Why is it so broken? How do we fix it?

When it comes to America’s healthcare system, there is no question that it is broken. There is a significant number of people who are ill with chronic conditions and many of them are uninsured. The prices for prescription drugs and other healthcare costs keep climbing, yet the quality of our health is declining. How did our healthcare system develop into this? What can we do to fix it?


0924 America's Healthcare TNOur healthcare system wasn’t always like this. Several factors have contributed to our healthcare system becoming what it is presently. Prior to the 1930s, there were no real “health” insurance companies. Instead, many labor unions, farmers’ associations, consumer cooperatives and mutual aid societies offered medical services to their members. They were able to contract with doctors and the hospitals the doctors networked with. This helped keep the cost of everything down. Under these type of plans doctors had a set salary or were paid a fee for each patient, deductibles were charged at point-of-service and preventive care was free because it was thought by encouraging people to do use this would keep down long-term costs. These plans were also a great benefit to patients because it allowed them to have all-inclusive care in one place from doctors across many different specialties depending on the patient’s needs. For the use of these services, the patient had a set monthly fee. The structure of this system compelled doctors to provide excellent care while not overusing supplies and services. In the 1930s, the American Medical Association (AMA) because concerned about the popularity of these health plans and there was talk of putting into place a national healthcare system. The AMA thought, between the two, doctors would be told what to do as far as patient care and not get paid appropriately for their services. So, they created the concept of what has become our current health insurance model where doctors are paid for every service they provide and the health insurance companies would finance it. This has fostered the idea that doctors should deliver as many services as possible and just bill the insurance companies. Due to this push from the AMA, the number of Americans with health insurance went from about 25% to almost 80% between 1945 and 1965 thanks to their plan. Obviously, the AMA’s plan of doctors maintaining control has backfired significantly. Nowadays, the insurance companies essentially dictate what type of healthcare is provided. If they don’t cover a procedure, many doctors won’t perform it because they aren’t guaranteed a paycheck if they do. Unfortunately, this is exactly what the AMA feared—doctors being in limited positions when it comes to taking care of patients and a small number of companies have enormous power over how healthcare is provided.

Another component of how our current health insurance system came to be is the federal government executed wage controls during World War II in order to prevent companies from luring employees away from each other. The hope was that it would keep production costs down. To find a way around this, many companies figured out they could offer non-monetary benefits, such as health insurance, as a bargaining tool. To add further confusion to the mix, the Internal Revenue Service ruled that these benefits were not taxable as income, so employees didn’t have to pay income tax on them. This linking of health benefits to employment isn’t good for a number of reasons. It makes the market for individual health insurance incredibly thin and many people who are elderly or have preexisting conditions can’t find affordable health insurance. Also, it is affected by the job mobility of workers. People used to stay with one employer for their whole career. That is not the case anymore and when people change jobs, they often have to change insurance companies. This means the new insurance company can limit their coverage because they can deem an illness you had treated by your previous insurance company as a preexisting condition.

Besides the invention of the current health insurance system, there are several other factors that have played a role into how the healthcare system is failing the American people. The main is not knowing how much anything actually costs. For instance, if you want to know how much a procedure is going to cost, you’re not going to get a concrete answer. The billing process is extremely confusing with multiple different codes that have to be used for one procedure. This makes it easy to make errors. In order to try to get the billing correct, many doctors are having to spend increasing amounts of time documenting things “appropriately.” Unfortunately, the thing that suffers the most is patient-centered care. Doctors aren’t spending as much time with patients for two reasons, they need to focus on billing in order to get paid and they can’t bill for their time that is spent listening to and comforting patients—there isn’t a code for that. In our current model, providers are compensated per service rather than on the number of positive outcomes they have, which means they are paid for the quantity, not quality, of care they deliver. Obviously, the more insurance companies get billed, the higher the premiums become. Some doctors claim that due to the increase number of malpractice lawsuits, they order more tests than they feel are necessary to make sure they don’t miss something and end up being sued. Another element is that providers don’t have any reason to charge less because insurance companies will always want to pay less than whatever is charged. If you ever have looked at an explanation of benefits page, it is easy to see where the provider bills for one amount and the insurance company pays another, which is usually a smaller amount. Since these forms are confusing, most people truly aren’t aware of how much something costs because when their insurance company pays, they aren’t “paying” for it. Due to this lack of awareness, most people have developed a sense of entitlement, which leads them to believing that if they don’t have health insurance or a way of paying for healthcare, they should still receive care for any injury or illness regardless of their ability to pay for the services. Since these services cost money, the debt gets absorbed by the hospital or passed onto other consumers. Another part of this is the people who have health insurance, but they have high deductible plans. High deductible health plans require an individual to cover 100% of expenses until the deductible is reach. These plans are great for keeping the monthly premium low, but can get expensive quickly when you need to use it. Often people who have these types of plans do so because they can’t afford high monthly premiums, which means they also don’t have money to cover the cost of their deductibles either.

