America’s healthcare dilemma

There is no question that America’s healthcare system needs a massive overhaul. The current system does not cover everybody, is too expensive and in spite of that Americans are not the healthiest people in the world.
In this blog I will discuss two issues: universal coverage and cost of healthcare.

In the USA, 15% of the population does not have health insurance. But that indicates that a huge majority of 85% is covered. Most working people get group health insurance as a benefit from the employer. Since it has become a tradition, every big and medium employer provides group health insurance to all its employees. The employer’s incentive is to get tax break for paying employee’s insurance premium. Senior citizens are covered by the government program of Medicare.

The idea of health insurance like any other insurance is noble. Among the insured people, only a small number fall seriously sick and incur huge costs for cure. The insurance in effect distributes this cost among every insured including those that are healthy. The underlying promise is that you, the healthy person are paying a part of the cost of cure of a sick person today through your premium with the expectation that if you fall ill, other insured persons will similarly pay your cost.

Unfortunately the insurance companies do not work this way. First, since most expensive health problems occur at old age and the elderly are covered by the government’s Medicare program, it is the government that pays for most of the expensive treatments. This largely reduces the burden of the insurance companies. Second, in spite of this the insurance companies try to get as many healthy people and as few sick people as possible in their group health plans in order to increase profitability. For individual plans, the premium for people with pre-existing conditions is extremely high.

On the customer’s side there are two problems with employer-paid health insurance. First, we the customers of healthcare market do not care about the cost whether it is physician’s fee, hospital bed charges, charges for a surgery or medicines and cost of insurance premium. This is because we the employees in effect get health insurance as a subsidy. When we decide to buy a TV or a car, we generally tend to buy a model that suits our income and budget. A low paid employee does not buy a Ferrari or a 50 inch LCD HDTV. The average person tries to cut cost by going to discount stores, buying things on sale. Even if they do not haggle, the manufacturers try to reduce product price to gain huge volume of customers. But unfortunately, since for most of us the insurance is already paid by the employer, when it comes to visiting a doctor or going to hospital or buying medicines, we do not care about the cost. Since a massive majority of customers do not care about the cost, the free market system cannot work in healthcare industry. Not only that, in most cases the end user does not know up front what the total cost will be. Months after the treatment, a bill comes from the doctor or the hospitals indicating what portion was paid by insurance company and what portion, if any, will have to be paid by the patient’s family.

The second problem is that healthcare for most comes as a right and not a privilege. It is highly egalitarian in the sense that in a company, usually all permanent employees from the CEO to the janitor or driver get the same insurance plan. It is a subject of argument whether everyone should get the best healthcare. This is also true for Medicare since every senior citizen irrespective of financial condition, gets the same treatment. I think that it is a subject of a public debate whether everyone should get the same, top quality, expensive healthcare.

Our hospitals and doctors face little competition. The hospitals are huge and expensive. The bed charge exceeds the daily cost of the best five-star hotel in New York City. The charges for ICU are even higher. The hospital administration charges exorbitantly high price even for over-the-counter medicines. I do not believe in telling the hospitals or doctors that they cannot charge beyond certain limits. That brings in infinite regulations which defeat the purpose.

Instead, I propose that smaller health centers be allowed to develop. It is a miniature hospital with, may be 10 beds, few doctors, nurses and other staff. Sometimes, it is possible to start such a health center by a group of doctors. The administrative overhead will be small. Usually in some countries such health centers, often called Nursing Homes, provide treatment and surgery for certain diseases only. So, if you have a heart attack or need heart bypass surgery, you may get admitted to a Cardiac health center. If the patient has lung disease, he may choose a specialty center for lung diseases. Competition from health centers will force hospitals to reduce costs that no amount of congressional regulation can achieve.

In the USA, doctors make huge amount of money due to lack of competition. After residency and optionally after fellowship, when a doctor starts practicing or gets employed, she usually starts her career with an income that is double the median household income of the USA. With experience, it goes higher. In certain specialty areas such as Cardiac surgery or Anesthesiology, sky is the limit. Doctors often complain that they are burdened by huge loan incurred for medical education as well as massive malpractice insurance premiums. But, in general their luxury cars and large homes indicate that the patients are not getting a good deal.

