The whole point of free speech is not to make ideas exempt from criticism but to expose them to it.

Friday, August 28, 2009

Don Frankenfeld is in the building. Sort of.

Way back when, we republished a sketch of Don Frankenfeld's proposed health care plan. It gathered a few comments and then seemed to just be gathering dust, lying dormant from Aug 4 until just the other day when "That One Guy" checked in and asked Don some pretty interesting questions.

Well... it seems "the great one," Mr. Goldwater Republican Conservative extraordinaire, has picked up the gauntlet. So I will too. Ladies and gentlemen, I give you That One Guy and his eminence Mr. Frankenfeld, the Elvis of Health Care Reform, locking horns this morning deep in the jungle of the impassioned Universal Health Care Debate (Note to self: ...well ok, that might be just a tad to much coffee there, BF, dontcha think?)

So, TOG asks Don:

Frakenfeld: I think your proposal is more suited to funding higher education than Health care. Costs are what they are in part because we are not provided with a list of charges before receiving care, but only afterward. Often the charges are for things we never asked for.

We were quoted $12,000 for prenatal care and delivery. Complications at the time of delivery ran that up to over $75,000. I promise I wouldn't have stopped to shop around while my wife was hemorrhaging.

I certainly would not have risked trying to get her to another hospital with a lower rate.

The controls the market can impose only work in the presence of competition. There is only competition in the non-life threatening area eg. colds, muscle strain, back pain, allergies. As soon as blood is spilled, all competition is over and market forces are a joke, even in urban settings.

We don't use market forces for some of the most important things in our lives. No privatized municipal water or sewer systems, for example. When market principals have been applied to other utilities such as electricity, Enron and %1,000 increases in charges have resulted.

Which brings us round to the question," Should Health care be a utility or a commodity or a discretionary purchase, as it presently is for me and 40 some million other Americans?"

And Don replies via an email to me:

For starters, I recommend the lead story in this month's Atlantic Monthly, "How American Health Care Killed My Father," by David Goldhill, It is a lengthy and articulate analysis of the current mess, and concludes with a recommended solution that is very similar to my own.

I agree that one reason for today's high health care costs is that so much is at stake, often life itself. I don't expect you or anyone else to bargain while your wife is hemorrhaging. But you are wrong to suggest that because health care is urgent and important, it is somehow exempt from market forces. Just the opposite. The reason you are willing to pay $75,000 for emergency care is that the provider realizes that your demand for care is very high at that moment, and high demand leads to high prices. Likewise, it is wrong to suggest that water or sewer services are exempt from market forces. Higher prices for these services affect their use; never mind that the prices are charged by a municipality instead of a private vendor.

As I see it, our current system is dysfunctional for at least two reasons. First, as Goldhill points out, "health care" is not the same as "health." In other words, our focus should be more on results, less on process. Second, for nearly all Americans, whether or not they are insured, there is an almost complete disconnect between services performed, on the one hand, and payment for those services, on the other. Someone who is insured commonly thinks of the cost in terms of the co-pay, not the aggregate cost. If I pay only 20% to 25% of the cost of my diabetic supplies, I am less careful in my expenditures than if I had to bear 100% of the cost. And someone who is uninsured often ends up paying much less than the "rack rate," as well, with the balance ultimately covered by those who have insurance in the form of higher rates. Sadly, and sometimes tragically, the uninsured patient doesn't discover the ultimate cost until after the fact, and the cost may vary hugely from one patient to the next, depending in part on one's willingness or ability to negotiate. But for this disconnect between costs and sources of payment, market forces would likely drive down costs dramatically.

A word about competition. For it to work well, a high level of transparency is required. That is, the fees of doctors, hospitals and other providers should be clearly disclosed in a way that is easily understood. (The Internet is one mechanism to achieve this.) But the beauty of the market place is that Adam Smith's "invisible hand" really works, albeit imperfectly. It is not necessary that you, an individual health care consumer, be a sophisticated purchaser or a clever negotiator. As long as a small number of buyers and sellers acting at the margin behave in a sophisticated and informed way, a market price will be established which is efficient, and in the case of health care, presumably lower.

Finally, for now, I do not really claim to have found a perfect solution. Any system will be imperfect, and in some individual cases unjust. But as Teddy Kennedy was fond of saying, the perfect is often the enemy of the good. The current system is a monstrosity. Almost any change will be an improvement, and the changes I suggest would certainly result in near-universal coverage and almost certainly result in much lower costs. In other words, even "ready, fire, aim," is better than the status quo.

Ok now, your turn, Forumpians...

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