Another part of the rise in cost is the prices that pharmaceutical companies are charging. On average Americans pay somewhere between 50 – 80% more for medicines than Canadians, Australians or Europeans. The main reason is that these and other countries are able to negotiate prices directly with the companies; whereas, our government leaves it to a free market. So, each individual insurance company has to separately negotiate with each pharmaceutical company. This is why the price for a medication can vary significantly. It all depends on the insurance company’s bargaining power and which type of plan an individual is enrolled in. Unfortunately, with medications costing so much, many Americans aren’t taking them as prescribed, like taking a pill once a day instead of twice in order to make them last longer. As you can imagine, this can have substantial impact on their health. Many Americans have also asked their doctors to prescribe medications that cost less than others even if it isn’t the most optimal to treat their condition. Some people have turned to buying their medications from other countries, which is concerning because not all countries have the same standards related to medication safety as we do. Alternatives therapies are also being used, regardless of their effectiveness or lack thereof, because they don’t cost as much as medications. Another problem with medication costs are pharmacy benefit managers, like Express Scripts and CVS Health. They are designed to help employers manage healthcare costs, but this doesn’t really contribute to keeping the overall cost of healthcare down. In fact, there has been some concern that they are contributing to the expensiveness of healthcare. One way that they do this is that most of these companies have a policy regarding the copay for a medication. If the copay is more than the cost of the medication, then the difference goes to the pharmacy benefit manager rather than the consumer paying the lesser amount. The reason pharmacists don’t tell their costumers they could actually get a medication cheaper without insurance is because they could lose the contract with the pharmacy benefit manager.

An additional issue that affects healthcare noticeably is that the technology that is being used to communicate among healthcare facilities, providers, pharmacies and consumers is outdated. Currently, about half of doctors in the United States use paper records. By not having an integrated, comprehensive electronic health communication system, essential health information is much more likely to be missed causing unnecessary injuries and deaths to occur. Right now, it is up to each individual to coordinate all of their care. While it is definitely important that patients are involved in their care, they don’t know all the intricacies of medicine and might not know when a test, procedure or medication that is being ordered that could harm them. When each small part of the team that is involved only knows their small part of it, it can become dangerous. If we were to think of healthcare as any other business, the lag in technology would be astounding. Can you imagine not having access to your back account 24/7 or the ability to access your personal information at any other company whenever you want?

Health insurance is different from all other types of insurance. Most other insurances are used to help cover the cost of catastrophic events, such as car accident, house fire and flood damage. These types of insurance aren’t used for regular maintenance issues, like oil changes, new tires, smoke detectors, gutter cleaning and roof replacement from wear and tear. All of those type of expenses we have to budget and save in order to pay for them ourselves. If we can’t afford or choose not to get these maintenance services done and something goes wrong, then pay for the damages out-of-pocket. When it comes to health, this is a little harder to justify taking that risk. We know that at some point our body will be injured or get sick, sometimes without warning. Unlike other things, if we have neglected a health condition for too long, the consequences can be much more severe. This is why it is important to have regular check-ups with your doctor to catch anything that might be concerning early. Since the cost of healthcare, even preventive care, is so expensive, many people need insurance to be able to afford it.

Another issue with our current systems is that we value intervention over prevention. We can see tangible results when someone’s condition improves. These results are less noticeable when there wasn’t a problem to currently correct, but one is being prevented from occurring. Part of this problem is that we always want to try the newest medications and therapies rather than using the ones that we know are definitely effective. Obviously, new information is becoming available all of the time, but it isn’t necessarily better than what is currently in place. Also, we know that as a disease progresses, the cost of managing it rises. People who are poor and elderly are disproportionately affected by chronic conditions, which are expensive to manage. With the aging Baby Boomers population, healthcare costs are going to continue to rise because the cost of insuring the elderly is high because due to their chronic conditions. So, many insurance companies won’t write policies to cover them. Medicare was established in 1965 to help fill this gap, but it is modeled after the insurance companies, which means that it functions just as poorly. Since both of these groups can’t afford preventive care and managing their conditions, those expenses get absorbed by health insurance, hospitals, doctors and other consumers, which causes the overall cost of healthcare to go up.

The quality and standards the United States has is excellent, which is why many places use them as guidelines in forming their own healthcare systems. In fact, more and more foreign countries are seeking accreditation from us for their facilities and doctors to ensure that the standards are the same. This allows them to provide the same quality care but at a fraction of the cost. Usually the amenities at these facilities is much better than those people can afford here at home, so it is becoming increasingly popular to travel outside the United States to have a procedure done. Obviously, just because we have high quality and standards doesn’t mean that our system isn’t broken. The main problem is that our citizens aren’t able to adequately afford the quality care that we have and this significantly impacts the outcomes when you look at the overall health of individual citizens as a whole.

If we don’t change our current system, the number of Americans with poor health will continue to grow and those who will be able to afford access to healthcare is going to get smaller. In order to allow more people to have the ability to access affordable healthcare, we need a massive restructuring. The first thing we should do is go back to plans that are similar to those that were run by the unions, associations, cooperatives and societies. This would decrease costs while emboldening doctors to come up with pioneering healthcare ideas. It would broaden the playing field and get control away from the few companies that currently hold it. Also, we need to allow these groups to negotiate the costs of medicines, services, tests and hospitalizations. The key to making this work is that everyone has to participate in some sort of plan with no opt outs being available. This will help to spread the risk of insuring those who will utilize the system more than others. Obviously, some people will need help to pay for coverage and should be offered a subsidy, but everyone should still pay something. Also, instead of having subsides that encourage people to buy insurance just from health insurance companies, the subsides should allow people to purchase coverage from any medical plan. This will help to provide the diversification needed.

