[CitizensTruth] The Government can ...

[Robin Migalla]

Hello Everyone,

Mike, I really appreciate your sharing of your good doctors - Dr. Diet, 
 Dr. Quiet and Dr. Merryman.  These truly are doctors who will do more to 
bring about health than any other that I know of.  As Voltaire (1694-1778) 
once said, "The purpose of medicine is to amuse the patient until nature 
effects a cure."  He also said, "Doctors pour medicines of which they know 
little to cure diseases of which they no less into humans of which they 
know nothing."  I'm always amused at how I'm reminded that the more things 
change, the more they stay the same.

Chuck, I especially liked the comments from Wittner about other "public 
options."  I'm yet again reminded of my schizophrenic political leanings 
between very libertarian and very progressive.  I guess I have a 
libertarian head and a socialist heart.  I expect bridging the gap between 
these two extremes in myself will go a long way towards giving me some 
serenity.

Someone recently shared with me what I believe the best evaluation of our 
current health care dilemma and a proposed solution that I have seen 
to-date.  I share it below for your reading pleasure, but if you'd rather 
see it with all the formatting bells and whistles, here is a link:

http://www.theatlantic.com/doc/200909/health-care

The article is from the September issue of "The Atlantic."  It's long but, 
I believe, well worth your consideration.  What I especially liked about 
the article was how well thought out it is.  Being rather pragmatic myself, 
I love lots of facts rather than emotional rantings.  I also really 
appreciated the links Goldhill draws between the big picture and the 
individual on a very personal level.  After all, what good is it to talk 
about all this stuff if I can't get my head around how it is going to 
impact my small little life.  I'd love to get lots of feedback on it.  Here 
it is in its entirety...

After the needless death of his father, the author, a business executive, 
began a personal exploration of a health-care industry that for years has 
delivered poor service and irregular quality at astonishingly high cost. It 
is a system, he argues, that is not worth preserving in anything like its 
current form. And the health-care reform now being contemplated will not 
fix it. Here's a radical solution to an agonizing problem.

by David Goldhill
How American Health Care Killed My Father

Illustration by Mark Hooper

Almost two years ago, my father was killed by a hospital-borne infection in 
the intensive-care unit of a well-regarded nonprofit hospital in New York 
City. Dad had just turned 83, and he had a variety of the ailments common 
to men of his age. But he was still working on the day he walked into the 
hospital with pneumonia. Within 36 hours, he had developed sepsis. Over the 
next five weeks in the ICU, a wave of secondary infections, also acquired 
in the hospital, overwhelmed his defenses. My dad became a statistic-merely 
one of the roughly 100,000 Americans whose deaths are caused or influenced 
by infections picked up in hospitals. One hundred thousand deaths: more 
than double the number of people killed in car crashes, five times the 
number killed in homicides, 20 times the total number of our armed forces 
killed in Iraq and Afghanistan. Another victim in a building American 
tragedy.

About a week after my father's death, The New Yorker ran an article by Atul 
Gawande profiling the efforts of Dr. Peter Pronovost to reduce the 
incidence of fatal hospital-borne infections. Pronovost's solution? A 
simple checklist of ICU protocols governing physician hand-washing and 
other basic sterilization procedures. Hospitals implementing Pronovost's 
checklist had enjoyed almost instantaneous success, reducing 
hospital-infection rates by two-thirds within the first three months of its 
adoption. But many physicians rejected the checklist as an unnecessary and 
belittling bureaucratic intrusion, and many hospital executives were 
reluctant to push it on them. The story chronicled Pronovost's travels 
around the country as he struggled to persuade hospitals to embrace his 
reform.

It was a heroic story, but to me, it was also deeply unsettling. How was it 
possible that Pronovost needed to beg hospitals to adopt an essentially 
cost-free idea that saved so many lives? Here's an industry that loudly 
protests the high cost of liability insurance and the injustice of our tort 
system and yet needs extensive lobbying to embrace a simple technique to 
save up to 100,000 people.

And what about us-the patients? How does a nation that might close down a 
business for a single illness from a suspicious hamburger tolerate the 
carnage inflicted by our hospitals? And not just those 100,000 deaths. In 
April, a Wall Street Journal story suggested that blood clots following 
surgery or illness, the leading cause of preventable hospital deaths in the 
U.S., may kill nearly 200,000 patients per year. How did Americans learn to 
accept hundreds of thousands of deaths from minor medical mistakes as an 
inevitability?

My survivor's grief has taken the form of an obsession with our health-care 
system. For more than a year, I've been reading as much as I can get my 
hands on, talking to doctors and patients, and asking a lot of questions.

Keeping Dad company in the hospital for five weeks had left me befuddled. 
How can a facility featuring state-of-the-art diagnostic equipment use 
less-sophisticated information technology than my local sushi bar? How can 
the ICU stress the importance of sterility when its trash is picked up once 
daily, and only after flowing onto the floor of a patient's room? 
Considering the importance of a patient's frame of mind to recovery, why 
are the rooms so cheerless and uncomfortable? In whose interest is the 
bizarre scheduling of hospital shifts, so that a five-week stay brings an 
endless string of new personnel assigned to a patient's care? Why, in other 
words, has this technologically advanced hospital missed out on the 
revolution in quality control and customer service that has swept all other 
consumer-facing industries in the past two generations?

I'm a businessman, and in no sense a health-care expert. But the 
persistence of bad industry practices-from long lines at the doctor's 
office to ever-rising prices to astonishing numbers of preventable 
deaths-seems beyond all normal logic, and must have an underlying cause. 
There needs to be a business reason why an industry, year in and year out, 
would be able to get away with poor customer service, unaffordable prices, 
and uneven results-a reason my father and so many others are unnecessarily 
killed.

Like every grieving family member, I looked for someone to blame for my 
father's death. But my dad's doctors weren't incompetent-on the contrary, 
his hospital physicians were smart, thoughtful, and hard-working. Nor is he 
dead because of indifferent nursing-without exception, his nurses were d  
edicated and compassionate. Nor from financial limitations-he was a 
Medicare patient, and the issue of expense was never once raised. There 
were no greedy pharmaceutical companies, evil health insurers, or other 
popular villains in his particular tragedy.

Indeed, I suspect that our collective search for villains-for someone to 
blame-has distracted us and our political leaders from addressing the 
fundamental causes of our nation's health-care crisis. All of the actors in 
health care-from doctors to insurers to pharmaceutical companies-work in a 
heavily regulated, massively subsidized industry full of structural 
distortions. They all want to serve patients well. But they also all behave 
rationally in response to the economic incentives those distortions create. 
Accidentally, but relentlessly, America has built a health-care system with 
incentives that inexorably generate terrible and perverse results. 
Incentives that emphasize health care over any other aspect of health and  
 well-being. That emphasize treatment over prevention. That disguise true 
costs. That favor complexity, and discourage transparent competition based 
on price or quality. That result in a generational pyramid scheme rather 
than sustainable financing. And that-most important-remove consumers from 
our irreplaceable role as the ultimate ensurer of value.

These are the impersonal forces, I've come to believe, that explain why 
things have gone so badly wrong in health care, producing the national 
dilemma of runaway costs and poorly covered millions. The problems I've 
explored in the past year hardly count as breakthrough 
discoveries-health-care experts undoubtedly view all of them as old news. 
But some experts, it seems, have come to see many of these problems as 
inevitable in any health-care system-as conditions to be patched up, 
papered over, or worked around, but not problems to be solved.

That's the premise behind today's incremental approach to health-care 
reform. Though details of the legislation are still being negotiated, its 
principles are a reprise of previous reforms-addressing access to health 
care by expanding government aid to those without adequate insurance, while 
attempting to control rising costs through centrally administered 
initiatives. Some of the ideas now on the table may well be sensible in the 
context of our current system. But fundamentally, the "comprehensive" 
reform being contemplated merely cements in place the current 
system-insurance-based, employment-centered, administratively complex. It 
addresses the underlying causes of our health-care crisis only obliquely, 
if at all; indeed, by extending the current system to more people, it will 
likely increase the ultimate cost of true reform.

