Last week David Brooks wrote an interesting opinion piece called Let’s Get Fundamental which highlights some of the more pervasive underlying problems with insured healthcare. Brooks’ writing itself wasn’t anything special (sorry David, I usually enjoy your columns, but this one was pretty mundane), but it did call to my attention a truly great essay written by David Goldhill in The Atlantic entitled How American Healthcare Killed My Father. Goldhill’s essay has a misleading title — little of it is actually about how the American system failed his father. It’s actually a high-level view of how any system whereby all of our health-care costs are “insured” is theoretically terrible. Healthcare is not health “insurance!”
Crystallized into its most succinct form, Goldhill’s argument has three major points: 1) there is no possible universe in which having routine healthcare paid for by “insurance” instead of out of our own pockets makes sense, 2) we don’t realize how significant the true cost of this perverse setup (where even routine checkups are paid for by “insurance”) is to our own pockets., 3) even worse, the misdirection that occurs by having us pay money to insurance companies who in turn pay for all our healthcare causes massive inefficiencies in the type of care (and how much of it) we actually get. All of this paid for out of our own pockets just in an obfuscated way that makes it tough for us to get a real handle on it. I highly recomend Goldhill’s entire article as his writing is brilliant and he has several other terrific arguments, but the scope of my post today just covers these major points.
Think about this issue at a high level. You walk into a doctor’s office. You walk out, having paid some pittance of a co-pay (say $30). To you, it seems nearly free. But how could it possibly be free? Who would be subsidizing our care? Furthermore, an insurance company, one that specializes in statistically understanding how to finance rare large outflows (e.g. massive surgeries) with common small inflows (premiums), pays for this. How could it possibly be more efficient for an insurance company — which has to handle massive overhead, investigate claims, etc. — to pay for services only you and your doctor know the true value of?
The answer is it can’t, it isn’t, it never will be! The entire American healthcare system is actually one giant misdirection caused by a single seemingly innocuous law which made employer contributions to employee health plans tax-deductible half a century ago. This law meant that employer-funded health insurance became the most affordable option (after taxes) for all healthcare coverage and that completely skews our entire system.
How so?
Let’s take an example from my own life. About four or five years ago, I had terrible pain on the outer half of my left knee every time I ran. One routine visit to an orthopedist and I had a reasonable diagnosis of iliotibial band syndrome (ITBS), a common injury in which one has strained the band connecting our hips to our knees (along the sides of our legs). The injury either gets better on its own or through physical therapy in more severe cases. However, in addition to this diagnosis, I got a prescription for an MRI, “just to make sure.” These works plague our healthcare system.
MRIs are something like $1200 (why they cost so much is another argument and to avoid circularity, I will avoid discussing that). You should not have a $1200 procedure to diagnose an injury that has already been diagnosed(!) when the prognosis even if this diagnosis is not correct is still nothing serious (at worst without an MRI I would have to see the doctor again in a few months if the pain continued). Is there any planet on which this can possibly be efficient?
And yet I of course had the MRI done because in our current system that’s the most efficient thing for me to do — hell, I’m already paying for it anyway.
