Health Care

There's been a lot of talk around health care in the last few years, and whether socialized medicine is better than privatized medicine. Usually I hear the same tired arguments that don't get anywhere - "The Government is wasteful and stupid", "The private sector is wasteful and greedy" and we end up with some sort of compromise that satisfies no one and is, on balance, as good as either one would have been on its own.

Betsy and I were talking about this, and she mentioned that one thing that caused privatized health care to be set up incorrectly was the fact that the incentives on doctors were backwards: Doctors have little incentive to keep you healthy - they make the most money when you are sick.

I thought a little bit more about this and I think the monetary incentives are actually backwards in three cases:

For doctors and drug companies: You are neutral if you are healthy, an asset if sick, and neutral if dead.

For health insurance providers: You are an asset if healthy, a liability if sick, and neutral if dead.

For life insurance providers: You are an asset if healthy, an asset if sick, and a liability if dead.

So doctors should, if acting in their own best interest, want you to stay sick (or treat you for things you don't have), while health insurance has a material incentive to move you from sick to dead as quickly as possible (as this is often less expensive than moving you from sick to healthy). As such, we have doctors and drug companies charging huge amounts of money for procedures and medications that may not be necessary and health insurance companies unwilling to pay it. The only people who would prefer you alive are the life insurance people, who have little say over your health care!

A better system would seem to be one in which all three were combined. That is, you pay your doctor a monthly fee for both health and life insurance, and no money changes hands other than that, unless you die. Now, if you get sick you become a liability, and if you die, you become an even bigger liability. The monetary incentive is for the doctor to keep you as healthy as possible for as long as possible. I think this is the proper set of incentives and would buy into a system like this. I think the government could pass a few laws that would go a long way towards reforming the system (prohibiting companies from doing business in only one of these spaces, for example) without spending a dime of taxpayer money.

Meanwhile, for the free market people, this doesn't kill off medical research like socialized medicine might. In fact, it refocuses research: Current incentives favor therapies that you'll have to take for your whole life (read: Statins, blood pressure medications, Viagra, Celebrex). The new incentives favor research into prolonging life and health and keeping you off medications (read: cancer treatments, better antibiotics, etc.)

The one place where this plan falters is the case of chronic disease, which is not in danger of killing you, but makes life miserable none the less. There would have to be some further incentive for doctors to treat you in this case. I'm not sure what this would look like.

Someone tell me why I am wrong about this. Please tell me that there's a good reason that no one is kicking an idea like this around in health care debates.