I'm a Democrat, and have long been concerned about America's lack of a 
health safety net. But based on my own work experience, I also believe that 
unless we fix the problems at the foundation of our health system-largely 
problems of incentives-our reforms won't do much good, and may do harm. To 
achieve maximum coverage at acceptable cost with acceptable quality, health 
care will need to become subject to the same forces that have boosted 
efficiency and value throughout the economy. We will need to reduce, rather 
than expand, the role of insurance; focus the government's role exclusively 
on things that only government can do (protect the poor, cover us against 
true catastrophe, enforce safety standards, and ensure provider 
competition); overcome our addiction to Ponzi-scheme financing, hidden 
subsidies, manipulated prices, and undisclosed results; and rely more on 
ourselves, the consumers, as the ultimate guarantors of good service, 
reasonable prices, and sensible trade-offs between health-care spending and 
spending on all the other good things money can buy.

These ideas stand well outside the emerging political consensus about 
reform. So before exploring alternative policies, let's reexamine our basic 
assumptions about health care-what it actually is, how it's financed, its 
accountability to patients, and finally its relationship to the eternal 
laws of supply and demand. Everyone I know has at least one personal story 
about how screwed up our health-care system is; before spending (another) 
$1trillion or so on reform, we need a much clearer understanding of the 
causes of the problems we all experience.

Illustration by Stephen Savage

Health Care Isn't Health (Or Happiness)

"Money is honey," my grandmother used to tell me, "but health is wealth." 
She said "health," not "health care." Listening to debates over health-care 
reform, it is sometimes difficult to remember that there is a difference.

Medical care, of course, is merely one component of our overall health. 
Nutrition, exercise, education, emotional security, our natural 
environment, and public safety may now be more important than care in 
producing further advances in longevity and quality of life. (In 2005, 
almost half of all deaths in the U.S. resulted from heart disease, 
diabetes, lung cancer, homicide, suicide, and accidents-all of which are 
arguably influenced as much by lifestyle choices and living environment as 
by health care.) And of course even health itself is only one aspect of 
personal fulfillment, alongside family and friends, travel, recreation, the 
pursuit of knowledge and experience, and more.

Yet spending on health care, by families and by the government, is crowding 
out spending on almost everything else. As a nation, we now spend almost 18 
percent of our GDP on health care. In 1966, Medicare and Medicaid made up 1 
percent of total government spending; now that figure is 20 percent, and 
quickly rising. Already, the federal government spends eight times as much 
on health care as it does on education, 12 times what it spends on food aid 
to children and families, 30 times what it spends on law enforcement, 78 
times what it spends on land management and conservation, 87 times the 
spending on water supply, and 830 times the spending on energy 
conservation. Education, public safety, environment, infrastructure-all 
other public priorities are being slowly devoured by the health-care beast.

It's no different for families. From 2000 to 2008, the U.S. economy grew by 
$4.4 trillion; of that growth, roughly one out of every four dollars was 
spent on health care. Household expenditures on health care already exceed 
those on housing. And health care's share is growing.

By what mechanism does society determine that an extra, say, $100 billion 
for health care will make us healthier than even $10 billion for cleaner 
air or water, or $25 billion for better nutrition, or $5 billion for parks, 
or $10 billion for recreation, or $50 billion in additional vacation 
time-or all of those alternatives combined?

The answer is, no mechanism at all. Health care simply keeps gobbling up 
national resources, seemingly without regard to other societal needs; it's 
treated as an island that doesn't touch or affect the rest of the economy. 
As new tests and treatments are developed, they are, for the most part, 
added to our Medicare or commercial insurance policies, no matter what they 
cost. But of course the money must come from somewhere. If the amount we 
spend on care had grown only at the general rate of inflation since 1970, 
annual health-care costs now would be roughly $5,000 less per 
American-that's about 10 percent of today's median income, to invest for 
the future or to spend on all the other things that contribute to our 
well-being. To be sure, our society has become wealthier over the years, 
and we'd naturally want to spend some of this new wealth on more and better 
health care; but how did we choose to spend this much?

The housing bubble offers some important lessons for health-care policy. 
The claim that something-whether housing or health care-is an undersupplied 
social good is commonly used to justify government intervention, and policy 
makers have long striven to make housing more affordable. But by making 
housing investments eligible for special tax benefits and subsidized 
borrowing rates, the government has stimulated not only the construction of 
more houses but also the willingness of people to borrow and spend more on 
houses than they otherwise would have. The result is now tragically clear.

As with housing, directing so much of society's resources to health care is 
stimulating the provision of vastly more care. Along the way, it's also 
distorting demand, raising prices, and making us all poorer by crowding out 
other, possibly more beneficial, uses for the resources now air-dropped 
onto the island of health care. Why do we view health care as disconnected 
from everything else? Why do we spend so much on it? And why, ultimately, 
do we get such inconsistent results? Any discussion of the ills within the 
system must begin with a hard look at the tax-advantaged 
comprehensive-insurance industry at its center.

Health Insurance Isn't Health Care

How often have you heard a politician say that millions of Americans "have 
no health care," when he or she meant they have no health insurance? How 
has a method of financing health care become synonymous with care itself?

The reason for financing at least some of our health care with an insurance 
system is obvious. We all worry that a serious illness or an accident might 
one day require urgent, extensive care, imposing an extreme financial 
burden on us. In this sense, health-care insurance is just like all other 
forms of insurance-life, property, liability-where the many who face a risk 
share the cost incurred by the few who actually suffer a loss.

But health insurance is different from every other type of insurance. 
Health insurance is the primary payment mechanism not just for expenses 
that are unexpected and large, but for nearly all health-care expenses. 
We've become so used to health insurance that we don't realize how absurd 
that is. We can't imagine paying for gas with our auto-insurance policy, or 
for our electric bills with our homeowners insurance, but we all assume 
that our regular checkups and dental cleanings will be covered at least 
partially by insurance. Most pregnancies are planned, and deliveries are 
predictable many months in advance, yet they're financed the same way we 
finance fixing a car after a wreck-through an insurance claim.

Comprehensive health insurance is such an ingrained element of our 
thinking, we forget that its rise to dominance is relatively recent. Modern 
group health insurance was introduced in 1929, and employer-based insurance 
began to blossom during World War II, when wage freezes prompted employers 
to expand other benefits as a way of attracting workers. Still, as late as 
1954, only a minority of Americans had health insurance. That's when 
Congress passed a law making employer contributions to employee health 
plans tax-deductible without making the resulting benefits taxable to 
employees. This seemingly minor tax benefit not only encouraged the spread 
of catastrophic insurance, but had the accidental effect of making 
employer-funded health insurance the most affordable option (after taxes) 
for financing pretty much any type of health care. There was nothing 
natural or inevitable about the way our system developed: employer-based, 
comprehensive insurance crowded out alternative methods of paying for 
health-care expenses only because of a poorly considered tax benefit passed 
half a century ago.

In designing Medicare and Medicaid in 1965, the government essentially 
adopted this comprehensive-insurance model for its own spending, and by the 
next year had enrolled nearly 12 percent of the population. And it is no 
coinci-dence that the great inflation in health-care costs began soon 
after. We all believe we need comprehensive health insurance because the 
cost of care-even routine care-appears too high to bear on our own. But the 
use of insurance to fund virtually all care is itself a major cause of 
health care's high expense.

Insurance is probably the most complex, costly, and distortional method of 
financing any activity; that's why it is otherwise used to fund only rare, 
unexpected, and large costs. Imagine sending your weekly grocery bill to an 
insurance clerk for review, and having the grocer reimbursed by the insurer 
to whom you've paid your share. An expensive and wasteful absurdity, no?

Is this really a big problem for our health-care system? Well, for every 
two doctors in the U.S., there is now one health-insurance employee-more 
than 470,000 in total. In 2006, it cost almost $500 per person just to 
administer health insurance. Much of this enormous cost would simply 
disappear if we paid routine and predictable health-care expenditures the 
way we pay for everything else-by ourselves.

