Healthcare Reform: Reason and Direct Democracy

 The strong and inelastic demand for healthcare in America — our demand for the very latest technological advances in diagnosis and treatment — sends soaring skyward the prices we pay for medical testing and procedures, far above the reach of the average American. Hospitals, to be competitive with one another,  attract the better doctors using generous fee-based pay schemes, whereby doctors, who are always vulnerable to malpractice suits anyway, are financially incentivized to perform services that might not be effective or even necessary.

Hospitals must also recover the costs of multi-million dollar medical equipment that attracts both the finest physicians and the privately insured. So even when existing medical equipment is working well, an innovation in technology imposes pressures upon hospital administrators to update their equipment in order to retain market competitiveness.

But there are other causes for this pricing predicament: Doctrinaire free market advocates would ascribe it to our government’s market interference — its limiting of nationwide insurance competition, its mandating that illegals and the indigent receive treatment, and its insufficient reimbursement models for Medicare and Medicaid.

Doctrinaire liberals, on the other hand, would bewail the corporate, profit-driven denial to Americans of our right to healthcare treatment, carried out through lobbyist influence and the consequent legislative blocking of a universal single-payer system.

But the healthcare issue is far more complex than this.

What if, for example, we Americans had no fear to face either the social stigma of disease or the blank unknown of death? What if we dutifully treated our common illnesses and injuries but accepted the onset of a fatal disease or the infliction of a mortal wound with a selfless dignity rather than with a mortal desperation? And if we refused all expensive, life-extending measures?

The consequent fall in the demand for emergency medical care might be well reflected in lower prices paid by all. So ought we struggle to forestall and overturn the verdict of Nature, even at great cost to family or to society? Is that a civil right?

The human genome is surely devolving in consequence, as diseases that might have killed yesterday’s adults are instead cured by modern medicine. The underlying pathogenic genes responsible for the disease are still passed to the next generation — whereas such genes in past generations would have brought about their own demise. Who knows how this concentration of pathogenic genes will affect future generations?

But is an enlightened attitude toward life, disease and death required in a country whose medical field advances so quickly? It seems quite likely that another century will not pass before genetic therapies have overtaken the spread of disease in humanity. Perhaps then we can “back-engineer” our own human evolution.

For now, unfortunately, we find ourselves caught in a very expensive transition to that medical paradise — that future when perhaps medical costs will have become negligible for everyone — of no import whether universally covered or privately paid.

So, assuming that an enlightened life perspective is out of the question, how do we get there from here? The advancement of medical research and technology must not be slowed; yet the costs of care today ought to be curtailed — or else this, our pricey purgatory, will prevail longer than necessary.

If free market advocates had their way, their resulting open market would not ameliorate the increasingly expensive medical-technology and doctors-fee competition between hospitals: People are so desperate to prolong life, even a few weeks or another month, that the demand for healthcare would remain inelastically high at any price.

And if the liberals prevailed — laying aside the absurdity of one person having a “right” to be treated medically by another human being — at a price point — then presumably a bureaucrat, or a body of bureaucrats, would be officially charged with administering a new universal system. Faced with finite financial resources, they would either make distinctions between those who merit treatment and those who do not; or they would ration resources across all patient care, making little distinction between a patient injured or ill through no fault of his own and one whose actions directly caused his condition, e.g. a chain smoker or a bungee jumper. But such official injudiciousness and arbitrary magnanimity by the state more injuriously debases morality and delegitimizes government than the free market in its fullest operation.

The solution then?

Because demand is inelastic, prices must be kept artificially down. The free market functions for all consumers only when both supply and demand are elastic in relation to price. But to individually set the price of every medical procedure and of all medical equipment would require endless bureaucracy and thus invite unlimited favoritism and red tape.

The real answer requires a broader principle than this.

From libertarians we find an objection to state licensing of professionals because, they argue, such government intervention places artificial limits upon the number of doctors and medical professionals in the field and upon the nature and the number of medical devices and treatments available to all.

But rather than dropping state licensing requirements altogether, why not make explicit the link between state licensing and state price controls?

In other words, if medical professionals and medical suppliers wish to receive the imprimatur of the state and whatever legitimacy accompanies such certification, the value exchanged for this bona fides would include a limitation upon the fees charged by professionals for their services and a limitation upon suppliers for the prices charged to consumers for their products:

No person to whom any of the several states or the United States has granted a license to render a service, or to own or operate a device intended to provide such a service, or to provide a good shall retain the same upon exacting a rate, a fee or a price that exceeds twenty times the federal minimum wage; two times both the actual costs of operation of the device and the resulting marginal dimunition of its functioning life, as applied to its replacement cost; or two times the cost to replace the good, respectively.

(from Amendment XIII)

Under this system the state licensing of professionals might well fall into relative disuse, likely concurrent with an explosion of unlicensed or privately licensed practitioners. The more the merrier, as this greater number of providers would better meet the constant high consumer demand, in this case for medical care, thus lowering the price for the average healthcare consumer. Yet those who retained their state licensing and abided by the fee and price limitations, no doubt true humanitarians, would exercise a secondary price-competition pressure upon unlicensed providers, keeping prices lower across the industry.

And any medical professionals and medical suppliers opting to operate outside of state licensing could still charge private patients, insured or cash payers, whatever the market dictated. Private hospitals could operate with only private licensing, or none at all, perhaps charging for the highest quality care and for the latest technology the fees that only the most affluent could afford. Even so, the technology competition between separate private facilities would fuel medical research and technology advancement and thus extend the progress of medical science for all.

That this state licensing in a direct democracy constitutional amendment was extended to all industries reflects an attempt to avoid legislatively targeting a single industry, avoiding a de facto bill of attainder. As for those citizens who, even with price controls linked directly to state licensing, still could not afford healthcare, they might either rely upon private charities — adopt an enlightened attitude toward life and death — or limit their health risks and unnecessary expenditures, perhaps even their number of children.

Thus, for the greatest number of people we preserve the usefulness of the state and the better elements of the free market system, limiting the ability of state licensed professionals to benefit from state power in exacting from their customers prices that do not reflect their actual costs — the costs that would prevail given full competition among the largest number of suppliers.

And thus we, the People, find ourselves the beneficiaries of more affordable products and services for the foreseeable — and well into the rapidly advancing- future.

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