The merits and costs of President Obama’s health care plan currently are being debated at length. I have an opinion of my own as to what a health plan should be to attack the rising health care costs.

My insight into how we can, and should, reduce health care costs is based on the diagnosis of why costs are rising. I suggest one major reason why costs are rising, and will continue rising even after the government plan is established, is because those who provide health care are profit-oriented.

If, as a CEO, your measure of success is how well earnings per share are performing in your company—and the board will fire you if you are not successful by this measure—I suggest that, almost by definition, you will aim to increase profits by all legal means you can. You, the CEO, will use research costs as an excuse to charge as much as possible for drugs, and do the least amount of innovation that will allow you to claim it is a new drug; change a single molecule, for instance. It really is not a new drug, but legally can be patented, thus forbidding competitive forces that would reduce the cost of the drug.

Doctors are profit-oriented too. They invested years in training, and have staggering student loans to pay back, and for these investments they want a sizable return. In addition, since they are socially ranked by their income bracket, it should not surprise anyone that they are revenue-oriented and can increase their revenues by ordering repetitive returns of patients to their clinic. Furthermore, to avoid being sued for malpractice they over do testing and the insurance companies then have to cover rising costs by charging higher premiums.

The system seems as if it was designed to continuously cause costs to escalate.

Today the government, through Medicare, tries to control how much doctors get paid and what treatments they can provide. The result is that the good doctors opt out of the government plan; they charge as much as they want and get paid by those who have the means. The rest provide treatment that is not as good to those who rely on government assistance; these doctors’ professional discretion is hampered by what the government approves or does not approve. They also get paid ridiculously lower rates, for which they have to submit endless papers to the government.

Government controls of Medicare costs (an A solution from my PAEI code) causes social disintegration and lower-quality medical care for those who rely on the government for their medical needs. Furthermore, it does not reduce the rising cost of medical care. The fact is that the government has been regulating costs for a few years now and they are nevertheless still rising….

I have an idea for attacking the problem at its cause, not in its manifestation.

To start with, I would have all medical school studies for becoming a doctor or nurse be free to the students. They would be paid by the government.

Doctors, when they graduate, would be like faculty members at universities: They should have a fixed salary. Salary increases should be decided, like at universities, by publications, service to the profession, and quality of professional services.

The cost of office visits would be paid to a governmental agency. This way doctors could pay attention to the medical service they provide with no other incentive clouding their judgment. (It would be illegal to take any “under the table” payments.)

University professors are not profit-oriented. They are there to serve. So it should be with the medical profession.

All medical research should be financed by the government; all rights to what is discovered would belong to the government, which could license the production and distribution of drugs to the drug companies. That would cut the cost of drugs. Today drug companies seek enormous profits because they claim they need them to invest in developing new drugs. Under my plan their profits would be controlled because the government would determine, as licensors usually do, the price charged for the drug.

The licensing can be done through a bidding process, so in order to get the license the drug companies will have to offer the lowest cost for production and distribution possible.

All medical journals would be owned and published by the government and no advertising would be permitted. Today, drug companies advertise extensively in medical journals and thus have lots of power over what is published. Furthermore drug companies pay doctors to do the research and thus control what is published. This conflict of interest, because of the financial incentives, can cloud the professional judgment of the researcher.

I suggest that having research done by public funds, licensing production and distribution, and paying doctors on salary will cut the costs of health care to patients.

What is left to discuss is insurance: If insurance companies are profit-oriented why would the cost of insuring not go up?

Here we need a not-for-profit insurance plan that covers everyone. The subject is highly complicated, granted. My attempt, far from offering a solution, is to identify what I believe is the source of the problem: the profit motive. If that is not dealt with, no solution will work. All that is done with bureaucratic controls is to arrest the manifestation and that is not good enough.

Sincerely,
Dr. Ichak Kalderon Adizes