Illustration by Stephen Savage

The Moral-Hazard Economy

Society's excess cost from health insurance's administrative expense pales 
next to the damage caused by "moral hazard"-the tendency we all have to 
change our behavior, becoming spendthrifts and otherwise taking less care 
with our decisions, when someone else is covering the costs. Needless to 
say, much medical care is unavoidable; we don't choose to become sick, nor 
do we seek more treatment than we think we need. Still, hospitals, drug 
companies, health insurers, and medical-device manufacturers now spend 
roughly $6 billion a year on advertising. If the demand for health care is 
purely a response to unavoidable medical need, why do these companies do so 
much advertising?

Medical ads on TV typically inform the viewer that a specific treatment-a 
drug, device, surgical procedure-is available for a chronic condition. Many 
also note that the product or treatment is eligible for Medicare or 
private-insurance reimbursement. In some cases, the advertiser will offer 
to help the patient obtain that reimbursement. The key message: you can 
benefit from this product and pass the bill on to someone else.

Every time you walk into a doctor's office, it's implicit that someone else 
will be paying most or all of your bill; for most of us, that means we give 
less attention to prices for medical services than we do to prices for 
anything else. Most physicians, meanwhile, benefit financially from 
ordering diagnostic tests, doing procedures, and scheduling follow-up 
appointments. Combine these two features of the system with a third-the 
informational advantage that extensive training has given physicians over 
their patients, and the authority that advantage confers-and you have a 
system where physicians can, to some extent, generate demand at will.

Do they? Well, Medicare spends almost twice as much per patient in Dallas, 
where there are more doctors and care facilities per resident, as it does 
in Salem, Oregon, where supply is tighter. Why? Because doctors 
(particularly specialists) in surplus areas order more tests and treatments 
per capita, and keep their practices busy. Many studies have shown that the 
patients in areas like Dallas do not benefit in any measurable way from all 
this extra care. All of the physicians I know are genuinely dedicated to 
their patients. But at the margin, all of us are at least subconsciously 
influenced by our own economic interests. The data are clear: in our 
current system, physician supply often begets patient demand.

Moral hazard has fostered an accidental collusion between providers 
benefiting from higher costs and patients who don't fully bear them. In 
this environment, trying to control costs is awfully tough. When Medicare 
cut reimbursement rates in 2005 on chemotherapy and anemia drugs, for 
instance, it saved almost 20 percent of the previously billed costs. But 
Medicare's total cancer-treatment costs actually rose almost immediately. 
As The New York Times reported, some physicians believed their colleagues 
simply performed more treatments, particularly higher-profit ones.

Want further evidence of moral hazard? The average insured American and the 
average uninsured American spend very similar amounts of their own money on 
health care each year-$654 and $583, respectively. But they spend wildly 
different amounts of other people's money-$3,809 and $1,103, respectively. 
Sometimes the uninsured do not get highly beneficial treatments because 
they cannot afford them at today's prices-something any reform must 
address. But likewise, insured patients often get only marginally 
beneficial (or even outright unnecessary) care at mind-boggling cost. If 
it's true that the insurance system leads us to focus on only our direct 
share of costs-rather than the total cost to society-it's not surprising 
that insured families and uninsured ones would make similar decisions as to 
how much of their own money to spend on care, but very different decisions 
on the total amount to consume.

The unfortunate fact is, health-care demand has no natural limit. Our 
society will always keep creating new treatments to cure previously 
incurable problems. Some of these will save lives or add productive years 
to them; many will simply make us more comfortable. That's all to the good. 
But the cost of this comfort, and whether it's really worthwhile, is never 
calculated-by anyone. For almost all our health-care needs, the current 
system allows us as consumers to ask providers, "What's my share?" instead 
of "How much does this cost?"-a question we ask before buying any other 
good or service. And the subtle difference between those two questions is 
costing us all a fortune.

There's No One Else to Pay the Bill

Perhaps the greatest problem posed by our health-insurance-driven regime is 
the sense it creates that someone else is actually paying for most of our 
health care-and that the costs of new benefits can also be borne by someone 
else. Unfortunately, there is no one else.

For fun, let's imagine confiscating all the profits of all the famously 
greedy health-insurance companies. That would pay for four days of health 
care for all Americans. Let's add in the profits of the 10 biggest 
rapacious U.S. drug companies. Another 7 days. Indeed, confiscating all the 
profits of all American companies, in every industry, wouldn't cover even 
five months of our health-care expenses.

Somebody else always seems to be paying for at least part of our health 
care. But that's just an illusion. At $2.4 trillion and growing, our 
nation's health-care bill is too big to be paid by anyone other than all of 
us.

In 2007, employer-based health insurance cost, on average, more than 
$12,000 per family, up 78 percent since 2001. I've run several companies 
and company divisions of various sizes over the course of my career, so I 
can confidently tell you that raises (and even entry-level hiring) are 
tightly limited by rising health-care costs. You may think your employer is 
paying for your health care, but in fact your company's share of the 
insurance premium comes out of your potential wage increase. Where else 
could it come from?

Let's say you're a 22-year-old single employee at my company today, 
starting out at a $30,000 annual salary. Let's assume you'll get married in 
six years, support two children for 20 years, retire at 65, and die at 80. 
Now let's make a crazy assumption: insurance premiums, Medicare taxes and 
premiums, and out-of-pocket costs will grow no faster than your 
earnings-say, 3 percent a year. By the end of your working days, your 
annual salary will be up to $107,000. And over your lifetime, you and your 
employer together will have paid $1.77 million for your family's health 
care. $1.77 million! And that's only after assuming the taming of costs! In 
recent years, health-care costs have actually grown 2 to 3 percent faster 
than the economy. If that continues, your 22-year-old self is looking at an 
additional $2 million or so in expenses over your lifetime-roughly $4 
million in total.

Would you have guessed these numbers were so large? If not, you have good 
cause: only a quarter would be paid by you directly (and much of that after 
retirement). The rest would be spent by others on your behalf, deducted 
from your earnings before you received your paycheck. And that's a big 
reason why our health-care system is so expensive.

The Government Is Not Good at Cost Reduction

Every proposal for health-care reform has featured some element of cost 
control to "balance" the inflationary impact of expanding access. Yet it 
goes without saying that in the big picture, all government efforts to 
control costs have failed.

Why? One reason is a fixation on prices rather than costs. The government 
regularly tries to cap costs by limiting the reimbursement rates paid to 
providers by Medicare and Medicaid, and generally pays much less for each 
service than private insurers. But as we've seen, that can lead providers 
to perform more services, and to steer patients toward higher-priced, more 
lightly regulated treatments. The government's efforts to expand "access" 
to care while limiting costs are like blowing up a balloon while 
simultaneously squeezing it. The balloon continues to inflate, but in 
misshapen form.

Cost control is a feature of decentralized, competitive markets, not of 
centralized bureaucracy-a matter of incentives, not mandates. What's more, 
cost control is dynamic. Even the simplest business faces constant 
variation in its costs for labor, facilities, and capital; to compete, 
management must react quickly, efficiently, and, most often, prospectively. 
By contrast, government bureaucracies set regulations and reimbursement 
rates through carefully evaluated and broadly applied rules. These 
bureaucracies first must notice market changes and resource misallocations, 
and then (sometimes subject to political considerations) issue additional 
regulations or change reimbursement rates to address each problem 
retrospectively.

As a result, strange distortions crop up constantly in health care. For 
example, although the population is rapidly aging, we have few 
geriatricians-physicians who address the cluster of common patient issues 
related to aging, often crossing traditional specialty lines. Why? Because 
under Medicare's current reimbursement system (which generally pays more to 
physicians who do lots of tests and procedures), geriatricians typically 
don't make much money. If seniors were the true customers, they would 
likely flock to geriatricians, bidding up their rates-and sending a useful 
signal to medical-school students. But Medicare is the real customer, and 
it pays more to specialists in established fields. And so, seniors often 
end up overusing specialists who are not focused on their specific health 
needs.

Many reformers believe if we could only adopt a single-payer system, we 
could deliver health care more cheaply than we do today. The experience of 
other developed countries suggests that's true: the government as single 
payer would have lower administrative costs than private insurers, as well 
as enormous market clout and the ability to bring down prices, although at 
the cost of explicitly rationing care.

