Is socialized medicine on the horizon? (Part 2)

Dr. Rich at the Covert Rationing Blog sets out a scenario:

So if you are a health insurance executive, you are probably looking at your current broken business model, lamenting that your savior Mr. Obama is probably not going to be able to come to your rescue with the one last windfall he has promised, and observing what is happening with other “vital” American industries in similar straits. DrRich imagines that these executives have already resolved themselves to a government takeover (indeed, this was the end-game they have long planned once their last Obama windfall played itself out), and that they are merely calculating the right moment for it. How best to divest their stock before hinting that such a takeover is in the works? With careful planning and negotiation, can some of the takeover money be parlayed into executive bonuses, or at least into one last, extravagant junket (a la AIG)? There is no real hurry, after all – whenever the health insurance industry says it just can’t do this any more and that the government needs to take over healthcare, then no matter which other industries the government will have already acquired, what choice will the feds have?

This could happen, although I still contend that in the long run we will have to return to a more market-based health care delivery model.  One of the fundamental problems with the current American health care delivery system is that there are way too few primary care providers.  Whether you’re a government bean counter, a corporate bureaucrat, or a private pay patient, the fact is utilizing primary care medicine is just plain cheaper than the alternatives.  We should be grateful that we have specialists like cardiologists and ER docs who heroically snatch patients from the jaws of death every day in this country.  But we should keep in mind that many or most of those patients wouldn’t have needed such tremendously expensive and valiant health care if they had a family doc prescribing them a $4 generic antihypertensive or antilipid drug.

Another fundamental problem with our health care system is the predominance of the third party payor model.  Whether that third party is a private insurance company or a government agency matters less than a lot of people realize.  As the late Nobel Prize-winning economist Milton Friedman observed,

“Two simple observations are key to explaining both the high level of spending on medical care and the dissatisfaction with that spending. The first is that most payments to physicians or hospitals or other caregivers for medical care are made not by the patient but by a third party – an insurance company or employer or governmental body. The second is that nobody spends somebody else’s money as wisely or as frugally as he spends his own.”

Friedman went on to acknowledge that this by itself does not explain why health care costs in the United States are so much higher than in other countries.  Other factors, like the tax exemption of employer-provided medical care, also raise the cost of health care.  But couldn’t the lack of primary care providers be another major factor in the high cost of health care in the United States?  Sepulveda, Bodenheimer and Grundy writing in Health Affairs (27, no. 1 [2008]: 151-158) noted

Dozens of studies show that a strong primary care sector is associated with lower health care costs and improved quality. Peter Franks and Kevin Fiscella examined surveys from a nationally representative group of 13,270 adults who were asked if their personal physician was a PCP or a specialist. People with a PCP rather than a specialist as a personal physician had 33 percent lower annual health care spending and 19 percent lower mortality; cost and mortality data were adjusted for age, sex, ethnicity, health insurance status, reported diagnoses, and smoking status. Other studies confirm that patients with a regular PCP have lower health care costs than those without.

We may or may not take a detour into socialized medicine, but ultimately we will have to greatly increase the number of primary care physicians in the U.S. and rely less on third party payors, both private and governmental, to pay them.

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