Shib,

If you’re not reading Megan McArdle on health care, you need to be. She’s probably written an article on health care insurance once every six weeks or so since Obama was inagurated. She’s data driven and considers the human factor in her analysis, which many of the more “left” proposals don’t bother to do. And unlike most on the “right” (Meg’s not really “right”, but leans libertarian in her thinking) and like myself, she believes we need a universal system; and although we’d LIKE a totally free market system, we realize that the horse has left the barn on that one. Health care in the US is too totally fucked up to be fixed quickly by a radical retrenchment to market economics.

Broadly speaking, our health care delivery mechanism consists of an enormous number of small businesses which rely on each other to a large degree. Every other industry in America that consisted of small businesses with interreliance has gone through a phase of consolidation to gain efficiency. In retail, that’s Wal Mart. In auto manufacturing, Ford, Chevy, and Dodge, rather than 20 different firms back in the 40’s. You name the market, it’s gone through a phase of consolidation to become more efficient.

But not health care services. Most hospitals are small businesses, most doctors ARE small businesses. This results in massive duplication of services, both on the administrative and the clinical sides. Further, providers often consider each other as competitors; there is no way, for example, that the Memorial system in Houston is going to share any patient information with the Methodist system or the University of Texas system; they consider themselves to be in competition for patients. Thus, co-operation between providers is spotty and often slow, so the tendency is to not bother to request cooperation. This leads to duplicative paperwork and clinical testing.

This inefficiency has been well demonstrated by comparing the status quo with the few instances where providers have consolidated (Kaiser, Cleveland Clinic, etc) and who deliver quality care at lower cost than the regional average. And, there are all sorts of horror stories patients and doctors can and do tell as to how granularity lowers the quality of care (and raises the costs) for themselves and their patients.

So, efficiency’s a problem. The second major problem that needs to be addressed is to incent the patient to shop the system for lower cost. You can do that like Japan does, (single payer with painfully high co-pays) or you can do that like Singapore does, which is closer to the HSA concept, or how the Dutch do it, with actual reverse auctions where the providers bid on your procedure. But you have to do it somehow.

So, a good starting point would be a system which incents the providers to merge into larger clinic networks, along with patient incentives to seek out lower costs. The ACA has *some* lightweight incentives to merge, and the HSAs could provide the patient incentives to seek out lower costs. But neither party has been willing to toss enough money into their proposals, because raising taxes is not popular. But if they can’t get it figured out, and if you think it sucks now, it’s REALLY going to suck in another 10 years.

So, make me Queen for a Day at this point, and I’d beef up the ACA by (1) putting HSA options onto the exchanges, (2) increasing the financial incentives to get the invincibles to use them (takes tax increases), and (3) ferret out all the dis-incentives that providers use to *not* consolidate and fix those, as well as increasing the incentives to do so.

But the devil is in the details, obviously. Nothing about (3) would be easy.

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Data Driven Econophile. Muslim, USA born. Been “woke” 2x: 1st, when I realized the world isn’t fair; 2nd, when I realized the “woke” people are full of shit.

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