But even leaving aside the effects of price controls on innovation and 
customer service, today's Medicare system should leave us skeptical about 
the long-term viability of that approach. From 2000 to 2007, despite its 
market power, Medicare's hospital and physician reimbursements per enrollee 
rose by 5.4 percent and 8.5 percent, respectively, per year. As currently 
structured, Medicare is a Ponzi scheme. The Medicare tax rate has been 
raised seven times since its enactment, and almost certainly will need to 
be raised again in the next decade. The Medicare tax contributions and 
premiums that today's beneficiaries have paid into the system don't come 
close to fully funding their care, which today's workers subsidize. The 
subsidy is getting larger even as it becomes more difficult to maintain: 
next year there will be 3.7 working people for each Medicare beneficiary; 
if you're in your mid-40s today, there will be only 2.4 workers to 
subsidize your care when you hit retirement age. The experience of other 
rich nations should also make us skeptical. Whatever their histories, 
nearly all developed countries are now struggling with rapidly rising 
health-care costs, including those with single-payer systems. From 2000 to 
2005, per capita health-care spending in Canada grew by 33 percent, in 
France by 37 percent, in the U.K. by 47 percent-all comparable to the 40 
percent growth experienced by the U.S. in that period. Cost control by way 
of bureaucratic price controls has its limits.

Uncompetitive

In 2007, health companies in the Fortune 1,000 earned $71 billion. Of the 
52 industries represented on Fortune's list, pharmaceuticals and medical 
equipment ranked third and fourth, respectively, in terms of profits as a 
share of revenue. From 2000 to 2007, the annual profits of America's top 15 
health-insurance companies increased from $3.5 billion to $15 billion.

In competitive markets, high profits serve an important social purpose: 
encouraging capital to flow to the production of a service not adequately 
supplied. But as long as our government shovels ever-greater resources into 
health care with one hand, while with the other restricting competition 
that would ensure those resources are used efficiently, sustained high 
profits will be the rule.

Health care is an exceptionally heavily regulated industry. 
Health-insurance companies are regulated by states, which limits interstate 
competition. And many of the materials, machines, and even software 
programs used by health-care facilities must be licensed by state or 
federal authorities, or approved for use by Medicare; these requirements 
form large barriers to entry for both new facilities and new vendors that 
could equip and supply them.

Many health-care regulations are justified as safety precautions. But many 
also result from attempts to redress the distortions that our system of 
financing health care has created. And whatever their purpose, almost all 
of these regulations can be shaped over time by the powerful institutions 
that dominate the health-care landscape, and that are often looking to 
protect themselves from competition.

Take the ongoing battle between large integrated hospitals and specialty 
clinics (for cardiac surgery, orthopedics, maternity, etc.). The economic 
threat posed by these facilities is well illustrated by a recent battle in 
Loma Linda, California. When a group of doctors proposed a 28-bed private 
specialty facility, the local hospitals protested to the city council that 
it was unnecessary, and launched a publicity campaign to try to block it; 
the council backed the facility anyway. So the nonprofit Loma Linda 
University Medical Center simply bought the new facility for $80 million in 
2008. Traditional hospitals got Congress to include an 18-month moratorium 
on new specialty hospitals in the 2003 Medicare law, and a second six-month 
ban in 2005.

The hospitals' argument has some merit: less complicated surgical cases 
(the kind specialty clinics typically take on) tend to be more profitable 
than complex surgeries and nonsurgical admissions. Without those profitable 
cases, hospitals can't subsidize the cases on which they lose money. But 
why are simple surgeries more profitable? Because of the nonmarket methods 
by which Medicare sets prices.

The net effect of the endless layers of health-care regulation is to stifle 
competition in the classic economic sense. What we have instead is a 
noncompetitive system where services and reimbursement are negotiated above 
consumers' heads by large private and government institutions. And the 
primary goal of any large noncompetitive institution is not cost control or 
product innovation or customer service: it's maintenance of the status quo.

Our Favored Hospitals

In 1751, Benjamin Franklin and Dr. Thomas Bond founded Pennsylvania 
Hospital, the first in America, "to care for the sick-poor and insane who 
were wandering the streets of Philadelphia." Since then, hospitals have 
come to dominate the American medical landscape. Yet in recent decades, the 
rationale for concentrating so much care under one roof has diminished 
steadily. Many hospitals still exist in their current form largely because 
they are protected by regulation and favored by government payment 
policies, which effectively maintain the existing industrial structure, 
rather than encouraging innovation.

Between 1970 and 2006, annual Medicare payments to hospitals grew by 
roughly 3,800 percent, from $5 billion to $192 billion. Total annual 
hospital-care costs for all patients grew from $28 billion to almost $650 
billion during that same period. Since 1975, hospitals' enormous revenue 
growth has occurred despite a 35 percent decline in the number of hospital 
beds, no meaningful increase in total admissions, and an almost 50 percent 
decline in the average length of stay. High-tech equipment has been 
dispersed to medical practices, recovery periods after major procedures 
have shrunk, and pharmaceutical therapies have grown in importance, yet 
over the past 40 years, hospitals have managed to retain the same share 
(roughly one-third) of our nation's health-care bill.

Hospitals have sought to use the laws and regulations originally designed 
to serve patients to preserve their business model. Their argument is the 
same one that's been made before by regulated railroads, electric 
utilities, airlines, Ma Bell, and banks: new competitors, they say, are 
using their cost advantages to skim off the best customers; without those 
customers, the incumbents will no longer be able to subsidize essential 
services that no one can profitably provide to the public.

Hospitals are indeed required to provide emergency care to any walk-in 
patient, and this obligation is a meaningful public service. But how do we 
know whether the charitable benefit from this requirement justifies the 
social cost of expensive hospital care and poor quality? We don't know. Our 
system of health-care law and regulation has so distorted the functioning 
of the market that it's impossible to measure the social costs and benefits 
of maintaining hospitals' prominence. And again, the distortions caused by 
a reluctance to pay directly for health care-in this case, emergency 
medicine for the poor-are in large part to blame.

Consider the oft-quoted "statistic" that emergency-room care is the most 
expensive form of treatment. Has anyone who believes this ever actually 
been to an emergency room? My sister is an emergency-medicine physician; 
unlike most other specialists, ER docs usually work on scheduled shifts and 
are paid fixed salaries that place them in the lower ranks of physician 
compensation. The doctors and other workers are hardly underemployed: 
typically, ERs are unbelievably crowded. They have access to the facilities 
and equipment of the entire hospital, but require very few dedicated 
resources of their own. They benefit from the group buying power of the 
entire institution. No expensive art decorates the walls, and the waiting 
rooms resemble train-station waiting areas. So what exactly makes an ER 
more expensive than other forms of treatment?

Perhaps it's the accounting. Since charity care, which is often performed 
in the ER, is one justification for hospitals' protected place in law and 
regulation, it's in hospitals' interest to shift costs from overhead and 
other parts of the hospital to the ER, so that the costs of charity 
care-the public service that hospitals are providing-will appear to be 
high. Hospitals certainly lose money on their ERs; after all, many of their 
customers pay nothing. But to argue that ERs are costly compared with other 
treatment options, hospitals need to claim expenses well beyond the 
marginal (or incremental) cost of serving ER patients.

In a recent IRS survey of almost 500 nonprofit hospitals, nearly 60 percent 
reported providing charity care equal to less than 5 percent of their total 
revenue, and about 20 percent reported providing less than 2 percent. 
Analyzing data from the American Hospital Directory, The Wall Street 
Journal found that the 50 largest nonprofit hospitals or hospital systems 
made a combined "net income" (that is, profit) of $4.27 billion in 2006, 
nearly eight times their profits five years earlier.

How do we know whether the value of hospitals' charitable services 
compensates for the roughly 100,000 deaths from hospital-borne disease, 
their poor standards of customer service, and their extraordinary 
diseconomies of both scale and scope? Might we be better off reforming 
hospitals, and allowing many of them to be eliminated by competition from 
specialty clinics? As a society, couldn't we just pay directly for the 
services required by the poor? We don't know how many hospitals would even 
survive if they were not so favored under the law; anyone who has lost a 
loved one to a preventable hospital death will wonder how many should.

