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Thursday, September 17, 2015

Why is healthcare a such mess? How can it be fixed?

Your Question:  The healthcare system is a mess.  How did it get this way? What is the solution?

My Answer:  Let me start by saying that in front of me right now is a bill from Paula Sterns Hospital in Ludington, Michigan, from March of 1943.  It is the bill for my grandma's entire three day stay when she had my dad.  The cost was $23.00.  The ambulance bill was $2.  If you adjust these bills for inflation, they come to $317.26 and $27.59.

The cost of just one breathing treatment today is $123.00, so you can easily see that something occurred in healthcare that inflated the cost of it by a stunningly high margin way over the rate of inflation.  What happened was that, during the 1960s, the progressives decided that the healthcare system was messed up and they could fix it. So they created regulations. So now hospitals have to hire people to make sure the regulations are met.  To pay these people the cost of healthcare increases.

In the 1970s they realized that the prices were too high for many people, so they had to come up with another solution. This time they created medicare and medicaid and DRGs and more regulations.  To make sure regulations are met, more people must be hired.  To cover the cost, prices go up.  But now people still can't pay, so third party system is created.  So now the hospital bill does not come directly from the hospital at all, but from insurance companies.  So not only do you have to pay the hospital bill, now you have to pay an insurance bill as well.

So this is the system until 2010.  Now you have healthcare prices that have skyrocketed beyond belief. You have 40 million people who have no insurance at all, some by choice and some not by choice.  You have the same people who messed up the system in the first place try to fix the problem, once again, with more government.  More regulations are created.  Hospitals now have to hire hundreds more personnel just to make sure regulations are met.  This is done at the expense of patient care, even though it is meant to improve patient care.  Instead of prices dropping, they skyrocket once again.

So who is going to solve the problem now.  Hopefully not the government.  The government got involved in healthcare during the 1960 and created the same problems they propose to fix.  And the more they try to fix it with their ideal solutions the more they make it worse.  They do not ever solve the problems they propose to fix, they only succeed at creating chaos.

The solution to all of this is simple: let capitalism work.  That's the only thing that has not been tried, at least since the 1960s.  When you go to the hospital to seek a service, you should get a bill from the hospital for that service.  The price would not include any middlemen, and therefore would be very inexpensive, like it was in 1943 when my grandma only paid $25 for an entire hospital stay.

Surely the price would be a little higher due to inflation and technology, but price of healthcare today is beyond reasonable.  Why? Because, back in the 1960s, government officials, sitting around a table in leather chairs drinking coffee, decided they could make it better.  Did they? Absolutely not.  These people need to get out of the healthcare industry, and let the people, the markets, the states, solve the healthcare crisis.

The real solution is capitalism. Here you would have individual hospitals compete for your services.  What one hospital did best to win you over, other hospitals would copy.  When one hospital creates a program that fails, other hospitals will not copy that program. That is what's needed. Competition is the best method of driving down prices.  If you charge too much, people can go somewhere else.  If you provide good service at a good price, then your hospital will be the one chosen.

I am not naive.  I understand there are outside forces involved in price increases.  There is better technology today, there is better education that costs more, etc.  But, still, the healthcare solutions since the 1960s have all come from Washington, and everyone of them has failed to solve the problem.  And so many people say, "Well, what else can we try?"  I propose to try capitalism, because it is the only solution that has yet to be tried -- at least not since 1943.

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