Critique of the US Healthcare System

In the US, we have a mix of a private, employer-sponsored and a public, government-sponsored health system.  Regardless of what people believe and say, in the US we already have a >50% socialist healthcare system.  Medicare/Medicaid, the government sponsored "health insurance" provided to the poor and elderly, is already the largest health insurer in the country.

Capitalism Is Regulated Out of Healthcare

Free market capitalism is simply not functioning in the US.  Hospitals and physicians are regulated out the wazoo with regard to what they can and can't do.  Here are some basic capitalist, free-market ideas that don't work in the US:

• Doctors have no pricing power (i.e. Health insurance companies set the prices doctors can charge for visits and procedures.  If a doctor charges more, a health insurance company simply won't pay.)... could you imagine being in business, but not being able set the price on your own products and services?
• Doctors can't give commissions to other doctors and hospitals that send them patients... can you imagine being in business but not being able to pay a sales person a commission for a new client referral or for making a sale?
• Doctors can not refer patients freely to practices and hospitals they have a financial interest in (see self-referral regulations)... can you image owning a paper company and an envelope company, but not being allowed to sell paper to your envelope company?

Socialism Can Not Be Morally Eliminated From Healthcare

Relative to other industries, there is something fundamentally different about healthcare.  Even if we could do away with the social elements of our healthcare system currently reserved exclusively for the poor and elderly, the American people simply would not support a pure capitalist motive in healthcare.  Can you imagine doctors refusing to help injured people that can't pay?  What would we do with all the 80 year olds that are falling apart... throw them out on the street? 

Clearly, since the high costs of healthcare are directly related to pain and suffering and life and death, the psychological evaluations of value and profit that apply to most business seem wildly at odds with the business of healthcare.  Obviously a blank check for any healthcare procedure would bankrupt the system, but at the same time, I don't think anyone wants Wall Street bankers deciding if a procedure is justified or not when it comes to their family's health.

Without Centralization The System Is Doomed 

In short, the hybrid socialist-capitalist healthcare system in the United States creates confusion for healthcare providers and patients.  I don't think anyone wolud argue that the relationship that ultimately matters the most in healthcare is the that of clinicians interacting with their patients.  Unfortunately, this relationship is interfered with, regulated, and controlled by large institutions.  Without centralized control, nobody takes ultimate responsibility for the health of the system:

• Doctors don't want to pay for improved infrastructure because they can't raise their prices.  Thus increased overhead (even in the name of higher quality care) equals less money in a doctor's pocket.
• Health insurance companies don't want to invest to improve health because they are currently more focused on reducing the number of procedures in order to maximize profit (i.e. collect as many premiums as possible, but pay as few claims as possible).  If overall population health improved, the cost of care would decrease and premiums would naturally follow suit.
• Hospitals don't want to improve community health because less hospital visits and procedures means less money for them (i.e. hospitals only get paid when you are admitted or have a procedure done, not when you are healthy)
• Suppliers like pharma and medical surgical companies try to develop blockbuster, multi-billion dollar, super expensive products to allow them to extract as much profit as the system can possibly bear.

Costs Are Out Of Control

There is absolutely no argument that the costs of the US healthcare system are completely out of control.  Healthcare expenditures in the US in 2005 were $2 TRILLION, which accounted for approximately 15% of the US gross domestic product (GDP).  It is currently projected that healthcare expenditures will reach $4 TRILLION by 2015, or 20 percent of GDP. 

The rate of expansion in US healthcare expenditures is not sustainable and will ultimately bankrupt many business and possibly the country.  According to some statistics, the cost of healthcare for General Motors already accounts for more of the price of a car than the cost of steel!!

The per person cost of healthcare in the United States is far more than in any other country in the world (see the chart to the right).  You would think that since we are spending all this money on healthcare, that our health system would be head and shoulders above that of other countries... in some respects it is, but unfortunately according to other measures it clearly is not (see quality of care discussion below). 

Perhaps the biggest victim of the hybrid US healthcare system is the US taxpayer.  It is not widely understood that the government (i.e. Medicare) is already the largest health insurer in the country.  It is also not widely known that the Veteran's Administration (VA) is the largest hospital system in the country.  Unfortunately, despite the scale of the government's healthcare operations, the republican led congress passed laws that forbid the government from using its scale to negotiate price with pharmaceutical companies.  Can you imagine if Walmart was prohibited from negotiating price with any of its suppliers!  The ultimate result is that the US taxpayer absorbs these higher costs.

Quality Of Care Is Terrible

While we may have the most advanced medical devices, surgical equipment, medicines, x-rays, lasers, etc.  the quality of care we receive in the US is below par.  Infant mortality rates in the US are worse than in several third-world countries.  Over 100,000 people a year die from medical mistakes each year in the US... this is more deaths than from acts of terrorism, car accidents, and some forms of cancer.  In other words, just going to the hospital in the United States puts you at risk of being killed.

Clinicians Are Not Properly Incentivized

Everyone wants the smartest, most talented doctors possible to treat them.  However, the current healthcare system is discouraging intelligent, caring individuals from becoming physicians.  Here are some issues that give budding physicians pause when considering a career in medicine:

• Medical school debt is suffocating: The average physician leaves medical school with ~$130,000 of educational debt
• The threat of malpractice litigation is always hanging over your head:  Almost every physician is always just one frivolous lawsuit away from never practicing medicine again.
• Cost of malpractice insurance is prohibitive: The average annual malpractice insurance premium is $19,000 per physician
• Physicians that keep their patients healthy (and away from hospitals) are not paid more

Patients And Citizens Are The Biggest Losers

Patients are always complaining that their doctors don't give them enough attention or don't really care about them.  Unfortunately, since healthcare costs are increasing across the board, but payment to doctors by health insurance companies are actually declining, doctors need to see more patients that ever just to make the same salary they made in the past.  In addition, health insurance companies have raised the paperwork bar and are constantly refusing to pay many claims.  This paperwork burden is being absorbed by doctors who have to hire more people to deal with the extra run around.  Unfortunately, the patient is the ultimate loser because doctors have less and less time than ever. 

The fundamental question we need to ask is do we really want doctors to be businessmen?  40% of the physicians in this country are in private practice and ~70% of doctors are in practices with less than 10 physicians.  Shouldn't these physicians be exclusively focused on providing the best possible quality of care to their patients? 

Unfortunately, each private practice is a small business that has to reinvents the operational process of the business of healthcare.  Have you ever noticed how many administrators are in a doctors office? I believe the average ratio is almost 1:1.  Just think how refreshing it would be to walk into a doctors office that was exclusively focused on clinical issues rather than collecting payements and processing claims.