A frequently heard refrain from many “experts” is that in healthcare, markets unlike in other commodities do not work. This concept was given credence by a 1963 article written by the Nobel Prize winning economist Kenneth Arrow.[i] Professor Arrow’s five points were:

1) unpredictability – frequently our need for healthcare is unexpected and urgent

2) barriers to entry – one cannot just put up a sign and practice medicine; it takes years of education and licensing, thus diminishing supply

3) the importance of trust – patients must trust the competence of a physician, especially with procedures

4) asymmetrical information – because doctors usually know far more than their patients, their advice is frequently blindly followed and government or other 3rd parties are too removed to determine appropriateness

5) idiosyncrasies of payment – payment takes place after the service; patients have little information of cost and rarely pay for services directly. [ii] *

But, are these parameters really different than other market transactions that we undergo every day and does a distant bureaucracy make it better or worse? This was explored in an article published in 2012 in The Atlantic by Avik Roy [iii], which analyzed the five points:

1) unpredictability – not unique to health care; many occasions occur suddenly, but are addressed by warranties on various products and with old-fashioned insurance

2) barriers to entry of practitioners with licensing – licensing is common with lawyers, dentists and in many other activities such as animal grooming, hair dressers and barbers, etc. yet there is no claim to make these a government dominated function

3) trust – when purchasing any product such as cars, airplane tickets, etc we trust that the product is safe

4) asymmetry of knowledge – is not unique to healthcare; most of us cannot take apart then rebuild an automobile, a computer, a television, but we shop for value using price transparency

5) idiosyncrasies of payment – indeed this is the problem; prepaid healthcare has become more entrenched since Arrow’s paper in 1963. Instead of suggesting more government control, the solution should have advocated more patient-centered control. [iv]

Others besides Kenneth Arrow contend that a patient cannot always shop for healthcare, for instance when having a heart attack or other acute serious event. However, in 2013, 32.1% of total healthcare spending was for hospital care, and certainly not all was on an emergency basis.[v] Thus less than the 32.1% of healthcare spending is for acute problems. If the industry were structured like all others, price transparency and patient choice would be in effect for the remaining issues, thus controlling costs.

Proving that markets do work in healthcare in this country is the spectacular growth of health savings accounts along with high deductible insurance.[vi] With these accounts patients use tax-free dollars for their routine healthcare needs as they shop for the best value, using their insurance only for big-ticket items.

Instead for a vast majority of Americans with our present price fixed, pre-paid, government dominated, third party healthcare system we have:

1) perverse incentives that encourage excess treatments that plague our system, especially Medicare

2) excessive costs

3) inferior service

4) a mistake-prone system

5) no incentives to control costs and increase efficiency

6) neglecting other critical societal needs

7) extreme complexity

8) many left with no or inadequate insurance.

Change to mostly patient directed care will be difficult for many to accept. The Congress has been at the center of health care for over 50 years giving their members relevance, various talking points, the center of a great deal of lobbying activity and access to considerable campaign financing. Other major players such as health insurance companies, the pharmaceutical industry and “certified” electronic health record providers have been extremely successful lobbying for great economic advantage in this government centered, price-controlled system. Established physician organizations have become convinced that our government is the source of physician income and thus tout the government line. The academic “experts” who testify before Congress have built their careers becoming well versed in the intricacies of our convoluted government controlled system. All these entities will find it difficult to change to a patient-centered health care system regardless of its logic, better care and less cost.

It is in the interest of our society for each member to be as healthy and productive as possible. This can happen only if every citizen has the possibility of having excellent up-to-the-minute health care—and the cornerstone of such care is an active therapeutic relationship with a skillful, knowledgeable, compassionate physician. Our task is to create a system whereby every American has an equal opportunity to have this type of healing relationship, thereby maximizing health while at the same time conserving resources.

We could have a healthcare system that offers equal and better care for all, as opposed to the present multitiered entity, with all of its attendant problems.

In the United States we now have a five-tiered health care system: the uninsured, Medicaid, Medicare, private insurance and those on the exchanges with narrow networks and increasingly unaffordable deductions. The uninsured and Medicaid patients, as discussed in chapter 8, have the greatest problems in terms of access and poor health outcomes. Some Medicare patients are also experiencing access problems that will substantially worsen if the decreases in reimbursement included in the Affordable Care Act (ACA) actually take place.[ix] Patients with private insurance have the best access, although with the advent of the ACA, insurance companies are limiting hospital and physician choice along with increasing deductibles in order to control costs. [x] The cost of health care and the complexity of the present system must also be addressed.

