What's Wrong with American Health Care?

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Toward a (More) Multipolar Health-Care System

I have for years argued that most people would be reflexive free-market capitalists if not for their experiences with a handful of businesses: airlines, banks, cable and Internet providers, etc. At the very top of this list is insurance companies. "The trouble with socialism is socialism," as Willi Schlamm famously put it. "The trouble with capitalism is capitalists." These [baroquely ornate string of expletives deleted] insurance monkeys are the capitalists Willi Schlamm warned us about.

Congress, responding to years of outcry against "surprise" medical bills, is about to do what Congress does, which is make things somewhat worse by giving the people what they are clamoring for.

Medical bills and medical insurance can be perplexing and exasperating. They often are random-seeming. My mother's last stay in the hospital lasted several weeks, some of them in cardiac intensive care. The bill that came was absolutely staggering, about ten times the annual salary she'd earned at the end of her working life. But she spent the last part of that working life employed by the state, so she had excellent insurance at practically no cost, and so instead of being saddled with a ruinous bill she could never hope to pay, she received a check equal to about a year's pay. It was a welcome outcome, but an absurd one. I have more stories of that kind, as I am sure many of you do. I suppose I am the kind of sucker insurance companies like: I have a high-deductible plan in case I get hit by a cement truck, but if I need a COVID test or an eye exam, I generally use the insurance card that says "American Express" on the front of it, sparing myself the Kafkaesque horror of engaging with the insurance bureaucracy.

Surprise medical bills most often come to people who have received medical services under the impression that these were covered by their insurance only to find out that some portion of the tab — or all of it — is landing on them. The New York Times: "Patients go to a hospital that accepts their insurance, for example, but get treated there by an emergency room physician who doesn't." People coming into emergency rooms often are not at that particular moment very much inclined to carefully scrutinize paperwork of any kind.

What's worse, as the Times reports, is that in such situations "doctors often bill those patients for large fees, far higher than what health plans typically pay." Note that this is the opposite of the experience of many patients who choose "concierge" medical care, "concierge" being what the boys down in marketing came up with as a substitute for "cash up front." Many (though by no means all) medical services provided on a cash basis are offered at a lower price than the one quoted to insurers, in part because medical practices that simply will not look at insurance cards need not employ an expensive staff of clerks to look at insurance cards (and manage insurance records and have long stupid maddening extended telephone conversations with insurance people) and pass along some of this savings to their patients — who, because they are paying out of pocket, have an opportunity and incentive to comparison shop.

That "concierge" model — a functional market with lots of buyers and sellers and competition — is, in most cases, the ideal way medical care should function, and the presence of such a functional market is one of the reasons so many Americans have much better experiences with cash-only dermatologists, cosmetic surgeons, etc., than they do when they have a heart attack or cancer. That latter category of care — care for severe injuries and serious or chronic disease — provides a basis of skepticism for the market-oriented approach to health care. Patients in those situations, the argument goes, have no negotiating power as buyers — faced with a choice of paying or dying, they will pay (or at least agree to pay) whatever is asked. And so, that argument goes, either prices must be set by a third party such as government, or payment must fall to and be negotiated by a third party, such as government or an insurance company. Much of the debate about health-care policy in the United States ignores the problems of third-party payments and instead turns its attention to the question of which third party should make the payments: insurance companies or government.

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