Are we presently at the dawn of a new “golden age” of medicine? There are some amazing things happening today regarding cancer treatments. But is further progress being hampered by a moribund medical establishment? 50 years ago health insurance was known as “hospitalization”, because that’s about all an insurance policy covered. When one went to the doctor back then you got treated and paid your $20 or whatever on the way out and that was it. No co-pays, no paperwork hassle, just a simple business transaction. Same thing when you went to the drugstore. And nobody seemed to complain about the cost of health care. But there were still people who couldn’t afford to pay even the modest amounts doctors charged then, but somehow the medical profession by and large was able to absorb these “charity” cases and still make a decent living for doctors. Doctors themselves were mostly independent practitioners, running their own businesses. As an economic model, that seemed to work pretty well for them. But somewhere along the way doctors lost control of their pricing and their independence.
Over time companies began to offer increased benefits for health care, offering to pay for routine doctor visits, even some prescription medications, and lowering the deductibles for hospital care. More and more people came to view health care as a right, and as benefits increased many began to abuse the system, treating health care as if it was free since the benefits and insurance systems hid the true cost of providing health care. It should not have been surprising then that the demand for something perceived as free would force annual increases in health care spending running several times the rate of inflation. Being a limited resource, this also caused prices for services to rise accordingly. The one positive outcome of all this was research into new and better therapies was well funded, the financial incentive being there to find a cure no matter what the cost since patients were insulated from the consequences of expensive treatments.
As therapies improved and positive outcomes became the norm rather than the exception another problem soon arose. Medicine came to be viewed more as a science instead of the combination of science and art that it truly is. If doctors and other medical professionals really knew what they were doing they’d be referred to as medical engineers rather than ‘practitioners’. People’s expectations of uniformly positive results began to result in lawsuits for medical malpractice at an increasing rate due to the occasional negative outcome. In the past, malpractice suits were not all that common and were typically brought about by genuine mistakes or poor doctor performance. As a result most of the time these suits were quietly settled. But as the number of suits increased and settlements continued, patients found that even frivolous lawsuits wouldn’t be contested and so an explosion of so-called malpractice lawsuits ensued, further driving up doctors’ overhead. As a result, 25 cents of every medical dollar today is siphoned off by an insurance company, doing nothing to improve health care. Doctors’ private practices, squeezed on the one hand by sky rocketing malpractice insurance premiums and on the other by insurance companies that told doctors what they were going to pay for patient care, not what the actual cost really was, began to abandon private practice and join up with hospitals and other types of providers in a bid for survival. In doing so they gave up the last vestiges of control over what they could charge for their services. The cost of a medical education in America now typically exceeds $400,000. Having lost control over their pricing, a doctor graduating today may have such a poor return on that investment once all the student loan interest piles up that they’ll never be able to repay the cost of their education. This will result in two things: 1. a doctor shortage, and 2. a rising tide of mediocre care.
In the second decade of the 21st century we’ve arrived at the point where we have the world’s most advanced medicine but few can afford it. Friends of ours recently visited a prestigious hospital in a major city and were told that the minor cancer surgery he needed would cost them $150,000 and they had to pay up front. Needless to say they walked away from that. Another friend, treated at the same facility, was billed $90,000 for a one night stay and surgery to remove kidney stones. He had “insurance” so he didn’t have to pay this, but what did the hospital really get for this? Surely not $90,000. But without pricing transparency who knows? Poor people are getting health care for the most part however. Just go visit any big city hospital emergency room, particularly on the weekends. There will be many poor people waiting for treatment since by law hospitals can’t turn them away. But this is a very inefficient way to serve them, and the hospitals recoup their costs by overcharging other patients and insurance providers. The few doctors who remain in independent practice are still getting squeezed. One obstetrician whom I know has an annual malpractice insurance bill of over $250,000, and he’s never been sued. Others refuse to participate in the government sponsored programs for the poor and elderly, Medicaid and Medicare, because the government takes over 9 months to pay off on claims. Anywhere else in business when receivables go over 120 days they get sent to a collection agency. The government’s solution to the problem, the “Affordable Care Act”, only made things worse. So now, because of ObamaCare, people lucky enough to be able to afford health insurance policies now find that their deductibles start at over $6,000 and go up from there, so what’s the point in having insurance in the first place?
So where do we go from here? How can we make health care in America truly affordable again? As a first step, all health care providers, from independent practitioners to the biggest hospital complexes, would be required to publish prices charged for their services. All patients and prospective patients would be required to be presented with a cost estimate of their proposed treatment plan and possible options for payment. Costs for routine office visits and common lab procedures would be prominently displayed in doctors’ offices. Doctors would even be allowed to include pricing in advertisements. Insurance companies would be prohibited from dealing with hospitals directly. Patients would be required to submit bills and treatment proposals to their private insurance companies. Hospitals could offer their own plans, so-called concierge plans where for a fixed sum they could offer ala-carte medical services. But patients or their guardians would be required to review all expenses related to their own treatment. Patients could also shop around for more cost effective treatments if they desired, bringing market transparency to bear. The second thing sorely needing addressed is tort reform to reduce the incidence of frivolous lawsuits. The threat of a malpractice lawsuit should still be available in order to keep hospitals in particular accountable, but it should be harder to bring such a suit and suits that are deemed frivolous and are thrown out by the court should result in the plaintiffs paying the court costs.
In the end, it may be that old fashioned competition could ultimately bring about reform. It’s now possible to fly to Malaysia, the world’s top medical tourism destination in 2016, for example, undergo knee replacement surgery, recover in a 5 star hotel for some time after leaving the hospital, then fly home all for about one half to one third the cost of a typical knee replacement surgery in America, including the hotel stay and air fare. So called medical tourism is the fastest growing industry in Malaysia. Other countries such as India, Thailand and Brazil have also discovered the wonders of fixed-price procedures and pricing transparency. A few enlightened insurance plans are beginning to recognize this as well. Even something as simple as Laser eye surgery can be done in Turkey for $1100 for both eyes. So it might just be that old fashioned competition could be the answer to affordable health care in America. Mainstream insurance companies will probably be the last to embrace this, although there are a few private plans and at least one Christian health care sharing ministry that support overseas healthcare providers. At least 16 hospitals in Malaysia have received the highest possible accreditation from the same organization that certifies hospitals in America. We seem to import most everything these days, why not health care as well?