The Affordable Care Act is more of our broken health care model

Every week we read another article on the fuzzy math and ridiculous mark-up for our routine healthcare. Do your own research; see Elizabeth Rosenthal’s article in a recent Sunday New York Times, the $2.7 Trillion Medical Bill or Steven Brill’s lengthy tome in Time, Bitter Pill.

We spend, and will continue to spend, more on healthcare than any other nation in the world and yet we are 38th in healthcare rankings according to the World Health Organization. America has the most efficient markets in virtually every other sector except healthcare.  Unfortunately, we are just beginning to see that our landmark health reform law, the Affordable Care Act, is no improvement and it will give us less for more.

America has had a broken model for our healthcare for nearly two generations (50 years). What is broken is our dependence upon 3rd-party middleman (government, insurers) when we need healthcare. Even though 70 percent of our health care is elective, non-emergent and provided outside of a hospital we allow middlemen to control all transactions.  These middlemen obscure all real pricing and insulate us from normal market dynamics and price-competition.  This prevents the development of a virtuous cycle between consumers (us patients) and providers (doctors, clinics, hospitals).

Thus, instead of win-win healthcare where individuals are paying attention to costs and are motivated to stay healthy (by saving money), we have lose-win-lose healthcare where everyone loses but the middlemen—have you ever noticed that there is always a crane in a hospital parking lot? Our poor collective health, with our obesity and diabetes epidemics, may be just one indicator of how decoupling the patient from their healthcare is a failed strategy.

America needs to move from an “open bar,” everything is covered and no one is paying attention to costs model, to a “cash bar,” consumer-driven healthcare model. Patients would pay attention to costs, have leverage for access to care (which will be important moving forward) and be incentivized to have healthy behaviors. Providers would be more correctly focused on the patient and be motivated problem solvers for the patient—providing higher quality and more convenient care.  This model for healthcare is more holistic and ethical too; by engaging and incentivizing the recipients of care it recognizes the interdependence of all stakeholders while giving patients and their families the ultimate choice of how their healthcare is managed.

America needs to think differently about healthcare and embrace a new consumer-driven healthcare model and paradigm: one that is decentralized, empowered, and collaborative.  It is no coincidence that the two most competitive economies in the world, Singapore and Switzerland, have such a model. Consumer-driven healthcare will make us more fiscally and physically competitive.

Regrettably, the Affordable Care Act is more of our tired and broken health care model; increasing 3rd party dominance, centralizing control, fueling unprecedented market consolidation. This has already increased our costs and decreased our choices and access to care.

Matt McCord is an anesthesiologist. He is founder, Michigan Alliance for Sustainable Healthcare, and can be reached on Twitter @MattMD.

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  • C.L.J. Murphy

    I’m going to take the liberty of cross-posting the comment I submitted earlier today to another recent post here which asked “Will health care price transparency help reduce costs?”

    In his book Free to Choose, economist Milton Friedman described four ways to spend money.

    1. You spend your own money on yourself.

    2. You spend your own money on someone else.

    3. You spend someone else’s money on yourself.

    4. You spend someone else’s money on someone else.

    Obviously prices will matter most to someone in position #1.

    When you’re spending someone else’s money on yourself (#3) or spending someone else’s money on someone else (#4), not so much.

    A good prescription for lowering health care prices might be a
    combination of price transparency plus more high deductible/catastrophic insurance plans, and take insurance companies and the government out of the loop for most routine transactions.

    Can you imagine what grocery prices would be like if we all had “someone else” picking up the tab for us?

    / / / / / /

    • Matt McCord


      Agree. Great post and great analogy. I use that analogy often; imagine if we had “Foodaid”, where, instead of Foodstamps, we had the government control our food.

      Instead of allowing individuals choices on where and what
      food to buy for their family, the government’s “Foodaid” program would make meal decisions for you. They would decide how much food rations each family is
      due, the ratios of meat vs. potatoes, fruit and vegetables—and everyone is mandated to eat fish. Each grocery store would have a Foodaid aisle, manned by a government official, to make certain that everyone is in compliance. Your
      purchases would be carefully entered into an electronic database to ensure that no individual or family received too many Fruit Loops.

