What’s the solution for American Healthcare?

The American healthcare system is a mess. While it produces good results – no one disputes that the quality of care that can be received in America is unparalleled – it faces exorbitant costs, runaway legal costs and the problem that it leaves out millions of people. The Affordable Care Act (more commonly known as Obamacare) did something to alleviate one of these problems by requiring Americans to buy insurance from private companies. The goal was to give insurance companies millions of more guaranteed, healthy customers in order to offset the costs of the previously uninsured, very expensive and very ill customers they are now legally required to bear. But far more Americans opted to pay a fine instead of buying expensive health insurance than the government anticipated, so rates are predictably rising for everyone. 

I can’t tell anyone that the Affordable Care Act is a horrible piece of legislation without any redeeming qualities. There are parts of it – like letting kids stay on their parents insurance until age 26 or banning insurance companies for rejecting people based on pre-existing conditions – that are good ideas. It is also not anyone’s ideal law. But it suffers from the fact that any public-private solution is going to have externalities and unexpected consequences. It boils down to the fact that people are not chess pieces that the government can move around as it wishes. The government thought that it found a clever way to get the majority of healthy people to pay for the minority of seriously ill people. But it never anticipated the number of people who would choose to pay a fine and opt out. If rates keep rising and people keep abandoning the exchanges (the marketplaces that the government set up where people can purchase insurance) then the whole system becomes unsustainable. In a field like healthcare the problems are simply too deep and complex for a one-size solution. In choosing desirable goals for healthcare, the government is trying to aggregate hundreds of millions of competing desires and it just doesn’t work. 

The solution is not to add more layers of bureaucracy and controls, but instead to combine lowering costs with lowering the barriers to access. An easy first step is tort reform. Tort reform – specifically in medicine – refers to the idea that medical liability needs to be reworked to protect doctors more than it currently does. From 2006-2013, medical payouts totaled 29 billion dollars. Malpractice insurance regularly rises at least 100 percent every 3-5 years. But the biggest benefit from tort reform would be a reduction in the practice of “defensive medicine.” In 2013, doctors ordered 60 billion unnecessary diagnostic tests. Doctors are scared enough of being sued that it is changing how they practice medicine. Doctors and hospitals simply pass these costs onto the consumer. Special healthcare courts could be set up and designed to handle medical malpractice and reduce the massive costs associated with medical liability. 

Rather than providing care or insurance plans the government could provide block grants to states or individual citizens bookmarked specifically for health insurance. States would be looking at a smaller aggregated pool of desires and would be able to tailor solutions to the specific problems of their state. Individuals would be able to tailor their health insurance choices to their specific needs. 

The biggest fallacy that gets overlooked in the healthcare debate is that everyone needs to have health insurance. A healthy young man or woman doesn’t need an expensive and expansive plan that covers everything. Instead of spending thousands of dollars a month towards health insurance they probably will not need, the young and healthy person could invest that money in learning new skills, purchasing a home or saving up to start a family. They should at least have that option. Using block grants to states and individuals would strip out a level of bureaucracy at the federal level and again lower costs. States would be able to more effectively root out fraud – again because they are operating on a smaller level in an area in which they already have experience working. The state governments could learn from each other and mix and match the best policies across the country; this would turn each state into its own lab of creativity. 

The federal government is just not that good at doing things. Big organizations get clunky and hard to manage. A simple task like designing a website for the Affordable Care Act ends up with a website that doesn’t work and cost a hundred million dollars to build. Instead of getting involved in the health insurance market the federal government should lower costs, lower the barriers to entry and in cases where the two combined is not enough, provide the money to erase the barriers completely. A system designed with those ideas in mind would keep the excellent outcomes of the current system while abandoning its exorbitant costs.