The health-care consumer’s best friend continues his path-breaking work.
With the publication of his path-breaking book Patient Power in 1992, John Goodman did more to change the course of health care in America than Barack Obama has done, or will do. Goodman has just published a new book, Priceless: Curing the Health Care Crisis, which offers the prospect of a worldwide revolution in health care policy. With the Supreme Court about to rule on Obamacare, this book could not be more timely.
Patient Power argued for policies that would shift the power and control over health care funds and decisions to patients and their chosen doctors, and away from third party bureaucracies such as government, HMOs, and insurance companies. It spawned Health Savings Accounts (HSAs) and other consumer directed health plans that have proven far more effective in controlling and reducing health care and insurance costs than anything President Obama has ever done.
Health Care Liberation
Goodman begins his new book by explaining the vast, new revolutionary vistas that have opened up since Patient Power:
First is the importance of liberating doctors. Our focus in Patient Power was on freeing the patients….Give patients control over their own healthcare dollars, we argued, and they will become more careful, prudent consumers of health care. What I didn’t anticipate was that the changes on the supply side of the market would be far more profound than the changes on the demand side….On the provider side, however, we are unleashing a torrent of entrepreneurial activity that would have been unthinkable only a decade ago..
The foundation for the revolutionary changes is still Patient Power, Goodman explains:
When patients aren’t spending their own money, there is no way doctors can compete for their patronage based on price. When they don’t compete on price, they don’t compete on quality either. The services they offer will be only those services the third parties pay for and only in settings and ways the third parties have blessed. But give patients control over their own healthcare dollars and the provider community will begin to meet needs in ways the third-party-payer bureaucracies could never have dreamed of.
Part of the solution, Goodman explains, is consequently “Doctor Power,” giving doctors and hospitals more power over their own practices and services to compete in serving the needs and desires of patients. Goodman says, “What we need is a system in which the provider side of the market competes to provide value because it is in their self-interest to attract patients in this way. We will never solve America’s healthcare crisis from the buyer side of the market. It can only be solved from the provider side….[E]very example of high-quality, low-cost medicine originated on the supply side — not the demand side — of the market.”
Goodman continues, “The second thing I missed the last time around was the importance of prices. The single worst public policy decision in all of health care was the decision to eliminate money prices from the market. Have you ever wondered why the panhandler on the street corner has a cell phone, but no access to primary care? It’s because he can buy a cell phone in a real marketplace, but he can’t buy health care that way.” Goodman explains some of the implications:
As this book goes to press, a new study finds that enrolling children in the Children’s Health Insurance Program (CHIP, essentially Medicaid for children) does not result in their receiving more medical care. But when CHIP pays higher fees to doctors, the children do get more care…. But we make it illegal for the family to add to CHIP’s fees and pay the market rate for their care. They can have free health insurance only if they agree not to purchase the same care everyone else is able to buy.
Goodman contrasts the failure of health care for the poor with food stamps, which do successfully help the poor. With food stamps, the poor are free to choose the same food available in the market to everyone else at market prices, and supplement their food stamps with their own funds to do so.
Goodman further explains:
The third thing I failed to fully appreciate in the earlier book is the second biggest mistake in all of health policy: making it illegal for insurers to charge premiums that reflect real risks…. In most places we make it against the law for a health insurer to charge a fair premium to a person who has above average expected healthcare costs. This means that insurers have an economic self-interest in avoiding people with health problems and in failing to encourage them to seek optimal treatment once they do enroll.
Goodman and I both agree that the government should sponsor a health care safety net so no one will suffer without essential health care, as discussed below. With that backstop, however, we need to maximize the power of the market to provide the best health care at the lowest possible cost. But that is not what we are getting under current policies, as Goodman explains: “The absence of real prices for health insurance and real prices for medical care combines to completely deter what should be a vibrant market to solve the problems of people with medical problems…. Notice that both of these policy mistakes share the same basic problem: the suppression of the price system. That is why I chose to title this book, Priceless.”
Goodman describes how the market would work to benefit patients and consumers of health care if the price system were allowed to operate properly: “In a normal market, prices convey information. A high price tells innovators and entrepreneurs the market places a high value on getting a problem solved. It communicates that the reward for finding a solution could be high as well. When the price system is artificially suppressed, the information does not get communicated. Almost all of our problems in health policy stem from this central fact.” Goodman explains that if the price system is allowed to work, “In such a market, the sick would be just as desirable as the healthy to an insurance company. And there would be an active, entrepreneurial market to find low-cost ways to solve your health problems — in order to lower costs both for you and your insurer.”
Goodman explains as his fourth new insight the reason we are blocked off from truly effective health policy reform: “[T]he most important differences people have over health policy have little to do with facts, reasoning or logical argument. The most important differences stem from differences in fundamental world views. There are a very large number of people in this field who find the price system distasteful — at least for medical care.” As a result, “the truth of the matter is that there is no amount of evidence that is going to convince most of the orthodox health policy community that prices should be allowed to allocate resources in the market for medical care. For well intentioned reasons perhaps, they are emotionally predisposed to favor the suppression of normal market processes.”
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