      This would be a boon for the food and grocery industries.
      Representatives for the fish lobby would argue for greater portions of mandated fish, the Rice Growers Association (does that exist?) would support legislators from “rice states” to back larger rice allotments, and the Organic Farmers
      Association would lobby for a requirement that every family eat kale.

      To complete the “Foodaid” analogy, food would be “free”—or
      you would not know the real cost. Most employed individuals and families would have FoodCross/FoodShield cards purchased through their employer which would
      give them rights to get their food at Whole Foods or Trader Joes. Grocers would flourish as they now not only have guaranteed commerce but they also get to
      decide the mark-up on each item. Can you
      imagine the size of supermarkets in this scenario?

      Ridiculous isn’t it? This is exactly our situation in American healthcare.

    • Alice Robertson

      Quote: Can you imagine what grocery prices would be like if we had “someone else” picking up the tab for us?”

      I really like Friedman (and Reason magazine which I noticed you quote
      from. I appreciate that because even one who reads a lot can’t keep up
      on it all). But I sorta think we do have this analogy going on right
      now. Of course, the Secretary of Agriculture says food stamps are a
      stimulus. Long ago once the government started to pay for baby formula
      the price tripled. Government went to court and was told the free
      market can do as they please. I wonder though what judges would say
      today now that we have such a welfare cultural mindset.

      • C.L.J. Murphy

        Regarding food stamps and government-supplied baby formula, I prefer cutting the government out of the loop as much as possible there, too, and going with straight cash transfers for low-income citizens who need help getting by. Just treat them like adults and give them the money, via a scheme like Friedman’s negative income tax which doesn’t treat them like children, doesn’t disincentivize them from rejoining the job market, doesn’t pour millions into the vast bureaucratic welfare-industrial complex, and doesn’t distort the market as much as having the government decide what “free stuff” they need and then going out and buying it for them does. Some permutation of that could work for providing the poor with HSA funds for routine healthcare as well.

        There’s a video of Uncle Milt with William F Buckley Jr in 1968 where he describes a proposal such as this. If you’re having a slow Saturday as I am you may want to have a look:
        http://www. youtube. com/watch?v=xtpgkX588nM
        (cut and paste that into your browser bar, sans spaces)

        • Alice Robertson

          Is the point the negative income tax? If so sometimes it feels a bit like that with EIC and about half of Americans paying no federal tax. I realize it’s much more complex that this and the intent is different, but sometimes you wonder just how far this “responsibility” speel goes….as it morphs into “rights” instead of a helping hand. I have even thought a lot about this end of life stuff that is necessary to pay for all these entitlements. It feels like the aged are expected to have a responsibility to die early because just as the public at one point viewed doctors as crony capitalists who looked at them in a way some ER doctors claim administrators tell them to keep moving the meat, it appears doctors who used to capitalize on the aged now see them as leeches of the system. The medicinal worldview is evolving as funding changes.

  • Margalit Gur-Arie

    Neither Singapore, nor Switzerland have a free market health care system. Singapore has a free market for the 20% that are wealthy enough to afford private health care and a separate system (with separate wards) for those who cannot. Switzerland has universal health care mandated by the government (a.k.a. single payer) and full price controls on all services.
    The Singapore model and its grand total of 25 hospitals (or so) is not replicable in this country, but I would be very happy if we moved to a Swiss health care financing model.

  • Maggie

    And can the good doctor actually quote his patients a price when they ask upfront what his services will cost? If he can, he’s in the vast minority of doctors. Lots of blame to go around, but providers are by NO means innocent bystanders in this system.

  • Anthony D

    Okay, then try the U.K. system only if you want to go bankrupt.

    The NHS (National Health Service)
    is paid for out of our tax, but it is the prime target for many health
    migrants, and due to the massively inflated cost of medical services, we
    cannot contribute enough to get all the treatment we need. The NHS is
    the biggest employer in the UK but so vast are it’s commitments and so
    tight is the budget, that it is top heavy with managers on great
    salaries who’s sole task is to cut spending, this means giving contracts
    to those that clean for instance, to the lowest bidder. Thousands of
    NHS workers do not have English as a first language and patients suffer
    as a result.

