Saturday, July 16, 2011

I am not my brother's health care keeper

The sustainability of socialized health care in Ontario was in the news when the TD Bank released a study.  Every year government spending on health care increases more than revenues and this single social program now consumes 46% of Ontario’s budget.  Ontario is already planning to run a deficit for the next eight years – even as the health care crunch is just starting.  Imagine when the crunch is in full force!

Ontario has a baby boom generation that is much bigger than the older and younger generations.  The front edge of the baby boom has not even begun its period of heavy demand for health care.  The lead edge of the baby boom was born at the end of World War II and is now just over 60 years old.  Health care spending increases from only about $3,000 per year at age 60 to $15,000 per year (and growing) over the age of 80.  In the next 20 years the number of seniors over the age of 75 will double.  Do the math – the existing system cannot survive the coming demand and very large changes will have to come.  Without a change of philosophy either costs will skyrocket and cannibalize other programs or service quality will greatly deteriorate.

In the existing system of central control doctors and hospitals are paid a fixed amount per service provided.  Because patients are granted a “right to health care”, they can go to a doctor as frequently as they want and can consume unlimited amounts of money in the process.  If health care is a right, then who is to decide how much money should be spent saving a life – is $100,000 or $500,000 or $1,000,000 or more the right amount?  There is actually no limit.  In this system the last months of life consume vast amounts of money prolonging life by only short amounts of time.  The very old consume a large part of the limited funding that could otherwise be used to improve the lives of many more people, but because the system is socialized and their condition is life-threatening they can demand that such sums be spent.  This system creates a war between the sick and the healthy.  The sick people demand money for health care as a right that must be paid by others – the non-sick.  What a perverse morality is socialism! 
The TD authors point out that “paying for each service provided by the physician leaves little incentive to appropriately weigh the costs of procedures against their potential benefits. More­over, the physician has no incentive to consider how his or her actions in providing care for this patient will affect the care other patients receive and there are few mechanisms in place in order to effectively enable physicians to consider the cost-effectiveness of treatment decisions.”  They continue by recommending a
diagnosis-related group-based payment system” wherein “hospitals are reimbursed for the episode of care with which the patient is admitted and with the rate based on the type of service performed and the estimated cost of treatment per diagnosis fixed in advance. Payment is tied to an evaluation of the appropriate cost of the service and payments are for full episodes of care and not individual services performed.

Consider the implications of such a policy for the hospital. You arrive in the emergency with symptoms of a dangerous condition.  The hospital knows that if the condition is formally diagnosed then they will receive a fixed dollar payment based on average costs.  Initial tests are done but the doctor believes you would benefit from further testing, which is expensive.  He also knows that if he runs the test then the hospital will lose money on your treatment.  He requests permission of an administrator who decides the test may not be medically necessary and asserts that the doctor cannot be certain it will be helpful.  After all, lots of patients don’t have the test.  Besides, the supply of test equipment a lab time is limited and the administrator has a budget to keep.  If the hospital can spend less than average on you it makes a profit and looks good to the government regulators.

What about the implications for the doctor?  He knows there is more he can do to help you but he is restrained by the system from providing further help.  It is against the law for him to provide further services to you even if you wish to pay for his help.  The procedures he must follow are dictated by the policies of government regulators and hospital bureaucrats.  He is forced into a position that makes him choose between the evil of denying you further treatment or facing penalties by the administration.  His right to choose patients and treat them as he and the patient see fit has been removed.

What about you, the patient?  You are given the treatment based on partial information, never knowing that further tests could have helped, or even if you did know and want the tests you are not permitted to pay for them since your treatment is based on the principle of “universal access” and you have no right to choose your own tests or treatments unless the hospital administrator allows them.  In the name of universal access most of your rights have been forcefully removed.

If the current system of paying doctors by the treatment is severely broken and a system of payment by diagnosis will create perverse effects, then what are we left with?  The rarely discussed alternative is to implement truly free health care.  No, not the kind you don’t have to pay for, but one where all use of government force against patients, doctors and hospitals is removed.  Call it a liberated health care, just like prisoners of socialism become liberated when their country is freed or they escape to a more free country.  In a free country each individual is responsible for his own life and all the decisions he makes.  Every doctor is free to study as he wishes, build whatever practice he wishes, see the patients he wishes and charge any price he wishes.  Every hospital is free to stay small or become as large as its owners wish, build any facilities they wish, specialize in any area they wish, accept all the patients they wish and charge any price they wish.  And they all compete with each other to do the best job at the lowest price – that is the only way any business can survive more than a short time.

A free market is how things work in areas like dental medicine, chiropractic medicine, physical therapy, laser eye surgery and the few other parts of health care that remain relatively free from government control.  What has happened in these areas of health care?  Innovation is the rule not the exception.  Technology improves at a rapid pace and is quickly implemented or the practitioner loses patients or money.  Treatments become more effective and usually at a lower cost.  A shortage of professionals is almost unheard of and gaps are quickly filled by professionals who identify the opportunity.  New offices spring up wherever neighborhoods are built.  Patients are allowed to choose any professional they want and negotiate a mutually satisfactory deal.  No one has the right to force patients to accept only the government approved treatments or to force doctors to accept patients they do not wish to work with.  Professionals who are highly productive are rewarded financially to the exact degree their patients are satisfied. 

Individuals could choose to save for their future health care costs or more likely buy insurance, which would be available from any company wanting to be in the business and able to sustain its business model for the long term through satisfying its customers’ needs and wants.  If they choose not to do so, individuals must face the consequences of their choice: they cannot afford care or they must depend on the charity of others.  That is a system of true justice because it corresponds with the facts of reality and not the imagined “rights/whims” of people who would take health care from others by force.

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