President Barack Obama

The White House

1600 Pennsylvania Avenue

Washington, DC 20500

Dear President Obama,

As a fellow alumnus of Occidental College, I am writing to you about healthcare reform. You did say that all ideas were on the table. Bear with me, please. I am hoping you are a smart guy with an open mind, who will listen to a better means to reach the same end.

The first point is that we have to recognize we aren't making healthcare more affordable just by making someone else pay for it. Asking your wealthy uncle to pay two-thirds the price of some $180 tennis shoes does not mean you are buying affordable tennis shoes. Affordable tennis shoes are ones that have a lower price tag. So how could we make healthcare more affordable? We should do it the same way that other things in our economy have become less expensive over time - computers, Lasik eye surgery, DVDs.

When they are new, innovative products or procedures are expensive. Only wealthy people can afford them. Others look at them and say, "That's too expensive, I'm not going to buy the Blu-ray disc," or whatever the latest innovation is. Eventually the makers of the new thing run out of wealthy people; then they must figure out a way to sell it for less or they won't be able to get more clients. Whoever can figure out how to do it (it isn't always the same people who first made it) begins to offer it for a lower price. The company then operates at a lower profit margin but with higher volume. And that lowering of price trendy beaded Cutting Pendant keeps happening until pretty much everyone can afford to buy.

About the only time that doesn't happen is when the government (or an insurance company) steps in and says, "this is too expensive for ordinary people to pay for, so we are going to buy it for them." Under those circumstances, there is no incentive to make it cheaper. That's fundamentally why medical procedures aren't coming down in price. Nearly all medical procedures are paid for by someone other than the recipient.

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Here's the hard part. When Medicare sets a lower price (defining how little it will pay for a given procedure), it seems like it would be the same thing as when a lot of people say, "That's too expensive; I won't pay that much." But it doesn't work the same way. Instead of having an incentive to offer something more cheaply, because there are more clients to be obtained if you do, the service provider has just suffered an income cut, with no way to make it up. So the provider raises the price on some other service to make up for it - or makes the people with "better" insurance pay a higher price to make up for the lower price obtained from Medicare patients. Or the provider just goes out of business. And that's one reason why we are short of primary care doctors.

So for a thing to become more affordable, there must be millions of people who look at it and say, "No, that's too expensive. I won't pay that much." For prices to come down, that kind of price discussion has to enter the doctor's office. People need to say, "Isn't there a less expensive treatment or test?"

To increase the number of those conversations in the doctor's office we need to continue to encourage the spread of high-deductible health insurance with a health savings account or HSA (a savings account of your own pre-tax dollars that can only be spent on health care) to cover the deductible. I just got one of those at work and it changed
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