The HealthCare Problem: Why Can’t We Find a Solution?

May 14, 2012
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EXCLUSIVE POST – Once again, like every four years, as we move closer to yet another Presidential contest, healthcare policy will be the source of more than one vivid debate. It has happened before and it will happen again, particularly if the U.S. Supreme Court decides to strike down all or part of the Patient Protection and Affordable Care Act.

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EXCLUSIVE POST – Once again, like every four years, as we move closer to yet another Presidential contest, healthcare policy will be the source of more than one vivid debate. It has happened before and it will happen again, particularly if the U.S. Supreme Court decides to strike down all or part of the Patient Protection and Affordable Care Act.

We, as a society, seem to have a very difficult time coming up with an original solution to our healthcare jam, which is rather surprising given the fact that Americans are one of the most inventive societies on the planet. Perhaps the problem arises from the fact that we are trying to come up with a solution within the limits of our known and familiar universe. In other words, we are thinking inside the box while we should be trying to think outside of it.

The next logical question would be, what is wrong with our known universe? Why can’t we find a solution within the confinements of our known box. I believe that our constraining healthcare box paradigm has six fallacious sides, triggering a framework of false assumptions and expectations, but most importantly, preventing us from borrowing known proven solutions from other successful areas of life, namely “adaptation and innovation”.

I believe that the we are trapped in our healthcare box by:

 

Side 1 –  Thinking that health is our natural state.

Side 2 – Thinking that the healthcare problem is an ideological one.

Side 3 – Thinking that the problem in healthcare is the cost.

Side 4 – Thinking that the current Consumer-Payer-Provider trilogy is sustainable.

Side 5 – Thinking that your employer is actually paying for your healthcare.

Side 6 – Thinking that our options are limited to subsidize the demand (more of the same) or subsidize the supply (socialized medicine).


Thinking that health is our natural state.

We come to this world naked, hungry, cold, and stranded. Without our parents or some other responsible adults, we would die before we even realize we exist. As we grow up and develop a sense of self, we rapidly understand that we must use our income to buy clothing, food, shelter, and transportation. The natural state of things (naked, hungry, cold, stranded) requires expenditures (or energy according to the 2nd law of thermodynamics), in order to be reversed and we spare no expenses trying to reverse our natural state.

When it comes to health, the immense majority of human beings come to the world as healthy individuals, therefore making an effort to prevent diseases or spending money in disease insurance does not come as an imminent need to our minds. Our natural state is (in general) a healthy one and does not require energy input in order to be reversed.

This is a serious psychological handicap that prevents us from thinking about our own illness or death until we come close to those events. Unfortunately, and regardless of lifestyles and risk taking behaviors, we are all carriers of a sexually transmitted deadly precondition, commonly known as Life. The sooner we understand it, the more prepared we will be for what is coming.

Thinking that the healthcare problem is an ideological one.

Healthcare is an economic, social, practical, mathematical, philosophical and perhaps even a moral problem, but it is not a political one. Unfortunately, it lends itself to be discussed in ideological terms because few issues bring up as many raw emotions as this one, and we know that elections are about emotions, not reason.

Although I have no statistical proof, I would be willing to say that most reasonable Americans do not want people of any race, color, gender, class or political affiliation to have to go through life without preventive care and screening for curable diseases, or the inability to vaccinate their children due to lacking essential primary care coverage.

Likewise, same reasonable Americans probably do not want to pay for unnecessary, extreme and expensive tests and treatments based on futile attempts to delay the unavoidable. We do not need to cover every American, so we can have our custom-made artificial heart on shelves of nearby hospitals waiting for the right moment. It sounds cool, well intended and futuristic, but as a society we can’t afford it.

Life is precious, but it is not priceless and somewhere between equitable and affordable, there is a solution waiting for those reasonable Americans.

Thinking that the problem in healthcare is the cost.

As long as we continue to use the wrong words when trying to understand a problem, the solution will continue to escape us. So much repetition from the media (and politicians of course) has everyone convinced that we have a healthcare cost issue, when we don’t. Actually, we don’t even know how much it is the actual cost of most tests and treatments. We know how much we charge to provide them, but in a large majority of cases not their actual cost.

