Highlights
- Since the first edition of this book was published, the Affordable Care Act (Obamacare) has transformed the American healthcare system—and not for the better. Obamacare advocates promised not only to eliminate money as a barrier to healthcare access, but also to reform completely the practice of medicine itself. A decade has now passed, and the results are in. Healthcare has not become more affordable; high-quality care has not become more accessible; healthcare delivery has not become more efficient; and no, we’re not getting more healthcare. Nor are we getting healthier. Options for patients with preexisting conditions, for example, are worse than ever. How did all this happen? In this book, John C. Goodman explains why the rosy political promises of pro-Obamacare politicians fell flat.
- As it stands, everyone is trapped—not only patients, but also doctors, businesses, and medical institutions. Everyone is trapped in a web of perverse incentives that raise costs, reduce quality, and make care less accessible. Why is that? Our thirdparty- payer health insurance system still has the prices for care set by entities external to the doctor-patient relationship—with the most external of all possible parties, the government, now playing the leading role in the obfuscation. This lack of price competition inevitably leads to almost-zero transparency, no competition around quality, and the often radical price differences between providers we have today.
- Traps have consequences. It’s not that patients, doctors, nurses, hospital administrators, employees, employers, and even insurance companies do not know how to deliver good healthcare to Americans. And there are many things healthcare professionals could do to avoid waste, increase accessibility, and make care less expensive. But the system we have penalizes doing the right things and rewards doing the wrong things. Doctors are said to have too much freedom to provide treatments that are not “best practice” or “evidence-based”; patients are said to have too much freedom to patronize doctors and facilities they prefer. Therefore, pundits and wonks argue that government must tell doctors how to practice medicine and tell patients what care they can have and where they can get it. This is the opposite of what needs to be done, and Goodman explains why.
- Goodman offers solutions. How can we create centers of medical excellence designed actually to treat Americans—not exclude them, as is the current practice? How could the market for medical care be as efficient and consumer-friendly as, say, the market for cell phone repair? How can patients save money? How can doctors get even better at what they do—and make more money? Are these things even possible, when our current system is so broken? Yes, says Goodman.
- There is a way to get people and government out of the trap. That we need a new way of thinking is obvious. The good news is that there are literally thousands of healthcare entrepreneurs, any one of whom could rise to the level of Bill Gates or Steve Jobs in healthcare. Unfortunately, their efforts tend to be scattered and limited. Most of the time, they run into three major barriers: insurance companies, employers, and government. But despite these odds, new products and new services have continued to crop up to meet the needs of patients spending their own money. Goodman lists many hopeful examples that show how his ideas have already taken hold and, if not stifled by government regulation, could help more patients. Each initiative, however, was developed by the private sector. Liberated from legal impediments and suffocating bureaucracies, doctors, patients, hospital personnel, and profit-seeking entrepreneurs are perfectly capable of solving our most serious health policy problems. All they need is the freedom.
Synopsis
In this long-awaited second edition of his groundbreaking work Priceless: Curing the Healthcare Crisis, renowned healthcare economist John Goodman (the “father” of Health Savings Accounts) analyzes America’s ongoing healthcare fiasco—including, for this edition, the extra damage Obamacare has inflicted on America’s medical system. Goodman then provides what many critics of our healthcare system neglect: solutions.
Using research data and real-world examples, Goodman shows how empowering patients (by giving them control of their own healthcare dollars), liberating institutions (by repealing “race to the bottom” government policies), and designing new health insurance models (ones that, quite simply, allow patients to control demand and doctors to control supply) can change American life forever. If you read only one book on healthcare, this—again— is the one to read.
What Obamacare Has Done
The second edition of Priceless describes the damage Obamacare has wrought upon American healthcare. Goodman’s preface reminds readers of all those promises, implicit and explicit, made when Obamacare was first getting off the ground.
But in the ten years that have passed, none of these promises has been kept. Healthcare has not become more affordable. High-quality care has not become more accessible. Healthcare delivery has not become more efficient. No one is getting more healthcare. Emergency room traffic has increased, and waiting for care has become more and more common. Patients with preexisting conditions are worse off than ever before. To top it all off, Medicaid has drastically expanded. All this to the tune of billions of dollars. Goodman argues that these failures were almost entirely predictable to those with any economic sense.
Trapped
Goodman’s book is written from the premise that most healthcare problems arise because Americans are trapped.
The most sinister trap of them all— indeed, the one that inspired the title of this book—is the trap of obsessively focusing on the burdens of price barriers to care. On the surface, this is an intelligible and sympathetic concern. But it fails to consider that “nonprice barriers to care” can also be very costly—even more so. Goodman cites Britain’s National Health Service (NHS) as an example. It’s true that citizens in Great Britain have no price barriers to care on paper. But today, a record high of seven million people relying on the NHS are waiting for treatment ... a rate 186 times higher than before the pandemic. Many of those people are waiting in pain. Some will die before they get care. Goodman compellingly argues that “the cost of such waiting for many of them is undoubtedly greater than the cost (to the government) of their treatments.” As they say, time is money.
