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Some suggestions on improving the American health care system.
The following essay was initially written in 1992 and then modified during the Clinton administration. Parts have been modified since then. It's a work in progress that may lack continuity at some points. I emailed a copy to the Obama administration a few months ago.

The American health care system is complex and its problems cannot be solved by simplistic solutions such as creating some gigantic health care bureaucracy to manage the system or by forcing businesses to chose between firing employees or providing them with health insurance. Systems become more difficult to improve as they become more complex because changes may produce unanticipated negative effects.

The discussion about providing access to health care to all suffers from two major misconceptions. The problem cannot be solved without first clearing up these misconceptions.

Health care costs and health care spending are not the same thing. Health care spending can increase even if health care costs decline.

Many people fail to understand how insurance operates. Insurance merely provides a means of sharing risks. Insurance doesn't provide a magical source of funds to pay for health care. Giving people health insurance is the least cost effective method of providing them with access to health care.

The Clinton administration's health care proposal is the equivalent of a mechanic claiming that he has to replace a car's engine because the carburetor isn't working properly. Solving any social problem must begin with an analysis of the system or systems involved with emphasis on any defects that need to be corrected. Attempting to impose a solution without understanding the system can make the problem worse.

High quality health care benefits the economy by improving worker productivity and by providing jobs for health care providers. Purchase of sophisticated medical equipment creates manufacturing jobs. Overpriced health care distorts the economy by reducing consumer spending power and thus reducing employment.

The term "health care costs" refers to the amount the patient, or the patient's insurance company, pays for specific medical services. "Health care spending" refers to the total amount spent on health care by all patients, private insurance companies, and government programs.

Total health care spending will continue to increase regardless of what happens with health care costs particularly if more people obtain access to health care. The aging of the population and the development of new medical treatments have been increasing health care spending. People who would have died from cancer or heart problems thirty years ago are receiving treatments that dramatically increase their lifespan. Children who would previously have died before starting school now can live normal lives.

Surgery, development of new miracle drugs, and highly sophisticated equipment come with high costs that cannot be significantly reduced. Increases in cure rates offset these cost increases by allowing many patients to remain productive. Reductions in the need for long term treatment associated with some of these improvements also may reduce total costs for some patients.

Government should consider all expenses associated with health care problems rather than focusing only on payments for health services. People who become too disabled to work force government to increase spending for various public assistance programs. Families of wage earners who have died also may need government assistance.

Research and development constitute the primary cost component for new drugs. Spreading out these costs over more patients can reduce the price individual patients must pay for each drug.

Trial and error plays a major role in development of new drugs. The process typically involves a thorough evaluation of such potential drug sources as newly discovered plants. If a company finds a plant contains a substance with medicinal properties, the company then tests the substance for effectiveness and any undesirable side effects before the federal government allows the company to market the drug.

Research and development expenses also affect medical equipment costs. The complexity of the equipment affects its cost. The portion of these costs passed on to each patient declines until the patient load reaches the machine's capacity, at which point an additional machine must be purchased. The energy and labor expenses necessary for the operation of the machine may or may not vary with the number of patients depending on the individual machine.

Unfortunately patients increasingly face unnecessary health care costs. Legal expenses associated with medical malpractice lawsuits and expenses associated with processing of health insurance claims add unnecessary costs to patients' bills. Many doctors have become greedy. Many have increased their personal income even though medical technicians play an increasingly important role in providing health care.

Congress needs to thoroughly examine health care costs before making any decisions about how to reduce costs. Arbitrarily cutting back on health care spending, like Clinton proposes, would unconstitutionally deprive people of health care they can now obtain. Americans do not have a right to whatever health care they want without having to pay for it, but they do have the right to seek health care if they are willing to take the actions necessary to obtain health care. The Constitution does not give government the power to limit the ability of citizens to use their own money to purchase health care or to participate in health care insurance programs of their own choosing.

Proposals designed to provide everyone with health insurance ignore the way insurance operates. Proposals that would create some form of government controlled health care system either along the lines of the Canadian system or Clinton's approach are unlikely to be practical in a nation as large and heterogeneous as the United States even if they were constitutional.

The only nation comparable to the United States that has tried a nationally controlled health system was the late Soviet Union. Organizations, especially political organizations, require rules and bureaucracy to operate uniformly. The larger the organization the more complex the rules and the larger the bureaucracy. Without bureaucratic control, some regional and local components of the organization may start operating independently of the larger organization and begin pursuing different goals.

Flexibility provides the primary strength of the U.S. health care system. The diversity of health care providers and insurance programs provides a greater potential for improving the quality of health care because each will approach health care problems from a slightly different perspective. Smaller organizations can change quicker than large organizations because large organizations have more to change. A single national organization or nationally controlled state organizations would lack the flexibility of the current system.

