Health system rife with overcomplication

By Alexander Bonnel     11/19/09 6:00pm

Two weeks ago, I went to Methodist Hospital for a cortisone injection in an attempt to relieve the pain I've been having from a herniated disk. When the doctor's office called me with instructions, I asked them how much this procedure would cost. They said they wouldn't know until they processed my insurance. The day before my appointment, the hospital staff informed me that I would have to show up the next day and pay $400 out of pocket. Fortunately, my parents wired me the money that day to cover this unexpected financial imposition. During the consultation with my physician, I asked him how much a cortisone injection cost. I already knew what it cost me, but when I posed the question to him, he had no idea.

Whether they are undergoing surgery, picking up prescriptions or preparing for outpatient procedures, Americans never know how much health care services are going to cost. I often play a game with myself in which I guess how much my next drug refill will run me - never mind trying to estimate what the total cost is before my insurance deduction - and see how far off I am. It is apparent our current health care system disguises its costs from its consumers.

If you haven't already, I highly recommend reading David Goldhill's "How American Health Care Killed My Father" in the September issue of The Atlantic. Goldhill touches on many things, but the most important point he makes is that we've created an insurance-based and administratively complex health care system that prevents transparency in both price and quality, and therefore discourages competition.

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He shows that our use of insurance has seriously deviated from its original purpose: to protect an individual from the extreme financial burden of urgent health catastrophes. Americans now expect insurance to cover everything from doctors' visits to prescriptions. By shifting the cost of every service onto someone else, we are inherently promoting the classic problem of moral hazard. We keep consuming health resources because we don't know how much they really cost. The Economist has repeatedly argued for an assault on the distortions that keep prices so high.

U.S. health care is suffering an identity crisis: It claims to have a competitive free-market system, but in reality it is crippled by major inefficiencies and a lack of market pressure. Think of the time it took hospitals to introduce electronic medical records. If we had been talking about a truly competitive industry, hospitals would have adopted these records immediately, years ago, to maximize the efficiency of information flow.

So how do we solve this crisis? Well, let's take a look at other countries' experiences. But rather than using the typical poster children across the Atlantic for comparison, I turn your attention the other direction to a nation often left out of our political discussion: Singapore.

Singapore has a health care system heavily based on individual responsibility. The most important component of this policy is their 3M system: MediSave, MediFund and MediShield. MediSave is a mandatory savings account that sets aside 6.5 to 8.5 percent of every paycheck towards retirement and future health-related expenses. MediFund is a government endowment fund that helps the poor pay for their medical expenses. MediShield is a national insurance plan designed to pay for catastrophic health events. Patients pay directly for the majority of the services they get and dip into their MediShield in the case of urgent and expensive treatments.

As a result of this simple and direct system, Singapore has kept its health expenditures at about 3 percent of its gross domestic product, an unthinkable achievement for most developed nations.

Singapore appears to have a system that fits perfectly with the U.S. mindset, in that private insurers compete under market pressure and efficiently allocate resources to serve their paying customers.

That being said, no system, including Singapore's, is perfect. I think a truly competitive health care system infuses capitalism into medicine, which may make many physicians and patients uncomfortable. Most physicians go into medicine for the intellectual and rewarding aspects of the profession and would feel uncomfortable giving their patients a menu of services offered with their respective prices. Even with proper consultation, there's no telling if consumers would make the right decisions for themselves, given the asymmetry of information in medicine.

In addition, I think this truly competitive system would create major inequalities in health, due to the regressive nature of MediSave. But that's where our government would, and should, intervene. We could develop pro-poor policies that would help reduce the costs for our marginalized populations who can't afford health care services but need it the most.

Our country is at a pivotal fork in the road with health care. Either we must truly embrace our history of individualism, or we must shift entirely toward a more European, collective mindset. I strongly believe Singapore's model is the best fit for the United States.

Regardless of how you feel about the current health reform, there is no denying that the creation of a public option will only further distort our system. It is going to out-compete a number of private insurers and, just like Medicare and Medicaid currently do, hide the real costs and prices from consumers. Whatever we choose to do in this century, we need to reassess our cultural values and shift away from the current mess we've created.

Alexander Bonnel is a Wiess College senior.

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