Tuesday, March 5, 2013


I just finished reading a very informative article in last weeks Time magazine about the health care costs that we, insurance companies and the government pay. One can certainly be outraged at being charged $1.50 for a single Tylonal  tablet that cost the hospital 1.5 cents. But maybe this is pointing to an even bigger outrage; that fact that middle class earnings have declined since the 1970s while the price of health care has only increased. At what point do we find that people just can't afford to get sick? And have we already reached that point?

I think that we're there and have been for a while. The single biggest driver of personal bankruptcy are medical bills. pretty much everybody can name a friend or relative (or themselves) who were charged huge sums for simple procedures and short hospital stays. The usual response from the political class is that greater competition and more transparency will make people better consumers of health care and thus drive costs down. It just never seems to happen. People aren't all that excited about asking the price of a needed health procedure. They're either insured in some way, so that they never actually deal with the price, or they are in no condition to haggle. "Gee, I'm going to have to check that other hospitals price to repair my broken leg." "I'll get back to you." We're not buying washing machines here.

That concept, that health care is not like other goods and services, is at the heart of the problem. When you need medical attention, you need it. In many cases, if you don't get that attention, you will die. Or suffer disabling after effects. Or disabling after effects until you die. None of these is a good outcome for the consumer. But, as the Time article lays out, this produces some very good outcomes for the medical industry. They make loads and loads of money.

Now, it's pretty clear that suggesting that maybe doctors and hospitals and drug companies charge less is seen by some to be... un-American. It brings into question the entire capitalist system that we have created and defend. But, I think that if we can look at it from a slightly different angle, or two, we might just see some light at the end of the tunnel that isn't a train.

As I asked at the start, has the health care industry reached the tipping point beyond which people just can't afford to pay any more? If your health insurance goes up 20% and your paycheck hasn't gone up in three or four years, you may have to do without the insurance. The same is true of increasing co-pays and deductibles. And for the uninsured medical bills can be just devastating. If things don't change, each year will see fewer and fewer consumers of health services. From a business standpoint that would be a very bad thing for the health care industry.

But we don't ever seem to get to that point because health care is a necessity of life. So maybe we need one of those different angles to solve this.

As a society we have determined that for certain things necessary for life we don't want to leave outcomes to the free market economy. The water that comes into your home, even if it's from a private, for profit, company, is heavily regulated. Joe's Water Service can't really compete on price or service because Joe has to meet the same quality level as the city water department. The same is true for sewage collection. We assume that these services will be provided by our city or town, or by a public service district. It wasn't always like that.

In the days before the urbanization brought about by the Industrial Revolution fresh, potable water was hard to come by. Rain barrels and hand pumped wells in the towns and, sometimes, water collected from creeks or streams out in the country. If you were lucky, or your ancestors were smart in selecting their homestead, you had a nice fresh spring bubbling out of the hillside behind the house. Whatever the source, your water needs were pretty much your own problem to solve. And, again, the same is true for sewage and other waste. In the country it was dig a hole and put a shed over it and in the cities, well you really don't want to know about the cities. After the age of throwing "slop" out of the window into the street came the age of cess pools in the back yard and a wagon with a tank, and a hand operated pump, used to empty the nasty pit that your grandpa told you to never play near. (Not a problem. The smell took care of protection just fine) These services were provided by private companies which started with two guys and a wagon and grew to rather large firms with dozens of trucks. Notice, though, you were still on your own. You had to contact the company so have them come and pump out the pit.

After the Industrial Revolution caused cities to explode in size and density, and the old model of taking care of your own needs fell under the weight of too many people need too much food and producing way too much waste. In order to protect the public, as a whole, from water borne and waste borne diseases the cities and towns took over these services. They became public utilities.

The same thing happened with natural gas and electricity. Even though we may be supplied by a private, for profit, company, they and their price structure are regulated by public utility commissions. We really don't want price competition on natural gas services. The safety of the population trumps capitalism in these cases. Electricity and natural gas are just too dangerous for price wars and such. Interestingly, heating oil, and propane have not followed this trend. The reason has to do more with infrastructure (pipelines and wire) than with any other economic or public safety issues. You just can't pump heating oil to individual homes by way of a network of pipes. Particularly in the winter. With respect to electricity the problem is economy of scale. It doesn't make economic sense to generate power all over the map when that power is going to be generated with the burning of coal. Or the damming of a river. Or nuclear power. Those are big business and government projects.

So, we see that certain necessities of life are better distributed to citizens by either their government or companies regulated by their government. And then there's health care.

In the case of health care we have turned the whole on its head. We have huge companies, making huge profits, providing the needs of the citizens with lots and lots of outlets for their "products," with some government regulation, but mostly with the attitude that any other system is socialized medicine and a very bad thing. I just don't get it.

We have a necessity of life, health care, that we purposely leave in the hands of private enterprise, and we wonder why the cost keeps going up. Please note that, even though Medicare and Medicaid are government programs, they're designed as a way to pay private health care providers. Not to provide health care. And that is the heart of the matter. We didn't dream up "sewage-aid" or "water-care" to help pay for those necessities of life. No, governments stepped up and took the burden on themselves. Your public utility provides the water or the sewage removal.

I'm afraid that only such a public utility model can cure the health care mess that we find ourselves in. I think we have to look at what the rest of the industrialized world has done and pick out the best practices and adopt Universal Public Health Care for all. Not some patched together Frankenstein monster like we have today, but a real national health care provider. The doctors would work for the government and nonprofit hospitals would actually not make huge profits. The government would fund drug research directly and the consumer would reap the benefit of cancer drugs that don't cost $15,000 a dose. We could, in fact, become civilized. Oh, who am I kidding. Civilized doesn't buy politicians. The health care industry sure does! 


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