The problem with healthcare costs in the U.S. is two fold. On the one hand, once a new layer, insurance coverage, is added to the ordinary Keynesian model the system is seriously thrown off. Secondly, when the providers of the services decide what services are to be rendered the system is further distorted. This simply means that a doctor is in the unique position of telling his patient what services the patient needs. But there is also the fact that the doctor profits when he does this (up sells). In most any other supply-demand situation we do not have a parallel paradigm.

For example, if a person is offered the best car in a dealership that person will not make an up charge purchase where the dealer profits more if he cannot afford it. He’ll certainly conclude that he could just as well get from point A to point B out of the rain in a less expensive car that he can afford. This is nothing more than a pure supply and demand system. 

But in the doctor-patient model the patient doesn’t know whether he can or cannot do as the doctor suggests. The truth of the matter is that the patient (customer) has no way to know if he can do without what the doctor (the car dealer) is suggesting. In a pure supply-demand scenario the market sets the true price and the market doesn’t lie but as can be seen the doctor-patient scenario is not a true supply-demand transaction. What results then is a distorted price as opposed to the true market price.

If we now go back to the concept of having insurance coverage added to the transaction it can be readily shown how the system gets further deteriorated. Once the doctor has suggested to the patient that he needs more care in the form of more testing or treatment the patient doesn’t even have to think twice about it. In the mind of the patient the reasonable thought process will always be why not do what the doctor suggests which is the easiest route for the patient. The patient doesn’t have to spend any more time or effort analyzing the merits of the situation because he’ll figure doing more for his health, especially if suggested by a doctor, is the lowest risk way to go when after all is said and done the insurance is going to pay anyhow. So why the hell not go along?

Compare this to the car dealer transaction where not only is a customer capable of selecting a car he can afford but he doesn’t have any personal risk of life and death if he’s wrong. Moreover, since it is he who has to pay and there will never be a third party paying the bill then it is worth it to him to spend the time properly analyzing the deal.

Now let’s just go one more step and see what the insurance company does when it gets the medical bill(s) to further disrupt general principles of economics. These companies have the means to hire true medical experts to give them an idea of whether the care that is being billed for is reasonable. So, the carriers pretty much know what they should be paying for versus what they will be paying for. But they have their own interests. Interest number one is to keep their customers too (the insureds). They risk losing a customer if they reject payment. On the other hand they also have to consider their bottom line. 

But they have a sure proof way of gaming the system that our car dealer doesn’t have and it works as follows; the insurance carrier can just pay the bill even if it’s known by them that it’s too high because that will please the customer- insured patient and prevent him from switching insurers. The company then makes back that over-payment the next year by raising premiums across the board such that they make back their money in a way that is totally unnoticeable to the customer who used the coverage. Since there are so many insureds the increase in premium to each customer is very low and is not therefore noticed or objected to as an increase in a car cost might be to one single person. But, over time the accumulated amount of over charges being added to premiums finally gets large enough to be noticed and the customers (insureds) can no longer even pay those.

That’s where we are today as a result of kicking this can down the road for 50 years. The problem is becoming so large that now we’re asking our Government to insure over the private insurers which it doesn’t have the resources or expertise to do. 

Clearly, we can not judge life and death and Human suffering solely with economic theory and so therein comes the rub. In short, we cannot see ourselves only allowing those who happen to be rich to live. Not only is this against the core beliefs of the majority of us it would also be inconvenient for the rich if they didn’t have police to protect them and laborers to serve them. So, we have a situation where, for one reason or another, we need to provide medical care to everyone whether each recipient of the care can afford it or not. This then creates a 100% demand all of the time. Insurance is then brought in to hedge the risk and provide the care but it needs to stay solvent and make a profit. This situation can usually work if not too many people get sick.  

So, the problem to be solved is how we can provide affordable care for the people of our Nation. I suggest that the reason America’s economic system is so great is because it provides in part for Human reason. Any economist will tell you that the unknown is never the product, the service or the math but rather Human emotion. It is the inability of economic theory to provide an equation of certitude for Human actions that provides the variability of markets. I suggest that to begin to solve the health care problem we have to start with the problem of Human behavior and make that as certain as we possibly can.

