The Reversal of the Great Risk Shift

John Reilly has an excellent post up about the recent federal health care bill.

The enactment of the new federal health-insurance system this week marks the beginning of the reversal of the Great Risk Shift that has characterized American society since the late 1970s. There is now reason to hope that American society can return to something like its historical condition, in which it was possible to change jobs and geographical location without taking your life into your hands. Wages may again be able to rise, since all new money that becomes available for personnel costs will not automatically be eaten by insurance-premium increases. More generally, the subtle loss of morale generated by a system that, for the first time in American history, made a physical necessity problematical will begin to abate, with a consequent rise in personal initiative and national cohesion.

Like Reilly, I too am sanguine about the effects of the passage of this bill, and I see it as an ultimately positive development. This may seem a little strange, because by political temperament, I ought to be bitterly opposed to this enterprise. However, John Reilly was instrumental in convincing me otherwise. He is one of the most reasonable men I know, and he exemplifies the virtue of hope, which makes for a critical difference in perspective.

Reilly has been making the argument that a reform of the health care system in the United States will be a liberation. His reasons for saying so are fundamentally conservative, which annoys pretty much everyone involved, but I believe he is on to something. He has been arguing that the current system limits our free market system by tying people to their jobs which offer good benefits, and making businesses bear the brunt of funding health care, when our foreign competitors do not need to do so. He also insists that health care is not a right, and cannot be. It is rather a matter of public order and entirely practical. Rights-talk is far too absolute to be productive.

One of the chief difficulties with the American system is its opacity. The quality of the health care is really quite good, and it is a vicious calumny to say that the uninsured have no health care in America, rather, they get all their care at the Emergency Department, which is both expensive and inefficient. The rub here is that the people who don't have insurance often wouldn't go to the doctor until they are really sick anyhow, so there is only marginal improvement to be made here. From my time working in the local hospital, I know that the truly poor often simply don't pay their medical bills, which means the service is subsidized by those of us who do pay. It would be better if we did this up front, instead of persisting in sending overdue notices to people with no means or intent to pay anything.

The pricing is the really bizarre thing. If you look at a bill for any medical service, you see a ridiculous value that is invariably cut by half or more if you have insurance, but it is nearly impossible to find out what this value is beforehand. The actual cost of medicine in the US is practically a trade secret. Billing codes are actually copyrighted by the American Medical Association, and guarded fiercely. The Magistra needed hand surgery recently, which was covered well by my excellent insurance, but we actually were unable to find out beforehand how much it would cost.

No business can run this way. Not only can you not determine the cost beforehand, the matter can take 3-6 months to be paid in full. Costs would go down in American health care if only the accounts receivable were smaller! One of the best experiences I ever had was when I went to the ED and forgot my insurance card. When I got the bill I forwarded it to my insurance company, and then I paid the negotiated price directly and got reimbursed. I carry a large savings balance, so this kind of thing is easy for me, but if this is the best to offer the system needs work.

Since I work in the medical device industry, I know that the prices that the manufacturer ultimately sells for in different countries are not all that different. The US is the single biggest medical market in the world [followed closely by Japan], but medical devices still make plenty of profit in the various and sundry health care systems in the rest of the world. I have to laugh when the claim is made that switching to some kind of national health care system in the US will inevitably stifle creativity and innovation. It is certainly possible, depending on how stupid the system is, but all medical device manufacturers compete globally, with a majority of our customers being in allegedly stifling systems already.

The pharmaceutical companies may be in a different boat. I've been of the conclusion that Big Pharma is in trouble for a while now. Actual innovation there is slim, most recent drugs seem to have worse side effects than the things they treat, and R&D costs are ridiculous for new drugs. Don't mistake me, R&D on a medical device can easily cost hundreds of millions of dollars, but I think the results are actually better, and you don't have to worry about generics stealing your market once the patent runs out.

There is a lot of room for cost-improvement in the American health care system, but the really interesting thing is that this political development will not result in creeping socialism, but rather presages the return of a more traditional society. The Age of Autonomy, and both right- and left-libertarianism is ending.