Blog from July 2012

There are 8 blog entries from July 2012

American Healthcare - Part V: Impractical Expectations
July 1st, 2012 | View Post
Obviously every medical emergency is different and every patient unique. However, if you take that story into consideration without applying any type of political bias, there is at least one point of comparison that should stand out above all else. How is it that the price of one health care option is able to outweigh another by twenty fold? Is it actually possible that I, or any other patient, could have been the recipient of twenty times the level of care? It is highly unlikely.

Had I been comprehensively insured at the time of my accident, it is a fact that that I would have received the highest level of care immediately following the accident. Furthermore, it is highly unlikely that I would have questioned any of the associated finances with the examination since I would not be directly responsible for them. But in a healthcare system whereby finances must be accounted for in one way or another, the question still remains of how the two estimates of care could have varied by so much. This is why having a thorough grasp on the economics of modern health insurance is so important. These huge cost differentials are common and due to the fact that there is no incentive to control costs within any step of the process. Insurance companies and medical corporations massively benefit from the liberal and often unnecessary applications of their products. This is exactly why the hospital bill would have been so much more expensive than the minor care facility turned out to be; I would have paid twenty times the cost for a fractionally more accurate diagnosis, all the while experiencing a barrage of the latest and greatest medical technologies.

The question that should be asked of all Americans is whether our expectation of a healthcare system is to save lives, or to provide individuals with every advanced comfort available regardless of the broader scope of costs. It seems that the expectation from most people who supported the healthcare bill is the latter; every medical condition should be accounted for, regardless of the costs involved. Not only is this impossible, it is unconscionably selfish. There are a finite amount of monetary resources available within the United States and every medical procedure uses up some of these resources. When we waste precious resources in an effort to make fractionally better diagnoses, there are simply less resources available for the greater good. The consequence of this will be an increase of medical spending across the entire country, albeit abstracted through insurance premiums. Of course with any type of spending increase, those at the bottom are always going to get hit harder than those at the top.

In the nineteenth century it would have been considered a medical luxury for one to have access to a drug like acetylsalicylic acid. Despite the comfort it could have provided to millions at the time, there were still costs involved in its production and thus it was generally administered only when absolutely necessary. As medical and technological advancements were made, the drug became cheaper to manufacture. Eventually it became readily available, albeit as something called Aspirin. This type of history is significant to our current predicament. Not all medicines can be made instantly available to those who need them. If politicians had a genuine interest in helping to solve the American healthcare debacle, they would be working to reduce healthcare costs. They would be ensuring that the costs of modern drugs were decreasing and becoming more accessible to Americans, much like Aspirin once did. They would not be instituting policies guaranteed to increase the level of medical spending under the false pretense that this will somehow result in better healthcare.

Any politician who would attempt to convince people that the intent of mandatory insurance is to put everyone on equal footing should have his or her motives severely scrutinized. The notion is both impractical and illogical. If we assume for a moment that every single American were somehow provided the exact same quality, convenience, and cost of healthcare, then we would also have to assume that not one other American (of over 300 million) would attempt to find a medical product or service even slightly better, more convenient, or cheaper. Of course human beings simply do not function in that way. This is why the tenants of capitalism, despite the flaws, are what drive a free society. Perhaps not surprisingly then, the bill also addresses at least one capitalist enterprise.

The healthcare act of 2010 curiously contains a provision for levying additional taxes against tanning salons. This is actually one of the mechanisms installed to cover the additional costs, albeit a seemingly small one. The idea behind the tax is that since tanning salons are unnecessary (according to the state) and increase the risk of skin cancer, then they should be taxed accordingly. The idea is actually quite logical; the higher the risk of adverse health effects, the higher the tax should be. But this is an extremely dangerous precedent we have permitted the government to set for itself. By what authority does the United States federal government have to dictate what is “good” for us, and what is “bad” for us? Moreover, who makes that decision?

While I personally believe a tanning salon is a ridiculous waste of money, many would say the same of a motorcycle. Many might also say that a motorcycle is far more dangerous; why not tax motorcycles in the same way? Statistically speaking, they pose a far more significant risk to riders than those of cars. What about the correlation of fast foods to obesity and diabetes, or perhaps the ratio of adventure activities to injuries, or promiscuity to pregnancy and disease? There is an almost never-ending list of causality in our world. It would stand to reason that within this government-controlled framework, any type of non-essential, higher-risk activity could be subjected to arbitrary government taxation in the name of better healthcare. If I had to guess, I would imagine tanning salons simply lacked the necessary lobbying power in Washington prior to the bill’s passage.

