Part 1: Why is Health Care So Expensive?
As I read the tea leaves, I see a socialist model coming to our everyday lives via Obama Care. I’d prefer that the Republicans design a market-based system one that includes market-based cost savings as opposed to a Democratic system that nationalizes 20 percent of our economy and forces all of us to do it their way (or the highway).
When I attended graduate school my left-leaning professors were in favor of a single-payer health care system. All of them! By the way, the term “single-payer” is code for a government run or “socialist” health care system. Remember, if the Federal government is the only payer, then it tells the doctors and hospitals what to do, how to do it, and how much to charge. Like they have ever done that right!
Afghanistan Health Care
Before I begin, let me tell you a story about my two deployments to Afghanistan. A story that’s applicable to this article. I am a health care administrator in the U.S. Navy and my specialty area is Plans, Operations, and Medical Intelligence. I also hold a master’s degree in health care policy and administration. In my military role, I plan operational medicine for the U.S. Navy, Marine Corps, and other services (in a joint environment) – essentially everything from forced entry with the warfighter to casualty evacuation to higher levels of care for the wounded and injured.
The military bureaucracy, as anyone that’s served will tell you, is insane! It’s why I have a bitter-sweet relationship with the military. I love the camaraderie and the sense of doing something bigger than myself, but sometimes the bureaucracy makes you want out! I guess that’s why I’m a reserve component officer. That’s why I own my own business, too – Sternes Realty.
Though this article isn’t about the military health care system, I can tell you it’s well funded, wasteful, and it often rations care. It does pretty decent health care because, in large part, it compares it’s outcomes with the private sector. I often wonder how good it would be if it had no private sector to compare itself to.
In 2008 and in 2013 I deployed to Afghanistan – a war zone. In my first deployment, I was a military adviser to the Afghan National Police (ANP) – a paramilitary organization that actually engaged the Taliban more than the Afghan National Army (ANA). By the time I got to Afghanistan in 2008, we had occupied the country for almost seven years and they still could not provide health care to the ANP or the ANA very well if at all.
When I returned in 2013, I was responsible for certifying the corps and above hospitals and their sole medical school, before transferring autonomous control to the Afghan government. We compared them to the most basic third-world standards. Their progress was slow, but they eventually earned the certification for transfer. There’s something to be said about taking off the “training wheels” to make someone learn how to ride a bike! It’s basic human behavior. When you stop micro-managing someone, they finally begin to own the system and make it work – and this is the premise of the Idaho health care plan.
During a mounted combat patrol during my first deployment, we came into an ANP forward operating base. It was the only one I saw, at that time, that had a real health care and wound care clinic – with doctors, nurses, and medics. In 2008, the ANP or the ANA could not run a simple logistics system composed of a catalog and an ordering system – I’m not making that up. However, in Adraskan, somewhere between Herat and Kandahar, there was a fully functioning clinic with proper resupply.
Why? Because a NATO member country contracted with a private Afghan company to provide care there – and it was good care, too. Meanwhile, everywhere else the police and soldiers were dying everyday because the Americans and other NATO countries could not properly coach them to set up a health system like we have in the U.S. military and NATO.
We Were Making Them In Our Image
During a discussion with fellow soldiers and sailors, we found it laughable that America was using bureaucrats to nation build. With all our central planning and coaching, we couldn’t get the Afghans to develop a very effective army or police force – let a lone a suitable health care system. Instead of building their private sector and economy, we were doing what the Soviet Union tried and failed to do there, more than two decades earlier.
We were building a socialist system instead of a market-based system. The Afghan people have been independent, free-market capitalist for thousands of years, mostly because it’s the only system that could provide for their families through all of their wars and conflicts. So, introducing the Adraskan model would have been natural for them.
If we would have embraced a hybrid private-military health care system, they would have had the battlefield and non-battlefield health care they deserved. Instead, they unnecessarily died for more than a decade as NATO tried to develop a public system.
For years America and NATO paid for “make work” programs to employ the people. As the generals said, if we don’t they’ll take up arms against us. One would think the natural extension to that argument would be to develop a sustainable private economy. We should have been encouraging American, European, and other countries businesses to invest in Afghanistan’s private development. They have oil, copper, and other important metals worth developing. They also have millions of low-wage workers that could have sewed clothing or rugs – and thereby made lots of money for their local economy (good money in Afghan terms).
