Almost everyone agrees: healthcare reform is needed, and the call is loud and clear. Silently, decision makers have also agreed NOT to tackle the hard questions that must be answered before any of the debate can be settled.
Ultimately, the healthcare crisis is a simple case of limited resources and unconstrained demand. We might wish healthcare reform could simply be about caring for our fellow citizens, or developing superior science, or implementing uniform efficiencies. But it’s not.
We have limited time, money, personnel and equipment that can be assigned to this one part of life. And what we spend on healthcare will not be spent on education, housing, food, infrastructure, public safety, and a multitude of other very important priorities. But it is not popular to say that everyone cannot have everything.
What are the crucial questions?
Healthcare reform boils down to how we as a society choose to allocate and assign limited resources in the face of unlimited demands. In reality, resource allocation in healthcare is no different than allocation of other resources, except that it may be more emotional and the consequences of scarcity are more frightening and dire.
The essential questions that no one wants to mention:
- How much can we afford to spend as a nation on healthcare needs as opposed to other needs?
- How much can we afford to allocate (minimums and maximums) to any one individual/community or group at the expense of other needs?
- To what extent will we mandate taxes or fees for some and redistribute these resources to others?
- What mechanisms should we use to collect, distribute and deliver services?
- Are some types of care more valuable than others?
We cannot debate healthcare under the presumption that there should be unlimited resources for all.
The current legislative debate about healthcare includes more than the usual share of finger-pointing, blame-assigning, and scare tactics. Unlike some topics, healthcare affects every person and accounts for one in every six dollars we spend (1). Huge amounts of personal suffering, daily hassles, business interests and future careers are at stake.
Emotion and personal bias weigh heavily on this topic. Fear (founded and unfounded) arises easily here—and can easily be provoked. All sides have resorted to polarizing terminology to “ignite” their base against the evils of each side with statements that are false, misleading and inflammatory.
So, instead of dealing with the real dilemma of how to allocate scarce resources, we pretend that the problem can be fixed with one philosophy (single-payers will produce more effective treatments, price controls, and higher efficiencies) or another (private insurers will demand competition, squeeze out the fat, and advance care through investments in innovation). We argue about the potential disparities caused by government regulation on one side, or private insurance denials on the other.
Depending on whether you are blue or red, the threat is either greed or over-regulation; capitalism or socialism; win-at-all-cost attitudes or entitlement mentalities. Actually, the biggest threat is this: convincing ourselves that the math can work and we can all have everything we want in unlimited quantities.
So, you decide what kind of reform you want. All we suggest is that you start with the most fundamental questions. How much can we afford to spend on healthcare versus other life needs? And how will that resource get allocated to any given group or person? What is the minimum and maximum? Once you can make that choice, THEN decide who controls the money and the delivery of services.
Until we can honestly address the fundamental questions we are afraid to ask ourselves, the other issues are a convenient distraction.
Our opinion? Our data on healthcare spending suggests that too much is already being spent on healthcare, at the expense of other human capital needs (education and competitive wages as two examples). Every healthcare dollar is a dollar not spent in other ways.
Economists think of allocation of finite resources (for a person or a nation) based on maximizing the marginal utility. In their terms, efficient allocation happens when the value of the very next dollar spent—on anything, whether that is healthcare, food, education or roads—produces the greatest overall usefulness to the recipient(s). When individuals spend their own money, consumption reflects efficient choices reflecting marginal utility. However, when prices of one good are subsidized more than others, marginal utility is artificially high and consumers spend more on it.
When faced with wants that exceed resources, it is imperative that incentives be aligned as closely as possible with high quality, competitive pricing and innovation. This occurs most efficiently with fewer parties involved in a transaction. Consumers of those resources need a shared incentive to consume resources wisely, and providers of the resource need an incentive to compete based on quality and price.
The model for this is best achieved by assigning an amount of dollars to each person, which he decides to spend on his own behalf. This allows each person to define utility and value individually. One can argue where the dollars come from for people in need (employers, governments, other citizens). But our position is that resources should come in the form of dollars (or vouchers)—to be spent as desired—not services delivered and paid for by a third party. Providers should also be able to compete as freely as possible, allowing the types of break-through innovations not seen in highly-regulated environments.
Whether you agree or disagree with our position is not the point. First, we need consensus about how much we can afford to spend.
Why this matters: As reform legislation looms, it is time to face underlying choices that will shape future American generations. What burden are we willing to place on our grandchildren in the pursuit of unlimited medical care today? What other advances will we forsake in housing or transportation or science as we increase our spending on medical care to one in every four dollars? Let us be the brave generation that defined when “enough” is enough, sparking innovation in more cost-effective care, and enriched our society in other ways.
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(1) Keehan S, Sisko A, Truffer C, Smith S, Cowan C, Poisal J, et al. Health Spending Projections Through 2017: The Baby-Boom Generation Is Coming To Medicare. Health Affairs, 27, no. 2 (2008): w145-w155. (Published online 26 February 2008) Accessed August 15, 2009.
Your approach is completely rational and correct, Wendy, as long as you are King. Unfortuantely, many of your comments would be chewed up by the democratic process and the free press.
ReplyDeleteEconomic qestions like "(H)ow much healthcare is “enough” for a... person?" or "How much can we afford to allocate...to any one individual?" or "How much can we afford to spend on healthcare versus other life needs?" can only be answered as long as you're not talking about your own child or someone injured in an accident.
Furthermore, These questions are probably irrelevant so long as ERs are staffed by sentient beings who will not turn away the sick and injured.
The non-economic, moral question might be: How much accountability is society willing to impose on its citizens? Will we allow the poor who chose food over prescriptions, or those who do not get insurance when it is available, or those who have made poor health risk decisions die?
Nations that allocate their resources more effectively, will ultimately do better than those who do not. Health care is one of those resources.
ReplyDeleteHealth care expenditures have widely varying "returns" and our society has adopted the philosophy that "any" return is worth it. Thus we have the unlimited spending on care that delivers marginal returns. What a waste.
As you mention, we could get much better returns for our investment in primary prevention, education, transportation infrastructure, alternative energy research, etc.
But we need to make the hard choice of determining "how much". Unfortunately, no one wants to draw that line.
I think your approaches to health reform are great. What if congress actually implemented something like this!
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