Allowing the government to be the judge and jury of what constitutes acceptable risk would lead to a nanny-state of unfathomable dystopian proportion. The United States was founded on the idea that people control their government, not the other way around. This basic concept is responsible for the entire western notion of democracy. But given the obvious dependencies we all have on healthcare, is it really so wise to promote a system that exploits this dependency in the name of better health? The Bush Administration made a case that it was necessary to forgo certain civil liberties (outlined in the Patriot Act) in order to remain safe from terrorists. These types of hollow promises in the name of security and well being run contrary to the American foundation of liberty. They exploit the fears and needs of Americans to promote policies that benefit others. The healthcare bill has is no exception to this rule.

I would completely agree that nobody in the United States, citizen or otherwise, should have to suffer unduly at the hand of a medical catastrophe. The country is far too wealthy and technologically advanced to accept such a subpar standard of human accountability and compassion. But at the same time, neither should any person be legally mandated, especially at the federal level, to provide private industry of any kind with his or her business. While about half of the country might still be convincing themselves that their party would never have led them astray, the reality is that in due time, the healthcare bill will prove to be far worse than having done nothing at all. We cannot have a system built upon financial risk mitigation whereby nobody loses and meanwhile expect it to become more affordable; it is a mathematical impossibility.

The basic misconception lies with people believing that smaller incremental costs are somehow better or cheaper than one lump sum. This might be true if we spread those costs out ourselves, but in reality, we just wind up paying substantially more for goods and services that we never needed in the first place. This is very similar to the idea behind gift cards that we explored earlier in the book. The more you abstract the cost of something, the less likely people are to consider the price, and the more wasteful they ultimately become. But that does not change the original cost of the good or service from existing. Rest assured, we do pay for those costs, as well as all of the administrative costs that go into managing them. They are merely abstracted into smaller monthly or quarterly payments.

continued in "Part VI: Practical Healthcare Proposals"
American Healthcare - Part VI: Practical Healthcare Proposals
July 1st, 2012 | View Post
After decades of poorly crafted medical policies, and between all of the civil discontent that has resulted from the passing of the healthcare bill, it seems reasonable to doubt whether the United States is capable of having a balanced, equitable, and practical healthcare system that all can agree upon. Achieving this type of balance presents a difficult puzzle for lawmakers. At the heart of the best working systems are simplicity, practicality, and accountability, none of which lawmakers appear to have any interest in discussing, much less attempting to legislate.

Before any other changes are adopted, I would encourage all Americans to urge members of Congress to repeal the Patient Protection and Affordable Care Act of 2010. It is important to note, however, that this should not be done to upset the left or appease the right. It should be done because it was poorly crafted legislation.

Constitutionally speaking, if Congress intends to create and enforce any type of federal healthcare mandate, an amendment should be properly made to the Constitution, ratified by the states, and executed, just as the process has required for over two hundred years. Neither the Democrats nor the Republicans have any constitutional authority simply to dictate such wide-stretching federal legislation. Even beyond the Constitution, it should be common sense that the legal empowerment of multinational corporations with a guaranteed marketplace will, among many other things, only help to ensure the expansion of lobbyists and special interest groups. This is sure to result in nothing but higher healthcare costs, poorer service, and an even less manageable bureaucracy. How can Americans possibly expect any level of impartiality between the various branches of healthcare while they are legally joined as one?

But it is not enough just to repeal the law. In parallel to the time it would take Congress to remove the legislation, there are several very simple and practical improvements that could be debated and readied for implementation across the country. Individuals have an incredible ability to control the direction of healthcare through the power of our capitalist market. While politicians might continue to remind us of how they know best in the matter, immediate and positive change requires nothing more than for us to be responsible and accountable, and to hold others to these same standards. But everybody must do his or her part.

First, and above anything else, it is important for our society to start an open dialogue on the differences between healthcare and health insurance. One of the dangers that this lack of understanding has wrought on society is that it removes the base principles of calculated risk from public discussion and debate. Politicians, both Democrats and Republicans, have long since capitalized on this and as of 2009, made the modern healthcare debate almost exclusively about insurance. Instead of discussing some base expectation or level of healthcare, as would perhaps be a progressive step for our society, they have instead debated whether or not people should be legally required to hold private health insurance. This has been paired with the notion that health insurance should be responsible for every single treatment we ever receive, regardless of how routine it may be. This whole idea is absurd in almost every respect and provides insurance companies with enormous powers and profits.

