Real Healthcare Reform

(AP Photo/Andrew Harnik)

Healthcare reform is going to come up again just after the election (as Obamacare gets overturned with Barrett on the court).  It is time conservatives have a real plan.

First things first – we pay too much for healthcare.  We are paying ~18% of GDP or roughly 2x most of the rest of the OECD.  There are frequently responses of “but they use government intervention to lower prices, and their service sucks.”

First off – our service in the US also sucks. It isn’t like comparing the Hyatt to Motel6.  Its more like comparing Super8 to Motel6.  Is one better?  Maybe, but just a little.  Also, our care is better it isn’t by much.  Do we have better survival rates after cancer diagnosis and heart attacks?  The difference depends on the stage at diagnosis for the particular type of cancer or the severity of the heart attack.  It also depends on things like how you weigh one potential side effect against another.  It isn’t like the US cure rate for breast cancer is 98% while the UK is 20%.  The reality is that after accounting for stage at detection it might be 95% in the US and 94% in the UK.  Even then the differences aren’t clear.  Would you pay double for a system that moves from 94% to 95%?  Put differently, if you could shave $10,000 off of your family’s insurance policy by agreeing to a medical system that had 94% cure rate for breast cancer instead of 95% would you take that deal?

Second, the complaint is that a system with heavy government involvement can provide essentially identical outcomes (seriously, look at the results for France, Germany, Israel, UK, and Canada) for a lower cost.  Do we as conservatives really want to concede that point?  Personally I would look at it and say “we have generated a Frankenstein’s monster that is worse than socialism.”  If a socialist system can provide first world medical service for $6,600 per person in Germany, and $5,400 in Canada then what should the cost be in a capitalist system?  I would suggest $4,000 or lower.  We pay $11,000 for each person in the US, way too freaking high.

Why do we pay too much?  Simple, we pay our workers too much, they do too many things, they use too expensive of products, and there are too many of them.  I can use a labor and delivery as an example.  In the US almost all babies are delivered by an Ob/Gyn in a hospital with several support staff in the room.  In times past the delivery was done by a family doctor (not a specialist) in a home by himself.  Also, that family doctor would make more than your average worker, but not by much.  Now an Ob/Gyn makes (on average) $318k per year (here).  How many of the rest of you are in that sort of bracket?  I asked for an itemized bill for my first child’s birth over a decade ago.  It included several pairs of gloves at $10 each.  Now I’m no expert on these sorts of things, but I doubt that the physicians gloves actually cost $10/pair.  I am glad the physician was in the room, but I don’t think the other 4-6 nurses were really needed.  Our Ob/Gyn seemed pretty competent on her own, and everyone else mostly just stood around.  When our second was born with a midwife at a birthing center there was an aid, but the whole process went more smoothly and cost less than $2,000 for the entire birth, and that was cash out of pocket.  I had tried calling ~5 hospitals asking what the cost for a routine labor and delivery was, and none of them could tell me.  The Nurse Midwife told me flat out $1,800 for a routine labor and delivery including pre-delivery and post-delivery.  It did not include the 18 week ultrasound.  Seriously, a midwife can figure out what the cost would be, but a multi-million dollar hospital can’t?

Enough griping.  Solutions:

Licensing and Certification

We have a certification process for doctors and nurses that is absolutely ridiculous.  We require med school, residency, and board exams.  If the board exams do what they say then why the other requirements?  We should allow nurses with [x] years of training to sit for a board exam.  The time in a hospital can serve in lieu of Medical School.  MD’s from certain other countries (Germany, UK, France, Israel, Japan, Singapore, etc.) should receive expedited green cards to work in the US and have a license to practice medicine.  Family Nurse Practitioners and Physicians Assistants should be allowed to practice the full scope of their training.  They are trained in diagnosing and treating certain maladies and should be allowed to practice that scope without physician oversight.  This would cut the average salary for primary and specialty care in half.  The reality is outcomes really wouldn’t change much.  Do you think the French trained doctor is really going to do that poor of a job delivering a baby?