As much as doctors are an esteemed group of people it remains the fact that they retain all of the same Human emotions as anyone else. There has to be some break in the doctor aptient economic relationship but a retention in the medical care relationship We must deal with that issue while allowing the medical profession to prosper in a fair manner for what they do. I suggest that allowing the doctor to decide what services are necessary for patient care in an almost unfettered fashion should stop. This can be started quite thoroughly with a national Best Practices list for medical care. Data from the last 40 years can be assembled now and could show us outcome patterns for almost any disease there is. All we’d really have to do is get this data for the top 50 conditions of ill being to seriously dent the current system probably. It would be very easy then to just have the medical system provide services in line with that data. In this way we could not only standardize medical care to a large degree we would have known costs going in for the insurers which will be lower. 

All of medicine cannot be standardized but a very large part could be and we could provide back up opinions and care from that point on. For example, if the data shows that diagnosing and properly treating Kidney Stones can be done with two steps instead of three then we drop the unneeded third step. We can always add that one in on a case by case basis later if necessary of course. In short, we in large part take away from the medical profession the ability to up sell as well as variability of opinions. If the patient can drive a Ford instead of a Lincoln then that’s what we do going back to the car dealer example. This takes the temptation off the doctors, the worry off the patients, the costs off the payers, the premiums down and the entire market re-set at a lower price point.

But let me also cover one other issue in medical care and that is medical malpractice. No doubt that everyone has heard some in the medical profession talk about how they have to practice defensive medicine. They say that if they do not order extra tests and procedures, which they happen to profit from, then they could be accused of medical malpractice if they miss something. Therefore, they just have no choice but to order them.

Let’s analyze that position a bit however. In a medical malpractice lawsuit the law in every jurisdiction in America is that the plaintiff (patient-victim) must prove to a reasonable degree of medical certainty that the doctor violated the applicable standard of care and that this caused a harm. To do this a qualified expert medical witness must give the opinion in court that the doctor deviated from the standard of care or that the care rendered was beneath that which should have and would have been rendered by a qualified practitioner in like or similar circumstances. Restated, all the physician is required to do are those procedures required by the standard of care but he’s not required to provide every possible procedure known to mankind or to even exceed the standard of care (physician’s not required to give the best care but only reasonable care). 

A simple example might be the ubiquitous practice of performing a chest X-Ray on every patient admitted to the hospital. The truth is that every person admitted to the hospital does not need a CXR. What this person does need is some good old hands on patient care that many doctors no longer do (that onfortunately is Physician Assistant stuff now). If a proper history is taken by a real doctor and the patient’s lungs are clear and there are no signs or symptoms of heart or lung disease then in the vast majority of cases a chest x-ray is totally useless and a complete waste of money. X-Rays further subject the patient to radiation and aggravate global warming. 

Going on, let’s assume that this patient suffers a pulmonary embolus in the hospital for whatever reason. This is a blood clot landing in the lungs. Let’s say that this person sues for damages alleging that the hospital negligently caused the embolus. Well, it’s easy to see that if the blood clot was wrongfully caused by the hospital, for whatever reason, it wasn’t the fact that an admitting CXR wasn’t done that caused it. That would be an absurd allegation. A CXR, moreover, is needed of course after the blood clot but not before. Therefore, if the applicable standard of care didn’t call for a CXR in the first place there is no need to take one to defend the case. What the cop out term “defensive medicine” really means is that those doctors need to take, and profit from a test, that is not required by the standard of care for the purpose of having evidence to defend themselves in court against something that is inadmissable and cannot be used against them in court in the first place! Doctors are only required to comply with the standard of care in matters of malpractice. If they know that standard and comply with it then they’re safe. So why let those doctors take the crazy, upside down position that they are incapable of complying with the standard of care and that this inexcusable negligence should the subsidized by the public to enrich them? Shouldn't a licensed physican in the State know the standard of care for practice in that State?

Moreover, we could look at making a Federal Law that protects doctors who do in fact comply with the Best Practices by saying that where they can prove with expert testimony that they properly complied with such standards that this then is a defense against malpractice.

The above analysis looks at the micro picture of the supply side health care costs but there is also a macro demand side picture. The macro picture involves the unprecedented income and job asymmetry currently afflicting this Nation. It is not hard to see that as a direct result of this less people have the ability to pay for medical care even when it’s controlled and curtailed to its essential minimum. The persistence of trickle down economic theory and tax breaks for the very wealthy is only going to throw middle class macro economics off so much that nothing in the realm of micro economics or physician supply side reform will ever have the necessary effect to make health care affordable. In other words, health care costs can be lowered but if that is simultaneously accompanied by loss of jobs or fair wages for the middle class then there will be no net help for the common man as health care will continue to be out of reach. 