I would suggest to all Americans, particularly those who are self-insured, that they closely examine the true costs of their insurance package. Consider the monthly cost, the deductible, any copayments, and any percentage of care they are still responsible for beyond the insurance coverage (this can often be 20% or more). Compare that to what yearly medical costs have traditionally been, and many people may be surprised to learn how much they are actually spending just to visit the doctor a few times a year. As an alternative to a comprehensive health insurance plan, consider combining a catastrophic plan with a health savings account (typically called an HSA). Catastrophic medical insurance plans often come with relatively high deductibles that are neither appropriate nor practical for routine healthcare. They do, however, more appropriately embrace the fundamental idea of how insurance is mathematically calculated and is designed to function. Catastrophic plans are specifically intended to treat medical emergencies and more severe healthcare needs as they arise. Health savings accounts work very similarly to retirement accounts (such as IRAs and 401Ks), are available to anybody, and allow individuals to make yearly tax-deductible contributions of up to $3,050 (as of 2010). That is about the same amount of money one might expect to spend annually on a premium health insurance policy. Moreover, the money within the HSA can even be invested just like most retirement accounts allow for. But one of the key benefits to an HSA is that it provides the individual with the ability to manage and offset his or her own financial risk. In other words, if the individual happens to not require medical care over a given period of time, the money they would have otherwise spent on insurance is theirs to keep. This can significantly cut back on needless monthly expenditures and help individuals to save money. When the individual needs to pay for a medical expense, the money comes directly out of the HSA provided that the medical expense qualifies (as most do). Ironically, under the new healthcare law over-the-counter medications no longer qualify for this program without a doctor’s prescription. Why would the bill remove medical tax exemptions if its very purpose is to make healthcare more affordable?

Of course on the opposite end of the health insurance spectrum, many people enjoy absolutely wonderful benefits at a very low monthly rate through a company program. Although I am certainly in favor of individuals receiving these types of benefits, it is important to understand that this does not change the underlying cost of the insurance package. In these cases, the costs are simply defrayed by the company as part of an employee perk. If you are one of the millions that enjoy these top-shelf plans at a low monthly rate, take a moment to ask your human resources director what your monthly rate actually costs the company. Most people will be shocked to learn how much money is spent on them annually, regardless of whether or not they even use the coverage. These benefits might seem free to us, but the company is passing along the costs to their employees one way or another, be it through lower salaries, fewer stock options, or various other cost-cutting measures. This is also one of the reasons that companies are becoming increasingly inclined to hire contract workers instead of permanent employees; the costs associated with acquiring new employees is simply getting too expensive.

Although individuals can take it upon themselves to more responsibly manage their own healthcare coverage, government does need to play a role in helping to ensure sufficient facilities exist. A practical Congressional measure would be for the federal government to provide incentives (as opposed to mandates) for cities and states to ensure the 24-hour operation of minor care centers. These centers could operate as stand-alone facilities, or to be directly connected with local hospitals. Much like my personal experience with the motorcycle accident, the twenty-fold cost differential was a result of the hospital preparing to admit me into a full trauma room. Whether one has been seriously injured, or merely nicked their finger with a kitchen knife, many hospitals will admit the patient to a facility capable of providing the same high level of care. Of course, hospitals also come a premium rate. Any trained medical professional should be able to judge, within reason, what type of medical care a patient is in need of. Opponents of that idea will argue that the decision can be ethically wrong and could potentially jeopardize the care of a patient. But this counter-argument is essentially the same thing as suggesting everybody should be entitled to the best medical care possible, all of the time, regardless of the circumstance; it ignores certain boundaries and practicalities that the real world is forced to operate within. Moreover, in all medical cases, doctors are constantly required to take calculated risks for the well being of their patients. They use the information that they have gathered to make the most effective medical judgments possible. Why should this be any different with respect to the type of facility a patient is admitted to?

It is also worth considering how in the absence of this system, insurance companies can more easily assert their grip on medical costs. In reality, when the need for medical care arises, people rarely have the convenience of “shopping around” for a better deal; they are likely in need of immediate care. Provided the patient is insured, neither the hospital nor the insurance company has much incentive to try and keep costs low.

