The Atlantic, September 2009

atlantic september 2009David Goldhill’s piece about health policy identifies the main problem with the current US system as health insurance.  Not the fact that so many people lack health insurance, or the way health insurers operate, or any of the usual complaints, but in the sheer fact that Americans pay for health care primarily by means of health insurance.  Goldhill argues that this payment system strips patients of the ability to make informed decisions about their own care, subjects health care providers to a regime of incentives that are unrelated to the rationality of the marketplace, and inflates the costs of health care to unsustainable levels.  Goldhill proposes a far-reaching plan to replace this system. 

Under Goldhill’s plan, the government would operate an insurance plan that would provide coverage to every American who faced catastrophic health care expenses; that plan would, in time, “ultimately replace Medicare, Medicaid, and private insurance.”  It would pay only for genuinely catastrophic expenses.  Goldhill acknowledges that it would be difficult to define the limit of “catastrophic,” and discusses various dollar amounts that might be used as a cutoff.  Perhaps a percentage of national median income would be a better determinant than any absolute number of dollars, but Goldhill doesn’t bring that up. 

The second part of Goldhill’s plan are Health Savings Accounts.  Already in existence, these tax-sheltered accounts would under Goldhill’s plan be mandatory for all Americans, and would be the source from which virtually all health care would be paid.  Goldhill proposes that the government should subsidize low-income Americans with direct payments to their Health Savings Accounts, so that everyone would have at least as much money in his or her Health Savings Account as any patient would likely be able to claim from Medicare or Medicaid today.  The difference is that under Goldhill’s system, the patients themselves would be the ones writing the checks to health care providers.  The providers would then have to compete for patients.  That competition would take the mystery out of health care prices, and would give health care providers an economic incentive to keep prices down and quality of service up. 

Goldhill’s system would also give health-care providers an incentive to adopt best practices, breaking down resistance from entrenched stakeholders.  As an example of such resistance, Goldhill opens the piece with the story of his father’s death from a hospital-borne infection in 2007.  Remarking that about 100,000 Americans die of hospital-borne infections annually, Goldhill brings up Dr. Peter Pronovost, who has developed a checklist of simple disinfection procedures.  Hospitals which have adopted Dr Pronovost’s checklist have seen deaths by hospital-borne infection decline by about 2/3.  Yet most hospitals have refused to adopt the checklist, backing down in the face of doctors who are offended that anyone would suggest they need to be reminded to keep clean.  Goldhill closes the piece by asking us:

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?

I think Goldhill’s piece is a fine illustration of the points I tried to make in my post below.  In a highly bureaucratized society, we tend to think of freedom as a particular kind of relationship to bureaucracy.  We might say that we want to be free, when we mean that we want to rebel against bureaucracy and disengage from a bureaucratic system.  We might say that we want to be free when we mean that we want to enjoy some benefit produced for us by an efficient bureaucratic system.  Or we might say that we want to be free when we want to express ourselves by navigating a unique path through a bureaucratic system and working within that system to change the way it operates. 

Under Goldhill’s system, patients would pay for their own routine care, and health providers would compete for patients’ business.  This would certainly count as a rebellion against and a disengagement from the bureaucracy of health insurance companies.  

Every American, regardless of income, would have the ability to participate in this system.  That would be a benefit produced by an efficient bureaucratic system that would collect taxes, and an equally efficient bureaucratic system that would disburse tax receipts to low-income individuals. 

Health care providers, freed from their own dependency on insurance company bureaucracies, would no longer be restricted by the need to fit into the artificial requirements created by the economic irrationality of the insurance system.  Instead, they could introduce any innovations that sound medical judgment suggested and that the market would bear.  Thus, the fading of insurance bureaucracies would accord health-care professionals greater freedom to operate within their own bureaucracies. 

I have no opinion as to whether the USA should adopt Goldhill’s plan or not.  He acknowledges an enormous hurdle only on the last page:

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.

He has already warned of the unsustainable cost of the current system, comparing the growth of health care costs to the housing bubble and suggesting that America’s entire system of health care may soon collapse.  If that is correct, then a plan that will take generations to implement is not a realistic option.  A single-payer plan might not offer the same three dimensions of liberation Goldhill’s plan promises, but single-payer could be implemented within a few years and it could keep costs from spiraling out of control. 

On the other hand, Goldhill can point to some signs of “customer-driven care” springing up in the cracks currently gaping in the crumbling edifice of the insurance system.  Perhaps we might be able to find enough space in those gaps that we can build working models of the customer-driven system in the near term, perhaps big enough models to keep insurance costs from killing the economy before the reconstruction is complete.

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