Of all the things we might do to improve our
health care system, the one reform that is more important than any other is
almost never discussed.
It is ignored by Republicans. By Democrats. By
the experts. By the think tanks. And by just about everybody who has an opinion
on health policy.
Here it is: If we want the system to work
well, we must make it profitable to take care of sick people.
Profitable to whom? Profitable to everyone
whose services are needed. To doctors. To hospitals. And most important of all,
to the “third party payers”: insurance companies, employers and government
agencies – the entities that initially control all the money.
The idea is not new. Almost 250 years ago,
Adam Smith observed that the reason the free market works so well is that each
of us has a financial self-interest in meeting other people’s needs. The more
needs we meet, the more income we earn; the wealthier we become. It’s as simple
as that.
But in health care, we have done everything
possible to suppress normal market processes – year after year, decade after
decade.
We have suppressed the market so much that
there is no entity left that has a financial self-interest in caring for the
sickest patients with the most costly illnesses. No employer. No insurance
company. No hospital. No government agency.
It gets worse. Not only do we discourage
organizations from profiting by solving our most serious health care problems,
all too often we insist that they incur losses. That is to say, we make it in
the financial self-interest of organizations to run away from problems, rather
than solve them.
Employers have learned that if their health
plan is attractive to the sick, they will attract the sick. The remedy: the
typical employer plan today covers primary care with very little out-of-pocket
cost but charges the employee thousands of dollars for a hospital stay. The
implicit message: “If you plan to go into a hospital, you should probably look
for work somewhere else.”
Insurers in the Obamacare exchanges have
learned that the way to avoid sick people is
to make cancer patients and AIDs patients pay thousands of dollars for
specialty drugs out of pocket and to block access to the best doctors and the
best hospitals for any kind of serious illness.
Government programs are not immune. Medicare
entitles every healthy senior to a free “wellness exam,” which doctors say is
of almost no medical value. In contrast, a senior with an extended hospital
stay can face unlimited out-of-pocket costs. Medicare is far more attractive to
the healthy than to the sick.
Politicians, by the way, have two kinds of
payoff from the decisions they make: money and votes. Money not spent on health
care is money they can use to reward other constituencies. Within a normal
health insurance pool, about 5% of the beneficiaries tend to account for about
half of all spending in any given year. In a government-run health program,
that means that half the budget will benefit 5% of the voters.
The political incentives are to change that.
In every country where health care dollars are allocated through the political
system, the temptation is to take from the small number who are really sick and
spend it instead on the very large number who are relatively healthy.
That’s what happens in Medicare. It’s also
what happens in the Canadian and British health care systems and in other
countries with national health care programs.
So, what would the health care system look
like if we based it on the insights of Adam Smith?
Cancer Treatment Centers of America, to take
one example, would enter the individual market. It would advertise and actively
seek enrollees who have cancer. It would do that because CTCA would receive a
premium for each patient that covers the expected cost of their care.
CTCA wouldn’t be alone. Other centers of
cancer care excellence would also enter the market and actively seek patients.
Costs would come down, quality would improve and access to care would get
better – not because of government mandates but because of free market
competition.
Could there be a real market for patients with
cancer, diabetes, heart disease and other chronic conditions?
One already exists.
More than one-third of seniors on Medicare are
participating In the Medicare Advantage program, which gives them access to
private coverage – similar to the health plans employers offer. Seniors
pay community rated premiums, and no one can be penalized because of a health
condition – just like Obamacare. But unlike Obamacare, special-needs plans that
attract high-cost enrollees receive risk-adjusted additions to the standard
premium to cover the extra costs of their care.
As a result, health plans in this program
actively seek out high-cost patients, instead of running away from them.
Risk adjustment in Medicare Advantage is done
by Medicare itself. That means, it is done by the federal government. And like
all government programs, it is far from perfect.
However, economist John Cochrane has
shown how we can have market-based risk adjustment without government
involvement and I have expanded on this idea in a Goodman Institute Brief Analysis.
These ideas were actually incorporated in the Sessions/Cassidy health reform bill.
Some readers may wonder how the reforms
proposed here fit in with the very common notion that there is too much greed
in health care.
The greed that exists today is the wrong kind
of greed. Today’s greed is directed at maximizing one’s take from third-party
reimbursement formulas, avoiding sick people, shifting costs to sick people and
denying them care.
Adam Smith would have understood all this. In
almost every case, perverse incentives are created by unwise government
regulations.
https://www.forbes.com/sites/johngoodman/2019/06/13/the-most-important-health-reform-of-all/#7e0535924c2a
No comments:
Post a Comment