Another necessary component for establishing sensible healthcare policies is to remove the financial abstractions from within the medical marketplace. It is important to understand that those needing medical attention are customers, however unfortunate their circumstances may be. As customers, they will undoubtedly receive a bill for any treatments they receive. I would strongly advocate the government mandating that doctors and hospitals be required to provide all costs up front. Although I generally reject mandates on principle, this type of mandate in no way affects the private dealings of the market; it simply provides the consumer with information that they are already legally entitled to be provided.

I have heard it argued primarily by those in the medical field that it is simply too difficult to know what medical attention will cost before seeing a doctor, and therefore unreasonable to predict estimated costs up front. This is the primary reason why medical costs are typically not disclosed before service. However, this whole idea is baseless and falls somewhere between arrogance and conspiracy.

There are few service-based industries in the entire world whereby the service provider knows exactly what up front costs will be involved. And yet, in every one of these industries, the business is still expected to provide a cost estimate. For example, if you consider something as commonplace as having a vehicle diagnosed by a mechanic, how could they possibly be expected to know how long it will take, or exactly what types of tests they would to run? There are simply too many unknowns. This is easily solved by basic communication. There are certain costs that are provided to the customer up-front, and the rest are approved as progress is made. This is not a difficult system to understand, and yet we are made to believe that it is somehow an incalculable operation on the part of most medical facilities. Interestingly, dentists and veterinarians are able to provide accurate estimates before treatment.

Aside from it being too difficult, another counter-argument that will arise is that the medical industry has a unique moral responsibility to their patient. The claim is that, after all, how can anybody put a price on the wellness of a human being? That sounds nice, but it also tends to blind people from the reality that the medical industry is a business and will put a price on that aforementioned wellness, even when the industry attempts to form an argument to the contrary. It is therefore only reasonable that they be held to the same consumer business standards that any other industry would be held to.

This alleged moral responsibility would be a much more reasonable claim if we adopted a healthcare system whereby all costs were fully covered or reimbursed. In that case it might not make sense to ever disclose costs to the patient. But that is only because they would truly be a patient, and not a paying customer. Of course that model does not exist within the country, nor is it practical for the obvious associated costs. Consequently, so long as the United States healthcare system continues to operate as a private industry (which I anticipate being the case), then like all other private industry, it should not be exempt from having to provide the customer with the associated costs before they are incurred. In the absence of this, there is simply no mechanism in place for even the most basic of checks and balances to exist. Medical practitioners, hospitals, and insurance companies are free to manipulate the bill without ever even involving the customer. Incidentally however, the customer is still the one responsible for this bill.

Still, doctors and other medical professionals do have one very valid reason for arguing why they must provide the most comprehensive medical care to all patients, regardless of any costs, and that is due to medical malpractice. Medical malpractice lawsuits have steadily escalated for years throughout most of the most of the United States and as of 2009 were responsible for over $30 billion in litigation alone. As a direct consequence, doctors spend tens of thousands and sometimes even hundreds of thousands of dollars annually on insurance policies protecting them against malpractice lawsuits. Naturally these costs are indirectly passed onto the patients through more expensive billing and other service cost increases. But the problem is not as simple as just paying for the doctor’s insurance premiums. Because doctors want to avoid being sued in the first place, and certainly want to have a defense for when they are, it winds up being in their personal interest to run every medical test conceivably possible. This often results in patients receiving expensive and unnecessary tests from state of the art medical equipment. While some more advanced screenings can undoubtedly detect malignancies that doctors perhaps would not be able to on their own, the increased chance of detection is generally insignificant when contrasted with the significantly higher costs that will be billed to insurance. In other words, a ninety-five percent accurate diagnosis at the cost of one dollar is more useful than a ninety-eight percent accurate diagnosis at the cost of one hundred dollars.

Those interested in reducing the quantity and variety of claims arising from medical malpractice are generally said to be seeking tort reform. Although the term has been received more attention in Congress over recent years, it is not always made entirely clear what tort law is and why the reforming of it could be beneficial. Tort law is simply the branch of law within the United States (and other common law countries) that involves a breach of a civil duty owed to someone else. Plaintiffs of such suits are generally seeking some type of monetary damages from the defendant or defendants. Each of the sub-branches within the scope of tort law has their own criteria that generally must be shown in order to prove a breach. When people are said to call for tort reform within the medical industry, they are usually implying that the criteria needed to show medical negligence should be modified so that frivolous claims are less likely to occur.

