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Uncommon Thoughts on Health Care Financing in the USA: David Goldhill in The Atlantic

Regular readers of my blog (both of you!) come here for comments on Scotch whisky, maybe also the occasional photo album of funny street signs.

And my friends (yes, both of you!) know that I’m generally apolitical, at least in the sense of organized party affiliation. Certainly I have little to add to the vast flood of words spilled about US federal government policy, including the ongoing debate about health care financing.

But my friendly acquaintances are probably tired of my forwarding around David Goldhill’s much-discussed article in the September 2009 issue of The Atlantic, “How American Health Care Killed My Father.” So I thought I might just point it out here on my blog, give it a tiny bit more of SEO juice, and put my own annotations in a place where they’re easier for me to cut and paste into the next forwarded e-mail.

Goldhill makes a collection of points that don’t always hang together, yet are wonderfully provocative – reasonable, though often quite contrary to received wisdom. You should read his article directly, but I’ll call out a few of his best observations here:

  • Health care costs are rising without any coherent notice, scheme, or cap – both as percentage of GDP and federal government budget.

    “By what mechanism does society determine that an extra, say, $100 billion for health care will make us healthier than even $10 billion for cleaner air or water, or $25 billion for better nutrition, or $5 billion for parks, or $10 billion for recreation, or $50 billion in additional vacation time—or all of those alternatives combined?

    The answer is, no mechanism at all. Health care simply keeps gobbling up national resources, seemingly without regard to other societal needs; it’s treated as an island that doesn’t touch or affect the rest of the economy.”

    Goldhill argues that the method and structure of health care finance obscures any meaningful signal by which we could even trade off health care costs for other societal benefits, either as individuals or as a society.

  • Granting health insurance a special status – codified in tax law and other forms of government subsidy – has distorted the national economy by creating artificial excess of supply at inflated prices, similar to what has happened to housing.
  • Health insurance isn’t the same as health care – it’s just a (highly unusual, and probably detrimental) mechanism to finance health care.

    “We can’t imagine paying for gas with our auto-insurance policy, or for our electric bills with our homeowners insurance, but we all assume that our regular checkups and dental cleanings will be covered at least partially by insurance. Most pregnancies are planned, and deliveries are predictable many months in advance, yet they’re financed the same way we finance fixing a car after a wreck—through an insurance claim.”

    This is Goldhill’s central and strongest point. As long as the policy discussion is about how to provide comprehensive health insurance, then there’s little likelihood of creating a system with lower costs or better outcomes. And I’ve often wondered the same thing – what is it about health care that makes us think it needs a different or special financing mechanism from all other services?

  • Price opacity drives prices up – and in the current health care financing scheme, it’s in the interests of medical institutions to keep prices (and outcomes) opaque.

    “For almost all our health-care needs, the current system allows us as consumers to ask providers, “What’s my share?” instead of “How much does this cost?”—a question we ask before buying any other good or service. And the subtle difference between those two questions is costing us all a fortune.

    Without transparency on prices—and the related data on measurable outcomes—efforts to give the consumer more control over health care have failed, and always will.”

  • No one seems to have investigated the conventional wisdom that emergency room care is the most expensive form of health care.

    Goldhill’s two-paragraph attempt to discover hospitals’ true emergency room revenues and costs is not that useful, but the question stands – is emergency room care really that expensive compared to other treatments, and if so, why?

Goldhill makes some predictable (but no less worthy for that) points about the inability of a central authority to control costs (governments can control prices), pointing out that  health care programs in single-payer countries including Canada, France, and the UK face skyrocketing costs despite price controls.

He uses the example of LASIK surgery to show how a health-related procedure generally not subject to insurance financing responds to market forces, with providers competing on the basis of price and quality, just like in other areas of the economy.

Given the relative patchwork of issues Goldhill points out, he doesn’t propose a particularly unified solution. But that’s okay – he has a few ideas, most of which boil down to changing the method of health care financing. Rather than assuming comprehensive insurance as the standard, he argues convincingly that over time insurance should cover catastrophic and some chronic conditions, while the rest are paid for from individual income and savings managed through Health Savings Accounts (HSAs).

Most other benefits and fixes flow from that single mechanism, including an interesting extrapolation to the utopian point at which we pay for outcomes. Specifically, he hypothesizes that currently-separate links in the health care delivery chain will come together to serve the consumer (similar to an idea explored in Atul Gawande’s June 1, 2009 New Yorker piece called “The Cost Conundrum“).

In any case, Goldhill’s article reveals no obvious political ax to grind. He says he’s a Democrat, though it’s likely that some folks would claim his distrust of a centrally-set price policy would put him on the right. I just see a heartfelt exploration of what structural changes might really improve the general lot of American society, and I bet that if you engage his ideas thoughtfully, you’ll find the same.

One Comment

  1. Aaron

    Hi Ethan, kudos on your foray into the realm of politics. As assuredly as the unexamined life isn’t worth living, so is the over-examined one boring as s**t, so you’ve quite a few more government policy/societal impact posts to go before you start losing your fun-loving whimsy.

    Anyway, thanks for bringing Goldhill’s well-reasoned points into relief. Let us hope that the views of market-controlled costs and healthcare as required maintenance rather than emergency service catches on!

    Posted on 25-Jan-10 at 5:41 am | Permalink

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  1. […] I mentioned in an earlier post touting David Goldhill’s cover story in The Atlantic (September 2009), I think the structure […]

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