Businessweek has two good articles on Medicare reform in the latest issue. This one deals with the problems of Medicare, and the healthcare industry in general.
The problems of the health-care market begin with its reliance on third-party payments. Health providers are typically paid by insurance companies or governments, not directly by consumers. Thus, the typical consumer regards most of an additional dollar of health services as free. Not surprisingly, this environment promotes excessive demand and high costs.
Improvements to this structure are difficult partly because our society wants a system in which an individual's health care does not depend on an individual's income. Moreover, the quantity of care is not supposed to depend on costs. This makes it hard for the health sector to function in accordance with usual market principles.
Frankly, I do not understand why health care is viewed so differently from other consumer goods, including such essentials as food, clothing, and shelter. I accept that health services are difficult for consumers to evaluate, though the workings of cars and computers are equally incomprehensible to most people. The difficulties in evaluating medical treatment do suggest that people seek expert advice from third parties, which might look in some respects like HMOs or government agencies. But it is hard to see why this complexity means that incomes and prices should not play the role in the health-care market that they play in other markets.
They key point here, I think, is that we believe healthcare should be independent of income. I wish we could change this attitude. I went two six month stretches in college without healthcare, and 3 years with coverage only for catastrophic events. I have bad allergies and have taken Allegra for years. When I turned 19 and got kicked off my parent's insurance, my Allegra went up to $60 a month. That's a lot for a college student. You know what I did? I didn't take the pills every day. For some reason, I never thought someone else should pay for my Allegra. I just thought I would have to deal with my allergies until I could afford to buy more pills. It is nice to have relief from the symptoms, but it's not a life or death situation, and I think many healthcare situations fall into this same category.
I really think part of the problem with the healthcare system is that our expectations are all out of whack. Thus supply and demand are all out of whack, which puts prices all out of whack. There has to be a better way, but given the size and scope of the US healthcare industry, it would be hard to initiate change even if someone could figure out what needed to be done.
The other good article is here. It is basically a critique of the latest Medicare changes, saying that they don't really fix anything other than giving the politicians something to brag about when they run for re-election.
UPDATE: Scrappleface has a good solution.