You Are Not the Customer

What amazed me most during five weeks in the ICU with my dad was the 
survival of paper and pen for medical instructions and histories. In that 
time, Dad was twice taken for surgical procedures intended for other 
patients (fortunately interrupted both times by our intervention). My dry 
cleaner uses a more elaborate system to track shirts than this hospital 
used to track treatment.

Not every hospital relies on paper-based orders and charts, but most still 
do. Why has adoption of clinical information technology been so slow? 
Companies invest in IT to reduce their costs, reduce mistakes (itself a 
form of cost-saving), and improve customer service. Better information 
technology would have improved my father's experience in the ICU-and 
possibly his chances of survival.

But my father was not the customer; Medicare was. And although Medicare has 
experimented with new reimbursement approaches to drive better results, no 
centralized reimbursement system can be supple enough to address the many 
variables affecting the patient experience. Certainly, Medicare wasn't 
paying for the quality of service during my dad's hospital stay. And it 
wasn't really paying for the quality of his care, either; indeed, because 
my dad got sepsis in the hospital, and had to spend weeks there before his 
death, the hospital was able to charge a lot more for his care than if it 
had successfully treated his pneumonia and sent him home in days.

Of course, one area of health-related IT has received substantial 
investment-billing. So much for the argument, often made, that privacy 
concerns or a lack of agreed-upon standards has prevented the development 
of clinical IT or electronic medical records; presumably, if lack of 
privacy or standards had hampered the digitization of health records, it 
also would have prevented the digitization of the accompanying bills. To 
meet the needs of the government bureaucracy and insurance companies, most 
providers now bill on standardized electronic forms. In case you wonder who 
a care provider's real customer is, try reading one of these bills.

For that matter, try discussing prices with hospitals and other providers. 
Eight years ago, my wife needed an MRI, but we did not have health 
insurance. I called up several area hospitals, clinics, and doctors' 
offices-all within about a one-mile radius-to find the best price. I was 
surprised to discover that prices quoted, for an identical service, varied 
widely, and that the lowest price was $1,200. But what was truly 
astonishing was that several providers refused to quote any price. Only if 
I came in and actually ordered the MRI could we discuss price.

Several years later, when we were preparing for the birth of our second 
child, I requested the total cost of the delivery and related procedures 
from our hospital. The answer: the hospital discussed price only with 
uninsured patients. What about my co-pay? They would discuss my potential 
co-pay only if I were applying for financial assistance.

Keeping prices opaque is one way medical institutions seek to avoid 
competition and thereby keep prices up. And they get away with it in part 
because so few consumers pay directly for their own care-insurers, 
Medicare, and Medicaid are basically the whole game. But without 
transparency on prices-and the related data on measurable outcomes-efforts 
to give the consumer more control over health care have failed, and always 
will.

Here's a wonderful example of price opacity. Advocates for the uninsured 
complain that hospitals charge uninsured patients, on average, 2.5 times 
the amount charged to insured patients. Hospitals defend themselves by 
contending that they earn from uninsured patients only 25 percent of the 
amount they do from insured ones. Both statements appear to be true!

How is this possible? Well, hospitals bill according to their price lists, 
but provide large discounts to major insurers. Individual consumers, of 
course, don't benefit from these discounts, so they receive their bills at 
full list price (typically about 2.5 times the bill to an insured patient). 
Uninsured patients, however, pay according to how much of the bill the 
hospital believes they can afford (which, on average, amounts to 25 percent 
of the amount paid by an insured patient). Nonetheless, whatever discount a 
hospital gives to an uninsured patient is entirely at its discretion-and is 
typically negotiated only after the fact. Some uninsured patients have been 
driven into bankruptcy by hospital collections. American industry may offer 
no better example of pernicious "price discrimination," nor one that 
entails greater financial vulnerability for American families.

It's astonishingly difficult for consumers to find any health-care 
information that would enable them to make informed choices-based not just 
on price, but on quality of care or the rate of preventable medical errors. 
Here's one place where legal requirements might help. But only a few states 
require institutions to make this sort of information public in a usable 
form for consumers. So while every city has numerous guidebooks with 
reviews of schools, restaurants, and spas, the public is frequently 
deprived of the necessary data to choose hospitals and other providers.

The Strange Beast of Health-Care Technology

One of the most widely held pieces of conventional wisdom about health care 
is that new technology is relentlessly driving up costs. Yet over the past 
20 years, I've bought several generations of microwave ovens, personal 
computers, DVD players, GPS devices, mobile phones, and flat-screen TVs. I 
bank mostly at ATMs, check out my own goods at self-serve supermarket 
scanners, and attend company meetings by video-conference. Technology has 
transformed much of our daily lives, in almost all cases by adding 
quantity, speed, and quality while lowering costs. So why is health care 
different?

Well, for the most part, it isn't. Whether it's new drugs to control 
previously untreatable conditions, diagnostic equipment that enhances 
physician productivity, or minimally invasive techniques that speed patient 
recovery, technology-driven innovation has been transforming care at least 
as greatly as it has transformed the rest of our lives.

But most health-care technologies don't exist in the same world as other 
technologies. Recall the MRI my wife needed a few years ago: $1,200 for 20 
minutes' use of a then 20-year-old technology, requiring a little 
electricity and a little labor from a single technician and a radiologist. 
Why was the price so high? Most MRIs in this country are reimbursed by 
insurance or Medicare, and operate in the limited-competition, 
nontransparent world of insurance pricing. I don't even know the price of 
many of the diagnostic services I've needed over the years-usually I've 
just gone to whatever provider my physician recommended, without asking (my 
personal contribution to the moral-hazard economy).

By contrast, consider LASIK surgery. I still lack the (small amount of) 
courage required to get LASIK. But I've been considering it since it was 
introduced commercially in the 1990s. The surgery is seldom covered by 
insurance, and exists in the competitive economy typical of most other 
industries. So people who get LASIK surgery-or for that matter most 
cosmetic surgeries, dental procedures, or other mostly uninsured 
treatments-act like consumers. If you do an Internet search today, you can 
find LASIK procedures quoted as low as $499 per eye-a decline of roughly 80 
percent since the procedure was introduced. You'll also find sites where 
doctors advertise their own higher-priced surgeries (which more typically 
cost about $2,000 per eye) and warn against the dangers of discount LASIK. 
Many ads specify the quality of equipment being used and the performance 
record of the doctor, in addition to price. In other words, there's been an 
active, competitive market for LASIK surgery of the same sort we're used to 
seeing for most goods and services.

The history of LASIK fits well with the pattern of all capital-intensive 
services outside the health-insurance economy. If you're one of the first 
ophthalmologists in your community to perform the procedure, you can charge 
a high price. But once you've acquired the machine, the actual cost of 
performing a single procedure (the marginal cost) is relatively low. So, as 
additional ophthalmologists in the neighborhood invest in LASIK equipment, 
the first provider can meet new competition by cutting price. In a fully 
competitive marketplace, the procedure's price will tend toward that low 
marginal cost, and ophthalmologists looking to buy new machines will exert 
downward pressure on both equipment and procedure prices.

No business likes to compete solely on price, so most technology providers 
seek to add features and performance improvements to new generations of a 
machine-anything to keep their product from becoming a pure commodity. 
Their success depends on whether the consumers will pay enough for the new 
feature to justify its introduction. In most consumer industries, we can 
see this dynamic in action-observe how DVD players have moved in a few 
years from a high-priced luxury to a disposable commodity available at 
discount stores. DVD players have run out of new features for which 
customers will pay premium prices.

Perhaps MRIs have too. After a long run of high and stable prices, you can 
now find ads for discount MRIs. But because of the peculiar way we pay for 
health care, this downward price pressure on technology seems less vigor  
ous. How well can insurance companies and government agencies judge the 
value of new features that tech suppliers introduce to keep prices up? 
Rather than blaming technology for rising costs, we must ask if moral 
hazard and a lack of discipline in national health-care spending allows 
health-care companies to avoid the forces that make nonmedical technology 
so competitive.

