Wednesday, September 19, 2012

How to fix Medicare and Medicaid.

Medicare and Medicaid are in serious trouble.  Shortly their costs will skyrocket above their assets and income from the taxes designed to pay for them.  There are three distinct ways we can deal with this situation.

  1. Tax the general population to pay for the elderly health care and/or healthcare for the poor.
  2. Have Medicare/Medicaid not pay for certain extremely expensive treatments.
  3. Focus medical research on finding cheaper ways to treat/cure illness, as opposed to finding new ways to treat/cure diseases that we do not currently have effective treatments

First, those are the not the only possible ways to cure the problem.  We could theoretically grow the economy to a huge extent, giving jobs for all and offering huge salaries so retired people choose to go back to work, moving them to private insurance.   Or if you prefer a nightmare as opposed to a fantasy, we could be swept by disease, famine, or war, which would kill significant numbers of the poor and elderly.  But for obvious reasons, I am going to ignore these possible 'solutions'.   Enough fantasy and nightmares, lets move back to the real world.

Lets' start out by saying that we already do all three of these things and that in all likely-hood the solution will continue to be a combination of all three.

Now let's talk about which of these three reasonable situations we should focus on.

Well, we have a large national debt, so option 1 is not the best idea. Note, if we do nothing at all, it automatically gets used (as there is no law preventing the government from using general taxes to fund those health care programs) so it would probably be a better idea to work on the other options.

Option # 2 is slightly better - have medicare/medicaid not pay for certain extremely expensive treatments.    Right away, someone is going to shout 'rationing'.  Nope.  Rationing is some group decides who gets a treatment and who doesn't.   If insurance doesn't pay for anyone to get that treatment, it's simply called an uncovered treatment.  Or, if you are Ayn Rand, CAPITALISM.   There are a lot of uncovered treatments.

This is not a liberal/democrat plan, it is a conservative/republican plan.  When you privatize insurance without regulations, that is exactly what happens.  It does so in a rather irregular manner, but it happens. As I said earlier, it is the heart of capitalism: if you want the procedure, you can pay for it - either by getting better insurance/supplemental insurance, or by paying for it out of pocket.

  • For example, you medicare and medicaid don't pay for crystal therapy to cure brain cancer.  Why?  Because the medical community doesn't think it works. (They are correct.)
  • It also doesn't pay for 'experimental treatments', such as face transplants.  Many people think these do work, but we don't really have enough evidence.
  • But insurance also does not pay for certain things simply because they are too expensive for the benefit.  In Spain, you pay tens of thousands of dollars to get electrical implants that paralyze the nerves that cause migraines.   But Medicare and Medicaid don't offer that treatment because migraines aren't worth it.
Limiting coverage is not evil, as long as it is done based on the cost, not on the person.  If for example we choose to cover penis cancer, but not breast cancer even though penis cancer is more expensive, that's an ethical problem.   The best way to do this is to do it explicitly - have an outright cost/benefit analysis done, with what I call a "soft limit".  That is, things that are low cost, high benefit automatically get paid at full cost.  Things at or near the edge get a set payment and the user must make up the difference, while things significantly above the cost/benefit line gets no payments.

This "soft limit" method means that we pay some money even for things that are questionable, but not excessive.  Trust me when you need the treatment, you will be glad for that money, particularly if you don't have to complain to get it.

This brings us to the the best option, #3.   It requires some massive changes in our research an development.  Right now there are huge incentives to come up with more expensive treatments or cures, not cheaper ones. The only 'cheaper' option we have is generic drugs.  We don't need new expensive and slightly better treatments.   We need to change the focus of our research.

We could for example change the laws as follows:
  1. Offer only a 10 year patent protection for treatments or diagnostic methods unless they fall into the 'cheaper' categories below.
  2. Offer a 20 year patent protection for treatments /diagnostic methods that are at least half the cost of current methods.  If we don't have any treatment/diagnostic method yet, then the comparison cost is infinite.
  3. Offer a 20 year patent protection for cures - assuming the cure costs less than 10% of the estimated current treatment for the life of the patient. 
  4. Offer a 30 year patent protection for cures that are at least half the cost of the current method/treatment - but the price can not rise above that for the duration of the patent (or the patent vanishes).
 That system could theoretically radically change the focus of future research away from expensive methodologies and towards cheaper diagnostics,  treatments and cures.

Oh and there is one more thing we can do to cut costs without affecting service:  Eliminate medical mistakes.  Currently, medical mistakes are a leading cause of death - killing more people that Aids.  (Source) The current system evolved as a response to law suits, so it focuses on hiding what really happened.  We need to fix that system.

I suggest the following:   By law require all hospitals to offer 'Open Surgery'.  If the patient chooses 'Open Surgery', then they give up all right to sue for anything more than medical costs caused by the surgery, or $300,000 for death.  Put in a requirement that the doctor must be fully certified, sober,  and broke no laws (or the legal limits vanish).  In exchange, they get a full video record of the surgery, and a copy goes to the AMA, which would be instructed to create new surgical procedures based on what they find.   We still would need to find some way to discover and prevent non-surgical errors.

Finally, remember that we are probably going to have to do a mix of all three of these fixes.  One alone won't solve the problem.  But a combination of limited general tax support, reasonable limits on what we pay for and cheaper medical procedures can solve the problem.  

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