Health Care Conundrum

In an op-ed in WSJ 10/17/09, Vernon Smith, a Nobel Laureate in economics, explained the problem with health insurance in simple terms that any layperson can understand. Health care provider A recommends to patient B the services that B should buy from A. C, either the government or an insurance company, pays A. “This structure defines an incentive nightmare,” Mr. Smith writes and presents a seemingly unsolvable problem.

The Senate recently passed its version of health care reform. House and Senate committees will meet in January to start reconciling differences in House and Senate versions. During the health care debate this year, and for the past century – Theodore Roosevelt tried to institute a public health care system – the focus has been on solutions to a number of problems: the number of uninsured, ballooning costs, the alarming number of bankruptcies because of medical bills, insured patients who are cut off because their benefits exceeded a lifetime maximum, those people denied affordable coverage because of pre-existing conditions.

Various players in the medical care provider market have voiced objections to proposed solutions when the impact of a solution would be negative on them. Perhaps we should all admit that we will never fix this intractable problem. Like many cancer therapies, the “solution” may be to manage the problem, not solve it. Only when all parties give up the notion of finding a solution will we be able to sit down at the table and come up with a framework for managing this problem.

This idea was first conceived by James Madison, the chief architect of the U.S. Constitution. Unable to resolve the decade old dispute between advocates for a strong federal government and those who championed individual and states’ rights, Madison had the genius to incorporate the struggle between these two ideologies directly into the Constitution, thereby providing a structured debating platform for this continuing argument and struggle for power.

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