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Straightforward Solutions
to the Health Care Crisis

June 14, 2008

It is generally accepted that the cost of health care in the United States is so high, and is increasing so fast, as to be economically unsustainable. Universal health care will be impossible until this problem is solved.

From the perspective of controlling costs, however, so-called market-based plans are fundamentally flawed, because the US health-care system does not currently function as a free market.1 This suggests that a single payer system, where the government can essentially regulate fees, offers the only hope of controlling costs. That is why I favor such a system. In conjuction with the modest government plan described here, patients (and their insurers) would automatically be exempt from liability for any medical expense incurred within the scope of the plan.

The Plan

I envision the new government health program as being essentially an expansion of Medicare to cover all ages. Given the federal government's poor fiscal condition, however, the new plan would have to start on a very modest scale and have much narrower coverage than Medicare offers (and would continue to offer).

At the outset, the new plan might provide universal coverage for (1) initial2 care for non-recurring conditions, and (2) preventative tests and specified preventative treatments.

We should see how such a narrow plan functions before contemplating coverage for expensive chronic conditions (which would likely also require a new revenue source).

Footnotes

1 I believe there are three factors which insulate health care from normal market forces and account for why costs in the health-care sector are out of control:

  1. the total price of the services provided is usually hidden from the consumer (the patient) until after the services are rendered, making bargaining or comparison shopping impossible;
  2. patients are often in a state of duress (or incapacity) when they purchase health care services and cannot make rational judgments regarding cost;
  3. when the services are covered by health insurance, the patient has no motivation to control cost in any event.
Legislation requiring full disclosure of pricing might help counteract the first of these factors. However, the second and third factors listed above suggest that the market is inoperative and that some governmental regulation or intervention is justified.

2 Initial care would include

  1. diagnosis of the medical condition;
  2. doctor visits, outpatient procedures and prescriptions to treat the condition over the first 30-day period;
  3. hospitalization (including emergency room) for up to 7 days if required during the first 30-day period.