Fixing health care on the back of a napkin. (4 napkins actually)

The health care debate is quickly becoming an epic American tragedy. As a concept, the original idea was marvelous: "Affordable, quality health care for every American". That is a wish every American can understand.

The reality was never going to be as clean and easy as the speech made it sound. Health care in America is a business. There are lots of people who make lots of money preventing people from getting sick, helping people who are sick, and insuring people for when we do get sick. When there are lots of people making money at anything, they're never going to agree on everything. Even those three simple terms -- "affordable", "quality" and "every" -- are inherently at conflict. But we all got the concept.

It's not working out the way anyone conceived. Where our leaders are taking us is not marvelous. Unless the White House moves quickly and boldly in the next two weeks, the most likely outcome of next month's congressional debates will be a health care system that costs individuals more than ever and ends up putting more money into the hands of the very people that created the mess in the first place.

There are probably about a hundred people in this country who really understand how health care works. I'm guessing that right now half of them are trying to change the system and half of them are trying to keep it the same. Let's see if we can't get more of us to understand the basics so we can decide for ourselves which is the better direction.

In the next four posts, I'm going to do my best to explain what's going on in the way I know best: with simple pictures drawn on a napkin.

Actually, it's going to take four napkins. My colleague Tony Jones and I have been through piles of research and enough whiteboard markers to get an elephant stoned. I think we've come up with a clear and simple view of the essentials of the health care debate.

Without further ado, here's the first napkin. Let me know if it makes sense. (Or not.)
(Click here to view all slides as a PDF.)

 
This is the overall title page for all four napkins.

This napkin introduces the business of health care.

The equation is simple: I get sick, my doctor fixes me, my doctor gets paid.

Lately though, the "payer" (my insurance provider) has come between me and my doctor, telling both of us which treatments are okay and which are not. In fact, my insurance carrier has become the party that "rations" my health care.

The reason that's happened is because health care is really TWO businesses: one makes money fixing me, the other makes money providing payment.

I'm stuck in the middle. Both sides are interested in my health and my money. (Usually one more than the other.)

When I'm healthy, the insurance side loves me. I pay my premiums and they get to keep the money!

When I'm sick, the "provider" side (doctors, hospitals, pharmaceutical companies, etc.) love me. They get to provide their products and services and they get paid. (Partially by me and partially by my insurance carrier.)

Both businesses want my money. They hate each other.

Since I'm the only one putting money into the system (either via taxes, premiums, or cash payments), health care is a zero-sum game: there's only so much money to go around. When one business is getting it, the other is not. Both sides like to get as much from me as they can, to the exclusion of the other.

As the two sides fight to squeeze more blood from the stone that is me, I get... well, squeezed. This is bankrupting me and in more and more cases (can you say "Detroit"?) my employer. (More on that when we get to napkin 4.)

It's gotten so bad that the White House has determined that it needs to step in.

As it surveyed the damage, the White House determined that most of the things that need to change immediately fall on the "insurance" side of the equation. (Universal coverage, no restrictions, lower premiums, insurance exchanges, etc.)

 
Next up: what "health care reform" is really about. (It isn't health care.)

Comments

[Harold Pohl]

Your intention is good, I think, but this is too simplified to be of much use. You just don't have a good enough handle on the whole thing to do a simplification of this type.

[buy soma online]

Fantastic equation my friend! hahaha...
All I can add is, it is not a "Health Care Reform" but a "Wealth Care Reform"

[Term paper]

Nice blog, its great article informative post, thanks for sharing it. Thanks for the information!

[Matthew Holt]

Dan, sadly what you think is obvious is wrong. Insurers make more money when costs increase as almost all their business is on a % of total costs, so they are NOT interested in decreasing costs in the way you think. That's a smokescreen. And the "fight" between insurers and providers is almost irrelevant to wider system problems.

Why didnt you get one of the 100 people who understand health care to help you?