    The vast amount of time spent in the NHS is finding ways to cut
    spending, but with an ageing population and less working to pay the
    bill, it is becoming almost unmanageable.

    Theyare less than a quarter of the size of the US, so imagine the bill
    you would face in tax to get it started, leave alone run it.

    • Alice Robertson

      I can attest to that. You are right. I find the NHS terrifying (not just a monetary mess, and most people in the states who think it’s the dream system…like Dr. Berwick who is thankfully gone….don’t realize private insurance there is not what it is here). I thought it was quite good when David Cameron said if they receive welfare they should at least speak the language or be willing to integrate into an English country. And, yet, I do think if not for US aid at times the beautiful island may have sunk into the sea.

  • David Gorski

    You clearly don’t know what you’re talking about if you think
    Singapore and Switzerland have a free market health care systems that is decentralized. In fact, hilariously, in Switzerland the system actually
    rather resembles Obamacare more than anything else in that purchasing health insurance is compulsory and all Swiss are required to purchase a basic health insurance package. Each person pays up to 8% of his income for this health insurance, after which the government pays the rest. Citizens can then purchase supplemental insurance if they choose.

    Singapore isn’t that much different. Singapore’s system uses a combination of compulsory savings from payroll deductions to provide subsidies within a nationalized health insurance plan known as Medisave. I suppose it’s rather like a health savings account, but heavily subsidized and regulated by the government. It’s hardly “free market.”

    One wonders what else you got wrong.

  • buzzkillerjsmith

    Here we go again. Another free-market zombie just like all the other ones, sitting pretty in anesthesia. Margalit took down his models, so no need to go over that. If people paid for it all out-of-pocket, preventive services, which anesthesiologists do not generally provide, would be given short shrift. Pity about the prevention but surgeries for preventable illnesses might even increase. Yippee for some!

    There is a better way. Provide basic care for all Americans. Perhaps some of the funding could come from decreasing the income of overpaid proceduralists.

    • C.L.J. Murphy

      ” If people paid for it all out-of-pocket, preventive services, which
      anesthesiologists do not generally provide, would be given short shrift.”

      So you’re saying that Americans are too stupid to be left to their own devices in. re. managing their own finances for health care, and thus the government needs to force them to do it?

      Because I am very old, I remember when William Safire referred to 1988 Democrat presidential candidate Michael Dukakis as an ‘Eat Your Peas’ type. There’s always one! Using your reasoning, that people can’t be trusted to spend their healthcare dollars wisely so the government must do it for them, what about their food dollars? What about all those irresponsible people who don’t spend their paycheques on peas but on pork rinds? Should the government step in there, too, with an eat-your-peas provision whereby part of everyone’s earnings is confiscated and they are provided with healthy food instead of the junk they might buy if left to their own devices? See Matt McCord’s “FoodAid” analogy below.

      • Margalit Gur-Arie

        The government is not “forcing” anyone to get preventive services. There is no government fine or jail sentence for not getting your colonoscopy (although there may soon be one from your friendly corporation overlord). The government is just enabling you to get your colonoscopy, if you decide to have one and are unable to come up with the copay.
        Medical care is not like champagne and caviar, so all those foodaid analogies are just empty rhetoric.

        • C.L.J. Murphy

          All right, no they’re not forcing you to get a colonoscopy, but they’re saying you can’t be trusted to spend your own money on getting one so they’re going to take your wages off you and give you a voucher for a “free” one in exchange – which you can toss in the bin, just like the peas they have confiscated part of your paycheque to have home-delivered to you. But the point is still that the average American is too stupid to be allowed to spend their own money on their own priorities and the State must step in to act in loco parentis.

          Is there any study showing that citizens with HSAs, who are spending their own money on themselves, have poorer health outcomes than Medicaid patients, who are having someone else spend someone else’s money on their behalf?

          • Margalit Gur-Arie

            Actually, basic preventive care without a copay is for everybody, including those with private insurance and those with an HSA, not just Medicaid. The new law says that commercial insurers have to waive the out of pocket portion as well.

