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Kurtis R. Ericson 360 E.
South Water Street, Apt. 1206 Chicago,
IL 60601 President Barack Obama The White House 1600 Pennsylvania Avenue NW Washington, DC 20500 August 26, 2009 Dear Mr. President, I am writing
you today regarding healthcare and the need for legislation that shifts our
country towards a single-payer solution. On May 18, I authored a letter concerning
socio-cultural factors that favor a national healthcare program in the United
States. In the interest of thorough debate, this letter focuses on the
evaluation of current assumptions and existing business structures that detrimentally
impact healthcare and offers economic support for a single-payer solution. From an economic perspective, positive health is inexorably
intertwined with positive production. Moreover, proper healthcare is so vital
to an individual’s productive capacity that it cannot be viewed as a
traditional market output but is instead a prerequisite to the market itself. In any analysis
it is both prudent and helpful to establish an appropriate frame of reference before
examining available information and data. Today, many are evaluating healthcare
proposals based on their expected adjustments to the market’s production and
pricing of healthcare goods and services. In effect, this view establishes the
assumption that healthcare can simply be treated as a derivative of market
activity—like electronics, automobiles, and housing—rather than an input
thereof. I argue that this initial perspective
should be more closely examined and adjusted. I believe my
point is best illustrated with a thought experiment. The first question is
relatively plain: is the individual the root productive unit within any given market
economy? Yes; the fundamental unit of production is the individual. He/she may
be armed with capital and knowledge—which eventually provide skill—but
production is the role of the individual, and all market activity can be traced
to someone doing something for someone else. The second and more important
question for this analysis then becomes: is the health and wellbeing of any
individual an unavoidable and universally required consideration of that person’s
productive capacity? Said another way, if an individual is ill or otherwise
incapacitated, will his/her ability to produce goods and services be hindered,
all else being equal? Yes, an unhealthy individual produces less than would
otherwise be expected. At this point
it should be clear that all free markets depend on a collection of individuals
and the productivity of each of those individuals depends on conditions of
health. While I use this as a basis for state intervention, I am not saying a
market cannot ordinarily produce something on which it depends. Energy and transportation
services have clearly evolved to serve the market (ignore for a moment that due
to technical monopoly both of these also depend on services of the state). Even so, healthcare is different than all
other foundational inputs for three reasons: 1)
Health needs
are partially—and sometimes entirely—established at conception 2)
Health conditions
cannot be willfully divested or abandoned 3)
Overall, different
amounts of healthcare consumption are not always possible In most cases,
an individual can chose to buy a stereo, or a car, or a house; and in most
cases, an individual can divest those products by selling them to another
individual or simply abandoning them. Conversely, while an individual can
pursue actions that increase or decrease risks associated with poor health, he/she
cannot ultimately chose whether or not to get sick, contract influenza, break a
bone, or grow cancerous tissues. Be it a touch from God, a genetically derived
product, or a combination of the two, adverse health conditions are generally obtained
absent voluntary consumption. Therefore, the nature of demand for healthcare services
conflicts with other free market transactions that require informed and
voluntary exchange. In addition, a community’s overall status of
health can exhibit neighborhood effects on total economic activity—an
individual can benefit from doing nothing while others invest in preventative
healthcare. For example, someone who elects not to purchase a flu shot can
benefit (or suffer) financially based upon whether his/her community reaches
the critical mass of inoculated people necessary to avoid an epidemic. In the
event critical mass is reached, those individuals who acted to create a
collective benefit cannot obtain compensation from those who did not.