In 2003, the State of Texas created legislation to reform medical liability laws in an attempt to address the growing problem. That same year, medical license applications across the state rose from 2,561 to 4,041, an increase of almost 58%. This statistic is relevant in illustrating at least one of the direct benefits to having some type of tort reform. Unless we assume doctors began migrating to Texas just for the opportunity to practice medicine more carelessly, the unprecedented yearly increase shows how negatively our current legal system affects doctors. The State of California actually began addressing the problem as early as 1975 by passing the Medical Information Compensation Reform Act, otherwise known as MICRA. The state’s legislation, which is very similar to what Texas adopted in 2003, placed a number of fiscal caps on damages from medical malpractice suits.

Opponents of tort reform argue that increasing the burden of proof for medical negligence, or capping compensatory damages may not hold as many medical practitioners properly accountable for negligent acts. Statistically speaking, this is very likely true. Assuming that it were more difficult seek damages, or less lucrative for lawyers to pursue them, common sense would suggest that there would be less claims filed, and consequently more legitimate claims not investigated. But this is the type of balancing act that we need to consider very seriously. Nobody wants to see truly negligent claims wind up unresolved, nor should doctors be protected from the consequences of such incidents. But by not amending the very broad definition of negligence that medical practitioners can be sued for, we are only further jeopardizing our own healthcare system. So long as we continue forcing doctors to hold expensive insurance packages as protection from all too common frivolous suits, we can expect patients to continue paying for this through higher costs. Medicine is a science, and like all other sciences is not perfect in its application. It would benefit us as a society to comprehend this and to frown upon those who would seek to exploit minor mishaps for their own financial gain. Although it would take the leadership of Congress to actually begin drawing these lines, doing so would be to benefit of all society.

Finally, the United States needs more doctors. One of the simplest ways to address this problem would be for the government to create an incentive for students to seek a medical degree. A program like this would give students a full-ride through medical school. In exchange, they would be required to dedicate at least seven years of professional work to an accredited hospital as a general practitioner. Once this time period had expired, they would be free to practice medicine however they saw fit. This kind of reciprocal arrangement could be structured in any number of ways. For example, medical facilities could be granted full or even double tax deductions for privately establishing and managing the programs. Alternatively, debt-forgiveness programs could also be put into place. Once doctors completed their state obligation, their education debt would be forgiven in full. This latter type of program could be further administered through bonds, thus ensuring it remained solvent. However the funds were distributed, saturating the market with new waves of doctors would only help to reduce the increasing cost burden of healthcare. It would also have the ancillary benefit of not burdening students with an otherwise unmanageable level of debt.

In the years since I was involved in the motorcycle accident, I have had the pleasure of sharing my experience with hundreds of individuals from varying political and economic backgrounds. As a result, I have heard a wide range of responses to the situation I was in. Some have told me that my decision to leave the hospital was foolish, that I am not a doctor and should not have presumed to know the extent of my injuries. Others have told me that this was a sound decision and that if I was coherent enough to be mindful of the ensuing costs, then I was fully capable of determining where and how I should receive medical attention. But across the spectrum of responses, I have been consistently pleased to hear people express disgust for the situation and commend my effort of sticking to a principle amidst legitimate personal turmoil. I suspect that encouraging people to potentially jeopardize their own well being in order to make their point heard is generally frowned upon. But how else is a free society able to change its ways if it is unwilling to take action during difficult times? Anybody can succeed in favorable times. It is how we handle bouts of adversity that define us.

There are likely hundreds of simple and practical ideas just like those in this section that could be implemented in relatively short periods of time to help strengthen and improve the healthcare of the United States. But one thing is for certain, so long as the health insurance companies, pharmaceutical companies, and politicians remain in cahoots, the price of healthcare will unquestionably continue to rise. Americans should not expect this type of behavior is going to be changed just on good fortune and happenstance, nor is the drive to increase profit margins likely to disappear.

The United States was founded on the idea that people should not have to sit idly by and merely hope for the best. They reserve the right at all times to stand up and demand change. And when that fails, it is the responsibility of every American to take action and to stand up for the collective good of the entire nation. The rich must enable the poor, the educated must defend the illiterate, and those who can lead must speak out for those who cannot. If the American people would be willing to stand up for what is right and refuse to participate in systems that so clearly favor corporate and political interests, that collective will would be virtually unstoppable. This is how the healthcare system of the United States will return to greatness, not by playing the victims of special interests and expecting politicians will dictate what is right.