Three Obstacles to Health Reform

I mentioned in my previous post that I had submitted an essay to The Washington Post's pundit contest. This is not that essay; it is the original version, before I realized that the contest had a 400-word limit. (This piece runs 655 words, or so Word tells me.) I hope you enjoy it.


I think I’m a pretty typical American, so far as my health insurance situation is concerned. I get my health insurance through my employer, and my share of the cost comes out of my bi-weekly checks in an amount small enough to cause me very little pain. I’ve been happy with the service I’ve gotten from my healthcare providers, including my radiation treatments for prostate cancer, though I was irritated to learn that my favorite eye doctor was excluded from the latest list of preferred providers. I think it’s really too bad that some people don’t have insurance, and I worry that my own insurance might either go away or become so expensive that I won’t be able to afford it.

There are problems with our current system, and I think something ought to be done about them. At the same time, I don’t want to wreck a system that seems to produce pretty good results most of the time. So I welcome the initiatives by the Obama administration and the Congress to reform the system. There are just a couple of areas in which I think the pro-reform forces (and their opponents) seem to ignoring the elephants in the room.

First, there’s the simple matter of supply and demand. If demand for a good or service goes up, what did our economics teachers tell us would happen to the price? The price will go up as well. What does the act of providing insurance to many uninsured people, or insisting that their employers and the insurance companies provide coverage, amount to but an increase in demand? As many as twenty-five million people who do not have insurance today will be able to walk into a doctor’s office or a hospital, flash a card, and demand service. That is a ten percent increase in the demand for medical services, and I would expect the prices of such services to increase accordingly.

The second elephant in the room is the rate schedule. Doctors and hospitals complain that Medicare and Medicaid pay less than the “cost” (read: list price) of various procedures and tests. Congress has declined to enforce limits on payments to doctors in the past. And some doctors won’t take Medicare patients. When people compare the U.S. system to that in other countries they need to note that the rates for some procedures are set much lower than those here, and that doctors and hospitals aren’t permitted to decline to treat people. One way to lower costs is to enforce a reasonable rate schedule and demand that all doctors and hospitals accept payments according to that schedule or lose their licenses.

Third, there is the shibboleth about coming between the doctor and the patient. We don’t want, says President Obama, to have any bureaucrat, government or private, coming between the doctor and the patient. Well, we may not want that, but that’s exactly what we need to do. We need to stop doctors from ordering unnecessary tests (especially when they own a share in the laboratory), from performing unnecessary procedures, and from prescribing unnecessary drugs. The total of healthcare costs is the total income of hospitals, medical workers, insurance companies, pharmaceutical companies, and the government agencies involved (Medicare, Medicaid, USPHS, Indian Health Service, and so on). In order to lower healthcare costs, we have to lower the incomes of some of those people and organizations.

There are a lot of specific improvements in the healthcare reform bills before the Congress. A lot of good things are going to be done. But none of those things will lower the cost of the healthcare system unless we face the three problems I have outlined above. Frankly, I don’t think that Congress is capable of dealing responsibly with problems whose solutions are likely to be very unpopular. But I can always hope that there are some adults up on Capitol Hill. I’d like to think that there are.