Third-Party Payment Is the Main Problem Facing U.S. Health Care

Published January 1, 2008

In September, the ABC TV program 20/20 ran an hour-long special on health care.

One of its producers contacted me last spring after finding my congressional testimony on “consumer-directed doctoring” to ask if I would participate by refuting Sicko, Michael Moore’s movie promoting a government takeover of health care.

Sharing 20/20 host John Stossel’s passion for individual freedom along with his deep-seated distrust of government power, I agreed to the interview. I applaud Stossel for making a topic as complex as health understandable and even entertaining.

If nothing else, he succeeded in demonstrating that a government-run system would be worse than what we have now. With unforgettable stories and images, he showed the delays in care and lack of choice in countries with universal health insurance.

Insurance Portability

The program showed Hillary Rodham Clinton among a cheering crowd campaigning for “universal health care for every single man, woman, and child.” The only thing universal about health care in countries such as Britain and Canada is that it’s in short supply and requires long waits.

Stossel didn’t ignore the American health care system’s flaws–high costs, 45 million uninsured, people locked into jobs for fear of losing their insurance. One North Carolina woman switched careers, developed breast cancer that was treated into remission, and then lost her temporary insurance. She tearfully wondered whether our system will abandon her now that she has no health insurance.

Stossel could have boosted his argument for consumer choice in health care if he had driven home the following point: Had the breast cancer patient owned her insurance policy, she would not have lost it after switching jobs.

Ideological Concerns

Stossel deserves credit for interviewing her. Moore was not as fair or honest in Sicko. The truth, however, is that neither has the answer for people confronting such tragedies. With a history of breast cancer, the “free market” quoted the woman annual premiums of $27,000, which she could not afford on an annual income of $60,000.

But in countries with universal health insurance, her cancer most likely would have spread beyond cure while she waited for treatment. She would have been unable to obtain the timely medical care she needed at any price.

In the real world, real people fall through the cracks of every health care system.

That’s why I helped start PATMOS EmergiClinic in Greeneville, Tennessee seven years ago. Without presuming upon other taxpayers through nonprofit incorporation or direct government grants, the practice has grown to nearly 8,000 patients with about 60 percent uninsured, despite the presence of three state-subsidized clinics in Greene County.

Price Transparency

But how can consumers exchange their money for medical services when they don’t know the prices? Since day one, PATMOS has posted its prices–at the clinic, on our Web site, and at one time, on billboards on a nearby highway. To my knowledge, no other practice in this area publicizes its prices. Nor do our hospitals, even though as nonprofits they are tax-exempt.

When prices are publicly available and people are free to choose without government coercion or privilege, competition forces producers to be accountable for the prices they charge and the quality they provide. This–the free market–ensures value for consumers and fairness and honesty in the exchange.

The reason PATMOS is able to offer services at relatively low prices is that it does not accept insurance, and thus avoids the cost of settling thousands of small medical claims each year. Most other health care providers in this country don’t make their prices available to the public because the vast majority of Americans don’t pay directly for medical care–even routine care. Their insurance does.

Saving Money

Insurance not only obscures prices but also increases costs. The annual overhead at PATMOS is about $200,000 less than that of the average family physician who accepts insurance, according to data compiled by the Medical Group Management Association. PATMOS has about 5,000 patient visits per year, so the cost savings are about $40 per visit–which is nearly the price of a PATMOS visit.

PATMOS has saved the uninsured and patients with high deductibles more than $5 million since its inception nearly seven years ago when compared with what they would have paid at local emergency rooms for similar services. The free market saves consumers money.

If all 300,000 or so primary care physicians in this country settled accounts directly with their patients, it would create annual savings of about $60 billion. That’s more than one-sixth of the approximately $350 billion paid to physicians and their medical practices each year.

Other costs would be reduced as well, such as the additional administrative costs incurred by insurers, employers, and government. All of these deadweight costs are included in the price of every good or service this country produces, which is partly why many American jobs are being outsourced to other countries. Reintroducing the free market into everyday health care would reduce labor costs and save American jobs.

Resource Allocation

PATMOS requires three fewer employees per physician than the average medical office. This means about one million people nationwide are doing little more than settling small claims for routine medical care.

This is not a trivial issue, considering the United States will need 1.2 million new and replacement nurses by 2014. Eliminating insurance payments for small medical claims would make more people available for direct patient care. The free market ensures scarce financial and human resources are deployed efficiently on the consumer’s behalf.

Given PATMOS prices and the increasing cost of insurance, I believe reasonable people should conclude Americans don’t need and can’t afford insurance for everyday health care.

Robert S. Berry, M.D. ([email protected]) is a practicing physician with board certifications in emergency medicine and internal medicine in Tennessee. He has testified before Congress on “consumer-directed doctoring” and has appeared on Fox News, ABC News, CNN, and in The Wall Street Journal.