Mimsy Were the Borogoves

Editorials: Where I rant to the wall about politics. And sometimes the wall rants back.

Health care reform: walking into quicksand

Jerry Stratton, February 3, 2012

Osborne Model 1

Your new, government-approved laptop from the state computer exchange, complete with all required features—and no more. (Image courtesy Johann H. Addicks, CC-BY-NC-ND 3.0)

The first step, when you walk into quicksand, is to walk back out. You’ll find it a lot easier to build a bridge over the mire when you’re not sinking into it

We have a huge problem with health care costs in this country, problems caused by our strange system, mostly set up through tax breaks to employers but not individuals, that disconnects the people who need health care from the people who provide it. Rather than having people who need care purchase from the people who provide care, we set up a system that requires “insurance” even for routine, predictable costs. But the person who needs the insurance in order to get the care doesn’t buy the insurance either. They look for a job that pays for the insurance that pays the people who provide the care.

The doctor gets paid by the insurance company. The insurance company gets paid by the employer. The patient… also gets paid by the employer. The patient is completely disconnected from their own health care. It’s a system that obviously can’t work in the long run. Yet, when it fails, we set up a system—ObamaCare—that adds yet another layer, so that in order to get health care we’ll need to look for a job that pays for insurance that’s micro-managed by government that pays the people who provide the care amounts approved by government for approved care.

Either form is a recipe for higher prices and poorer care. And the reason we moved to the worse system that is going to make for even higher prices and even poorer care is that the original system raised prices and reduced care.

We need to back out of the quicksand before we can build the bridge.

While reading Priming the Pump, I started thinking about the advances that happened just because of computer-makers trying to cut costs to meet buyer needs. And then I thought, what if we bought computers like we do our health care? We wouldn’t buy computers ourselves. We’d get them through our employers. But our employers wouldn’t buy them for us either. They’d buy us a plan that guarantees us a computer when we need one. What can the plan buy us? The federal government and our state government both have strict rules on that.

The problem isn’t just about cutting costs. It’s about advancing the field of medicine. Amazing innovations happen when there is an incentive to cut costs imposed by the end-user. We wouldn’t have the computers we do today if it weren’t for companies like Radio Shack on one end and Apple’s Steve Wozniak on the other trying to make computers for people who were buying on their own budget. Remember the huge luggable portables of the eighties? If we bought our computers like we do our health care, instead of going to the computer store and choosing what we want, we would have a computer plan from our employer. Our employer would hire the purchaser, who would be answerable to our employer, not to us. We would tell our employer-funded purchaser that we needed a portable computer.

The purchaser would go down a checklist of government-mandated features that all computers must have and then tack “portable” onto the list. And the result would be a computer as big as a suitcase costing thousands of dollars. Where is the incentive to cut down that computer in this scenario? Where is the incentive to innovate? Sure, the person who ultimately gets the computer would want one that’s easier to carry. But they’re not paying for it.

And then when some conservative suggests that people ought to buy their own computers, we’d complain that the average family can’t afford thousands of dollars.

Innovations build on innovations. Because the market for health care has been so far removed from us, innovations have slowed. Moving the market even further away from us will slow innovations even further. We need to back out of the quicksand and let market forces impose the innovations of price on health—so that we can get better health care.

The need to cut costs due to direct consumer demand leads to more rapid—and more effective—innovations. Health providers today are in the business of dealing with human resources departments and government agencies. Their customers are bureaucrats. Their best innovations will be in the fields of paperwork and red tape. If we want their innovations to be health care innovations, their customers need to be their patients.

Wouldn’t it be wonderful if routine health care was so inexpensive that no one cared who paid for it? We can only have that if our system encourages providers of routine care to market directly to people who need that care.

In response to Why we must not ration health care: Rationing health care means fewer cures.

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