So, instead of using a the Adraskan model – privatization – we tried to force them into a socialist model – the military health system.
What the Afghans Can Teach America About Free Markets
Everywhere in Afghanistan I saw free-market commerce. You can get anything from computers, to canned peas, to furniture in their markets. In fact, their markets could get supplies quicker and easier than the world’s best military logistics system – the U.S. Army.
After traveling the back roads of Afghanistan, I began to notice how well the free market operated there. No government agency was building markets or providing sustainable economic development. It was being accomplished automatically by everyday Afghans. Prices were very reasonable and people, through their individual choices and free exchange, were buying and selling whatever they needed.
Meanwhile, though the Afghanistan Constitution made health care a right, it could not be found anywhere in the public system. The public system was plagued with corruption, graft, and fraud. Few of the hospitals or clinics could provide even the most basic care – unless you were “important” and were able to use your power to get what you wanted. Isn’t that the case for most government-centric societies? In these societies, only the higher-ups in the socialist utopias of Cuba and Venezuela, today, and East Germany and other Communist (socialist) countries during the Cold War could exerciser their right to free health care.
Meanwhile, if an Afghan went to the non-government doctors in town one could get decent health care for a reasonable price. Often from the same doctors in the public system. The medical providers used the public system as a referral system to their private practice. They’d go to the government clinic in the morning and open their private clinic in the afternoon.
What’s Wrong With America’s Health Care System?
I’ll make it simple. It all started with the wage and price controls during World War II. Since employers couldn’t pay wages above those allowed by government, they offered health care insurance as an incentive to get good workers. Then after the war, employers and employees expected to get health care insurance as a fringe benefit at work.
The problem with this method of paying for health care is the anonymous and removed nature of paying. Insurance was paying for it, “So give me the best I can get doc.” In 1978, I broke my leg and went to the hospital. When they discoverd insurance was paying for it, I remember hearing the doctor say, “Oh you’re insurance is paying, well your son will have to spend the night then.” For a simple Tibia fracture I stayed three days and two nights.
The bottom line is this. We developed a system that someone else – called a third party – pays for health care. The insurance companies make more money by increasing the costs of care. Professors and bureaucrats create formulas to control cost, which define how a doctor or hospital is paid. Some insurers negotiate rates with hospitals and networks to “control” the costs of care, but as we’ve all seen, that doesn’t work well either.
Wouldn’t you want to be paid by an equation, instead of what the market will bear – especially if you can use politics to boost one or two factors to get higher pay. It’s a method they all do very well. It’s a simple game. Insurance carriers negotiate “reasonable prices” and then pass the cost to the employer or government who then pays the premiums. Raising prices benefits the hospitals, physicians, and insurance companies – and it has no bearing to what a patient can pay and the real costs of health care.
When we took the individual out of the equation and let someone else pay for health care, we sidetracked the only thing that holds down prices – the human nature to pay less for something. The nature to shop around and compare prices. The nature to say, “Three days in the hospital to fix a simple fracture? Forget it, I’m going home. Splint it and when the swelling goes down, I’ll shop around for the best priced doctor to put a cast on.”
Oklahoma Surgery Center – How Health Care Should Be Done
Watch this video and see how health care should and could work.
If you want to learn more, watch these videos which I gathered together.
Government Makes Things Expensive – Let’s Make Idaho Lean and Mean
In this video you learned how free-markets improved the quality and costs of all forms of surgery – for 17 years! The video documents how the surgery center was able to reduce the cost to one-fourth, one-fifth, or even one-tenth of the prices charged elsewhere. Amazingly, the costs can be lower than the the individual’s out of pocket costs from a typical insurance plan. It’s actually cheaper than paying your deductibles and co-insurance. Wow!
What’s Next? Part 2: Why is Health Care So Expensive?
In my next article, I’ll explain how the scheme I’ve devised to deliver universal care to Idahoans. Which will be cheaper than what your employer and Idaho pays for insurance today – and it would deliver a good quality basic package of care to ALL Idahoans.