- The Washington Times - Thursday, April 12, 2001

I never thought Id be writing a book on medicine with a doctor. Of course, I never thought Id hit middle age and start to find the subject personally interesting, either.
Whats wrong with American medicine? Nothing, except that its going to collapse, and neither partial reforms nor bills of "rights" nor racketeering lawsuits nor slick public relations can save it. Too late for that. Were down to one simple choice: laissez-faire or nay-sez-faire. Either crush the managed-care Mafia, break the link between insurance and employment and open up to a whole new array of mechanisms … or turn it over to the government. After 40 years of accelerating degradation, there is no third way.
Why not? Two reasons.
First, medicine is unique among economic activities. Unlike any other commodity or service, the demand is potentially limitless. Thats because they keep on making it all those wondrous advances that lengthen and improve our lives and make us want and need even more. Unfortunately, miracles cost. Unfortunately also, medicines a labor-intensive service industry. Technology cant bring costs down the way it does in manufacturing or retail.
Costs will continue to rise. Rapidly.
Second, medicine is far more than an economic activity. It touches on the most fundamental questions of human life, ethics and politics. Rights and entitlements. Freedom and choice. Its the new "bloody crossroads" of American politics. And its going to get bloodier.
So howd we get into this mess? Most likely, it would have happened no matter what, given all those medical miracles. But three factors combined to guarantee disaster.
First, during the Second World War, health insurance got linked to employment. Wartime wages were officially frozen; fringe benefits were not. Medical insurance became a popular enticement in a tight labor market. Since benefits were deductible by employers and not taxable as employee income, everybody got happy. Today, health insurance has become an exorbitant nightmare for employers who offer it, a human tragedy for those who cant or dont.
Second, the passage of Medicare and Medicaid in 1965 created unsustainable "insurance pools" for the two groups most in need of medical care: the elderly and the poor. In most insurance pools, as in banks, only a small minority make withdrawals at any given time. Not so with the high-risk elderly and poor. And by making service essentially free at the point of delivery, it encouraged overuse.
Third, the HMO Act of 1973 fosters a bizarre, perverse, noxious form of capitalism in which managed-care companies make money by refusing to provide the services they promise. Business, i.e. large corporations and insurance brokers, negotiate with health-care providers for coverage. The market here is not for care, but for insurance. Low bidders win; annual changes of plans become routine.
In the beginning, it worked. After all, an employed population is, almost by definition, a healthy population. But stuff happens. Claims mount. So the HMOs, under the guise of efficiency, started rationing, then denying care. Capitation, the system under which doctors are paid a flat fee per patient, not for each service performed, also works its perverse logic. The sicker the patient, the less the incentive to treat. The result has been the prostitution of the profession.
So what to do? Given the certainty that medical costs will continue to rise by some estimates medical care, now about 15 percent of gross domestic product, will hit 30 within a few years and the utter indefensibility of the present system, only two alternatives arise.
The first: Give it to the government. No crazy "managed competition" HillaryCare or complex German-style business/labor/government co-ops. Just do it. The most compelling argument here is that, sooner or later, only the government will be able to muster the resources to pay for it. An additional argument, for those who favor such notions, is health care as a human right that no civilized nation can deny its members.
The greatest argument against: Governments act like governments. Bureaucracy. Regulation. Politics. Rationing. Enforcement. Coercion. Single payer means single buyer. If youre unhappy as a patient or as a doctor where do you go? Into the inevitable criminalized medical underground.
And when the government tells you that keeping yourself or your father or your daughter alive is really just "prolonging death" …
The other alternative is to create or, more aptly, to let people create, a vast, decentralized, flexible network of provider systems, based upon individual needs and preferences. Proposals and experiments abound. All these, and more, would be needed. Eliminate the tax break for employers. Give tax credits to consumers. Medical savings accounts.
Expand the role of associations such as AARP in providing insurance or specialty services, such as dental and eye services. Co-ops. A lively mix of insurance policies for specific conditions. Buy only what you need. (Would that cable TV worked thus.) Managed care for those who want it. Government for those who need it.
The great argument for: The economic efficiencies and human satisfactions that result from free choice. The great argument against: Given the inexorable cost spiral, it may not be enough.
So thats the choice, if collapse is to be avoided. But is "collapse" perhaps not too strong a word? I mean here, the California power crisis-style of collapse. You know its coming, but you dont really believe it until the day the power isnt there anymore … or your doctor tells you, "Care denied."

Philip Gold is a senior fellow of the Seattle-based Discovery Institute. This article is excerpted from "Care Denied: The Coming Collapse of American Medicine," co-authored with Ron Glasser, MD.

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