Intro
I found this lecture video to be quite entertaining and inspiring. It isn’t often that an idea meets little initial resistance internally for me, but the ideas expressed by Dr. Sean Flynn made so much sense and seemed like such a simple solution that it was hard to find any problems with the policies suggested. I agree with Flynn’s diagnosis of the many problems that plague the healthcare system in the United States. It is shocking that the potential exists for us to save around 13 percent of our GDP by cutting back on unnecessary healthcare spending while also encouraging saving, and it isn’t a topic that we hear very much about.
Third-Party Payment
Flynn outlines the third-party payment system currently employed in the United States healthcare system as the primary roadblock to the potential savings. I wholeheartedly agree with his analysis that such a system completely skews the incentives of healthcare providers. Instead of having a one-on-one relationship with your provider in which continued patronage would rely on the quality of service you receive, a third-party pays the cost of the service you receive, and thus removes any incentive for the practitioner to foster a positive relationship with their clients. On the flip side, incentives are also basically non-existent for customers under the third-party payer system. With no financial responsibility for the cost of care, why would someone care which hospital or urgent care they went to. Flynn points out that they may choose the much more expensive emergency room over an affordable urgent care simply because it is closer to them. This is horribly wasteful spending. But once again, there is no incentive against it, or rather consequence for it, so the consumer has no reason to care. Such extraneous spending quickly adds up when the government is footing the bill, making it easy to see the benefits of cutting such costs.
Singapore
Flynn proposes a healthcare system such as the one currently employed by Singapore. He argues that it would cut unnecessary spending by aligning consumer and provider incentives, driving both price and quantity down. From what I understood, citizens in Singapore are required to invest a portion of their wages into a savings account specifically set aside for healthcare expenses. This is similar to what we have in the United States with the wages withheld for FICA, except the saving isn’t required, and it isn’t really ours to spend. In general, people can’t be trusted to save, so a required savings program for you to spend on your own healthcare costs ensures that you will be able to pay for healthcare when you need it. In addition, the competition in such a decentralized healthcare industry drives prices down, making it easier for citizens to afford service with their allocated savings. They also have a trust fund that is reinvested in citizens in disaster solutions that have run out of their healthcare savings. In this way, you get the best of competitive healthcare and a logical safety net.
Price Transparency
Another key feature of the Singaporean healthcare system is prices. Prices are advertised up front in all hospitals, allowing consumers to compare their options and choose the best value for their money. This is in stark contrast to the United States, where you have no idea what you will be paying for service until your insurance company negotiates with the service provider. This is such a small feature, but I find it to be so compelling. You would think transparency of prices would be the bare minimum in an industry where the difference in service can mean life or death. Life threatening issues are already stressful enough without the uncertainty of how much you will end up paying after your insurance company decides if they agree with the charges the hospital sends, or the hospital billing as many things as possible to get the most out of your insurance company. I still don’t understand every charge that I get from my insurance company, and it seems like sometimes I pay different amounts for what is seemingly the same service. Without price information, there is no way for consumers to make guided decisions on where to go and what services they need. Lack of pricing transparency stifles competition and robs us of the benefits of healthcare providers competing on price.
Wholefoods and Indiana
The two examples of a Singaporean system working in the United States Flynn gives are of Wholefoods and the state of Indiana. In both cases, employees were provided with a healthcare plan in which everything over a certain deductible was covered by the company—or the state in the case of Indiana. This seems like basic coverage, except for the fact that the employees were given the exact amount of the deductible that was their responsibility to cover. They were allowed to do with the money whatever they pleased. They could spend it on healthcare when needed, or on anything else they saw fit. The coverage then was essentially the same as that of a fully covered policy like Medicare. The only difference is that by having an incentive to save money and use it for themselves, the employees spent 35 percent less on healthcare than they had previously. When it was their own money, they weighed cost-benefit analysis and made choices to save money. They chose affordable urgent care over the emergency room. By implementing this on a national scale, we, like Singapore, could reduce both the price and quantity of healthcare through competition and the incentive of consumers to save.