william hsiao

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The ‘Monstrosity’ Health Care System: 3 Problems, 1 Vermont Solution

Harvard health care economist William Hsiao

Sometimes when I think about the American health care system, I want to cry. It’s so hopelessly Byzantine, so dysfunctional, so exorbitant compared to other developed countries.

But it was oddly comforting to listen to Harvard’s William Hsiao, one of the country’s leading health care economists, speak last night at Brookline’s 16th annual Public Health Policy Forum. He has a gift for distilling down the complexity and making it all seem less hopelessly tangled — and what happens now in Vermont, where he’s helping to engineer the historic push toward a single-payer system, will show whether he’s right. Here, nearly verbatim — because he inspired me to try to type his every word — is what he said:

The American health care system has three major problems:
1) The uninsured
2) Quality of care
3) Affordability and rapid cost escalation.

If you were in President Obama’s shoes, how would you solve this?

I’d like to argue that the problem is systemic. It’s not one problem. There are several very fundamental causes all linked together, creating these three phenomena that we call problems. So what are these causes and how is Vermont attempting to solve these fundamental causes?

The first cause: Our health insurance is linked to employment, so if you’re not employed, or your employer does not offer insurance, you’re out of it. Basically, all advanced economies have moved away from that. We’re one of the few remaining to tie our health insurance to employment.

We’ve created a monstrosity of administrative complexity.

Secondly, we rely on many insurance funds — public or private, for-profit or non-profit — to insure people. We have a patchwork, so consequently you can do risk-selection: If I’m an insurance company, I would not want to insure anyone with gray hair like mine. I’d want to go to Silicon Valley and insure healthy young people. We created an insurance system that encouraged insurance companies to exclude the less healthy people and only insure the healthy.

Administrative hassle

Third, because we have so many insurance companies, everybody — doctors and nurses and nurse practitioners — has to deal with each one differently. We call that competition. We call that pluralism. What happens then? If you’re a practitioner, you’re going to spend your time dealing with multiple insurance companies. This is what doctors call “administrative hassle.” Continue reading