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Patient Power

by John C. Goodman and Gerald Musgrave

While American child protection policies treat two-year-olds as if they were competent adults, American medical policies treat competent adults as if they were two-year-olds. John Goodman and Gerald Musgrave argue that individuals have too few alternatives in their medical care. They propose a revolution in health care policies.


The authors describe our medical system as a three-step evolution. In stage one subsidiezed, imitation insurance pays and costs spiral. This “insurance” is more a prepayment service than insurance. In stage two attempts are made to reduce the rate of increase. Various bureaucracies fight for power, witness HMOs. In stage three public and private bureaucracies gain complete control of the system, creating ever more interest groups seeking cash and power. Regulations grow in attempting to curb that power.


This evolution is bad, not only because it wastes money and puts too much decision-making power in the hands of the wrong people. It creates incentives for medical groups to withhold information from patients. The more patients know, the worse for interest groups. The less a patient knows, the worse off she will be. Citizens have ready access to minutiae such as magazine reviews of internal frame backpacks, yet they are deliberately kept clueless about doctors, hospitals, procedures, and medical equipment. This cluelessness is partly due to patients not being customers. Third-parties are medical customers. Insurance is tailored to the desires of employers and interests groups. Insurance, for example, is not renewable if you lose your job.


Musgrave and Goodman argue the current U.S. health care system has more in common with a socialized system than a market system. So-called private health care is massively subsidized by the government. Weirdly, employer provided insurance is tax exempt while self-provided insurance is not. Patients pay little for routine medical costs. These practices create severe problems in the medical market. The incentives to increase medical costs are great, they argue, yet the costs are unseen by patients.


European countries and the United States share major similarities. One important one: Health care decisions are made by bureaucracies rather than patients. In Europe government makes the decisions. In America HMOs, government, insurers, interest groups make decisions. Both systems treat patient preferences as irrelevant. Relationships among patients and medical professionals are marked by condescension, indifference, hostility, and authoritarianism.


In life it is generally better for the person who has to face the most consequences to make the decision, especially in complex situations. Patients may be best served by a system that allows them to seek advice from professionals, letting patients make final decisions. When those less affected make decisions, they are more susceptible to selfishness and interest group pressures. They also lack knowledge of individual situations.


Some claim that patients are incapable of making these decisions. This is mistaken. Patients may not know how to perform spinal surgery, but are in the best position to seek out various experts and make final decisions. Choosing a doctor or procedure may be difficult, but choosing a politician (read: kleptocrat) who will choose a bureaucrat, who will choose another bureaucrat, who will choose a doctor, is even more difficult.


The authors lead us through hypothetical situations to illustrate how individuals in the medical system end up feeling victimized and trapped, the patient who pays $15 dollars for an acetaminophen tablet, the doctor, senate aid, medical supplier, and hospital administrator who all feel hamstrung by inflexible rules.


Some argue that “needs” should decide medical spending. We could, the authors counter, easily end up spending several times the GDP on needs, trying to eliminate conceivable harms and risks. No matter the system, rationing must occur. Self-rationing by individuals is better than interest group rationing.


Another popular belief is that a single payer system would be cheaper. The authors think this is unlikely. A singer payer system may be cheaper than the present system but not, they claim, a patient power system. A patient power system would reduce moral hazards, aggravation problems, administrative costs, regulatory costs, and waste by third parties. It would increase the incentives to cut wasteful practices. Eve, if a single payer system were cheaper, it has other costs such as waiting lines.


The authors recommend a refundable tax credit for the purchase of insurance and medical savings accounts. Citizens would thus have insurance for major illnesses and savings for routine illnesses. Any savings not used for medical treatment goes toward retirement. They recommend the use of medical savings accounts to pay for routine services because the use of insurance for $60 dollar office visits is wasteful, but why bother with medical savings accounts? They are wasteful, too. Medical savings accounts are a gift, welfare retirement program for people who rarely have minor illnesses or chronic illnesses. Medical savings accounts give the illusion of getting something for nothing, but every dollar that goes into a medical savings account has to come out of tax revenues. I'm sure individuals with misery causing chronic illnesses will be delighted to pay taxes for a gift retirement plan for people in excellent health while they get nothing. Most people should pay minor costs out of pocket. The authors would also make insurance portable and eliminate the regulation of insurance at the state level.


Other Patient Power prescriptions:

·        Health insurance premiums listed on wage statements (good idea)

·        Employee choice of health insurance company and coverage (good idea)

·        Medicaid and welfare devolved to states (good idea)

·        Cost estimates prior to service so patients can compare prices (excellent idea)

·        Elderly and disabled allowed to choose among various health care packages (good idea, though missing some important regulations that should go along with any such plan)

·        Physicians assistants and nurses allowed to provide primary care (nifty idea)

·        Negotiated liability by contract with medical providers (dubious idea)

·        Medical Enterprise Zones and programs which would reduce regulations and increase service in medically underserved areas.


Business sided excesses undermine this work, such as the claim that the larger the proportion of GNP spent on autos the better. Assuming cars are a good thing, spending more on cars is good only for sellers, not consumers or the economy. New cars that cost 50 cents would be wonderful. If people spent 90 percent of their money on cars, or anything else, that would be terrible for them.


Other weaknesses of this work: When discussing reasons for disparities in health care among various groups, they choose bureaucratic factors and often omit other factors. They make little mention of preventative health care. The authors also allege that favoring a younger patient over older patients for a transplant is discrimination. It is not discrimination. If a seventy-year-old gets a kidney transplant over a 20-year-old, that is discrimination. The seventy year old has much less life ahead of him, while the 20-year-old is denied the opportunity for a lengthy life. The 20-year-old would get much more benefit out of the transplant. This is a decent piece of work. It impressively covers important details. The medical prescriptions in True Security, however, are better. Recommended.

Book review article by J.T. Fournier, updated 5/09/09


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