Note: in a follow-on post, I’ve penned a better-researched, more considered opinion on healthcare. This post is kept intact for historical purposes. Feel free to read this first, though, as I feel it documents the problem I see.

An interesting article from CNN.com. It basically blames the economic crisis on rising middle-class costs - healthcare and education. These increasing costs made people go on borrowing sprees, and China’s loose lending policy provided the fuel. While I don’t agree with all the arguments, I do want to zero in on the rising costs of healthcare.

The current healthcare reform debate ignores a stark reality: healthcare in America is just too expensive. No matter which way you spin the facts, that’s one thing none of the policymakers are discussing. I’m glad this article brings that point up.

I believe that American healthcare professionals are overpaid - exorbitantly so - for the amount of work they do. This isn’t just my observation as a patient - it’s been corroborated by several doctors & doctoral resident friends in top medical schools here. From the number of patients they see, the time they take to provide a diagnosis, to the number of unnecessary tests and procedures they perform, America’s doctors are woefully inefficient compared to the rest of the world.

There are many reasons this system is the way it is. The high cost of a medical degree, the shark-infested waters of malpractice lawsuits, the big pharmas that give doctors kickbacks to prescribe their overpriced drugs… but most importantly, the disconnect between the patients using the service and the insurance companies paying for it. Any time you disconnect the usage of a service from the payment of it, you create inefficiencies.

Medical insurance is a tricky game. Each of the three players has different and conflicting goals - patients want the best care at low cost, doctors want the most money for their work, and insurers want the most profits. The weakest party in this game is the patient. Doctors call the shots on what tests/procedures the patient needs - often ordering unnecessary but expensive tests that simply pad their bottom lines. The insurance giants call the shots on your healthcare premiums. The tug-of-war between those two creates high costs for patients.

An insurance-based model works only if more people are paying into the system than are withdrawing from it - like auto insurance. When that model gets skewed (look at Social Security), the system starts to collapse under its own weight. As America grows older, this model will get skewed badly. The relative size of 20-50 year olds is decreasing, and the aging population is too large for it to support. That younger group isn’t exactly healthy either - problems like teenage obesity, diabetes, smoking and other lifestyle-related diseases are growing.

To stay profitable, insurers have to (a) reduce the per-patient cost, (b) reduce the number of people/procedures they cover, or (c) increase their premiums to crazy levels. Today, all insurance agencies employ a combination of these tactics. And yet there’s no way to sustain this without being unfair to at least one group - either the healthy population will have to pay outrageous premiums, or the aging/unhealthy population will be denied the healthcare they need.

Something needs to be done.

I don’t claim to have all the answers, but here’s a suggestion: remove the middleman. Remove the insurance agencies. Let the market (patients) bring the cost of goods (doctor’s services, prescription drugs etc) down to a sustainable level. For those who cannot pay for their healthcare needs, let’s have the government provide financial assistance, or build up a public healthcare system.

That is why I am in favor or a public healthcare option. If Obama can actually see it through to completion, more power to him!