Therefore, without mandates or a mechanism that provides free flu shots, there
is little incentive for any single individual to act despite the fact that the
net community benefit would be wholly positive. It is erroneous
to suggest a market can produce a resource on which it universally and
unavoidably depends when demand for that resource is by and large involuntary,
especially with the presence of neighborhood effects. Thus, individuals must
turn to the state, which in general remains responsible for enforcing contracts
and preventing coercion, to resolve market dissonance associated with
healthcare. Health insurance, as it exists today, encourages
poor decision making while simultaneously hindering labor market activity. In the United
States, the majority of non-federal healthcare delivery institutions are
non-profit. The traditional rationale for this structure fits with the moral
guidelines of physicians everywhere: appropriate care often requires elements
that may not always provide sufficient profit potential. There would be a
definite risk to community productivity if all hospitals optimized and
conditioned human life to maximize marginal revenue. As a consequence, most
providers must engage with highly concentrated (both politically and
commercially), profit-seeking supplier industries that exert a commercial force
against a far more dispersed consumer group—physicians and hospitals—that
remain ill-equipped to respond. Thus far, the easiest means of financial
recovery afforded to providers (e.g., the path of least resistance) has been
through the fee-for-service models designed by insurance firms which often
unnecessarily bolstered demand and further lifted total healthcare
expenditures. It is not
inherently harmful for a market to respond to financial uncertainty with
insurance schemes. However, one of the great missteps in the history of
healthcare was the decision to affix the bulk of health insurance to
employment. Today, most healthcare premiums are a function of employer size, the
insurer selected by an employer negotiator, and the insurer’s program design
and appetite for risk. If an individual becomes unemployed, he/she is forced to
pay more for the same coverage or purchase an extension program. In either
case, the individual’s cost of insurance increases for no other reason than changed
employment status. Furthermore, employer-sponsored insurance causes additional
market distortion through favorable tax status. In effect, two forms of income receive
different tax treatment which encourages employers to provide more income via
health insurance benefits and less through paid wages. Again, this causes an
unwarranted upward pressure on costs. Taken together,
the structure of provider cost pressures and the fusion of health insurance
with employment create a more rigid labor force (with a disincentive to
pursuing job opportunities with lesser health insurance provisions) that lacks
a direct appreciation of costs. Unfortunately,
neither of these issues can be resolved with a federal mandate for all citizens
to purchase insurance. Over the long term, such action introduces the
possibility of creating herd movements in the market where all healthy citizens
shift to a low cost provider, leaving other insurance firms unable to cope with
a disproportionately ill pool of policy holders. Without designing an elaborate
reimbursement schedule based on the health of each insurer’s policy group—which
would require substantial administrative management and tracking—unsustainable
cost growth would only continue. A single-payer framework presents the most robust
structure for third-party insurance, empowers the individual with greater
choice and liberty, and offers the most thorough support of total market
productivity. In the interest of market productivity and the resolution of present
cost pressures, the ideal healthcare proposal would include policies that allow
direct physician-patient decisions, introduce incentives for individuals to
procure a reasonable amount of services, shift the supply pattern for
healthcare (e.g., allow registered nurses and nurse practitioners to provide
more services), separate insurance and employment, maximize the size of the
insured policy holder group, minimize the administrative burden on hospitals,
and provide public vaccinations as needed. A single-payer system provides the
needed reform. Through
single-payer, the link between cost conciseness and decision making can be
reestablished. Traditional single-payer systems exist without patient
co-payments, and while this structure is arguably more philosophically
desirable, nominal co-payments may be necessary and practical in a modern
implementation. While certain provisions for impoverished families could and
likely would be established, these nominal payments communicate relative cost
to all consumers and facilitate a better balance between cost and benefit as
compared to our current system. A
single-payer system does not mandate federal physicians; it creates a single
insurance pool for all citizens. In-network and out-of-network cost disparities
would disappear from common application. Each individual would be enabled to
pursue any doctor within any health system. By removing unnecessary
intermediaries, a single-payer program promotes private or community practices serving
patients directly, administering care as agreed between patient and physician, and
operating in an environment unencumbered by multiple insurance approval
schemes. The tendency for different treatments rendered for the same diagnosis
based on reimbursement rates would cease. The labor market would receive a
solution to the conundrum of workforce productivity and optimal risk dispersal
while delivering a uniquely portable solution. To all citizens, single-payer
health insurance eliminates the need for multiple agencies overseeing various
federal health programs. Finally, the single-payer system also more easily
facilitates integrated records and care management, which would allow for less
testing and an improved decision-making process. Humans are, by
nature, living beings with an instinct towards self preservation and self
enhancement. In any economy, health is a universal, unavoidable, and generally
involuntary input to productivity. As a result, insurance to mitigate health
risk is necessary though current third-party insurance schemes have decoupled
cost consciousness from decision making while limiting labor market activity.
Once we begin to examine the problem within the appropriate frame of reference,
the need for a single-payer solution becomes clear. Therefore, the current
debate should focus more on the extent to which and at what pace an effective
single-payer transition should occur; not, as is often the case, whether single-payer
is required at all. Our communities and markets need more than HR3200 (the
America's Affordable Health Choices Act) and closer to Health Care Vouchers- A Proposal for Universal Coverage as offered
by Dr. Emanuel, M.D. and Dr. Fuchs, or better yet, the Wyden-Bennett Healthy
Americans Act. Please do everything in your power in pursuit of a
single-payer system. I appreciate your time and consideration. Respectfully, /s/ Kurt Ericson A concerned citizen “[G]overnment may enable
us at times to accomplish jointly what we would find it more difficult or
expensive to accomplish severally.” – Milton Friedman, Capitalism and Freedom |