Alice in Health Care: Part III and IV

Alice in Health Care: Part III
Thomas Sowell
Thursday, March 04, 2010

With all the controversies, charges, counter-charges and buzzwords swirling around the issue of medical care in the United States, there is a lot to be said for going back to square one and asking just what is the fundamental problem.

The quality of the medical care itself is not the problem. Few-- if any-- countries can match American medical training, medical technology or the development of life-saving pharmaceutical drugs in the United States. Most countries with government-controlled medical care cannot come close to matching how fast an American can get medical treatment, particularly from specialists.

Political hype is no reason to throw all that away. In fact, policies based on political hype over the years are what have gotten us into what is most wrong with medical care today-- namely, the way it is paid for.

Insurance companies or the government pay directly for most of the costs of most medical treatment in the United States. That is virtually a guarantee that more people will demand more medical treatment than they would if they were paying directly out of their own pockets, instead of paying indirectly in premiums and taxes.

Since people who staff either insurance company bureaucracies or government bureaucracies have to be paid, this is not bringing down the cost of medical care, but adding to it.

What also adds to the costs are politicians at both state and federal levels who mandate additional benefits to be paid for by insurance companies, thereby driving up the cost of insurance.

If medical insurance simply covered risks-- which is what insurance is all about-- that would be far less expensive than covering completely predictable things like annual checkups. Far more people could afford medical insurance, thereby reducing the ranks of the uninsured.

But all the political incentives are for politicians to create mandates forcing insurance companies to cover an ever increasing range of treatments, and thereby forcing those who buy insurance to pay ever higher premiums to cover the costs of these mandates.

That way, politicians can play Santa Claus and make insurance companies play Scrooge. It is great political theater. Politicians who are pushing for a government-controlled medical care system say that it will "keep insurance companies honest." The very idea of politicians keeping other people honest ought to tell us what a farce this is. But if we keep buying it, they will keep selling it.

One of the ways of reducing the costs of medical insurance would be to pass federal legislation putting an end to state regulation of insurance companies. That would instantly eliminate thousands of state mandates, which force insurance to cover everything from wigs to marriage counseling, depending on which special interests are influential in which states.

It would also promote nationwide competition among insurance companies-- and competition keeps prices down better than politicians will. Moreover, competition can bring down the costs behind the prices, in part by forcing less efficient insurance companies out of business.

Another very real and very big cost behind the high prices for medical treatment are the many forms of expensive "defensive medicine" that doctors and hospitals have to practice, in order to avoid being sued by unscrupulous lawyers. Expensive and unnecessary tests and treatments cost even more than the multimillion dollar awards that clever lawyers can get from gullible juries.

Tightening up the laws, so that junk science does not prevail in courts, would create some real savings in medical costs. But, since plaintiff's lawyers are big financial contributors to the Democratic Party, that is unlikely to happen during this administration.

Finally, there are costs that are high because people want medical care in more comfortable surroundings-- a private room rather than a bed in a ward, for example-- and are willing to pay for that. This is more common among Americans.

There is no reason for others to interfere with that, just because of a mindless mantra of "bringing down the cost of medical care" or class warfare rhetoric about "Cadillac health plans."
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Alice in Medical Care: Part IV
Thomas Sowell
Friday, March 05, 2010

Some years ago, one of my favorite doctors retired. On my last visit to his office, he took some time to explain to me why he was retiring early and in good health.

Being a doctor was becoming more of a hassle as the years went by, he said, and also less fulfilling. It was becoming more of a hassle because of the increasing paperwork, and it was less fulfilling because of the way patients came to him.

He was currently being asked to Xerox lots of records from his files, in order to be reimbursed for another patient he was treating. He said it just wasn't worth it. Whoever was paying-- it might have been an insurance company or the government-- would either pay him or not, he said, but he wasn't going to jump through all those hoops.

My doctor said that doctor-patient relationships were not the same as they had been when he entered the profession. Back then, people came to him because someone had recommended him to them, but now increasing numbers of people were sent to him because they had some group insurance plan that included his group.

He said that the mutual confidence that was part of the doctor-patient relationship was not the same with people who came to his office only because his name was on some list of eligible physicians.

The loss of one doctor-- even a very good doctor-- may not seem very important in the grand scheme of heady medical care "reform" and glittering phrases about "universal health care." But making the medical profession more of a hassle for doctors risks losing more doctors, while increasing the demand for treatment.

A study published in the November 2009 issue of the Journal of Law & Economics showed that a rise in the cost of medical liability insurance led to more reductions of hours of medical service supplied by older doctors than among younger doctors.

Younger doctors, more recently out of medical school and often with huge debts to pay off for the cost of that expensive training, may have no choice but to continue working as hard as possible to try to recoup that huge investment of money and time.

Younger doctors will probably continue working, even if bureaucrats load them down with increasing amounts of paperwork and the government continues to lower reimbursements for Medicare, Medicaid and-- heaven help us-- the new proposed "universal health care" legislation that is supposed to "bring down the cost of medical care."

The confusion between lowering costs and refusing to pay the costs can have a real impact on the supply of doctors. The real costs of medical care include both the financial conditions and the working conditions that will insure a continuing supply of both the quantity and the quality of doctors required to maintain medical care standards for a growing number of patients.

Although younger doctors may be trapped in a profession that some of them might not have entered if they had known in advance what all its pluses and minuses would turn out to be, there are two other important groups who are in a position to decide whether or not it is worth it.

Those who are old enough to have paid off their medical school debts long ago, and successful enough that they can afford to retire early, or to take jobs as medical consultants, can opt out of the whole elaborate third-party payment system and its problems. What the rising costs of medical liability insurance has already done for some, other hassles that bureaucracies and politicians create can have the same effect for others.

There is another group that doesn't have to put up with these hassles. These are young people who have reached the stage in their lives when they are choosing which profession to enter, and weighing the pluses and minuses before making their decisions.

Some of these young people might prefer becoming a doctor, other things being equal. But the heady schemes of government-controlled medicine, and the ever more bloated bureaucracies that these heady schemes will require, can make it very unlikely that other things will be equal in the medical profession.

Paying doctors less and hassling them more may be some people's idea of "lowering the cost of medical care," but it is instead refusing to pay the costs-- and taking the consequences.
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