SECTION FOUR: New Health Savings Accounts
The project combines several concepts developed in other chapters, but is ready to be considered as a whole.
With great reluctance, I feel I must discuss adding the option to buy out of Medicare. I am a happy satisfied patient of that program, and for many decades was a happy, satisfied provider of care under it. Prior to 1965, I practiced medicine for 15 years before there was a Medicare program, so I have something to compare it with. The main difference I see is the tremendous backlog of untreated chronic conditions which had built up during the Great Depression of the Thirties, followed by the war years. Let me describe it; but remember, my final conclusion is "Sorry, Medicare, but we've outgrown you."
In those early days, every mouth I opened hid snaggly teeth, every other eardrum seemed to be perforated. The smelly weeping varicose ulcers of the legs were hard to take, but there were hernias and gallstones galore. And hemorrhoids, and stomach ulcers. Most eyes seemed to have cataracts growing in them, the goiters were as big as grapefruit. From the doctor's point of view, the disease burden of the population was never going to be exhausted. We scarcely realized we were dealing with a backlog, and tended to believe this was just the way poor people had to live. In fact, we cleared out that backlog in ten years, scarcely realizing it was diminishing. Meanwhile, we built up another backlog, so to speak, of a population whose disease burden had been cleared away. Re-building that healthy reserve was a sort of ghoulish reserve against some blunder we could coast through. Because, like it or not, some people will neglect their health if we stop making treatment free.
If we now have another depression or war, we could probably coast through the lack of optional medical treatment for several years, believing all the while, the cost of healthcare was decreasing. Treating the backlog is one of the costs of Medicare which never seems to get counted, and doing away with it left us with an unmeasurable reserve of artificially healthy patients. And it wasn't just minor conditions with optional treatments. When I was a visiting consultant at Philadelphia General Hospital, it was not unusual to visit the autopsy room before we went to the wards, and the residents would present several, perhaps five, bodies on the slabs. Following that, we would go upstairs to the 40-bed wards and make rounds on the patients who might well occupy the slabs on another day, because they had been too far gone when they arrived.
Present day residents have little comprehension of the devastating severity of disease we had before us, and administrators have little idea of the change this has made in costs. When we needed all this equipment we often didn't have it; nowadays the residents have a lot of equipment they seldom use. Some of this would have improved without Medicare, but Medicare certainly hurried it up. You don't hear many doctors of my generation criticising Medicare.
Just what the patients thought of it all, is hard to judge. By the nature of things, the sick people were older than the doctors who treated them, and the doctors are now in their nineties. I get the feeling the old folks are deathly afraid Medicare will be stripped of funding in order to pay for the unaffordable Affordable Care Act. So they are ambiguous; they got a lucky break which they don't want to deny to younger people. But they seem to recognize the costs are unsupportable. They silently read the Sunday newspaper columns about the $10,000 pills for cancer. Like me, they see a two-page listing of hospital administrators making $4 million annual salaries, with the listing going down to $250 thousand per year before the newspaper runs out of space. The old folks know almost nothing about the Affordable Care Act, but they immediately recognize that such articles are written to stir up animosity to hospital costs. They don't know what to think, so they appear to have decided it is best to keep their heads low. All they seem to want is a chance to have their share of it, before it all goes away.
And they should feel the way they do. When Secretary Sibelius published the Medicare balance sheet, I was astounded to see the program is only 50% self supporting, the rest is borrowed from the general fund. And everybody knows the general fund is largely borrowed from the Chinese, who are in financial distress themselves, right now. Books are in print accusing the government of desiring more inflation, in order to cause effective default on our sales of Treasury bonds to (i,e, borrowing from) the Chinese. Medicare recipients showed little interest in the Obamacare debate, and therefore have almost no information about it. But they grasped the essential point, all right. Medicare is delivering a dollar's worth of healthcare for fifty cents. And everyone in Congress is scared to death to bring up the subject, for fear they touch the third rail of politics.