The federal government can correct the problem of workers losing insurance coverage for some illnesses when they change jobs by requiring all group health insurance programs to cover any disorder that was covered by a worker's previous employer provided insurance.

Insurance redistributes the costs of health insurance either by having those who are healthy pay the medical costs of others or by spreading out the payment for health care over a longer period of time. Insurance actually increases costs by adding the administrative cost of shifting funds from the insured to the insurance company and finally to health care providers.

Existing government and private insurance programs are part of the problem. Government insurance has encouraged the health care industry to increase costs. Lax administration in the early years guaranteed providers would receive payment even for unnecessary procedures like pregnancy tests for 80-year-old men. Having health insurance encourages people to seek medical assistance for minor health complaints that may not require a doctor's services but do require a payment to the doctor.

Democratic politicians who promise an all inclusive federal health care program are perpetrating a cruel hoax on the American people. Unless these politicians are incompetent they know such a program cannot work. The federal government has no magical ability to solve domestic problems and has difficulty operating in anything resembling a cost effective manner.

In recent years the federal government has shifted part of the cost of health care for senior citizens from Medicare back to those who benefit from it and shifted part of the cost of providing health care to low income persons through Medicaid to state governments. Children continue to suffer from malnutrition in spite of decades of federal food programs. Many have become homeless in spite of decades of federal housing programs. The quality of education provided by public schools declined as federal aid to education increased.

The only way the federal government can be expected to develop a workable government health insurance program is if voters replace all the people currently holding elective office in Washington.

Part of the problem with private health insurance involves the practice of having the insurance company pay all medical bills rather than just paying for something like operations or hospitalization. If car insurance worked like health insurance, the car insurance would pay for oil changes and tune-ups as well as for damage caused by wrecks or severe weather. Paying the doctor by having money pass through the insurance company increases health care costs by adding a middle man.

This practice has developed because employers have taken over the task of purchasing insurance for employees. The lack of income taxes on money employers spend on health insurance encourages employees to want the insurance company to pay a higher portion of their health care bills. This same goal could be achieved by allowing employers to switch from providing employees with comprehensive health insurance to paying money into an employee's Health Care IRA. Withdrawals for health care would be tax exempt to eliminate the need to have people pay taxes on withdrawals and then claiming tax deductions for medical expenses.

The employer would retain the benefit of helping employees pay for health care while giving the employer greater control over the company's health care costs. The employee would continue to receive tax free health care assistance while gaining greater control over his health care and building up savings in years when the IRA money from the employer exceeded health care bills. A Health Care IRA would be completely portable from one job to another and still be available after retirement.

The employer could continue to provide catastrophic health insurance or allow the investment company handling the IRA to provide such coverage. The investment company might be able to provide such coverage at far lower cost because the risk would be spread among a much larger group than are employed by most single companies. The investment company might vary the charge for such insurance depending on the amount individual account holders have invested in the fund.

Having patients pay their own medical bills using their IRA would eliminate the high administrative costs associated with having health insurance companies pay the bills. Patients would pay bills using either a credit card or check approach. The patient might write a check on a special health care account or use a special credit card issued by the company managing the IRA. The law could allow use of regular checks or credit cards, with the bank managing the checking account or credit card billing the IRA for the total amount of medical bills paid and providing the patient with a regular summary of medical transactions.

The law would limit medical care payments from an IRA to persons and facilities licensed to practice medicine by the state. However, patients would make decisions about what type of treatments to use their IRA's for. Eligible medical treatment could include cosmetic surgery and experimental surgery most insurance companies currently won't cover.


Any effort to assure the availability of health care must begin with measures designed to reduce costs. The high cost of health care reduces the amount of money consumers have available to purchase other goods and services. These efforts should emphasize reduction of costs like administrative costs that involve paying people who do not actually provide health care.

Changing the way malpractice cases are handled would reduce the cost of medical care by eliminating unnecessary costs associated with malpractice lawsuits. The federal government should also consider becoming more directly involved in providing health care by directly subsidizing health care facilities run by local government or other entities.

Malpractice lawsuits provide an expensive and largely ineffective way of discouraging health care providers from making mistakes. Government should require health care providers to warranty their work just like many repairmen do. If something went wrong after a doctor or hospital provided treatment, the doctor or hospital would assume the cost of fixing the problem. The bill for a given type of treatment would include an amount to cover insurance against something going wrong either because the doctor erred or because of soon unanticipated side effect. The system would take a no fault approach except for situations in which the patient ignored the doctor's orders and acted in a way that aggravated the medical condition. For example, someone who continues to smoke after receiving treatment for lung cancer should have to pay for any resultant treatment.

