US health care's chronic condition

Health care in the US is a mess – everyone agrees about that. The question is how best to clean up this mess. Should we copy the Canadian model? German? French? British? As George Halvorson and George Isham argue in “Epidemic of Care,” what many don’t seem to realize about these health systems it that the majority entail central government ownership of hospitals, turning physicians into government employees, etc. – basically, what would be the greatest nationalization in the history of the United States.

Some are more possible than others, like the German model, which allows for citizens to choose a health fund, which then receives a premium from the government to provide all health care. This is similar to what gun-toting, church-going, American-pie eating Hillary Clinton fought for in the 90s.

But do we want a single-payer system? I won’t say empirically yes or no, but I will say that I think it distracts from the real issues that cause the American government to spend more tax money per person on health care than the British government (and the British provide universal coverage).

The problem with US health care is not who is paying the bills.

One of the most basic problems with American health care is that it is trying to do two things at once.

1) Provide health insurance by pooling risk to pay for care in case of any accidents or unforeseen developments.
2) Provide chronic care and high-cost procedures for patients with known health problems.

79-percent of health care expenditures was directed towards patients with at least one chronic condition in 1998; more than half of spending went to individuals with multiple chronic conditions.

With this population, “insurer” is a misnomer. They are payers, be they public (Medicare, Medicaid) or private.

The market can do a good job providing health insurance because risk is actually pooled.

The introduction of the chronically-sick changes the game from pooling risk to simply pooling money. And as we’ve learned from the Social Security, there is nothing magical about pooling money – you get what you put in. The introduction of the "sick" population to the "healthy, but might get sick in the future" only drives up premiums in what amounts to a redistribution of income from the healthy to the sick.

I don't think there is anything implicitly wrong with that (though I don't want to pay for millionaire medication...), but clearly the government is better suited for economic redistribution than the private sector.

To further illustrate the health care split, only one-percent of patients encompass 30% of health care spending; 70% of the people encompass only 10% of total spending.

Heart transplants, dialysis, kidney transplants, etc. are the big cost drivers, and their relation to common health and lifestyle issues underscore the fact that the American health care crisis is profoundly behavioral.

Single payer systems accomplish both aims by making all citizens pay a higher premium by way of taxes to subsidize the chronic care while providing benefits not really in tune with the needs of the healthy 70%. It’s a compromise they are willing to make, and their large and active governments are well-suited to own and manage hospitals, employee physicians, etc.

The American model has clearly been a disaster, as it attempts to accomplish (1) and (2) partly with government programs and partly with private payers, with no delineation of responsibility or authority. The end result is a big game of cost-shifting, which runs both ways.

What’s the solution?

I’m not quite sure. The major problem is that chronic conditions are unbelievably expensive to treat, and while we know how individuals can minimize their risk for most conditions, we don’t know how to MAKE them do so. (Should Medicaid be handing out Whole Foods vouchers? Gym memberships)

I think the most important takeaway though is that there are two different problems. The more glaring is the healthcare system itself, which is overregulated, underregulated, and provided with a series of perverse incentives – yet, for most people, it really does an adequate, if not better job, and the changes being made are certainly going in the right direction. We’ve come a long way from the 80s.

The bigger problem is the population who live unhealthily. Rather than Universal Coverage or Single Payer, I think the more sensible rallying call would be for funding the heck out of Medicaid and instituting creative plans to minimize the unhealthy behaviors.

Again, I’m open to a single payer system (I’d take it over what we have now), but I think we’d be better off with a state “care” plan for the sick and those prone to sickness, and a separate insurance industry for healthy individuals for protection in case of emergency.