the country means leaving bureaucratic red tape behind and dealing instead with entrepreneurs who provide high-quality, low-cost medicine.
As these examples suggest, liberating the medical market by freeing doctors and patients is the
only way to bring health care costs under control without sacrificing quality. Continuing on our current path—allowing health care costs to rise at twice the rate of income under the aegis of an unworkable government Ponzi scheme—is by comparison unreasonable.
Reprinted by permission from Imprimis, a publication of Hillsdale College.