Having the courts determine whether or not health care providers should pay for subsequent medical problems encountered by patients increases costs regardless of the size of damage awards. Malpractice insurers must pay legal costs even for cases they ultimately win. Attorneys may encourage insurers to fight unwinnable cases in court rather than pay some form of settlement. In come cases insurers may pay because the settlement would cost less than fighting the lawsuit in court. Doctors and hospitals wishing to avoid malpractice suits may perform medically unnecessary tests solely to have the results available to use as evidence in court.

Patients and their insurance companies ultimately pay the bill for malpractice lawsuits. The cost of the warranty approach would also be passed along to patients. However, the costs would be lower because patients would pay only medical costs, legal costs would no longer be necessary. Doctors would have a greater incentive to provide the most appropriate medical treatment because they could not pass along the cost of additional treatment to the patient. Under the current system, doctors must choose treatment and procedures according to what judges and juries with no medical training consider appropriate.

Individual doctors who are less effective in providing appropriate medical treatment for specific ailments could be required to pay an additional fee or to discontinue attempts to treat such ailments. Malpractice suits do not eliminate ineffective doctors. Punitive damage assessments against a doctor's malpractice insurance company only force patients of other doctors to pay higher medical bills.

The federal government could further reduce health costs by requiring non-profit hospitals to actually be non-profit operations. Past regulations have been so lax that Wesley Medical Center in Wichita, Kansas, was essentially operating at a profit in the years before a for-profit corporation purchased it from Kansas Methodists. Wesley's "excess revenue" increased over 100% a year for several years. Government regulations should require that any excess revenue received by non-profit hospitals at the end of the year could only be used to cover charges to patients who have had trouble paying treatment their bills.

The federal government should prohibit hospitals and clinics from passing along the cost of building construction to patients or their insurance companies. Medical facilities could charge patients for maintenance expenses, but not depreciation expenses. Non-profit facilities would have to rely on donations to pay construction costs. Profit making facilities would have to use profits, or stock sales, to pay for construction.

New construction represents an investment. Businesses should pay for investments through profit increases resulting from increased revenue rather than be treating construction costs as something to simply pass along to customers. Incidentally, requiring facilities to use profit to pay for construction would not limit the ability to deduct construction expenses or depreciation when figuring tax liability.

Non-profit facilities should not be making investments with patients' money. Instead non-profit health facilities should rely on donations to finance new construction and purchase of expensive equipment like other non-profit organizations do. Some non-profit hospitals rely on donations to pay for patient treatment as well as construction costs. Hospitals could offer donors an incentive in the form of reduced charges for using new equipment, but donors who subsequently took advantage of the offer might have the reduce the amount of the donation that they could deduct when figuring income taxes.

Prior to creation of federal health insurance programs, non-profit hospitals managed to supplement patient charges with charitable donations. Many non-profit hospitals(e.g., St. Jude's and the Shriners' hospitals) still operate this way, if they charge patients anything at all.

Government operated health clinics could supplement private facilities, particularly in low income urban areas and rural areas. This approach could reduce government costs by eliminating administrative costs associated with insurance programs. Directly paying salaries and other costs would help fix government spending at a specified level.

The federal government might consider a similar approach for private health facilities. Participating facilities would receive a grant to fund the number of positions needed to handle patients eligible for government aid programs like Medicare instead of being paid for each service the facility provides.

Large private health insurance companies should consider adopting similar procedures to compensate health care providers. Instead of paying individual patient bills, large insurers should pay health care providers according to the average use of services by those they insure. Private companies and government could use annual audits conducted by computer to determine average use.

Using this approach would require insurance companies to abandon the current approach to copayments and deductibles which may not be cost effective anyway. Instead copayments and deductibles would depend on the nature of the medical need. Clients might, for example, pay a part of the cost for initial diagnostic visits to a doctor, regardless of the total amount spent during the year, but not pay for visits related to treatments for the medical problem identified in the initial visit. Deductibles might apply to elective treatments but not to essential treatments.

Clinton's proposal for a one page health care form could exacerbate the billing problem because the form might have to be too complex to avoid providing inadequate information to insurers. A more desirable approach for those companies that wish to continue using individual customer billing would involve establishing a uniform format for transmitting information by computer between health care providers and insurance companies. The health care provider might transmit all relevant information to the insurance company or the insurance company computer might query the health care provider for the information needed about each bill. Social Security numbers should not be used to transmit information by computer or to identify patients in the computer because of a possible loss of patient privacy.

Some clinics and hospitals are experimenting with placing doctors on salary rather than having them charge fees for each office visit or other action. This approach improves the ability to predict costs while discouraging the practice some doctors reportedly have of looking at a patient chart in a hospital and then charging the patient more than a plumber charges for a house call.

