Health Insurance Is Not Health Care

By John Lumbard, CFA.

In late December movie mogul Michael Moore, writing in the NY Times, described Obamacare as “awful” and said that he’d known this all along—but didn’t want to say so because it would give comfort to the President’s “enemies”.  Maybe it’s time we stopped the hyper-partisan hyperventilating, and gave some thought to making our health care system better.  People want lower costs, and they want to feel assured that they won’t have to file for bankruptcy if they become seriously ill.  If we can agree that those are the really important things, we can start looking around the world for field-tested solutions.

There are two ways to control costs.  One is to force hospitals and doctors to compete for patients.  This works very well in Costa Rica, Singapore, and other medical-tourist nations;  and even here the ‘States, at Quest blood labs and the new MRI clinics, and in laser eye and plastic surgery.

The other way is to have government set the salaries of doctors and nurses, and hire only the minimum numbers needed.  Equipment, drugs, beds, and all other items are managed at a micro level.  There are nations, such as Switzerland, that do this quite well; but Swiss trains run on time and under budget.  Everything in Switzerland, from the post office to the DMV, runs like clockwork;  and that doesn’t happen here.  We already have government-run health care, in the form of Medicare, and every year the Medicare Trustees issue lurid warnings of future bankruptcy.  Medicare also drives up the cost of everybody else’s care, by demanding huge discounts on everything from doctor visits to drugs to major surgery.

So how about if we start by giving free catastrophic care to every American—when the sky begins to fall in, the government pays the bills—and then try to promote competition?  This is a nation in which the consumer is king, in ways that seem astonishing to those who’ve never been exposed to it.  Health care is the only industry where consumers are submissive and ignorant of prices and costs.  Let’s give them the information they need to make comparisons, and also give them an incentive to shop for better prices.

Free catastrophic care—“high deductible” insurance—is not terribly expensive, and the cost will come down if we can drive down prices by unleashing competition.  The best model is Singapore, which has universal care that the World Bank says costs just 4.6% of GDP—a lot less than we spend on Medicare and Medicaid alone.

Our average life expectancy is 79;  Singapore’s is 82, tied for world’s highest, and they have the lowest rate of infant mortality.

Like Costa Rica, Singapore has a medical-tourism sector that attracts patients from wealthy European countries, and the island nation has also employs Healthcare Savings Accounts and other sophisticated free-market concepts. “No medical service is provided free of charge, regardless of the level of subsidy.”  Everyone has skin in the game, and this has proven to be a powerful incentive to shop and drive down prices.  It’s also a powerful disincentive to visit the doctor when you have a bad hair day.

The voters want bipartisan effort, and truth and transparency. Let’s give it a try.



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