Healthcare: A Large-Scale Solution

Healthcare may well be a prime example of a large-scale system that is doomed to fail due to the power of the status quo which benefits from it. When it fails, we will each have to take responsibility for our own healthcare.

Large-scale healthcare solutions are essentially impossible for a number of reasons. The healthcare status quo has reached a political critical mass: it now controls so much of the national income (16% of GDP and rising) and so many jobs that its constituencies cannot be overcome by political means.

Available solutions find no equivalent political support. What we have is a Statist/private-cartel partnership, with the worst excesses and inefficiencies of both the Central State and corporate cartels.

As noted yesterday, one goal of this site is to seek large-scale (policy) and small-scale (individual/household) alternatives and solutions. While it may well be the equivalent of tilting at wndmills to propose policy solutions, the exercise is nonetheless useful, as it delineates how far the status quo is from dealing with reality.

The fundamental reality is the U.S. spends twice as much on healthcare as other developed nations: over 16% of GDP versus roughly 8% for Japan, Australia, et al. Of the $2.3 trillion spent on healthcare in the U.S., roughly $1 trillion is "overhead": paper-shuffling, insurance fraud, Medicare fraud, lawsuits, counter-claims, etc. Another chunk is wasted on defensive medicine, costly medications that don't work or actually degrade health, and so on.

Monopolies are free to provide poor service, raise costs and expand their self-serving fiefdoms. While the U.S. healthcare system is supposedly a competitive one, that is basically a self-serving illusion: the reality is a handful of insurance, pharmaceutical and hospital corporations control the vast majority of the nation's non-government healthcare. Their control has been enabled by lobbying and political contributions which have turned the Central State into an anti-competitive partner that benefits these Elites.

"Defensive medicine" driven by malpractice lawsuits are another differentiator between lower-cost, rational systems elsewhere in the developed world and the U.S. "sickcare" system.

The large-scale issue is self-evident: we cannot afford the sickcare system we have, which leaves 45 million citizens without any care except emergency rooms and squanders a staggering 8% of the nations' GDP.

What we have is a system that views illness and treatement as profit centers: "fee for service." I have written extensively about this fundamental flaw: Is Fee-for-Service What Ails America's Health Care System?.

Sickcare thrives on an unhealthy entitlement of "rights" which are ultimately tools to divert an ever-greater share of the national income to sickcare cartels.

Radical transformation often boils down to this: Do more of what works and stop doing what doesn't work.

What we need is a system based on fostering well-being, patient responsibility, education and community. What we have is a system that see chronic disease as a profit center, a system which isolates people and worships the "doctor-patient" relationship when what we as a nation need is a culture of community and integrated health which draws upon resources much broader than doctors and nurses in hospitals.

For example, sickcare treats a 260-pound (obese) patient who smokes and is complaining of sore knees and heart trouble with knee replacements and surgical stents: two immensely costly and profitable operations. After consuming vast amounts of money, the patient is still smoking, still overweight, and still in poor health. His health was essentially ignored in favor of "treating" specific conditions which are profit centers. The patient's overall well-being is not profitable so it is ignored other than lip-service.

A more rational and "integrated health" treatment would be to offer classes and group therapy/support on stopping smoking, losing 80 pounds via fitness and better diet, and also address whatever mental-health issues may be behind the patient's poor health: stress, depression, anxiety, etc.

These treatments work by engaging the patient in his own care and in communities of other people struggling with the same issues. They end the isolation and teach the person that health is not something that is "treated" so much as lived. Such as system has many jobs that pay $48,000 rather than $148,000, and no profit centers.

If we are truly serious about transforming sickcare into healthcare, then we have to look at what currently works on a large scale.

The only large-scale healthcare provider that functions on a cost-effective and treatment-effective basis in the U.S. is the Veterans Administration. Many people judge the VA on its past reputation, or on the problems that stemmed from poor integration with active-duty medical care after the Second Gulf War. But if the goal is to provide healthcare for 4% of GDP, then the VA is the only large-scale model that works. The VA has many innovative low-cost systems which are basically unknown to the sickcare cartels and to the general public.

