News and Tribune

Opinions

October 25, 2012

HARBESON: Learning more about health care

> SOUTHERN INDIANA — A couple of months ago, a reader contacted me and suggested I review a book that he thought more people should know about. I had previously read a few articles from the author which intrigued me so I agreed. The book’s topic covers what is arguably the most important service/product everyone purchases at some point — health care.

Everyone has at least one personal story about health care that left them feeling frustrated. Medical professionals and patients feel trapped by the current system. Various third parties (government, huge insurance corporations and employers) are so deeply involved in the process that normal market forces don’t even come into play. As my friend noted in his initial email, “What other service or product do we engage the services of without knowing what the price is?”

This book, titled “Priceless: Curing the Healthcare Crisis,” was written by John Goodman, an economist who is sometimes referred to as the “father of Health Savings Accounts.” Goodman has been deeply involved in the study of the health care system and has spent a lot of time thinking about how to improve it. After reading this book, which is loaded with footnotes and references, I can’t say I have a complete handle on this complex topic but I’m certainly more informed.

One aspect of health care that has always puzzled me is how health insurance developed in a way that it often isn’t insurance at all, at least in the traditional sense of being a product offered to protect against a possible and unpredictable catastrophic event.

Goodman writes: “Most people in health policy view health insurance as just a way to pay medical bills. This book is one of the very few places in all of the health policy literature where you will find a defense of the idea that there is a social need for real health insurance. It is also one of the few places you will find an argument that we need a real market for health risks to determine the best way to insure against them and to determine what is the best way to partition insurance products between self-insurance and third-party insurance.”

Goodman’s book examines how interference in the health market has created perverse incentives as patients, doctors, insurers and other third parties try to make it all work. Professional licensing laws, tax laws, labor laws and employee benefit laws have created unintended consequences which have played a large part in creating the health care system we see today.

These artificial laws create an atmosphere that attempts to defy and ignore economic laws. No matter how much we may want to, we simply can’t avoid basic economics. One of the best examples of this is the problem of pre-existing conditions. Goodman points out that “Most of the time, the problem of pre-existing conditions arises precisely because health insurance isn’t portable.”

The reason it’s not portable is because of laws interfering with market forces.

Interference in the market has changed the very idea of insurance in regards to health.

Goodman explains: “The casualty insurance market is a real market in which real insurance is bought and sold. The health insurance market, by contrast, is an artificial market in which the product being exchanged is not real insurance at all. To a large extent, it is prepayment for the consumption of health care.”

He goes on to explain how this has created many problems leading to the huge increases we have seen in health care costs. One of the most interesting statistics Goodman notes is that spending on health care has much less effect on mortality than we think: “Studies show almost no relationship between aggregate spending on health and population mortality. Lifestyle, environment and genes have far more influence on life expectancy than anything doctors and hospitals are doing.”

He also talks about equality in health care and mentions many studies done in Britain and Canada that show the poor still do not get the access and quality of care that everyone hoped. Britain even has a term for one aspect of the inequality that comes from location: “postcode lottery.”

My favorite chapter in this book was “Designing Ideal Health Insurance.” Starting from scratch and taking all the interference out, he asks the reader to think through the process of how 1,000 people might set up a health care plan that works. In addition, when discussing problems to consider he adds this point: “Since all agreements are voluntary in this imagined scenario, coercion is not an option.”

Although he doesn’t really take this idea through to the end (he appears to be more focused on reforming the current system) anyone who tries to help people think about social issues from a voluntary standpoint is certainly on a better track than most.

So if you are interested in learning more about health care, including how you will be affected by the Affordable Care Act, you may want to read this book.

— Clark County resident Debbie Harbeson would love to see a health care plan where coercion is not a pre-existing condition. Write her at Debbie@debbieharbeson.com.

1
Text Only | Photo Reprints
Opinions
READERS' COMMENTS
Twitter Updates
Follow us on twitter