Aside from that rather considerable political matter, there are a number of basic flaws in Medicare. Medicare has a monopoly of healthcare for the elderly. It doesn't have to be mandatory. A 50% discount below cost would quickly make almost anything at all substantially mandatory. All monopolies inhibit competition, especially in adopting innovation, and all of them ultimately thrive on shortages. The breakup of the ATT monopoly unleashed a flood of pent-up innovation in the telephone field, for a familiar illustration.
The inevitable domination of a field by an extra-large competitor is dramatically illustrated by California's present dominance of insurance design. Essentially all new designs of insurance feel they must first conform to California's regulations, and if necessary just ignore the smallest states. That's a current example of what John Dickinson was afraid of at the Constitutional Convention. He was simultaneously Governor of Pennsylvania, one of the largest states, and of Delaware, one of the smallest. He knew what he was talking about, and essentially that is why we have a Senate with two votes per state, regardless of population. This analysis ought to be known as the Dickinson Concept, because it is one of the main reasons our Constitution has survived for two hundred years, while every single other constitution has floundered. Monopolies are usually very bad things, but in a very subtle way. And yet bigness is a sign of success in a company. It's a very subtle distinction.
In the case of healthcare, we have a nationwide system of one-price-fits all, making no distinction in price between good and bad care, or whether the patient lives or dies. Obamacare recognizes this flaw and has appointed a committee to look into fixing it. Lots of luck with that, because the nation recognizes the unwisdom of letting government pick winners and losers. It probably just can't be done acceptably. State-wide uniform prices are about the best you can do with either a command-and-control system or an insurance system. Haggling in a marketplace is treated with disdain, but it's the only way anyone has devised, to reward good quality. So, a nationwide Medicare encounters this problem, and enlarging it to nationwide single payer, would make it even more troublesome. Everyone can see that Wisconsin benefits when Illinois tries to do it.
Nationwide uniformity has some advantages, such as concentrating essentially all the deaths in one program for research, although the bigdata computer approach may eliminate even that edge. What a monopoly tends to do, is enlarge one institution's scope until it finally gets so top-heavy it collapses. How many corporations can you name who are a hundred years old? The curse of bigness is so powerful that only those who have experienced it, can anticipate it. The big gorilla dominates so insidiously, the competitors forget how to compete. Everything is wonderful, until suddenly it is terrible.
And finally, the greatest problem with healthcare is its design. By insuring the cheap stuff but running out of money when you really need it, we are killing the Canary in the Coal Mine. Front-end deductible reverses that perverse priority. It corrects a system that will only work if you eliminate most disease, big and small. The advance of science is relentlessly crowding serious illness into the age group over 66, and is eventually destined to trivialize medical care in younger healthier people. Eventually we will get, or possibly have already started to get, a system so focused on the present, it fails to look to the future. Eighteen percent of the gross domestic product is being transferred from people who will have never felt a wound, to the non-working minority over 66, who will eventually have serious illness all to themselves. The people who don't have much sickness are expected to pay for the old folks, who do. It's a prescription for rebellion, and perhaps some of the present travail is already a sign of it. I'm sorry to have to tell this to my fellow subscribers to Medicare, but if you become too expensive, the kids may ditch you. I'm already older than most people on Medicare, and you will notice I'm still struggling to design an alternative to this wonderful half-price bargain. It's tough, because even cutting the cost in half will leave the impression prices were unchanged. That's because the gains and losses were hidden in the public sector, with only the gains getting some publicity.
So, the conclusion is this. If the politicians are right and Medicare is untouchable, the main danger is its reputation will entice us to extend it further, as a "Single Payer" system for everybody. At a dollar for fifty cents, even an exorbitantly expensive system seems to be a bargain. So a last-ditch warning by implication is this: Follow the doctor's advice, in Latin, of Primum non nocere. If you can't make things better, for pity's sake, don't make things worse.
Originally published: Sunday, June 28, 2015; most-recently modified: Friday, June 07, 2019