            Health outcomes are that everybody sooner or later dies one way or another regardless of insurance or medical care. Medical care may provide better quality of life in some cases, or a few more life years in other cases, or nothing much most of the time for most people. Certain preventive care measures, such as immunizations, childhood screenings and prenatal care have indisputable (I presume) effects on society as a whole.

      • buzzkillerjsmith

        Not stupid, just short-sided. There is a considerable psychological and economic literature on this that might or might not be of interest to you. Please scoot on over to my comment about HC cost transparency for a basic primer.

        Ideology is always a lot of fun but at some point reality will creep in.

    • Matt McCord

      Buzzkillerjsmith…lets forget the first part. We can have universal care and for much cheaper. Just make us doctors and hospitals compete for your care and trust. If you can control where money is spent on healthcare (with guidelines) then you have the undivided attention of the industry. Currently, the industry focuses on the middlemen because they have the money.

  • David Gorski

    It figures, too, that this guy is in my state.

    Here’s a question for Dr. McCord: Name one country that has a true free market health care system and tell us its healthcare outcomes. I’ll wait.

  • Margalit Gur-Arie

    Hi Dr. McCord, for some reason your reply was stuck in moderation (I could see it, but couldn’t respond).
    Anyway, here is an interview with the architect of the Swiss system
    If you are still supportive of this model after you read it, I’m with you all the way :-)

  • Margalit Gur-Arie

    Dr. McCord, for some reason your comments on our initial conversation are getting stuck in moderation (maybe some technical glitch), so let me start a new one here.
    You are stating there that Mr. Goldhill is right, which I understand as basically ensuring through a catastrophic + mandated HSA arrangement that “consumers” control the portion of health care expenditures that are not catastrophic, i.e. the everyday cheap(er) stuff, although Mr. Goldhill alludes to having chronic disease belong to the government mandated “catastrophic” insurance portion.

    Hence two observations: first, as you very well know, approximately 5% of people are incurring about 50% of health care expenses. Surely, these fall under the catastrophic rubric, and since that is an “insured” category, I don’t see how changing payment mechanism for cuts and bruises will affect the bulk of our problem.

    Second, this entire consumer-driven advocacy is based on looking at other retail markets for products (not so much at services, where prices are less likely to tumble down year after year). One thing that is very clear from consumer retail is that rich people can and do buy better stuff. The wealthy have better homes, better cars, better furniture, better food, better soap, better toys…… While we all accept that as part of a free society, it is also worth noting that no one dies from using cheap stuff, and although cheap food may kill you in the long run, this is not immediately evident.

    I would submit that when it comes to health care, we, as a society, are not likely to accept the same situation, for a number of reasons. Unlike retail goods, big ticket items in health care have no cheaper substitute that is functionally equivalent – you either get your appendix removed or you don’t. As to smaller and ongoing items such as primary care, the much touted substitution of mass delivered non-professional services at retail venues for the poor, is really not equivalent in any way to having your own personal physician, not to mention that there are no significant savings associated with this type of degradation.

    So when we say consumer-driven, what we really imply is a tiered system of health care, much like everything else that is consumer-driven.

    I am afraid that whether we take Mr. Goldhill’s advice and self insure for small things, or continue on the Obama path, the results will be the same, and the overall costs will be the same as well.The one reason I suggested that you look at the Swiss model a bit more is that in Switzerland prices are negotiated and controlled (not by fiat) and equal across service providers, and profits are severely restricted. This IMHO is the missing piece in our system.

    • Matt McCord

      Margalit. Again, thanks for taking the time and your well thought-out comments.

      Since this is such a big subject and I am limited to 500 words, I did not get into the differentiation of that expensive subset of Chronic patients (e.g. diabetes, asthma, CHF, renal failure, etc.). Yes, they should be treated differently and will be more actively managed by care teams. This work could be directly contracted out to bidding (and competing) specialists–and it should. It is that latter bidding and competing part that would help lessen overall costs. Just like we have seen with Medicare Part D for example.

      Regina Herzlinger of the Harvard Business School suggested such specialty-care solutions for Chronic conditions in her wonderful book, “Who Killed Healthcare”:

      When we discuss healthcare I think that it is important to differentiate unplanned and unanticipated care (e.g. trauma, accidents, cancer) from predictable care (e.g. physicals, immunizations, screening exams, elective surgeries). Neither the rich or poor can predict nor shop for the former but all can for the latter. And, in fact, about 70% of our care is the latter.