Cost Estimates and Pre-approval

Each patient ought to receive an estimate for services and sign a paper with the estimate before services are rendered.  Here is the critical component – if the cost is above the estimate the patient is not liable.  So, if you come in for a routine labor and delivery (yes, I keep coming back to that) and there is a $600 addon for a hearing check that you never signed – you are not liable to pay that bill.  There is no arbitration, no negotiation, the bill simply does not apply any more than if somebody came along and cut your grass without asking and then mailed you a bill.  If the service was not specifically agreed to you don’t pay it, period.  “What about emergencies??!!!??!!???” First off, emergencies account for ~4% of US healthcare spend.  Let’s start with the 96% and then worry about the 4%.  However, in the event that a person is incapable of making a medically informed decision (i.e. unconscious after a car accident) the bill goes to the insurance company, and the process is closer to our current system.  However, the cost of a knee replacement, hip replacement, angiogram, and everything else would drop dramatically.  This could even extend all the way through cancer care.

Patient: “Okay Doc, I have prostate cancer.  What are my options, and how much do they cost?”

Urologist: “Option A is 90% effective and costs $6,000, but I really like option B.  Option B is 92% effective and costs $28,000.”

Patient: “How about we start with option A.”


First, remove all market protections beyond patents.  Currently there are only a couple of providers of insulin even though the formula was donated to the world and has been off patent for decades.  Why?  Our FDA keeps up barriers to competitors.  All barriers to competition other than patents need to be removed.  Second, biosimilars and generics need to have an expedited approval process.  Bringing a generic to market should take 6 months max.  A biosimilar would take longer, but should be limited not by regulation, but by the underlying chemical and biologic processing.  Even if generics are never brought to market the viable threat would keep down the cost of off-patent name brands.  It is likely that CVS might run its own generic drug company to spin up generics any time the manufacturers jack up prices.  Pharmaceuticals would also be required to list their prices – just like over the counter.  You can look at the board on the wall and see the area with Statins and see that your particular statin costs 4x the others and you might ask your doctor why you need that particular one.  Kind of like how you can look at cough medicines and make a choice between types and brand-name vs generic.

Medicines could also be imported from a list of approved countries (i.e. France, UK, Canada, Japan, etc.) that have good FDA equivalent agencies.  If Pfizer has decided that they are going to sell a drug for $5 in Canada we should allow CVS to buy that drug for $5.50 in Canada and sell it for $6.00 in the US.  I don’t care if Pfizer wants to sell it for $15 in the US.  If they want to do that then they would need to sell it for $15 in Canada.  “But Canada will block the drug altogether!”  Sounds like that is Canada and Pfizer’s problem.  When Canada and Pfizer agree to screw America then we should absolutely undermine their agreement.  There are several options 1) lower the cost in America 2) raise the cost in Canada 3) stop selling in Canada.  It would be up to Pfizer and Canada to decide which of these three options works best for them.  We need to start vetoing “sell for one price here and a different price there.”

Payment models

Almost all payments should be cash out of pocket.  I know this sounds crazy, but hear me out.  If the cost of insulin came close to the cost to manufacture insulin then diabetes would be cheap to care for.  It would be $100-$200 (max) per month.  Insurance would then be replaced almost entirely with HSA accounts.  These accounts would be funded by individuals and the cash in the account would pay towards medical services.  Some services (i.e. cancer treatment) would be above the deductible of the HSA, and traditional insurance would kick in.  However, since the patient gets to keep what is left in the HSA the patient still has an incentive to ask “doc, how much will that knee replacement cost?”  Importantly, Medicare and Medicaid would replace their current models with support payments into HSA accounts.  This is more critical for Medicare than Medicaid, but in both cases it is essential.  When that market moves you have now moved half of the payments in the US to out of pocket payments.  Even though the government would be paying the cash into the HSA account the owner of the account has an incentive to help drive down costs.


These reforms as a package would build a new healthcare system.  The system would incentivize high-quality low-cost care.  The patients would have both the information needed to make a decision and a reason to choose a low cost pathway.  The licensing barriers that protect overpriced professionals would be eradicated allowing the market to come to a more rational pricing structure.  The cost of pharmaceuticals would probably decline by at least 75%.  This also allows the free market room to make changes.  Our current market is not free, not efficient, and leaves many wishing for the efficiencies associated with socialism.

Singapore has a system very close to this and pays less than $3000 per capita for a system that has outcomes extremely close to ours (close enough that differences can only be found through gamesmanship).  Seriously, check out their outcomes and ask whether you would be willing to take their system for a 75% discount on healthcare.  I would.