Why our health-care system is sick

By DAVID MOON, Moon Capital Management
August 3, 2003

A family friend recently joined my wife and me as a parent of twins. Like my wife, Stephanie first went into labor only 20 weeks into her pregnancy. Her newborns were significantly more premature than ours. The similarities of our situations end about there.

My wife was about to turn 40 when our little bundles of demanding joy arrived. Stephanie is 15 and unmarried. We had been trying to get pregnant and start a family. Stephanie wants to get a driver's license and graduate from high school.

When my wife first went into premature labor, she spent a week in the hospital and was given a bunch of drugs. At home, she was visited by a nurse who showed us how to administer a constant dose of intra-muscular medication that would deter pre-term labor.

When Stephanie went into early labor, the doctor sent her home with instructions to reduce her physical activity. That doesn't help much when you are fifteen-years old, unmarried and rely on your minimum wage job. When her twins were born only 28 weeks into the pregnancy, they were destined for a hospital stay of six to eight weeks.

When our kids were born, our out-of-pocket expense was less than $1,000. This included a hospital bill for the children, which exceeded $50,000. We had dozens of ultrasounds. Stephanie had one.

The doctor who sent the pregnant teenager home may have based his decision solely on Stephanie's health needs. Or he may have been influenced by a TennCare system that pays for certain items and not for others. If so, some bureaucrat in Nashville or Washington made the rationing decision. When she got pregnant, Stephanie was deciding to access a medical system in which she has no financial stake. After that, she had little input into decisions about health system utilization. The folks paying for her healthcare - you and me - we had no influence on the medical treatment (or lack of) offered the girl in early labor. Nor should we. But now we are going to pay a hospital bill that will be hundreds of times larger than the cost of some preventive care earlier in the pregnancy.

TennCare is notorious for its silly decisions at the other end of the resource spectrum - paying for seemingly frivolous expenses and procedures. But our entire health care financing mechanism is broken. We have a system in which very few of us have a financial incentive in the decisions we make. So we utilize services with little regard to cost. Co-pays, low deductibles and insurance payments for routine health maintenance encourage us to use as much medical resources as possible, possible healthcare prices even higher. Insurance companies (including the state's TennCare system) have a financial incentive to discourage utilization.

In most cases, the person most impacted ' the patient ' has little or no financial incentive in deciding about utilization. We don't buy groceries this way; it is a strange way to pay for our medical services.

David Moon is president of Moon Capital Management, a Knoxville-based investment management firm. This article originally appeared in the News Sentinel (Knoxville, TN).

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