In 2002, the U.S. had almost six times as many CT scanners per capita as 
Germany and four times as many MRI machines as the U.K. Traditional 
reformers believe it is this rate of investment that has pushed up prices, 
rather than sustained high prices that have pushed up investment. As a 
result, many states now require hospitals to obtain a Certificate of Need 
before making a major equipment purchase. In its own twisted way, this 
makes sense: moral hazard, driven by insurance, for years allowed providers 
to create enough demand to keep new MRI machines humming at any price.

But Certificates of Need are just another Scotch-tape reform, an effort to 
maintain the current system by treating a symptom rather than the 
underlying disease. Technology is driving up the cost of health care for 
the same reason every other factor of care is driving up the cost-the 
absence of the forces that discipline and even drive down prices in the 
rest of our economy. Only in the bizarre parallel universe of health care 
could limiting supply be seen as a sensible approach to keeping prices 
down.

The Limits of "Comprehensive" Health-care Reform

A wasteful insurance system; distorted incentives; a bias toward treatment; 
moral hazard; hidden costs and a lack of transparency; curbed competition; 
service to the wrong customer. These are the problems at the foundation of 
our health-care system, resulting in a slow rot and requiring more and more 
money just to keep the system from collapsing.

How would the health-care reform that's now taking shape solve these core 
problems? The Obama administration and Congress are still working out the 
details, but it looks like this generation of "comprehensive" reform will 
not address the underlying issues, any more than previous efforts did. 
Instead it will put yet more patches on the walls of an edifice that is 
fundamentally unsound-and then build that edifice higher.

A central feature of the reform plan is the expansion of comprehensive 
health insurance to most of the 46 million Americans who now lack private 
or public insurance. Whether this would be achieved entirely through the 
extension of private commercial insurance at government-subsidized rates, 
or through the creation of a "public option," perhaps modeled on Medicare, 
is still being debated.

Regardless, the administration has suggested a cost to taxpayers of $1 
trillion to $1.5 trillion over 10 years. That, of course, will mean another 
$1 trillion or more not spent on other things-environment, education, 
nutrition, recreation. And if the history of previous attempts to expand 
the health safety net are any guide, that estimate will prove low.

The reform plan will also feature a variety of centrally administered 
initiatives designed to reduce costs and improve quality. These will likely 
include a major government investment to promote digitization of patient 
health records, an effort to collect information on best clinical 
practices, and changes in the way providers are paid, to better reward 
quality and deter wasteful spending.

All of these initiatives have some theoretical appeal. And within the 
confines of the current system, all may do some good. But for the most 
part, they simply do not address the root causes of poor quality and 
runaway costs.

Consider information technology, for instance. Of course the health system 
could benefit from better use of IT. The Rand Corporation has estimated 
that the widespread use of electronic medical records would eventually 
yield annual savings of $81 billion, while also improving care and reducing 
preventable deaths, and the White House estimates that creating and 
spreading the technology would cost just $50 billion. But in what other 
industry would an investment with such a massive annual return not be 
funded by the industry itself? (And while $50 billion may sound like a big 
investment, it's only about 2 percent of the health-care industry's annual 
revenues.)

Technology is effective only when it's properly applied. Since most 
physicians and health-care companies haven't adopted electronic medical 
records on their own, what makes us think they will appropriately use all 
this new IT? Most of the benefits of the technology (record portability, a 
reduction in costly and dangerous clinical errors) would likely accrue to 
patients, not providers. In a consumer-facing industry, this alone would 
drive companies to make the investments to stay competitive. But of course, 
we patients aren't the real customers; government funding of electronic 
records wouldn't change that.

I hope that whatever reform is finally enacted this fall works-preventing 
people from slipping through the cracks, raising the quality standard of 
the health-care industry, and delivering all this at acceptable cost. But 
looking at the big picture, I fear it won't. So I think we should at least 
begin to debate and think about larger reforms, and a different 
direction-if not for this round of reform, then for the next one. Politics 
is, of course, the art of the possible. If our health-care crisis does not 
abate, the possibilities for reform may expand beyond their current, tight 
limits.

A Way Forward

The most important single step we can take toward truly reforming our 
system is to move away from comprehensive health insurance as the single 
model for financing care. And a guiding principle of any reform should be 
to put the consumer, not the insurer or the government, at the center of 
the system. I believe if the government took on the goal of better 
supporting consumers-by bringing greater transparency and competition to 
the health-care industry, and by directly subsidizing those who can't 
afford care-we'd find that consumers could buy much more of their care 
directly than we might initially think, and that over time we'd see better 
care and better service, at lower cost, as a result.

A more consumer-centered health-care system would not rely on a single form 
of financing for health-care purchases; it would make use of different 
sorts of financing for different elements of care-with routine care funded 
largely out of our incomes; major, predictable expenses (including much 
end-of-life care) funded by savings and credit; and massive, unpredictable 
expenses funded by insurance.

For years, a number of reformers have advocated a more "consumer-driven" 
care system-a term coined by the Harvard Business School professor Regina 
Herzlinger, who has written extensively on the subject. Many different 
steps could move us toward such a system. Here's one approach that-although 
it may sound radical-makes sense to me.

First, we should replace our current web of employer- and government-based 
insurance with a single program of catastrophic insurance open to all 
Americans-indeed, all Americans should be required to buy it-with fixed 
premiums based solely on age. This program would be best run as a single 
national pool, without underwriting for specific risk factors, and would 
ultimately replace Medicare, Medicaid, and private insurance. All Americans 
would be insured against catastrophic illness, throughout their lives.

Proposals for true catastrophic insurance usually founder on the definition 
of catastrophe. So much of the amount we now spend is dedicated to problems 
that are considered catastrophic, the argument goes, that a separate 
catastrophic system is pointless. A typical catastrophic insurance policy 
today might cover any expenses above, say, $2,000. That threshold is far 
too low; ultimately, a threshold of $50,000 or more would be better. 
(Chronic conditions with expected annual costs above some lower threshold 
would also be covered.) We might consider other mechanisms to keep total 
costs down: the plan could be required to pay out no more in any year than 
its available premiums, for instance, with premium increases limited to the 
general rate of inflation. But the real key would be to restrict the 
coverage to true catastrophes-if this approach is to work, only a minority 
of us should ever be beneficiaries.

How would we pay for most of our health care? The same way we pay for 
everything else-out of our income and savings. Medicare itself is, in a 
sense, a form of forced savings, as is commercial insurance. In place of 
these programs and the premiums we now contribute to them, and along with 
catastrophic insurance, the government should create a new form of health 
savings account-a vehicle that has existed, though in imperfect form, since 
2003. Every American should be required to maintain an HSA, and contribute 
a minimum percentage of post-tax income, subject to a floor and a cap in 
total dollar contributions. The income percentage required should rise over 
a working life, as wages and wealth typically do.

All noncatastrophic care should eventually be funded out of HSAs. But 
account-holders should be allowed to withdraw money for any purpose, 
without penalty, once the funds exceed a ceiling established for each age, 
and at death any remaining money should be disbursed through inheritance. 
Our current methods of health-care funding create a "use it or lose it" 
imperative. This new approach would ensure that families put aside funds 
for future expenses, but would not force them to spend the funds only on 
health care.

What about care that falls through the cracks-major expenses (an 
appendectomy, sports injury, or birth) that might exceed the current 
balance of someone's HSA but are not catastrophic? These should be funded  
 the same way we pay for most expensive purchases that confer long-term 
benefits: with credit. Americans should be able to borrow against their 
future contributions to their HSA to cover major health needs; the 
government could lend directly, or provide guidelines for private lending. 
Catastrophic coverage should apply with no deductible for young people, but 
as people age and save, they should pay a steadily increasing deductible 
from their HSA, unless the HSA has been exhausted. As a result, much 
end-of-life care would be paid through savings.

Anyone with whom I discuss this approach has the same question: How am I 
supposed to be able to afford health care in this system? Well, what if I 
gave you $1.77 million? Recall, that's how much an insured 22-year-old at 
my company could expect to pay-and to have paid on his and his family's 
behalf-over his lifetime, assuming health-care costs are tamed. Sure, most 
of that money doesn't pass through your hands now. It's hidden in company 
payments for premiums, or in Medicare taxes and premiums. But think about 
it: If you had access to those funds over your lifetime, wouldn't you be 
able to afford your own care? And wouldn't you consume health care 
differently if you and your family didn't have to spend that money only on 
care?

