The Health Care Rebate

by Larry Mongoss, guest blogger

This is not a particularly China related topic, though it does reflect on the public versus private view that is one of the big disconnects between China’s government and its Western critics. Now that China has started to try some sort of insurance system for its public health care, Chinese people may find themselves on the other side of that divide. Perhaps there are some lessons from the US experience they can apply.

To the point is the ongoing bickering, arguing and fighting about health care reform that is going on in Washington and around the country. To call it a debate would be elevating it above its current station. Since most the arguments seem to be recycled I have decided to call it a “rebate,” though anyone hoping to get something back is likely to be disappointed.

As I see it, there are three basic things at issue in health care: who has access to it; how much do we spend on it; and how well does it work. The crisis in health care that many people are pointing to is a result of the reality that many people do not have access, we spend a lot, and by objective public health measures the system does not work very well. So what do we do to fix it?

Clearly we give more people access, we spend less, and we get better results. Public policy is so straightforward.

Politicians, unfortunately, seem to have pretty short attention spans and it appears they have gotten themselves completely stuck on the issue of coverage and simply want to argue about how much that will or will not fail to decrease costs and ignore the final question altogether. Worse, hampered by narrow vision, reelection worries, special interest groups and lobbyists, the only viable solution for expanding coverage seems to be a new “insurance company.” Thus the debate on what it will do to costs.

What exactly is required to lower the cost of healthcare?

I have heard people say increase competition in the insurance industry. Bush 43 used to like to talk about getting rid of malpractice law suits. More thoughtful conversations do look at lifestyle, nutrition and the ratio of general practitioners to specialists. But I have never heard anyone say that we need to have fewer doctors.

This is what confuses me. If we are going to decrease the cost of health care, does not that mean exactly that – we need to lower the number of doctors, nurses, hospitals, researchers and (of course) insurance workers. If we really like to have lots and lots of these people around I guess we could just pay them less, but somehow I don’t think that will work. More people means more money, fewer people means less money.

For those of you who want to simply take it all out of corporate profits, there is a legitimate argument to be made there. The United States does, to some extent, subsidize the rest of the world in pharmaceuticals by paying much higher prices for prescription drugs than most of the rest of the world. But that, like malpractice costs and insurance inefficiencies, is not enough to turn the tide.

As a society we need to make some serious choices going forward. It would be great if everyone in America was a doctor. But where would we shop, and who would grow our food? We won’t be able to import that because, frankly, as good as the doctors are in America they are also expensive. People in other countries are very price conscious, and only the very richest of them will come to America for treatment.

Market forces will eventually take care of this, by making it very unattractive to be in the health care industry in America. When this happens it will be seen as a terrible thing and the politicians will try to reverse the trend. If the current thinking on Capitol Hill persists I expect we will see this day sooner rather than later.

We need to add price consciousness to health care to our list of imports from China and other developing nations. The current employer-based insurance schemes and the extensions of that scheme under discussion will not do this. Health care, like any service, can’t be provided in unlimited quantities. It has to be rationed, either by price or by another mechanism. Until everyone recognizes that, and we are willing to actually talk about the hard choices, there will be little fruitful discussion.