Spending Someone Else’s Money Is Inefficient. So Why Does Healthcare Insist On Doing It Like That?

Jeffrey Singer, M.D., or Dr. Singer, is a general surgeon in Arizona. He’s also an adjunct scholar at the Cato Institute.

He claims that healthcare costs are too damn high—and they’re only getting worse. He’s got every reason to make that claim. Turns out that last week, researchers at Harvard and Dartmouth released a report estimating that healthcare costs will continue to grow faster than the economy for at least the next two decades.

This is a tremendous burden on average Americans, who already spend nearly a fifth of their average annual pre-tax income on health care.

So why can’t Obamacare stop this alarming trend?

Because the law doubles down on one of the biggest contributing factors to the high price of medical care: Health Insurance.

Health insurance is a complicated system that serves patients’ needs last. It introduces a third party into the doctor-patient relationship. This can be a private company—such as modern insurance companies—or the government—such as in Medicare and Medicaid.

But third party entities don’t spend money like we do.

We care about two things when we buy a product: quality and affordability. These are two things that will MAKE OR BREAK a new Direct Care clinic. These are deciding factors if you will. Our fight is to offer better care — no rushed visits, no hurried diagnoses — and better value — prescription savings, weekend visits, reduced trips to overpriced ERs.

However, insurance providers aren’t concerned about either one of these factors.

Affordability isn’t their biggest concern because they’re spending someone else’s money—their members’ premiums.

They’re also not concerned about quality because they’re spending that money on someone other than themselves—the patients receiving treatment.

This is a basic reflection of human nature.

It’s also the single worst way to spend money, according to the late Nobel Prize-winning economist Milton Friedman.

The best arrangement, as he demonstrated through his economic work, occurs when individuals spend their own money on themselves.

Ayn Rand would likely agree with this sentiment.

But that’s not what happens with health insurance. Here, insurers–whether a private insurer or the government (as happens under Obamacare—set prices) –negotiate compensation schedules with providers and facilities. Meaning, they don’t have to bargain to reach the best price possible. They just have to reach a price that is good enough—one that allows them to charge premiums that compete well with rival insurers.

Then they pass on the difference to customers who pay for premiums.

This only drives up the cost of healthcare. Once insured, patients, along with the healthcare providers that contract with insurers, continue to spend money in inefficient and wasteful ways.

The system encourages this behavior: Health insurance gives us the illusion we’re spending other people’s money when we get medical treatment.

Unfortunately, we’re not built to be frugal with someone else’s checkbook. And it’s this basic human impulse that led Friedman to label this the worst way to spend money.

In summation, health insurance is the worst way to spend money on something you know you’re going to need.

So why not cut out the middle man entirely, along the lines of most European countries? Their “single payer” healthcare system eliminates private health insurance companies altogether. In their place, the government acts as the sole health insurance provider.

This doesn’t fix a thing. When the government becomes the insurance company monopoly, such as in Europe or Canada, we see long wait times and rationed care. In America, a single-payer system would require putting the entire country on a system similar to Medicaid. But Medicaid consistently struggles with high costs, poor health outcomes, and decreased access to care. In both Europe and America, limiting patient choice and restricting treatment options are the only ways to keep costs down.

Obamacare bears this out. Plans currently offered on healthcare exchanges frequently include smaller doctor and hospital networks. Many patients must now decide whether they want relative affordability or more options.

Compare this to a healthcare system without third party insurance companies, whether public or private. It already exists—and it’s working. In the fields of cosmetic surgery, Lasik eye surgery, alternative medicine, and dentistry, the absence—or minimal presence—of third party entities has driven prices down and quality and service up.

There’s also a growing number of Direct Care clinics who are saving patients and insurance companies money.

Every patient and every doctor should demand a similar arrangement. Instead, Obamacare’s architects expanded a health insurance system that artificially increases costs and decreases choice. That’s not what the doctor—or the patient—ordered.