For lower-income Americans who can't fund all of their catastrophic 
premiums or minimum HSA contributions, the government should fill the 
gap-in some cases, providing all the funding. You don't think we spend an 
absurd amount of money on health care? If we abolished Medicaid, we could 
spend the same money to make a roughly $3,000 HSA contribution and a $2,000 
catastrophic-premium payment for 60 million Americans every year. That's a 
$12,000 annual HSA plus catastrophic coverage for a low-income family of 
four. Do we really believe most of them wouldn't be better off?

Some experts worry that requiring people to pay directly for routine care 
would cause some to put off regular checkups. So here's a solution: the 
government could provide vouchers to all Americans for a free checkup every 
two years. If everyone participated, the annual cost would be about $30 
billion-a small fraction of the government's current spending on care.

Today, insurance covers almost all health-care expenditures. The few 
consumers who pay from their pockets are simply an afterthought for most 
providers. Imagine how things might change if more people were buying their 
health care the way they buy anything else. I'm certain that all the 
obfuscation over prices would vanish pretty quickly, and that we'd see an 
end to unreadable bills. And that physicians, who spend an enormous amount 
of time on insurance-related paperwork, would have more time for patients.

In fact, as a result of our fraying insurance system, you can already see 
some nascent features of a consumer-centered system. Since 2006, Wal-Mart 
has offered $4 prescriptions for a month's supply of common generic 
medications. It has also been slowly rolling out retail clinics for routine 
care such as physicals, blood work, and treatment for common ailments like 
strep throat. Prices for each service are easily obtained; most are in the 
neighborhood of $50 to $80. Likewise, "concierge care," or the "boutique" 
style of medical practice-in which physicians provide unlimited services 
and fast appointments in return for a fixed monthly or annual fee-is 
beginning to spread from the rich to the middle class. Qliance Medical 
Group, for instance, now operates clinics serving some 3,000 patients in 
the Seattle and Tacoma, Washington, areas, charging $49 to $79 a month for 
unlimited primary care, defined expansively.

It's worth pausing over this last example. Many experts believe that the 
U.S. would get better health outcomes at lower cost if payment to providers 
were structured around the management of health or whole episodes of care, 
instead of through piecemeal fees. Medicare and private insurers have, to 
various degrees, moved toward (or at least experimented with) these sorts 
of payments, and are continuing to do so-but slowly, haltingly, and in the 
face of much obstruction by providers. But aren't we likely to see just 
these sorts of payment mechanisms develop organically in a 
consumer-centered health-care system? For simplicity and predictability, 
many people will prefer to pay a fixed monthly or annual fee for primary or 
chronic care, and providers will move to serve that demand.

Likewise, what patient, when considering getting an artificial hip, would 
want to deal with a confusion of multiple bills from physicians, 
facilities, and physical therapists? Aren't providers likely to organize 
themselves to provide a single price to the consumer for care and 
rehabilitation? And won't that, in itself, put pressure on providers to 
work together as efficiently as possible, and to minimize the medical 
errors that would eat into their joint fee? I suspect we would see a rapid 
decline in the predominance of the fee-for-service model, making way for 
real innovation and choice in service plans and funding. And the payment 
system would not be set by fiat; it would remain responsive to treatment 
breakthroughs and changes in consumer demand.

Many consumers would be able to make many decisions, unaided, in such a 
system. But we'd also probably see the rise of health-care agents-paid by, 
and responsible to, the consumer-to help choose providers and to act as 
advocates during long and complex care episodes.

How else might the system change? Technological innovation-which is now 
almost completely insensitive to costs, and which often takes the form of 
slightly improved treatments for much higher prices-would begin to concern 
itself with value, not just quality. Many innovations might drive prices 
down, not up. Convenient, lower-cost specialty centers might proliferate. 
The need for unpaid indigent care would go away-everyone, recall, would 
have both catastrophic insurance and an HSA, funded entirely by the 
government when necessary-and with it much of the rationale for protecting 
hospitals against competition.

Of course, none of this would happen overnight. And the government has an 
essential role to play in arming consumers with good information. Congress 
should require maximum transparency on services, prices, and results (and 
some elements of the Obama administration's reform plan would move the 
industry in this direction). We should establish a more comprehensive 
system of quality inspection of all providers, and publish all the 
findings. Safety and efficacy must remain the cornerstone of government 
licensing, but regulatory bias should favor competition and prevent 
incumbents from using red tape to forestall competition.

Moving from the system we've got now to the one I've outlined would be 
complicated, and would take a long time. Most of us have been paying into 
an insurance system for years, expecting that our future health-care bills 
would be paid; we haven't been saving separately for these expenses. It 
would take a full generation to completely migrate from relying on Medicare 
to saving for late-life care; from Medicaid for the disadvantaged to 
catastrophic insurance and subsidized savings accounts. Such a transition 
would require the slow reduction of Medicare taxes, premiums, and benefit 
levels for those not yet eligible, and a corresponding slow ramp-up in 
HSAs. And the national catastrophic plan would need to start with much 
broader coverage and higher premiums than the ultimate goal, in order to 
fund the care needed today by our aging population. Nonetheless, the 
benefits of a consumer-centered approach-lower costs for better 
service-should have early and large dividends for all of us throughout the 
period of transition. The earlier we start, the less a transition will 
ultimately cost.

Many experts oppose the whole concept of a greater role for consumers in 
our health-care system. They worry that patients lack the necessary 
knowledge to be good consumers, that unscrupulous providers will take 
advantage of them, that they will overspend on low-benefit treatments and 
under-spend on high-benefit preventive care, and that such waste will leave 
some patients unable to afford highly beneficial care.

They are right, of course. Whatever replaces our current system will be 
flawed; that's the nature of health care and, indeed, of all human 
institutions. Our current system features all of these problems already-as 
does the one the Obama reforms would create. Because health care is so 
complex and because each individual has a unique health profile, no system 
can be perfect.

I believe my proposed approach passes two meaningful tests. It will do a 
better job than our current system of controlling prices, allocating 
resources, expanding access, and safeguarding quality. And it will do a 
better job than a more government-driven approach of harnessing medicine's 
dynamism to develop and spread the new knowledge, technologies, and 
techniques that improve the quality of life. We won't be perfect consumers, 
but we're more likely than large bureaucracies to encourage better medicine 
over time.

All of the health-care interest groups-hospitals, insurance companies, 
professional groups, pharmaceuticals, device manufacturers, even advocates 
for the poor-have a major stake in the current system. Overturning it would 
favor only the 300 million of us who use the system and-whether we realize 
it or not-pay for it. Until we start asking the type of questions my 
father's death inspired me to ask, until we demand the same price and 
quality accountability in health care that we demand in everything else, 
each new health-care reform will cost us more and serve us less.

$636,687.75

Ten days after my father's death, the hospital sent my mother a copy of the 
bill for his five-week stay: $636,687.75. He was charged $11,590 per night 
for his ICU room; $7,407 per night for a semiprivate room before he was 
moved to the ICU; $145,432 for drugs; $41,696 for respiratory services. 
Even the most casual effort to compare these prices to marginal costs or to 
the costs of off-the-shelf components demonstrates the absurdity of these 
numbers, but why should my mother care? Her share of the bill was only 
$992; the balance, undoubtedly at some huge discount, was paid by Medicare.

Wasn't this an extraordinary benefit, a windfall return on American 
citizenship? Or at least some small relief for a distraught widow?

Not really. You can feel grateful for the protection currently offered by 
Medicare (or by private insurance) only if you don't realize how much you 
truly spend to fund this system over your lifetime, and if you believe 
you're getting good care in return.

Would our health-care system be so outrageously expensive if each American 
family directly spent even half of that $1.77 million that it will 
contribute to health insurance and Medicare over a lifetime, instead of 
entrusting care to massive government and private intermediaries? Like its 
predecessors, the Obama administration treats additional government funding 
as a solution to unaffordable health care, rather than its cause. The 
current reform will likely expand our government's already massive role in 
health-care decision-making-all just to continue the illusion that someone 
else is paying for our care.