We know for instance that the average ICU bed charges are anywhere between $2,200-$2,500 a day (medicines not included). Do the following test, ask any hospital administrator or CEO, what are their fixed costs for an empty bed in the ICU. No answer, right? Isn’t that surprising, since in any service industry, excess capacity should translate into lower prices. It happens in the airline, fiber optics, telecommunications, cruise lines, railroad and hotel industries, but not in healthcare, even when average ICU bed occupancy rate in American hospitals is around 68%.

What we really have is a healthcare price problem due to a market distortion. Prices are indicators that allow markets to understand how to behave, where to invest, when to buy, where to buy, etc. But prices lose their value as indicators when the demand is subsidized, as it is the case with our healthcare system. Of course the prices are going to continue to go up as long as someone continues to pay. And it is not the first time we have done this. Just think on the reasons behind the real estate market bubble or the prices (commonly called “the costs”) of higher education, both subsidized through artificially low interest rates on bank loans.

There are only two reasons why the price of a product can continue to outperform the consumer price index (inflation) for 40 years in a row. Either there is too much demand for the product or there is too little supply of it.  We know is not the later, since occupancy rate is well below 100% in every American hospital and we have more diagnostic tools, specialists and facilities per capita than any industrialized country in the world. Sadly, it would seem that we demand (and consume) too much healthcare. We use too much because in our current financial scheme, somebody else (Government, health insurance company) is able and willing to continue to pay (although not for long)

Thinking that the current Buyer-Seller-Payer trilogy is sustainable

Our healthcare system is based on a Buyer-Seller-Payer trilogy. The Buyer (patient) is consuming large amounts of items (healthcare), provided by a Seller (hospital, health professionals, radiology facilities, laboratories, etc). But the Buyer is not the Payer for the items (other than small deductible or co-payment), the bill is paid by either a commercial insurance or Government, breaking any resemblance of a functioning “healthcare market”.

Meanwhile, 40M consumers without any form of subsidy (coverage) tend to consume too little healthcare or none at all, which is a huge public health problem. We have the highest health expenditure per capita in the entire world, and that figure includes 40 millions Americans without health coverage in the denominator!

Now imagine how much healthcare is consumed by those doing the consuming!

Incidentally, this calculation alone should be sufficient to dispel the simplistic political fiction that including 40M currently uninsured (unsubsidized) in our flawed system will lower our healthcare expenditures. This is just a mathematical reality, not a moral statement. If what we want is to cover everyone and be sustainable, we need to overhaul the system completely.

Thinking that your employer is actually paying for your healthcare.

A classic among urban legends is to ask potential employer if health insurance coverage is part of the job’s perks. I don’t think there is a person reading this journal that doesn’t already know that employers do not pay for your healthcare insurance (but if you still believe it is paid by your employer, I have an obelisk, just a few meters from the White House with a great view of downtown DC that you may be interested in buying).

Health coverage is paid with a part of your salary that is used before it makes it into your pocket (and before it gets taxed). Your employer does most of the window-shopping, gets (hopefully) the best prices, and consolidates all the employees monthly payment into a single one (Insurance companies love that one). In return, employers get a large tax benefit for doing your health coverage shopping for you.

Using a work-based health scheme invented in Germany almost 120 years ago, when the average lifespan was 35 years, the relationship between germs and disease was just beginning to be established, most people died of acute infections and bed rest was the paramount of medical treatment does not seem to make a lot of sense. It would make better sense to come up with an innovative and sustainable solution for the current version of humanity.

Thinking that our options are limited to subsidize the demand (more of the same) or subsidize the supply (socialized medicine).

No other popular fiction reflects our healthcare dilemma better than this old Russian tale: a Vityaz (Russian knight) came to a fork in the road where a monolith sat with the following inscription: “If you ride to the right, you will lose your horse, if you ride to the left, you will lose your head”.

We are that Vityaz. If we continue to subsidize the demand for health services and spend nearly 18% of our Gross Domestic Product in the process, we will lose our horse. If we take the opposite path and become a purely subsidized supply health system a la UK or Canada, without rationing care, we will lose our heads.

Rationing of healthcare services happens today and will continue to happen whether we take one road or the other. So far, as a society, we have chosen to ration healthcare by keeping 40M without regular access to the system. On the opposite road, rationing will be decided by yet another bureaucratic organization somewhere in DC. We need to move beyond unsustainable options into a self-rationing, value based pricing health insurance system.

 

So here is my solution to the fork in the road dilemma: When you come to a fork on the road…don’t take it!

photo:Joe Belanger/shutterstock 


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