Healthcare Reform to Modernize the Care Industry

In the early 1900s, healthcare was poor quality, but inexpensive and readily available. Through a series of reforms, healthcare has become extremely high quality, but extremely expensive and nearly impossible to obtain. This outcome has been driven by the government regulation and organization of the healthcare system into something that extracts enormous wealth from society while providing little back.

There are a few things the government has done to mutate healthcare that can be readily resolved, and a few things that the industry has done to itself that can also be readily resolved.

  • Limitation of doctor licensing through a single organization, the AMA, which has incentives to limit the number of licensed doctors to maximize the income of the few doctors who are licensed.
  • Imposition of unnecessarily dangerous and harmful workplace and training practices for doctors.
  • Limitation of hospital services through the restriction of healthcare permits and licenses to the consent of other healthcare facilities in the area.
  • Consolidation of doctors facilities to corporations.
  • Ownership of healthcare facilities by financial organizations.
  • Lack of pricing communication by healthcare facilities.
  • The obligation to purchase health insurance to receive care.

These all have very readily apparent solutions.

By removing the limitation of doctor licensing from exclusively the AMA, and enabling doctors to set up other professional standards organizations for licensing, competition is introduced into the medical licensing field. Even if doctors prefer to limit their numbers to ensure their own wealth, this situation is not tolerated in any other profession. For example, most professional licenses, such as attorneys or engineers, are administered at the state level. And these other organizations do not limit the number of licenses issued, but simply establish basic standards required for a license to be issued. In some fields this has resulted in a glut of licensed professionals, such as attorneys, where there is no shortage of board-qualified attorneys.

This removal of a monopoly on the issuance of licenses enables a more meritocratic system that ensures better doctors can charge higher prices, and worse doctors are cheaper. As most people’s medical needs are fairly simple, even a poor doctor can reasonably attend to simple concerns, and a more expensive doctor may only be required for more complex needs.

The process to receive licensing is also an exploitative disaster that washes out countless good doctors for no reason other than the system was developed by a psychotic cokehead a hundred years ago and has never been fixed. It’s unconscionable to force doctors to practice for 24-to-48-hour shifts. Not only is this unnecessary and exhausting, but it dramatically reduces the quality of care to patients, the quality of life of doctors in training, and forces many people who would otherwise be great doctors out of the system. Adding insult to injury, the matching system where doctors in training are forced to relocate to distant areas in order to receive a residency, while supposedly good intentioned, is absurd and harmful, leading to the exclusion of people who have financial or family ties that prevent their relocation.

Currently hospitals and other care facilities are limited by the consent of other healthcare facilities in the area. This enables preexisting facilities to engage in cartel like behaviors and deny access to new competitors, who can only enter the local market by purchasing an existing facility. And once the cartel is established, they can ensure that their own new facilities get licenses while denying licenses to others, further expanding the footprint and control of their cartel. By removing these consent obligations and issuing permits to any qualified parties that wish to implement a new facility, the power of the cartel is broken.

One of the reason for the explosion in cost of healthcare is the consolidation of facilities under this cartel system. Nobody has a “family doctor” anymore, because family practices largely ceased to exist. They’ve been subsumed into massive corporate care facilities that have enormous overhead and costs that cannot be justified for any reason other than the consolidation of wealth and power in society through continued government interference in the market that only benefits corporations. By eliminating the cartel practices of licensing only by consent of competitors, doctors can decentralize from overly expensive corporate practices and return back to independent specialty operations. 

I will not object to the ownership of healthcare facilities by corporations, because corporate organization is an obligate practice of modern economics and the need to organize a large number of people to a single purpose. But the ownership of healthcare facilities by organizations that are primarily financially oriented, and own equity in the facility specifically to enrich their shareholders (as opposed to participating in a corporate healthcare facility to provide care), leads to the financialization of the industry that is exploitative to everyone involved except the wealthy shareholders.

With that understood, we can see that healthcare organizations would benefit from being employee-owned facilities where the majority ownership of the organization is held by the licensed, qualified care providers, and not MBAs or finance professionals whose only concern is how to maximize returns. The organization may be led or managed by business persons, but the prevailing voting rights of the organization must be owned by care professionals to ensure that the purpose of the organization – to provide care – is maximized.

In no other industry except healthcare is it possible to receive service without a prior agreement on price, or the commitment to a fixed price or pricing structure. A restaurant cannot produce a bill of an arbitrary amount after dining, the prices are on the menu. A restaurant cannot bill a patron months later, saying that they had been too busy to get around to it yet. A mechanic provides a quote on repairs before providing the repair. Every profession, save healthcare, has incentives to communicate the anticipated range of costs before providing services. The claim is that this cannot be possible in healthcare because lives are at stake and moments count, but the vast majority of care is not emergency care, it’s pre-planned and pre-scheduled. It may not be possible to have a pricing agreement in place before receiving someone in the emergency room, but people can also walk away from emergency room bills. There’s no reasonable justification for healthcare to not produce a proposed pricing schedule for anyone before any costs are incurred, and there’s no justification for follow-on bills of random and seemingly arbitrary months after care is received.