      Insurance should be for that unplanned or unanticipated care and the rest we should shop for. This will help us control our costs in a much more efficient manner than government controls (which you could argue that we have attempted for 50 years).

      You know how the price-control would go: whose price do you control? How do you do that without limiting access or rationing?

      I am suggesting that the individual or family should ‘ration’ their healthcare based on their individual needs.

      • Margalit Gur-Arie

        Thank you for taking time to reply, Dr. McCord.
        I do understand your suggestion and Dr. Herzlinger’s too. I just happen to really like the Swiss system much better :-)

        • Matt McCord

          Thanks Margalit. I will review that article in Health Affairs that you mentioned. God Bless. Stay healthy.

  • DD Cross

    This is another fine mess our B-school trained viziers have gotten American healthcare into. They didn’t–MBA, managerial whizzbang know-it-alls, techno docs, and save-a-dime-spend a thou politicians–rather all parties concerned. I’ve got to leave out my medical brethren as we’ve gone along with one innovation or another without much of a whimper.¶It’s a comin’–the Affordable Care Act–and it’s not too affordable and it’s making plenty primary care docs hang up their spurs–enough. Between biannual renewals, BC, CME, MOC, DEA, OSHA, HIPAA, Malpractice, license for this, license for that, who the hell wants to get involved with this mess?¶There are plenty of out-of-the box MDs (and DOs) with 250++K in debt, and a future as predictable as the next Power-ball numbers.¶The Canadians don’t have the procedure driven system, and largely–based on my extensive anecdotal research–are doing fine; then agin they’ve got a smaller population than the US.¶ Medicare, the time tested predictable payor in the US is at least a known entity, its hassles manageable, and could have been that grand stroke insuring all Americans (let folks buy into it), but noo. That’d be too easy.¶Now docs who ripened in the fee-for-service era, are hit with the prospect of–YIKES–getting a job. That’s frightening for the individualists who’ve spent their best part of growing up being their own boss, but kids in debt are said to do some desperate things. I have to reckon that implementing the new law in the US will take a few years, and the real victims will remain lost amid the confusion as more and more primary care docs attrit (early retirement–career change), and the extenders, along with Googlable anomalies run the show. So much for the face-to-face quality of care the “world’s greatest healthcare system,” has, eh?¶Not just more of the same, the same amped up by thousands of business wizards hawking new and better ways to confuse the hell out of sick folks.¶No matter how much you may not like it this is the law of the land, and the old expression kicks in: “Deal with it!”

    • Matt McCord

      Yes, but math is never wrong. The new crises in healthcare will be cost and access. Employers are already solving the cost problem by ‘self-insuring’ and moving their employees to cheaper HDHPs with HSAs. This will fuel growth in consumer-driven/direct-pay healthcare–beyond the reach of ACA mandates/guidelines. Yes, a 2 tier system will emerge as employers (and workers) will not tolerate being placed in the government queue.

      Access will be a growing issue as, regardless of public policy, 10,000 Americans turn 65 every day–and this will be the case for the next 19 years. Insurers will be pressured to help solve this problem by contracting with more providers/facilities to provide more care throughput.

      Right now we are seeing ACA driven market consolidation. This will give way to separation within just a few years.

  • Anthony D

    Government mandates have caused hospital administrative costs to skyrocket over the past 20 years. That, along with frivolous lawsuits from ambulance chasing lawyers, causing insurance rates to jump.

    “Loser Pays” legislation needs to be enacted to stop frivolous
    lawsuite’s but since trial lawyers are squarely in the pockets of the socialist-democrats, that won’t happen anytime soon.
    Government needs to be OUT OF HEALTHCARE altogether. Back in the late 1950′s and early 1960′s, hospital rooms were $15 a night and there were no government mandates. I discussed with a hospital administrator who told me well over 50% of his costs went to bureaucratic administrative #$%$ for the Federal government.

    Just like gas prices, where the Fed gets 45cents per gallon, then demonizes oil companies on their 3 to 4 cents per gallon profit. Government is our problem. It’s too big and to restrictive for free enterprise.

