What Healthcare and Higher Education Have in Common

Healthcare is notorious for runaway prices, which are due, in part, to this financing scheme: multiple payers. And these multiple payers have assured streams of revenue, which include:

* Employer-provided health insurance

* Health insurance purchased by the individual to comply with government mandates (as in Massachusetts' new healthcare system)

* Direct government grants (Medicaid)

* Dedicated taxes (Medicare)

If one payer doesn't pay a patient's tab entirely, then the provider just bills the other payers for the remainder. Out-of-pocket payments by patients get put on top of these other payments. A patient can have his medical bills paid by 3 or more parties. With multiple payers providing assured payments the market is subverted -- there is no pricing discipline. This leads inexorably to price inflation, which in the case of healthcare outruns the overall inflation rate big-time. Another enterprise that depends on multiple payers, assured payment, and heavy government involvement is higher education. And it, too, has raging inflation.

Assured payment results in waste and fraud. It has caused an explosion in medically unnecessary tests and procedures. It is why universities can provide their professors with cushy sinecures for precious little work. (How else could the University of Colorado afford a 6-digit compensation package for the likes of a Ward Churchill?) The hospitals and universities don't have to economize and prioritize; they can have it all. The money will be there for them.

Despite healthcare's soaring inflation rate, healthcare reformers want to throw yet more money at it. How are you going to get prices under control by pouring even more money into those assured streams of revenue? The reformers think that by eliminating paperwork and through other administrative efficiencies that they can reduce costs. (If so, what's the need for more money?) But the healthcare industry would respond to any increased cash flows by simply raising their fees, just as higher education does.

In 10 years, healthcare spending is projected to top $4 trillion, double what it is today, and much more than all federal spending today. Healthcare's share of GDP will increase from 15% to 20%.

The cure for healthcare inflation-and a great many other things, for that matter-is competition. And the way to get competition is by withholding funds, not assuring them. That's why Health Savings Accounts are so attractive. HSAs keep money out of the healthcare pipeline until you need it. And HSAs are also a fine incentive to improve your health by changing your lifestyle and habits, so that you won't have to tap into your own money.

The solution to the problem of multiple-payers in healthcare is not "single-payer", the "universal" system preferred by some reformists. Not if it means another government-run monopoly. (Government hates monopolies, except, of course, for government monopolies.)

Speaking of "universal": Congress should enact a nationwide law that allows all workers to divert their share of their company's health insurance budget into HSAs. That way if a company goes bust, like Enron, or stops providing health insurance to its employees, employees who have chosen this opt-out will at least have some healthcare money set aside. And because they would be universal, such HSAs would be portable, making it easier to change jobs, thereby making for a more dynamic economy.

America has not had a real market in healthcare since the 1940s. If we really want to reform our healthcare system, let's start by reintroducing healthcare to the market.

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More deadly NHS negligence

Simple procedures that could save the lives of thousands of hospital patients every year are still not routine in Britain. More than 12,500 patients a year die in hospitals from venous thromboembolism (VTE), blood clots that form in the veins of the legs or pelvis and travel to the heart or lungs. David Fitzmaurice, of the University of Birmingham, says that the condition kills at least ten times as many hospital patients as MRSA but gets far less publicity. Nationally – counting cases both in and out of hospital – at least 25,000 people die in Britain every year from VTE. “The number of deaths from VTE in the UK each year is five times greater than the combined total number of deaths from breast cancer, Aids and road traffic accidents,” Professor Fitzmaurice says in today’s British Medical Journal.

In hospitals, about 10 per cent of all deaths are caused by VTE, and many of these could be prevented. Drugs can reduce the rate by about 65 per cent, but an investigation by the Commons Health Select Committee found that as few as 20 per cent of patients were being treated appropriately. “A combination of factors may be responsible,” Professor Fitzmaurice says. “As a result of poor education, health professionals lack awareness of this condition. Venous thromboembolism is often a silent disease and often occurs after discharge from hospital.” He adds that the cost of the drugs may also be a barrier, although this is not clear.

The National Institute for Health and Clinical Excellence (NICE) published guidance last month that all patients undergoing major surgery should be assessed to identify their risk of developing blood clots. The formation of clots, known as deep vein thrombosis (DVT), occurs in more than 20 per cent of surgical patients and more than 40 per cent of patients undergoing major orthopaedic surgery. But it is also common in medical patients. Most of these thromboses are minor and cause no symptoms, but if the blood clot becomes loose it can travel to the lungs and cause VTE.

NICE’s suggestions for preventing blood clots include offering patients compression stockings, inflatable “boots” during operations and the use of blood-thinning medication. Professor Fitzmaurice says that NICE’s emphasis on compression stockings rather than drugs is controversial. It was not supported by a report of the Health Select Committee two years ago, which he says provided an opportunity to change practice. “Meanwhile, more than 25,000 may have died needlessly each year because of the failure to implement simple thromboprophylaxis in UK hospitals,” he concludes.

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For greatest efficiency, lowest cost and maximum choice, ALL hospitals and health insurance schemes should be privately owned and run -- with government-paid vouchers for the very poor and minimal regulation. Both Australia and Sweden have large private sector health systems with government reimbursement for privately-provided services so can a purely private system with some level of government reimbursement or insurance for the poor be so hard to do?

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