Wading Into a Health Care Swamp

David Strom
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Posted: Sep 12, 2008 4:59 PM
Wading Into a Health Care Swamp

It’s as predictable as the sun setting in the West: it’s an election year and reforming how we deliver health care is on the political agenda.

Advocates on the left are pushing an agenda of “universal health care,” by which they mean taking steps toward socialized medicine.

Advocates on the right are unfortunately divided. Principled conservative intellectuals promote free markets and disdain government intervention in the marketplace, yet when it comes to health care there are few politicians who are willing to advocate reducing the massive government role that exists today. McCain’s plan outlines some important reforms, but would not likely reduce the amount of health care spending controlled by government.

Government essentially controls health care for older Americans and is making significant headway into controlling children’s health care through S-CHIP. Finally government subsidizes employer-provided health care—keeping control out of the hands of individuals. Overall, government directly or indirectly controls about 50% (some estimates reach as high as 70%+ including subsidies) of health care spending. Consumers directly control relatively little of the total health care expenditures.

It is the structure of that government role and the subsidies of employer health insurance that has helped drive up costs to unsustainable levels—about 17% of our economy is spent on health care, or about twice as much as other industrialized countries. What we are doing today doesn't work, and conservatives should be very afraid of new attempts to socialize medicine.

What we are seeing today is a slow-motion government takeover of health care, and it’s not pretty. Our current health care “system” works well for pretty much nobody. Costs are spiraling out of control—because of a system dominated by third-party payers--and Americans are getting more scared every day that a health crisis could bankrupt them.

Wading into this policy swamp is the Mayo Clinic with a proposal that has something for everybody to hate. Mayo is proposing a system that relies primarily on private funding and individual ownership of health insurance, but also one that blends a top-down structure that is intended to create the right incentives within the system.

Their proposal is pure Mayo Clinic. For anyone familiar with Mayo and how it has become one of the premier medical institutions in the world their proposal has a familiar theme: it’s the system, stupid.

Mayo’s strategy for excellence has never been to simply recruit the best or to be the most cutting-edge, but to build an integrated system that taken as a whole will consistently provide the best outcomes for patients. Mayo believes that the principles behind its own success are transferrable to the health care system as a whole.

It’s that philosophy that animates Mayo’s health care policy proposal. It begins with the recognition that America has no health care system, but rather an unworkable collage of government, semi-private, private, and individual providers and payers that don’t even talk to each other well today. Mayo’s plan is to impose some order over the chaos. And in the process try to hold down costs and improve quality.

It proposes, in other words, to make the health care system as a whole work a lot more like the Mayo Clinic does. Integrated care will become the norm, not the exception.

A few big questions arise immediately: 1) is creating a health care “system” desirable? After all, we don’t have a food delivery “system,” or housing delivery “system,” so why a health care delivery “system?” 2) Wouldn’t such a system undermine the freedom of individuals and providers compared to what exists today? And 3) if it does make sense to follow Mayo’s path, how can we get from here to there?

Mayo makes a pretty good start at answering the third question—they got a wide range of stakeholders on board in designing the system, including labor groups, businesses, patient advocates, and providers. Answering the first and second questions is a lot more difficult, especially if you are an ardent advocate of the free market as I am.

From the perspective of the free market, the best solution to reforming our health care system is a scaling back of the third-party payment system which drives up costs and reduces individual control. Unfortunately, our politicians seem unwilling or unable to push for this reform on a grand scale.

Mayo’s solution takes a small step in that direction by pushing for a system where individuals own their health insurance even when it is subsidized by the government or employer, because health care plans would be portable. Consumers would be much more active in making their health care choices.

But can any system work on the grand scale encompassing the entire country? Can the all-important relationship between patient and doctor be preserved and improved under any kind of national plan, even private-sector driven?

Top-down planning rarely works well, as is even proven within the private sector, and it’s hard to see how this plan avoids the inevitable pitfalls.

The one thing we can be sure of is that with the political heft that Mayo Clinic wields, its proposal is sure to get a hearing in Washington no matter who wins the next election.