    • Alice Robertson

      Or cigarettes where the government makes more than the manufacturer. Part of the problem is a segment of your colleagues of yesteryear got greedy and messed up and now doctors of the current era (who it appears are expected to be up-to-date on all sorts of data and regulations, etc.) led us into this regulated mess (that on some levels were necessary).

      Lawsuits are down without regulation (risk management is quite a group of vipers:). But you did say “frivolous” so that’s a good distinction.

  • ronmexico

    Whats the solution then? Everybody is medicine is always crying about the laws but they also cry about private insurance companies. Seems as if doctors want things to improve we need to do something ourselves as a united front. Victimology whether boogie man is the Government or Insurance will not be the solution. Poor doctors. A bunch of very intelligent people with tons of professional organizations to stage real idea development to protect the profession and their patients.

  • lissmth

    Excellent narrative. WHO, however, should not be relied upon as a reliable source. Try:

    Concord Working Group, “Cancer survival in five continents: a worldwide population-based study,.S. abe at responsible for theountries, in schnologies, ” Lancet Oncology, Vol. 9, No. 8, August 2008, pages 730 – 756; Arduino Verdecchia et al., “Recent Cancer Survival in Europe: A 2000-02 Period Analysis of EUROCARE-4 Data,” Lancet Oncology, Vol. 8, No. 9, September 2007, pages 784 – 796.

    U.S. Cancer Statistics, National Program of Cancer Registries, U.S. Centers for Disease Control; Canadian Cancer Society/National Cancer Institute of Canada; also see June O’Neill and Dave M. O’Neill, “Health Status, Health Care and Inequality: Canada vs. the U.S.,” National Bureau of Economic Research, Working Paper No. 13429, September 2007.

  • Rob

    It never ceases to amaze me how little these doctor/pundits actually know about healthcare systems. The author, who is a doctor, recommends we go to a system like Switzerland or Singapore. The Swiss system is exactly like the exchages in the Affordable Care Act, offerng a choice of private insurace policies and a mandate that all citizens must purchase insurance. The Singapore system involves compulsory savings accounts by all citizens, subsidies and price controls, all of which are traced and controlled by the governent. Citzens then purchase private insurance to cover the expenses that the government system does not. How are those systems an improvement over the ACA? They’re not. It sounds like the good doctor doesn’t know anything about the ACA, Switzerland, or Singapore.

  • puravidacr10

    Dear Don, You have recognized the flaws and you are correct. Obama care needs a lot of work. We can blame our forefathers for this mess. Every society, primitive or not, have a shaman, witch doctor, or something pertaining to health. Not the U.S. Constitution. It wasn’t until F. Roosevelt that heath was recognized as an issue and then it was grouped with Education, and Welfare. What did they expect? Totally healthy people resided here and when we were through we just raised out eyes and said, “I’m ready?” Good health is just as much right as any of the other guarantees. One cannot serve a country in ill health. Here in Costa Rica I pay $19 a month for health care which includes everything. Insurance payment is based on a person’s income. The indigent receive the same care as the wealthy. You don’t have to spend your kid’s college money, mortgage your home, or other financial burdens. I am an R.N. with a Masters and can state the care is excellent. I recently spent seven days in the hospital. All medications, tests, doctor visits, etc., including an ambulance were covered by my insurance. I had Blue Cross and Blue Shield which I recently cancelled. They were willing to pay eighty percent after a thousand dollar deductible and wanted to approve of all of the care. That’s health care for over three hundred dollars a month????? The doctors here spend time with their patients and not just the allotted fifteen minutes. You are not just a treatment case but a person. The U.S. could have the same if the people work on it and demand it. God forbid if you have a pre-existing condition. You get no care. Those that have are so worried about those who have not that they are willing to sacrifice all they own to hospitals, doctors, and insurance companies, who limit their care. Work as a nation and get care for everyone and stabilize health care, An appendectomy in Alabama should cost the same as in New York but doesn’t. A spina biffida child must drain the family of all assets for care. Why? Yes, much must be done. Stop stratifying health care and make it available to all. Don’t listen to the nay sayers. “They have chattering mouths and very little thinking minds.” Victor Hugo

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