Charging patients a uniform fee for treatment of specified medical disorders rather than using itemized bills would also help eliminate a reported source of abuse by health care providers such as charging 80-year-old men for pregnancy tests. Providers would save money by not having to keep track of each individual cost item. Providers could take actions such as analyzing blood samples in the most cost effective manner rather than having to worry about whether insurers will pay for a specific test. Lab technicians might be able to conduct tests more quickly if they checked every sample for the same information rather than conducting tests according to a patient's age, sex, etc.

Government research should emphasize general subjects such as the immune system rather than specific disorders as well as covering nutrition and investigation of natural or "folk" cures. Government should also coordinate information about medical research. Private research into specific disorders is more likely to produce cures because researchers tend to be more dedicated to the task. Government research programs tend to attract researchers who are looking for funds. Some of these researchers may have other interests but portray or adjust their research as being related to whatever goal government wishes to achieve. Private groups tend to focus their research efforts and may ignore broader issues.

The federal AIDS research may demonstrate the disadvantage of having the federal government examine specific disorders. Finding a cure for AIDS may require a much broader effort than simply looking for some cure. Some researchers dealing with Chronic Fatigue Syndrome believe Chronic Fatigue might be more accurately described as Chronic Immune Active Syndrome. Cancer may also involve a failure of the portion of body's immune system that disposes of cancer cells including the cancers associated with AIDS. The federal government might have a better chance of finding a cure for AIDS if it emphasized research into the general operation of the immune system rather than only attempting to find an AIDS cure.

Medical researchers need to establish a better model to explain the cell than the one that relies on the outdated notions of Charles Darwin and his followers. A recent news article stated that researchers were surprised to discover a mechanism that seemed to regulate growth so that growth occurred in spurts at specified times rather than in some other fashion. Anyone with an understanding of systems in general would realize that healthy growth in animals must have some central control. For example, both of a person's legs must grow at the same rate or he will have trouble walking. All parts of the leg(bones, nerves, muscles, skin, etc.) must grow at the same time at the same rate or the leg will be defective.

Biological life, especially animal life, is too sophisticated not be designed by some highly intelligent being or beings. Even with our modern scientific knowledge, we cannot come close to duplicating most animal subsystems. Animals are too well engineered to have simply developed from some random chemical reactions. The design and operation of the cell is logically consistent with the description of a biochemical computer with molecular memory.

Many doctors and other health experts suffer from the attitude that the medicines drug companies produce contain some type of magic potions. Actually the "miracle" ingredients in modern drugs typically are based on plant extracts, fungi, or soil microbes. Pharmaceutical companies may not actually use "stump water" or a "mud dauber's nest" like Granny on the "Beverly Hillbillies", but the ingredients in their miracle drugs often come from similar sources. Folk medicine is based on years or, in the case of the Chinese, millennia of observation and experimentation. The lack of "control groups" in these experiments does not eliminate the possibility that many of these cures may work. Recent developments in the technology for examining chemicals have been indicating the presence of far more chemicals with possible medical value in common foods than researchers previously suspected.

The wide availability of plant products such as those sold as nutritional supplements limits the practicality of drug company investigations of medicinal value. A drug company might not be able to recover its research costs because anyone could grow and sell the plants with medicinal value. Government could recover its research costs through taxes collected from those who profit from growing and selling the plants.

The medical profession should seriously consider changing the way it trains doctors and other health care professionals. The current method of training doctors encumbers them with a high debt that they must repay while attempting to start a practice. This potential debt could be eliminated by shifting to a system that allows doctors to work their way through medical training by using skills as they acquire them.

Those wanting to be doctors would start out in positions like Emergency Medical Technicians and move to positions requiring more training as they learn more about medicine. Students would be getting practical training as they study medicine rather than spending years learning in a classroom and then having to obtain the experience allowing them to practice their skills. Prior contact with medical problems would give medical students questions their studies would help them answer. The current approach to medical training gives students the answers before they understand the questions.

Most technical jobs in medicine could be part of the training cycle including nursing. Students who could not handle the requirements of a job requiring more skills would still be able to perform jobs at the level they had demonstrated they could handle. EMT's often have problems with burnout that force them to quit after a few years. Treating the EMT position as an entry level medical position would encourage EMT's to study to qualify for more advanced positions instead of possibly dropping out of the medical profession.

The change in medical training would allow creation of new positions that might help improve the ability to provide health care without increasing costs. One position could be similar to an EMT or paramedic position. Such individuals would visit the homes of those complaining of health problems to obtain blood and urine samples and make a preliminary examination for the doctor who could then use this information to determine if the patient would need to visit the office for further evaluation before prescribing treatment. An in home examination would potentially allow discovery of any environmental problems, such as carbon monoxide leaks that might explain the patient's condition. In some cases the in home examination would allow a prompter response to potentially serious problems that might require hospitalization than having the patient come to the office might.

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