Solution: A voluntary program for all Americans—uninsured, Medicaid, Medicare, and privately insured—to enable anyone who wishes to forgo third-party-dominated healthcare. Citizens could choose between their present plans or a health savings account (HSA), funded by a universally available refundable tax credit increasing with age from the federal government and high-deductible health insurance plan (HDHP).[xi]

Individuals could add to their HSA with after tax dollars if they so wish; the account would grow tax free as would be withdrawal for health care issues. A plan of this nature would not require full repeal of the Affordable Care Act, but repeal of the mandates and the Independent Payment Advisory Board would be most helpful.

HSAs, which are permitted under the Affordable Care Act, should be expanded so that payments for HDHPs and direct care contracts would be paid out of those accounts.[xii] Direct care contracts are between a patient and her or his chosen physician, usually paid on a monthly basis varying in cost depending on several variables from about $30 to $100/month. [xiii]

Frequently this includes standard yearly lab work, approximately twenty-five visits a year, and discounted testing.[xiv] Several states have passed laws making direct care contracts more available by stating that they are NOT insurance, thus avoiding the myriad of state regulations.[xv] HDHPs should be available on a national level, avoiding the many state mandates that drive up the cost of health insurance; that would also ensure complete portability.[xvi] After death, any remaining funds in the HSA should be able to be passed on into another living person’s HSA, as per the patient’s instructions. To resolve disputes in the unusual instance when a family desires a premature death in order to acquire the accumulated funds, there would be recourse to the courts. Invariably the courts find in favor of the continuance of care.[xvii]

How can those without or with meager income, about 17 percent of our population, fund their HSAs? This would take place via a refundable tax credit, directly deposited into their HSA that would also include a HDHP in a manner similar to Switzerland,[xviii] Singapore,[xix] and previously in the state of Indiana.[xx] The federal government share of Medicaid could be provided directly into each person’s account or to the states as block grants. The states, if needed could augment these funds, depositing additional money in each person’s HSA assuring adequate funds for their (words deleted here) HDHP and direct care contracts. Experience with this method has demonstrated increased patient satisfaction, decreasing emergency room visits, and considerable lessening of costs.[xxi] In 2013 about 27 million working families and individuals received the earned income tax credit; those monies, or a fraction thereof, combined with the healthcare tax credit could be transferred directly into their HSAs.[xxii] Employers could augment those funds by contributing directly into their employees’ HSAs to assure adequately funded accounts to pay for HDHPs and direct care contracts. To accomplish this, HSAs would need modification by Congress. As this would cost employers much less than current health insurance, one of the major reasons for employee salary stagnation would be ameliorated, while federal expenditures for this group could be minimized.[xxiii] This would also eliminate the need for the problematic ACA exchanges and the Act’s expensive taxpayer-funded subsidies.

All of these transactions would be accomplished using pre-tax dollars and would eliminate any concern for problems regarding pre-existing conditions, in accordance with the HIPPA law of 1996.[xxiv] About 50 percent of the population pays federal income taxes; they would receive the healthcare tax credit to fund their HSA, with an arrangement with the employer for the augmentation of their account.[xxv] Payroll withholding for Medicare could gradually over decades transfer to an individual’s separate health account. This account would not be accessible till after age 65. Thus after an initial phase-in period for most Americans, there would be ample funds to be used for healthcare after retirement. The HSA for each family member would be in each individual’s name, so children would be accumulating funds from birth. Following proposed IRS guidelines monies in the account must be carefully invested in a conservative mix of stocks and bonds. The bonds would protect the account from large market declines and also help fund the national debt, eventually eliminating foreign participation. People could also stay with their HDHP for a lifetime, which premiums would actuarially assure their care when older. This capital accumulation eventually providing healthcare for most after retirement would relieve the federal government of its present Medicare obligations.

It would then be in the financial interest of insurance companies to foster healthy life-styles, thereby increasing their profits. But a fraction of the population will succumb to expensive disease long before retirement.[xxvi] Under this plan, the HDHPs would charge enough to fund additional reinsurance accounts. These accounts would also actuarially augment funds in the unfortunate individual’s HSA in order to cover increased expenses. In this way, the individual remains in charge of her or his care and sensitive to price. In effect, it is a reinsurance fund to ensure that individuals have the capability for funding their care along with their augmented HDHP. The reinsurance charges must be adequate to cover catastrophic expenses, such as for patients needing heart, liver, and kidney transplants. Notice that once the government directly or indirectly funds HSA accounts, the individual citizen is then in charge of her or his health care, rather than bureaucrats in Washington. It is possible that catastrophic costs for an elderly person could exhaust funds that have been saved over the years; either the special HDHP funds could meet that need or, in an extreme circumstance, the federal government could maintain a small account for this purpose, financed by general tax revenues.