A quick solution will be to make changes similar to the field of computer software. Every year, tens of thousands of temporary workers come to USA on H1-B visa to work in the areas of software development, maintenance, administration etc. This allows US corporations to get computer related services economically thus helping them to increase productivity. It certainly puts a downward pressure on the salaries of US computer professionals. Yet, a fresh graduate in Computer Science usually starts at $50000 which is about the same as median household income in the USA. A Computer Science graduate and a physician are both highly skilled and qualified. But the starting salary of the former is usually half of the latter.

Thanks to massive lobbying by the American Medical Association (AMA), the US government does not allow foreign medical graduates to come to USA. Young graduates are denied even tourist visa in most cases. The only foreign medical graduates that can come in are those who have obtained immigration (Green Card) through family sponsorship. No foreign doctor is given H1-B visa in order to practice in the USA. Yet, we find that those who are already here because they obtained the green card are excellent doctors. Therefore the argument that the foreign medical graduates are not as competent as US doctors does not cut ice. If, say 50000 foreign doctors are allowed in the USA every year for the next 3 years, the massive competition will reduce doctor’s fees drastically. At the same time, efforts must be made to increase enrollment in medical schools.

But the biggest reform has to come from us, the consumers. A person needs healthcare services in three conditions. First and in most cases, it is a simple and routine, short term problem like fever, influenza, diarrhea, stomach trouble etc. Second is the case of catastrophic health problems like cancer, heart problems, lung problems, broken bones etc. Lastly, there is the unpredictable health problem due to accidents.

I propose that the government provide health centers in every town and city to treat the minor, routine problems for free. In many cases, even trained nurses can diagnose and treat the minor ailments. In addition, the government must make it mandatory for everyone to visit the health center once every 6 months to get free and thorough medical checkup. Regular checkup can reduce chances of serious disease at advanced stage drastically.

For the catastrophic health problems and accidents, the patient can and should go to private hospitals or other medical facility. For this, everyone must have health insurance that an individual or a family will be able to buy. A person or a family who gets regular, free checkup from government health center will get heavy discount on insurance premium. Employer provided group health insurance should be banned. Like auto insurance, health insurance also will be for an individual or a family. No group health insurance should be permitted. In this way, the whole nation will be forced to share the risk and cost of the ill persons.

Only when you and I look for cheap and good quality health insurance for catastrophic conditions, the way we decide and buy auto insurance, will the cost of insurance come down. People will opt for royal quality insurance or basic, no-frills insurance based on their ability to pay premium. Since routine medical checkup will be almost mandatory and treatment for minor ailments will be free, the insurance cost will be much lower.

To be fair with hospitals, the law that forces the hospitals to admit even uninsured persons should be repealed. If a sick person comes without adequate insurance, a private hospital should have the right to deny the person admission. On the government’s part, it should buy basic, no-frills catastrophic insurance coverage for families below poverty level.

To summarize, here are the steps needed in my proposal.

1. Open up government medical centers in every town for free, routine medical checkup and treatment of routine, minor diseases
2. Ban employer based group health insurance. Health insurance should not benefit any group. It should either be individual or family insurance.
3. Allow foreign doctors to come in the USA to practice. A written test must be conducted to ensure the doctor’s competence.
4. Health insurance will only need to cover accidents and catastrophic as well as chronic illnesses.
5. No insurance company will be allowed to deny insurance to an individual because of pre-existing conditions. Also, premium can be increased only if the conditions could have been controlled by the individual. For example, if a person is smoker, alcoholic or drug user, his/her premium can be increased. But premium cannot be increased because a person has high blood pressure or diabetes.
6. Allow doctors or other investors to start small specialty clinics that will provide most hospital facilities only for certain diseases.
7. Government will directly buy basic catastrophic health insurance for families below poverty level.
8. A hospital or clinic will be able to deny a patient admission if the patient does not have adequate insurance.