Many of these dynamics are driven by the prevailing dominance of insurance in the health markets (or what passes as markets). Insurance has infected and metastasized throughout healthcare to an alarming degree, and people are now seemingly dependent on it. Personally, I haven’t had health insurance since I was 22 and left my dad’s coverage – that’s 20 years now. My own health costs have been less than $5,000 in that time, and would have been only a fraction of that amount if not for the dominance in health insurance driving up the costs.

To be blunt, health insurance is a stupid waste of money, and simply does not work for anyone other than the corporate hospitals and the insurance companies. The only thing health insurance does is enrich the insurance company and the hospitals, while harming everyone else.

Healthcare providers mark up the cost of healthcare by multiple times its costs, 3x to 5x, and often far more, because insurance companies will always refuse to pay the list price. The insurance company will negotiate the pricing, and “settle” at something that is closer to a reasonable price. But because the hospital knows this dance, they intentionally and dramatically over-price their services so that after the “negotiation” with the insurance company they end up at about what they expected to get in the first place.

This demands then that the healthcare provider upcharge non-insurance services in the same way so that they can represent these charges as their “normal” price, preserving their ability to negotiate the price later with insurance companies. And most people don’t understand this dance, and end up believing that the original stated price from the healthcare facility is firm.

And because the payor of the service, the insurance company, is abstract from the recipient of service, the insured, this separation of interests changes the cost sensitivity and the value proposition between the payor and recipient of care. Any time that the payor is separated from the recipient of what is being paid for, a gap between interests emerges that incentivizes abuse. The healthcare service knows they can overcharge the insurance company, and the insurance company knows that the employer can’t or won’t intelligently negotiate costs, and simply passes those costs down to the person who receives the insurance policy. The insured party, the recipient of care, is multiple steps removed from the decision making, and is dramatically disadvantaged.

The recipient of care is further disadvantaged and overcharged because every layer of personnel between them and the payment adds in their own fees, costs, and profit margins, continuing to inflate the cost of care. In a direct care scenario without insurance, the health service has much less overhead – the care provider, office staff, equipment and facilities, and overhead costs. When insurance is introduced, now the recipient of care is funding the care provider, office staff, equipment and facilities, and overhead for the care provider. And the recipient is also funding those costs for the insurer. And those costs for the broker. And funding those costs for the employer. This layering of cost upon cost upon cost before any service reaches the recipient leads to enormous inflation of costs to finally receive care. A broken arm that may have cost $5 to remedy in 1960, or $50 to remedy in 1980, now costs $5000 just to be examined, because the system is so intermediated with so many unnecessary cost centers and additional participants that are relying on the recipient’s payments.

In nearly all cases, health insurance is simply a scam to enrich the insurance company (majority owned by the wealthy) and the healthcare corporation (majority owned by the wealthy too).

With health insurance, an insurance policy covers (or purports to cover, once mandatory minimums, deductibles, and out of pocket costs are addressed) checkups, procedures, and medication, among other things. It also covers emergency and long-term care.

Let’s cast that in the analog of auto insurance. Auto insurance does not pay for gas, engine or transmission maintenance, tires, windshield wipers, road hazard, or most incidental damages. Basic auto insurance only pays for liabilities from an at-fault collision, and medical costs related to that liability. Only premium policies cover incidental damages such as someone scratching your car, or a tree falling on it. Auto insurance is itself arguably overpriced, but not nearly as dramatically overpriced as health insurance. Yet health insurance, in the auto analog, would be covering gas, tires, maintenance, and on and on and on. No wonder it’s so expensive!

The best solution for health insurance is to draw it back and minimize it to its original purpose: Emergency and long-term care for health conditions. Not everything under the sun, all appointments, procedures, and medications. Those need to be out of pocket to directly connect the recipient of care to the payment for care, to reintroduce cost sensitivity and remove all the compounding overhead from introducing numerous unnecessary organizations into the supply chain.

The reforms proposed are:

  • Multiple organizations qualified to license doctors
  • Restriction of doctors’ hours of practice to standard 8 hours per day, 32 hours per week
  • Elimination of mandatory relocation to become a practicing physician
  • Elimination of industry cartels limiting the construction of new facilities
  • Reorganizing care facilities as employee-owned and care-provider-managed
  • Up-front pricing menus for standard procedures
  • Elimination of health insurance from most health transactions

With these reforms, there would be many more doctors providing a better standard of care. There would be more facilities and competition between them. The financialization of the industry would be reduced, and existing major health corporations would likely part themselves out and unwind their finance industry ties due to a reduction in profitability on part of the large-scale facility, through increased competition. With up-front pricing and the elimination of insurance for typical procedures, recipients of care would be able to choose more cost-conscious providers and cost sensitivity would be reintroduced.

These reforms will never be taken seriously, because they would result in a reallocation of wealth from the rich investors, back to the actual care providers and care recipients. And anything that makes rich people less rich, or poor people less poor, will never happen without massive public uprising to demand it – and even then, most likely the cops will just shoot anyone who protests, like they always do.