Some people claim Medicare is a model, but as its costs continue to expand far faster then the GDP, it is widely recognized as unsustainable.

Medicare is a hybrid of the worst elements of a State/cartel system: it is easily gamed for private profit, and there are few constraints on fraud.

The VA works because it is owned and operated by the Federal government. It has no insurance industry or malpractice industry to feed and its doctors have no incentives to game the system for private profit. It provides care to millions of vets, many needing intensive care, for $40 billion a year--less than 10% of Medicare's bloated, open-ended cost.

Is VA care perfect? No. Do people have to wait? Yes. Are there limits on the care VA provides? Yes. Are the doctors and nurses allowed to practice their trade without interference from insurance executives? Yes.

The VA has the only nationally integrated patient database. The savings from this, both in treatment and cost, are significant.

In essence, the VA is a model for a government-owned system which offers basic care for reasonable costs. Combine the VA model (outpatient clinics, national database, etc.) with Kaiser Permanente's extensive patient education services, and you have a system which the nation could actually afford.

Kaiser offers a model for large-scale integrative health education and support that requires and encourages patient action. Getting people into support groups that teach them how to improve their mental and physical health works.

Unlike the VA, this new national system with be opt-in: if you prefer to pay cash for your healthcare or buy private insurance, go ahead; no one's stopping you. If anyone can provide better care for lower cost than the national system, then by all means provide it. (The national healthcare system would have a co-pay for every visit and service: nothing is free, because when anything is free, it is wasted/squandered.)

A payroll tax of 2.9% (currently the Medicare payroll tax) would be paid by all workers, on all wages, and by all investors on all investment income.

Medicare would be abolished, along with Medicaid and the fraud-riddled Workers Compensation system. A system modeled on the VA, with limited care (sorry, no $100,000 doses of "maybe this works, maybe it doesn't" meds) with Kaiser Permanente-type patient education would be ungameable and difficult to sue. Without outside vendors and labs to funnel money to, the avenues for fraud would drop to near-zero.

With no insurance system to burn through 40% of the money, the savings would be immense.

Yes, it would have all the problems inherent in any bureaucracy. But ultimately it would be forced to compete with a wide-open private sector, which would be unable to compete with the government-owned care if it remained as absurdly pricey as it is now.

If I make $50,000 a year, I would pay $1,450 a year in taxes to support the government option. If I didn't like the government service, etc., then I would be free to buy insurance or just save my money and buy care for cash.

Various insurance companies would undoubtedly offer "supplemental" insurance to cover whatever costly treatment the government system didn't offer, with all the usual constraints on coverage.

The target would be to reduce total healthcare costs to 8% of GDP--4% on the national system available to every citizen of any age, and 4% on private-sector spending for additional care people want enough to pay for it themselves.

This is all tilting at windmills, because the status quo is unreformable. Rather than make adult trade-offs and rational choices about a system which might cost half of the current "sickcare," what will happen is the status quo will devolve: Medicare will exist, but it will be increasingly difficult to find a doctor willing to accept its rates and restrictions.

Meanwhile, the cartels in control of the "private" market will continue skimming an ever-larger share of the national income until the system implodes.

The way to see a doctor will be Third World: you pay cash, either as a bribe or as an open-market fee.

With that possibility in mind, then the individual alternative is simple: be responsible for our own health, and save enough money to pay for care with cash.

I know these choices, large-scale and small-scale, will not be popular. Yet I also know that a sickcare system that will soon absorb 20% of the GDP is unsustainable. Indeed, sickcare alone will bankrupt the nation.

I cannot call a system which burns most of its funding on paper shuffling, cartel profits, fraud, "defensive medicine" and high-profit, often-needless medications "healthcare." To call the skimming, gaming, profiteering, and bloat of politically protected cartels and a byzantine mess of the worst possible public/private excesses (Medicare and Medicaid) "healthcare" is to further the fundamental fraud at the heart of America's sickcare system: that a Statist-cartel system operated to extract maximum profit from fee-for-service can ever provide integrated healthcare. It can't; it can only provide what we have now: unaffordable sickcare.

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