UNITED STATES HEALTHCARE PROBLEMS AND SOLUTIONS
THE EXISTING SYSTEM AND PROBLEMS
Uwe E. Reinhardt, the Princeton healthcare economist, spoke at ECH 30 years ago. He said, "in your most drunken moments, you could not invent a more bizarre and byzantine healthcare system". The humor in this is the truth in it.
Our healthcare system is flailing because provider financial incentives are misaligned and encourage doing things rather than preventing problems. Hospitals get paid for filling beds and doing procedures. Physicians get paid for their volume of work, seeing people, prescribing, operating. The fragmentation of providers results in unnecessary competition, duplication and delays, in costly inefficiencies and medical errors. On top of all this, to be successful, for-profit insurers depend wholly on charging more and delivering less care.
We spend more than twice the average for all developed countries for healthcare. (World Bank 2017). The following figure shows how much of an outlier the U.S. is compared to other developed nations. And the divergence is worsening. We have failed to provide adequate value in the largest sector of our economy at a time when there is such great need in other areas.
Healthcare in the U.S. is the world's best for those who have access to it. That said, the major problems are:
It is almost all for profit, which generates good returns for shareholders, but contributes to making healthcare expensive and difficult to obtain, especially for those who need it the most: those with pre-existing conditions. Socialized medicine is stigmatized, but Medicare can only be described as such, and is highly successful.
Profit is the difference between premiums paid and payments for care. Precise administrative costs for Medicare vs private insurance is subject to debate, described here in the Politifact online resources.
Medicare administrative costs are estimated in the 3-4% range, and private insurance 16-20% range. Savings from a single payer system has been estimated at $383 billion to $500 billion per year in the article above. Running an insurance company like a business means denying care or charging very high rates for those with pre-existing conditions, having very high deductibles and capping lifetime payments.
Pharmaceutical profits contribute to high healthcare costs, especially with restriction on governmental programs negotiating better drug prices.
Fee for service payment systems encourage more service, more visits, more tests, and more care, not always better care. Doctors’ groups set up scanners next to hospitals to compete for reimbursement for these services, and the same is repeated for laboratory tests, outpatient surgery centers, cardiac testing, etc.
Solutions should correct root causes, and the principles be clearly defined. I believe those principles should be:
All Americans have a right to essential healthcare which should not only be for profit.
National medical costs should be capped. We already spend more per person than any other country .
Incentives should encourage managing population health through prevention, early detection, and prompt service, and reimbursement be on a per person per year basis, not based on volume of services (fee for service)
There should be competition in the healthcare market on a level playing field, based on process, outcomes, satisfaction and costs. With the same per person revenue, who can provide the best outcomes and satisfaction? Profits will depend on efficiency, good service and good medical management.
Whether there is a single or many payers is a political question; the fewer the number of payers, the more streamlined and level the playing field.
Many needlessly fear Canada-like waiting times. They would not have those waiting times if they spent twice as much as they do now, which would still be less than we are spending now. Satisfaction will be achieved through free market forces, and robust competition by large integrated providers.
This may sound near impossible to achieve, given the obvious opposing political and financial forces, but it is what is needed and it is what is best for the country. It has been achieved in most other developed countries. It is being implemented in parts of the United States. Americans deserve and should demand this.