This plan providing access for all Americans would decrease our health care costs. It is axiomatic that all of us are much more careful spending our own money than we are with everybody else’s. Complete cost transparency would be required with physicians and hospitals paid market prices for their services—a dramatic change from our present price-fixed system.  Under this universal system there would be no uncompensated care. Thus, hospitals would no longer need to be not-for-profit and would be taxed like any other entity. They would have to compete on service and price. New entrepreneurial facilities offering superior services would most likely be created along with the disappearance of outdated certificate of need laws.[xxvii] [xxviii] Hospitals would soon learn to compete like all other enterprises and would add substantially to local, state, and federal tax coffers.

My plan has many similarities to that recently published by the Pacific Research Institute.[xxix] A major difference is that with my plan I would give employees a choice. Employees could change their insurance and opt for a tax credited HSA-HDHP account. As this would be a new option, I expect that initially many would be skeptical, but over time almost everyone would want the advantages of controlling their own healthcare dollars.

There is a need to strengthen and nurture the therapeutic patient-doctor relationship

Historically, physicians have cared for patients applying skills and knowledge with compassion, understanding, and empathy. There is no doubt that a strong patient-doctor therapeutic relationship improves care and leads to better results. [xxx] This plan would ameliorate the increasing dominance of third-party prepaid medicine as described in chapter 9, which is compromising this relationship.

Patients in charge of their own funds under this HSA-HDHP system would be able to seek out a compatible physician to meet their needs. Patients and their physicians together would control the amount of time needed for each visit, with payment adjusted accordingly; this does not happen in the present third-party prepaid health care system.[xxxi] Physicians and hospitals would be free to choose a patient record system that enhances patient and physician needs rather than fulfilling artificial requirements (presently called meaningful use and now MACRA).[xxxii] Patients spending their own money would pay more attention to maximizing their health, thus decreasing their spending. This is the pathway to improving population health, one patient at a time, rather than the present bureaucratic attempts to accomplish this goal.[xxxiii] Presently there is electronic reporting of patient information in the event of adverse outcomes involving various therapeutic agents; that practice should be retained.[xxxiv] When there is participation in National Institute of Health clinical or other trials, electronic reporting must take place as directed by the research protocol.

We need to determine if there really is a Primary Care shortage

Presently we do not know whether a primary care shortage exists. This is because there has not been patient market choice to meet the needs of those with chronic disease, who make up about 10% of the population. We do know that there are now more physicians per 100,000 population in the United States than at any other time in our history.[xxxv] Certainly physicians trained as Internal Medicine and Neurological subspecialists could, if patients with chronic disease so desired, meet their primary care needs, thus decreasing demand on other physicians. The choice of primary care by graduating medical students under this HSA-HDHP system, with a greater emphasis on patient relationships and enhanced incomes, would be more appealing than at the present time. But only in a true market system will we know the answer to the primary care question. And only in a market system will we be able to determine if our nation has a greater or lesser need for primary care vis-à-vis specialty-trained physicians.

With individual choice we could have a brighter health care future

If, as I suspect, a majority of Americans choose the self-directed HSA-HDHP option, health care in this country will significantly improve, especially for the poor, and there will be a large decrease in the national cost of health care.[xxxvi] Our decades-long divisive health care debate would finally be over. We could then focus more on the most important task facing any society: creating an educational system that ensures that every child, to the maximum of their ability, has the skills to successfully participate in the now worldwide industrial economy. This would require a much more intense educational system than exists at the present time and would require more funding. With health care consuming approximately 18% of gross domestic product this funding would prove elusive. An HSA-HDHP system would allow us to spend less on health care and more on our future.


* Professor Arrow also had no knowledge of the upcoming information age, with its attendant increase in patient knowledge, thereby significantly decreasing this asymmetry.  The knowledge missing is price transparency and market forces fostered by a |price-fixed centralized government system.


[i] Kenneth J. Arrow, “Uncertainty and the Welfare Economics of Medical Care, ”Bulletin of the World Health Organization (February 2004, 82 (2)), available at: http://www.who.int/bulletin/volumes/82/2/PHCBP.pdf (5/5/2015).

[II] Ibid

[iii] Avik J. A. Roy, “Liberals Are Wrong: Free Market Health Care Is Possible,” The Atlantic, Business, Megan Mcardle, editor, (March 18, 2012) available at: http://www.theatlantic.com/business/archive/2012/03/liberals-are-wrong-free-market-health-care-is-possible/254648/ (Accessed 5/21/2015).

[iv] Ibid

[v] Fast Stats, CDC, “Health Expenditures,” available at: http://www.cdc.gov/nchs/fastats/health-expenditures.htm (Accessed 5/24/2015)

[vi] Clare Krusing, AHIP, “New Census Survey Shows Continued Growth in HSA Enrollment,” (July 9, 2014), available at: https://www.ahip.org/Press-Room/2014/HSA-Census-Survey/ (Accessed 5/22/2015)..

[ix] Alyene Senger, “Obamacare’s Impact on Seniors: An Update” (Heritage Foundation, Issue Brief #4019 on Health Care, August 20, 2013), available at: http://herit.ag/WO7R5U (Accessed 9/11/2014).

