What would a capitalist health CARE system look like?
Lets forget all the rhetoric about ObamaCare, socialism, and death panels for a minute and think about designing a health care system from scratch. What should the goal of the health care system be? Ultimately that goal should be to produce the best health, for the most people, at the least cost. Before dismantling our own health care system it would be wise to evaluate how it performs in relation to those goals.
Evaluating health is complicated but at its most basic level the goal is to keep people from dying. To keep things simple, therefore, lets look at life expectancy. America ranks #37 in life expectancy, at the very bottom of developed nations (defined loosely as North America, western Europe, Japan, Australia, New Zealand, and Israel). We are the only developed nation without universal health care, and the one health metric where we rank #1 is how much we spend on health care. In short, we end up with the worst health, provided to the fewest people, at the highest cost. Quite the opposite of our stated goal, and thus discussing ways to improve it seems like a worthwhile exercise.
As a baseline we should consider what life expectancy might be if almost nothing was spent on health care. Guatemala ranks #111 in health care spending with $308 per year. They also rank #112 in life expectancy with an average of 70.3 years. This will serve as our model of a country with almost nothing spent on health care but without extenuating circumstances such as war, famine, untreated disease, and other types of instability. What does the US, who spends $7,164 gain for all that money? An extra 7.9 years at the cost of over half a million dollars. In fact, we spend over $68,000 for each of those extra years. Of course we don’t want to reduce our life expectancy, and so we wouldn’t want to emulate Guatemala no matter how cheap it is, but can we do as good or better than we do now without spending so much?. Lets look at another developed country. Japan is #1 in life expectancy at 82.7 years but #24 in spending at $2,817. They live 4.5 more years than we do while spending less than 40% of what we do. The extra years that they live relative to Guatemala costs them about $17,000 each, that’s about 25% of what OUR extra years cost us. Israel does even better getting their extra years for less than $13,000 each. If 36 countries can provide longer life expectancies for far less money than we do perhaps it is time to ask what has gone wrong with health care in America.
In the recent debate over health care reform the most recent legislation has been derided as a socialist reform. The current system, therefore, could be assumed to be the capitalist alternative and yet it has resulted in the absolute least efficient health care on the planet. Capitalism is supposed to lead to efficiency right? Many will argue that health care is a right, or a public good and should not be run for profit. That capitalism has no place in health care. I disagree. I contend that this cognitive dissonance results NOT from a failure of capitalism but by its complete absence in our existing health care system. After all, in our system, providers profit when people are sick and to an insurance company every health care procedure they pay for is a loss on the books. The only incentives in the system lead to poor health, more cost, and less health care. This is almost a worst case scenario for the concept of perverse incentives.
So what would a capitalist health care system look like? For the time being let’s forget about insurance, which is better defined as a way to pay for health care and not a key component in its quality. Based on the principles I laid out under the definition of capitalism we can say first that consumers should have a choice of health care providers (doctors, hospitals). Second, patients (consumers) should have access to the information they need to make the best possible decision about what doctor they should choose. Third, the providers should be competing for patients based on their ability to provide the best health for the least cost. This is the basis of an efficient health care system based on the principles of capitalism.
One could argue that we do have a choice in providers, although the counterpoint is that too often that choice is restricted by our insurance companies. Our insurance companies are generally chosen for us by our employers who have different goals than we would for making that choice. Anyone who has ever had the experience of taking a new job in a new town knows that choosing a new doctor starts with the list of doctors approved by the insurance company that their employer chose for them. This restriction in choice has to result in inefficiency.
We live in a world of information and if you have access to the internet you can find reviews on everything from blenders to doctors. This is a huge boon for capitalism and one reason I am optimistic for our future. On the other hand, most reviews are pretty subjective and negative reviews are more common than positive reviews. A patient is much more likely to write a review if they are angry than if they are satisfied. Evaluating doctors should include both subjective and objective data. The bedside manner and patient experience (subjective) are important and should not be discounted, but equally important are hard data on the doctors performance which is lacking. One possibility would be a systematic reporting system required of doctors and highly encouraged for patients, perhaps with financial incentives. After all, the better information patients have, the more efficient (less costly) their health care will be in the long run.
Of course not everybody has the time, energy, knowledge, or ability to crunch a lot of numbers and to help them make the best decisions there might be a role for something along the lines of a health care consultant. These would be independent entities who would be evaluated solely on their ability to get the best health care for the least cost for their patients. They would not be doctors, who would specialize in the actual diagnosis and treatment of disease, but they would have enough medical knowledge to give decent advice. They would also be familiar enough with the local medical community that they could provide good recommendations for. They would also not be, or work for, insurance companies and HMO’s with a perverse incentive to deny needed care. They would also not be required but would be available as knowledgeable experts a patient could hire to advocate for their best interests with doctors, hospitals, and insurance companies.
The idea of a patient advocate invites comparisons to lawyers. I hesitate to make this comparison because lawyers have a terrible reputation but on the other hand, if you find yourself in legal trouble you are far better to have the best one that you can afford on your side. On another note lawyers are paid on a performance basis. Their results are public knowledge and the ones that have the best results can charge the most money. This is an example of true capitalism at work and makes our legal system one of the best in the world, which clearly cannot be said of our health care system. While it is true that our legal system clearly benefits the wealthy, as does our health care system, even the poorest defendant has access to legal advice, which is not the case for health care. The bad reputation that lawyers have is due largely to the possibility that they can be used to attack someone as well as for defense and this possibility would not exist for patient advocates and thus it is unlikely they would end up with the same reputation that lawyers do.
The third principle is the one that is most egregiously violated. There are certainly many, many providers who do their best every day to provide the best health for their patients, but they have to fight against insurance companies to do it .Doctors expect to, need to, and should be paid for their effort, but there is very little financial incentive for them to spend time reviewing a patients history, listening to their concerns, or conducting research. A basic principle of capitalism is that we can not, and should not rely on altruism and good will. What we need is to ensure that a health care providers self-interests are lined up with societies self-interests. This means that the better health care they provide the more money they make. In our current system if a doctor wants to be paid they need to play according to the rules set up by insurance companies and thus their incentive is to compete on the basis of who can best play the insurance game, rather than who can provide the best health care.
If you are beginning to sense a trend that insurance companies interfere with all of the principles of capitalism then you are paying attention but enough for now. We’ll discuss insurance at another time. In summary, a capitalist health care system would be one that treats doctors as producers and patients as consumers. It would try to maximize the choice of doctors, maximize the information that patients have and the tools they have to make good decisions, and ensure that competition was among doctors to provide the best health care because that would be what determined how much money they made.
VerbalEconomics 