There are other traps that Goodman describes and condemns in detail, many of which are the fault of the overbearing government. Simply repealing many of these policies would liberate a great number of Americans. For example, most working-age Americans rely on employer-sponsored health insurance. But why do we cling to this health insurance model when it’s so clearly outdated? Because federal tax law generously subsidizes employer-provided insurance. It was only recently, after President Trump issued an executive order, that employers were enabled to deposit funds in employee accounts called Health Reimbursement Arrangements (HRAs), from which employees can pay premiums, tax-free, for coverage they obtain in the individual health insurance market. This is undoubtedly an improvement. However, even this order limits HRA deposits to be used only to buy Obamacare-compliant insurance. The heavy hand of the government blocks patients, doctors, and employers from doing what’s best for them at every turn.
Freeing Patients and Institutions from the Trap
That doctors and hospitals need to find better ways of providing care is obvious. But how? Could it be that there is a way for doctors and hospitals to save taxpayers money, make more money for themselves, and ensure that patients don’t suffer?
Actually, Goodman argues, yes. There is a way. Markets. A free market for health insurance, where people are free to make their own choices, combined with Health Savings Accounts (where patients control demand) and “centers of excellence” (where doctors, not government, control supply), is the vision Goodman casts in Priceless.
The truth is, employers, government bodies, and insurance companies will never care more about patients than patients care about patients. By this logic, empowering patients to control their own healthcare dollars and make their own decisions is obviously a better way to control prices and improve healthcare than leaving impersonal bureaucracies with their hands on the wheel (as is the case now).
Many politicians and pundits complain that too many people are underinsured. In fact, Goodman argues, the opposite is true: “a far greater number are overinsured. That is, too many people are paying insurance companies to pay medical expenses that they could more economically pay themselves.” A shocking number of Americans would be better off assuming risks themselves. In this way, HSAs and HRAs are essential tools to liberate patients.
Better still, “when patients are paying for their care with their own money, providers are free to be unrestricted agents of their patients, rather than agents of a third-party-payer bureaucracy.” Without the heavy hand of government involved, doctors can hone and develop their relative centers of excellence to become the best at what they do.
An example of a “center of excellence” would be the Mayo Clinic. Another example would be the Johns Hopkins Breast Center, which focuses on mastectomies. It’s time to expand this model—and for government to get out of the way.
Designing Health Insurance Anew
There are three features of ideal health insurance that any new design must incorporate. First, insurance must be patient-centered. This is for reasons already discussed: no one cares more about health insurance dollars than the patient to whom those dollars belong.
Second, ideal health insurance must allow insurers to specialize in the business of insurance—not transform insurers into providers of care essentially. Insurers should be free simply to do what they do best: “pricing and managing risk.” The market, of course, can and should still combine insurance and healthcare delivery when and where it makes sense. But as a rule of thumb, we should prevent insurance companies from embroiling themselves in the business of healthcare, which is (by definition) not their business.
Third, consumers need better access to more information. What makes this difficult, in almost all cases, is the heavy hand of government. By getting government out of healthcare, everyone has access to the information they need to make the best choice for them.
Principles for a New Healthcare Order
There are key principles that should govern the purchase of any healthcare plan. For instance: First, patients should pay a price for care equal to its marginal social cost. As it stands, doctors and hospitals are rarely paid real prices for the services they render. Instead, they are paid on the basis of “payment formulas.” This becomes complicated when each payer has a different formula. Medicare, Medicaid, Blue Cross, etc., all pay different prices for the same service. “As a result, there really is no market-clearing price that brings supply and demand together,” Goodman writes.
The second principle follows from this logic: providers ought to receive a price equal to the marginal social value their care creates. If providers also receive a fee less than the value of the service, they will underprovide that service; if they receive a fee higher than the value of the service, they will overprovide that service.
The third principle is that, wherever possible, these prices should be determined in competitive markets. Competitive markets are key to finding out the real worth of services and products. Without a competitive market, the actual social cost and social value of healthcare would be unknown.
Fourth, insurance should be individually owned and portable—i.e., able to travel with people from job to job and in and out of the labor market. Clinging to an employer-sponsored insurance model in an era when precious few Americans can expect to stay with any one employer for long stretches of time is antiquated and foolish. It’s time to get with the twenty-first century.
Fifth, people should be able to switch freely between individual self-insurance and third-party insurance based on their preferences and market opportunities. Right now, tax law subsidizes third-party insurance and severely penalizes individual self-insurance. Unsurprisingly, this means most people opt for third-party insurance, which means that third-party bureaucracies pay every medical bill ... even when it would save patients and doctors time and money for patients to manage these expenses themselves.
Impersonal bureaucracies, shielded from marketplace competition, have run American healthcare into the ground for far too long. The best time for sensible, workable solutions to our healthcare crisis would have been yesterday. The second-best time is today. With uncommon clarity, humanity, and optimism, Goodman fearlessly explains how we can liberate our health from the confinement of bureaucracies and heavy-handed legal impediments; how doctors, patients, hospital personnel, and profit-seeking entrepreneurs can come to the rescue and solve our most pressing problems; and how freedom can unlock the horrible traps we’ve let ourselves lie in for far too long.