But let's forget about money for a moment. Aren't we also likely to get 
worse care in any system where providers are more accountable to insurance 
companies and government agencies than to us?

Before we further remove ourselves as direct consumers of health care-with 
all of our beneficial influence on quality, service, and price-let me ask 
you to consider one more question. Imagine my father's hospital had to 
present the bill for his "care" not to a government bureaucracy, but to my 
grieving mother. Do you really believe that the hospital-forced to face the 
victim of its poor-quality service, forced to collect the bill from the 
real customer-wouldn't have figured out how to make its doctors wash their 
hands?


-----Original Message-----
From:	Chuck Minne [SMTP:mincam2 at yahoo.com]
Sent:	Thursday, September 03, 2009 19:32
To:	Mike Kirk; citizenstruth at six.pairlist.net
Subject:	Re: [CitizensTruth] The Government can ...



When "Public Options" Serve the Public - and When They Don't
Thursday 03 September 2009
by: Lawrence S. Wittner


Dr. Wittner points out that there is a successful "public option" in place 
for fire and police protection. (Photo: Thomas Hawk / Flickr)


    Currently, there is nothing more controversial in President Barack 
Obama's health care reform proposal than the "public option." Much of the 
controversy, of course, has been generated by private insurance companies, 
determined to safeguard their hefty profits, and by Republican politicians, 
eager to destroy anything that might redound to the benefit of the 
Democrats. Even so, a little clear thinking on the subject of public 
programs might illuminate their advantages and disadvantages.

    In fact, there are numerous "public options" in American life, with 
many of them rooted deep in the nation's history. In the area of education, 
there are public schools; in recreation, public parks; in travel, public 
roads; in fire-fighting, public fire departments; in law enforcement, 
public police forces; in culture, public libraries; in transportation, 
public bus and train lines; in mail delivery, the post office; in 
sanitation, public water supply plumbing, and sewers; in energy, public 
power; in old-age security, Social Security; in nutrition, public school 
lunch programs. Where did the notion ever come from that public programs 
were somehow "un-American"?


Continued at:  http://www.truthout.org/090309A?n

Kucinich is for Single Payer, but he has also proposed letting the states 
go single payer if the Feds do not. His Health Care ideas are here:

http://kucinich.us/index.php?option=com_content&task=view&id=2806

 "The hotly-debated HR3200, the so-called "health care reform" bill, is 
nothing less than corporate welfare in the guise of social welfare and 
reform. It is a convoluted mess. The real debate which we should be having 
is not occurring.

"Removing the "public option" from a public bill paid for by public money 
is not in the public interest. What is left is a "private option" paid for 
with public money. Why should public money be spent on a private option 
which does not guarantee 100% coverage nor have any cost controls? A true 
public option would provide 30% savings immediately which would then cover 
the 1/3rd of the population who presently have no healthcare.

"Unfortunately, under HR3200, the Government is choosing winners and losers 
in the private sector; proposing to spend public funds on subsidizing 
insurance companies who make money not providing health care. This process 
wil insure only one thing - the expansion of profits. Gone is the debate 
over cost.

"As a result of current negotiations, the Medicare Part D rip-off will 
continue for another decade, further fleecing senior citizens. Drug 
importation has been dropped, so no inexpensive drugs can be accessed from 
other nations.

"Instead we are told the pharmaceutical companies will accept a 2% cut in 
the growth rate of their profits - this they call cost control! "

An older Kucinich page of DK info is here:

http://www.ontheissues.org/2004/Dennis_Kucinich_Health_Care.htm



Excerpted from: The Independent UK

Something strange has happened in America in the nine months since Barack 
Obama was elected. It has best been summarised by the comedian Bill Maher: 
"The Democrats have moved to the right, and the Republicans have moved to a 
mental hospital."
A few months ago, a recent board member for several private health 
corporations called Betsy McCaughey reportedly noticed a clause in the 
proposed healthcare legislation that would pay for old people to see a 
doctor and write a living will. They could stipulate when (if at all) they 
would like care to be withdrawn. It's totally voluntary. Many people want 
it: I know I wouldn't want to be kept alive for a few extra months if I was 
only going to be in agony and unable to speak. But McCaughey started the 
rumour that this was a form of euthanasia, where old people would be forced 
to agree to death. This was then stretched to include the disabled, like 
Palin's youngest child, who she claimed would have to "justify" his 
existence. It was flatly untrue - but the right had their talking-point, 
Palin declared the non-existent proposals "downright evil", and they were 
off.
It's been amazingly successful. Now, every conversation about healthcare 
has to begin with a Democrat explaining at great length that, no, they are 
not in favour of killing the elderly - while Republicans get away with 
defending a status quo that kills 18,000 people a year. The hypocrisy was 
startling: when Sarah Palin was Governor of Alaska, she encouraged citizens 
there to take out living wills. Almost all the Republicans leading the 
charge against "death panels" have voted for living wills in the past. But 
the lie has done its work: a confetti of distractions has been thrown up, 
and support is leaking away from the plan that would save lives.
These increasingly frenzied claims have become so detached from reality 
that they often seem like black comedy. The right-wing magazine US 
Investors' Daily claimed that if Stephen Hawking had been British, he would 
have been allowed to die at birth by its "socialist" healthcare system. 
Hawking responded with a polite cough that he is British, and "I wouldn't 
be here without the NHS".
This tendency to simply deny inconvenient facts and invent a fantasy world 
isn't new; it's only becoming more heightened. It ran through the Bush 
years like a dash of bourbon in water. When it became clear that Saddam 
Hussein had no weapons of mass destruction, the US right simply claimed 
they had been shipped to Syria. When the scientific evidence for man-made 
global warming became unanswerable, they claimed - as one Republican 
congressman put it - that it was "the greatest hoax in human history", and 
that all the world's climatologists were "liars". The American media then 
presents itself as an umpire between "the rival sides", as if they both had 
evidence behind them.


--- On Thu, 9/3/09, Mike Kirk <mjkirk12 at yahoo.com> wrote:


From: Mike Kirk <mjkirk12 at yahoo.com>
Subject: Re: [CitizensTruth] The Government can ...
To: "Hal Snyder" <hal at drxyzzy.org>
Cc: citizenstruth at six.pairlist.net
Date: Thursday, September 3, 2009, 4:47 PM






Hal,

My primary opposition is sending more money to Washington - they seem to 
re-allocate it for other purposes (war, bailouts, foreign aid to dictators, 
pork projects) that I disagree with.

If the states were to manage the healthcare option, then I would be more 
likely to support it - as the funds would have less chance for misuse.

Some needed changes that could be achieved through legislation:
   - Laws requiring all health insurance to be non-profit only
   - Laws to prevent exclusion based on pre-existing conditions
   - Financially reward providers and patients (tax deductions) for taking 
early preventative healthcare measures to lower costs of catastrophic care.

This might help to improve the problems with the current system - they are 
probably already there in some form.

But, the three best doctors I know of are:   Dr. Diet,  Dr. Quiet and Dr. 
Merryman.   :-)

Regards,
-Mike

P.S.  Peter Schiff on cosmetic surgery. 
 http://www.youtube.com/watch?v=-uMh7MwLOpc  Start at time: 05:30 min





From: Hal Snyder <hal at drxyzzy.org>
To: citizenstruth at six.pairlist.net
Sent: Thursday, September 3, 2009 2:05:58 PM
Subject: Re: [CitizensTruth] The Government can ...

Thanks, Mike.


Back at you:


Why We Need Government-Run Universal Socialized Health Insurance
http://www.youtube.com/watch?v=Jng4TnKqy6A


The topic is health insurance, but it could just as easily be public works, 
gearing up for sustainable energy, healing and protecting the environment, 
relocalizing our economy, dealing with peak oil/soil/water etc.


I think there are good reasons people shift toward either libertarian or 
liberal (or you could say anarchist vs. socialist to be inflammatory) 
poles.



On Sep 3, 2009, at 1:33 PM, Mike Kirk wrote:




Funny (but true) parody song:

http://www.youtube.com/watch?v=LO2eh6f5Go0
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