Health Care Reform

The current debate over "health care reform" is actually pretty comical. Most pundits and politicians decry the system as "unsustainable" (true) and that is cannot be defended. We have heard ad nauseam that the United States spends more that any other country (true) with worse results (not so true). The comedy is that this is exactly the system politicians and people want.

In the history of health care delivery in the United States we have utilized exactly one model that worked to contain costs while delivering care....the HMO. And because it worked we immediately set about dismantling it. Texas actually serves as a wonderful case study. We have had one of the highest rates of uninsured for the last....well forever really. However, there was a brief period of time when HMOs began to take hold in Texas and the annual increases in medical costs not only slowed to inflation, they actually were negative. While there was a lag period, the lower costs of medical care resulted in fewer uninsured and the rate began to drop.

The problem is that every dollar in health care spending is someone's income (yes, that includes the health plans that I represent). There are basically two ways to contain costs, either you reduce the unit cost or you reduce the rate of utilization. Both of those avenues take money out of the pocket of....medical providers. And that is not a situation which they will tolerate. So as HMOs gained further footing the medical providers in Texas (docs and hospitals) mounted a massive campaign to dismantle HMOs and they were largely successful. Since that time, medical costs have basically been on a steady upward climb.

We had a model that worked. Quality was the same as or better under HMOs as it was under the fee-for-service system. The cost, however, was far less. We voted for a system that was more expensive, less efficient, delivers worse care, and is unsustainable. So where is the comdey you ask? Well, the solution that many in DC are now proposing- the same people, mind you, that railed against HMOs- is to create a giant government run HMO. Somehow the voters will find this far more acceptable because the government will be running it despite that fact that the health plan they currently operate, Medicare, has $35 trillion (yes, trillion) in unfunded liabilities and they have zero idea how to address that problem outside some laughable savings numbers that will supposedly be achieved through adoption of electronic medical records and rooting out "waste." Truly pathetic.

Many would suggest we just adopt the system that works in other countries...say France. I'd content that we don't have to look that far. If the idea is just to find a location where health care is cheap and replicate it, we can just do what South Dakota does. In all seriousness, the solution will be a difficult one but it frustrates me to hear people suggest that the private sector has tried and failed to deliver health care effectively. The truth is that the private sector did it effectively, that interfered with the monopoly rent system enjoyed by providers who petitioned the overnment to intervene on their behalf, the government did so, and now we complain that the private sector has somehow failed. It didn't, it was made to fail.