Next, we need to change what payment is based off. Compensation should be directly tied to the quality of outcomes which can be measured through standards that are found in evidence-based practices. With healthcare being so pricy and the current health insurance model, many people have come to expect someone else to cover the cost of their healthcare expenses. Since individuals aren’t paying for the majority of services out-of-pocket, there is no one insisting on more value for the money being spent. So, there are few incentives to increase quality or efficiency. In order to change this, the cost of healthcare needs to be more affordable so individuals can take more of the responsibility of paying for their care. One way to make this happen is to make all charges for services, tests and procedures transparent. Prior to any service, test or procedure being completed, an individual should know exactly how much each item associated with it will cost. In addition, we know that a majority of the costs come from routine and predictable expenses, so there is no reason that individuals wouldn’t be able to know how much they will need to pay prior to having any of these completed. To help with cost control, reasonable monthly out-of-pocket spending caps should be put in place to ensure that people will comply with their treatment plan. This will help prevent the need to pay for expensive complications. This is why a focus on prevention is key to keeping overall healthcare costs down. It is estimated that if we have a stronger emphasis on disease prevention, over 200,000 American lives could be save per year.

Another element of cost control is to reorganize the billing structure. Currently, all the billing is done separately, such as doctors bill separately from the facility. Also, there are usually multiple itemizations that aren’t clearly defined and the bills arrive at least several weeks after the procedure. There should be a standardized form for all medical billing. This would reduce the confusion and decrease the number of errors, which would cut administrative costs for doctors and hospitals. Since the federal government accounts for a third of all spending on healthcare due to Medicare, Medicaid and healthcare provided to federal employees, they could lead the way by developing a form that can be used by all providers.

Most people have come to expect that the government should provide a solution to the healthcare problem. While there is no question that they need to play a role in helping improve the process, it wouldn’t be the most productive to have the responsibility rest solely on them. Government involvement in healthcare will make the improvement process slow and arduous because of politics. This is why we need to involve the private sector because a push from here would increase efficiency, innovation and rapid evolution at that same speed we’ve grown accustom to in other aspects of our lives. We all know when programs are funded by the government, quality tends to lack because it will only increase up to the point that is covered by the funding.

Instead of focusing on mandates that provide health insurance for everyone, we should be finding innovative ways to reduce overall healthcare costs. An option that would be more helpful is providing a refundable tax credit. It would only be available if a taxpayer could provide a policy number of a qualified health plan. This plan would need to include catastrophic coverage and coverage for any children that person is responsible for. Another possible option is to eliminate the income exclusion for employer-paid benefits. This means employers would have to list the cost of each employee’s healthcare on their W-2 form and allow their employees the option of not participating in the plan, but take the employer’s payment share in return. By doing this, an employee would be able to use this money to purchase a plan from somewhere else, thus increasing the individual marketplace. Also, small businesses and other groups should be allowed to collaborate and combine their purchase power to create plans for their members. We should also be requiring insurance companies to offer the same terms to all individuals, regardless of past medical history, but vary the price based off of age and gender. The whole idea is to offer as many choices as possible to individuals, which will help push down the prices.

Information technology has dramatically changed our lives and the healthcare sector needs to catch up. One thing that we need is a completely electronic health system which allows a patient’s information to be available to any provider, hospital or pharmacy. By having this information readily available no matter where an individual is seeking care, will allow for a continuity that is currently lacking. This will reduce unintentional, but potentially deadly, errors. Also, having centers that specialize in a small number of procedures have been proven extremely beneficial because they are able to deliver quality outcomes at cheaper prices since they aren’t trying to do everything and don’t need large amounts of special equipment that is often required when you are performing multiple special procedures. One example of this are small walk-in clinics. There has been a large increase in the amount of them, which is great because they are able to offer routine care at times that is convenient to most people. The key is making the availability of their services, locations and hours of operation well known. If more people utilize walk-in clinics, it would help to ease the burdens placed on emergency rooms in providing care to people who don’t necessarily need to be there and it is much more cost efficient.

The goal of the healthcare system should be to ensure that people have access to quality healthcare that is affordable. In order to do this, healthcare needs to be subjected to the same competitive pressures that every other part of the economy has. This can only happen if we increase the number of players in the market from both sides, insurance companies and consumers. Then, we can expect the same of healthcare that we do of any other business, which means overtime the price of a service declines while quality increases.

Healthcare is complicated and it is going to take commitment and time to fix it. But, how can we not invest in it? It is something that affects all of us. Not having good health impacts every other aspect of our lives. When our health, as a society, suffers, so does the economy, environment and all other societal issues. So, in order to improve the quality of our lives, we need to start with healthcare!