[Art Ignacio]

Great that you're doing this. Much needed with all the shouting. Should you need support about the the position of insurers, here's a Bill Moyers PBS interview with former CIGNA exec Wendell Potter

http://www.youtube.com/watch?v=7QwX_soZ1GI

Maybe you've already seen it. Looking forward to napkin 4.

[arizona carpet cleaners]

They keep throwing out 30 million without health care. That is ONLY 15% of the population. And they are probably counting short term displaced workers (out of work 30-60 days but eventually employed again) and illegal immigrants. Can't we fix this problem for those 15% without killing the entire system?

[Martin Jennings]

Hi Dan,

Superficially, your napkin is accurate. Unfortunately, you've missed one of the primary reasons for increasing costs of care, malpractice insurance. Tort reform is necessary to reign in much of the cost of care. The government must eliminate fraud and waste on their side; medicare/medicaid. By eliminating a percentage of overhead (malpractice premius) the providers can lower rates, with lower rates, insurance companies can lower their negotiated rates with provicers, thereby lowering end-user's premiums.

[Rotkapchen]

One gross oversimplifications -- actually the element for which the MOST waste occurs isn't represented here. The context of medical care: doctor's offices and hospitals (all much bigger than just the doctors and their services: billing, cleaning, scheduling...).

As well, this ignores another critical element missing from the system: economic choice. We go to our doctor not knowing what the visit will cost us or whether or not we will get results from our investment. Medical is the worst economically balanced industry there is.

[Rain]

Hey Dan - just a quick question...are the underlying costs of health care going up along with insurance premiums, or are just premiums going up? We are sort of abstracted from the 'actual' cost of our healthcare because we pay for it indirectly, right? Great work (as always)

[Steve Kaiser]

Thanks for putting some work into simplifying this! I only hope that the people spewing (and being influenced by) rumors and lies will take the time to learn what the true problems are.

One note, I think a fundamental problem with insurers is that most of them are public companies, therefore responsible to their investors and motivated to constantly increase profits. THAT is the main reason they want to limit payments.

[chris barnes]

Dan, this is great! Can't wait to see the rest of the story.

I understand that you've lumped MDs, hospitals, and pharma together since they all make $$ by providing product or service to patients. However, their motivations and goals are different. I would love to see a visual explanation that dives into the relationships on the left side of your sketch.

Also, it would be interesting to sketch what the healthcare system looks like from the perspective of each stakeholder.

Per your previous post, let me know if there's any way we can help.

[Susan Hamilton]

I really like this blog and perspective. Couldn't agree more. So far. I'll be back to watch you 'draw' some conclusions! Most of my insights on this problem are on http://ow.ly/jJJj , and you can look me up in Newsblarg.com, I'd like to hear from you.

[Doug Caldwell]

Thanks for explanation. I will share it with lots.

[Art]

To suggest that the two businesses "hate each other" seems a bit too simple.

I'm interested in knowing how you deal with the "us" in the equation. To me part of the frustration in the debate is that I neither expect nor want the Federal government to provide for my healthcare.

I'd support a system where citizens have some sort of catastrophic coverage and a way to manage their own consumption of healthcare via MSAs or some sort of personal acct. I'd also support reform that helps reign in some of the abuses and costs. However, I'd prefer not having the government involved in much more than that.

So part of the healthcare debate is also philosophical and how one would view the role of government. In our quest for individual liberty we need to make sure that our perspective isn't altered by what's immediate or pragmatic at the moment. Because one day we may find that all we hold are empty promises and have lost the pursuit of liberty that is the linchpin of our society.

[Jack Hadley]

As always, Dan, you help the world make sense. I remember what you recently said at the VizThink conference I attended in San Jose, "...whoever draws the best pictures gets the funding." If one side or the other would just listen to your advice, they would probably win the debate.

[Shalu]

Dan, I am quite happy to see your latest post!
I recently moved from Canada (where health care is almost free!) to US. I am shocked to see the state of US health care. Unfortunately, none of my contacts have been able to explain the way health-care works here.
I am hoping your next few posts will help me understand the system.

[Lee LeFever]

I'm so excited that you're doing this Dan! I think you are doing a great service - looking forward to the next ones!