Health care, along with everything else the great middle class built in America is going to be destroyed if reforms aren’t made related to income asymmetry along side specific micro-economic medical practice reforms. As long as we have more and more hundred millionaires and billionaires then we’re headed for disaster. Having the most Billionaires in the World is not a badge of honor but a disgrace. It’s an Oligarchy. The United States will cease to exist as anyone knows it and this will eventually hurt the rich even more than the middles. Imagine the hypocrisy when Mr. Rich has to clean out his own garbage and wash his own Rolls after he has killed off the very class that gave him the great Country to be rich in to begin with! Cass warfare is also not good for the general health.

Also being used in error are two more semi-layers of useless significance. First, are the medical operated management firms which claim the ability to lower Worker’s Compensation costs and second is the use of Nurses by some types of management companies for utilization review. We can make quick work of both of these. Doctor owned and/or operated organizations are never going to lower costs properly. All they’re going to do is raise costs a bit less for their guarantee of endless work. They are hopelessly conflicted, Humanly greedy and offer no help to the problem at all.

Orthopedic groups are notorious for this. The only thing that they’re offering a large employer is the same old unneeded testing and care but for a slight discount. There’s a reason they only offer these services to giant employers and that is so they can realize giant scale. These medical organizations can be completely wiped off the Earth and prices will go down and Humans will be cared for so long as there is proper utilization review. Once again, it is simply the fact that with proper medical care and Best Practice guidelines enforcement the over payment to the health care system would trend way down as would impoverishment of the system from high ticket and unneeded scans and procedures. Many people who fall down don’t need an MRI or CT or invasive evaluation anywhere near as much as the system does.

Turning to nurses it must be realized that a nurse is not a doctor and never will be. No amount of wishing that we can get a doctor’s expertise for a nurses’ price is going to change this. Insurers use nurses to evaluate claims for proper utilization and this is a sin which truly has an adverse effect on patient care. The utilization review process must use qualified doctors not nurses (unless it is strictly a review of nursing practice). This provides another check on the level of medical services being offered as the system won’t last long if the costs are brought down only to have the services drop below Best Practices. It is not a Best Practice to have a nurse pretend to be a doctor and pass judgment on the efficacy of medical procedures. A nurse is a nurse and should review nursing utilization only because a nurse has no greater expertise than this. It should be a State ethical violation for a nurse to issue any opinion for an insurance company which is beyond her License. If the insurers won't reign the practice in then it could be done this way.

Concluding, there are still some fixes that can be made in dealing with medical care but if the big picture isn’t also fixed then we’re only kicking the can a bit further until mother nature and evolution take over in a very harsh and unforgiving fashion. That is to say that not only will our economy be hurt but that evolution will thin the herd. We will see survival of the fittest in its purest form. The more we can fix both sides of the supply-demand equation the better off we’ll be with respect to health care and probably many other things. Here, greed is not good. The idea is to minimize the role of insurance and medical management firms in health care, to eliminate nursing reviews of utilization and minimize doctor discretion with respect to Best Practices. We can further minimize insurance involvement by addressing the massive and growing income asymmetry we are experiencing through tax policies and we can minimize doctor discretion with data driven Best Practices. The goal is to get as close as we can to the model of buyer-seller with no other participants. The model which defines economic theory as we understand it. 

Beyond the above, there is not much more that can be done unless we find miracle type cures in the future. The population of the Earth continues to rise and resources have to decline. It is thus not possible to design a system at this time that will work for more than a couple of generations. This is especially true where the major premise of the system design is that all people must get all available care. This premise is the hair pin in the engine which just isn’t involved in any other business transaction where a customer who can’t afford something simply does without. All economic theory as we know it does not deal with such a system where the buyer is guaranteed a service at any price whether he can pay or not. This, I believe, will always be the systems breakdown point and someday will have to be faced. The nature of the Universe is clearly that there is a price for everything. There is an energy cost for everything and we all know how far our cars go when the tank runs dry. That is the nature of things. Given enough time a system which uses too much will have to run dry and just stop. That click is really ticking loudly now.