[x] Edie Littlefield Sundby, “You Also Can’t Keep Your Doctor,” Wall Street Journal, November 3, 2013, available at: http://on.wsj.com/1jpcj46. (Accessed 9/11/2014).

[ix] Health Savings Accounts (HSAs) were created in 2003 so that individuals covered by high-deductible health plans could receive tax-preferred treatment of money saved for medical expenses.

[xii] Merrill Matthews, “Health Savings Accounts Will Survive Obamacare—At Least for Now,” Forbes, March 27, 2013, available at: http://onforb.es/1pcaZj2. (Accessed 9/11/2014).

[xiii] Stephen C. Schimpff, KevinMD.com, “No Direct Primary Care Isn’t Too Expensive,” (August 25, 2014), available at: http://www.kevinmd.com/blog/2014/08/direct-primary-care-isnt-expensive.html (Accessed 5/11/2015).

[xiv] Epiphany Health, http://socialsquare.wix.com/epiphany-health (Accessed 1/23/2016) and ATLAS MD, “We’re Here for You. All the Time,” available at: http://atlas.md/wichita (Accessed 9/12/2014).

[xv] Daniel McCorry, “Direct Primary Care: An Innovative Alternative to Conventional Health Insurance,” (The Heritage Foundation, Backgrounder # 2939 on Health Care, August 6, 2014), available at: http://www.heritage.org/research/reports/2014/08/direct-primary-care-an-innovative-alternative-to-conventional-health-insurance (Accessed 5/24/2015).

[xvi] NCSL, “Mandated Health Insurance Benefits and State Laws: Updated & material added January 2014”, available at, http://www.ncsl.org/research/health/mandated-health-insurance-benefits-and-state-laws.aspx  (Accessed 1/23/2016).

[xvii] George J. Annas, “The Baby K Case,” New England Journal of Medicine 330: 1542-45 (1994).

[xviii] Regina E. Herzlinger and Ramin Parsa-Parsi, “Consumer-Driven Health Care: Lessons from Switzerland,” JAMA 292: 1213-20 (September 8, 2004), available at: http://bit.ly/YAS6ku. (Accessed 9/11/2014).

[xix] Raisa B. Deber, with Kenneth C. K. Lam, “Experience with Medical Savings Accounts in Selected Jurisdictions” (CHSRF [Canadian Health Services Research Foundation] Series of Reports on Financing Models: Paper 4, July 2011), available at: http://bit.ly/1qo9ioR. (Accessed 9/11/2014).

[xx] Avik Roy, “Obama Administration Denies Waiver for Indiana’s Popular Medicaid Program,” Forbes, November 11, 2011, available at: http://onforb.es/1gNeZ8o. (Accessed 12/15/2011).

[xxi] Ibid.

[xxii] Center on Budget and Policy Priorities, “Policy Basics: The Earned Income Tax Credit” (updated January 20, 2015), available at: http://www.cbpp.org/cms/?fa=view&id=2505. (Accessed 9/11/2014).

[xxiii] David Blumenthal, David Squires, The Commonwealth Fund Blog, “Do Health Care Costs Fuel Economic Inequality in the United States?”, (September 9, 2014) available at: http://www.commonwealthfund.org/publications/blog/2014/sep/do-health-costs-fuel-inequality (Accessed 5/14/2015).

[xxiv] Health Insurance Portability and Accountability Act of 1996 (Public Law 104–191, 104th Congress), available at: https://www.gpo.gov/fdsys/pkg/PLAW-104publ191/pdf/PLAW-104publ191.pdf  (Accessed 1/23/2016).

[xxv] Chuck Marr and Chye-Ching Huang, “Misconceptions and Realities about Who Pays Taxes” (Center on Budget and Policy Priorities, September 17, 2012), available at: http://www.cbpp.org/cms/?fa=view&id=3505. (Accessed 9/11/2014).

[xxvi] U.S. Department of Health & Human Services, AHRQ (Agency for Healthcare Research and Quality). “The High Concentration of U.S. Health Care Expenditures” (Research in Action, Issue 19), available at: http://1.usa.gov/1lYBmOG. (Accessed 9/11/2014).

[xxvii] Herzlinger Regina, Who Killed Health Care?: America’s $2 Trillion Medical Problem – And The Consumer – Driven Cure, McGraw-Hill, New York,2007, Part III p. 157-247

[xxviii] Christopher Koopman, Thomas Stratman, MohamedElbarasse, Mercatus Center, George Mason University, “Certificate-of-Need Laws: Implications for Michigan”, (May 2015) available at http://mercatus.org/publication/certificate-need-laws-implications-michigan (Accessed 10/6/2015).

[xxix] Sally Pipes, “The Way Out Of Obamacare”, January 11, 2016, available online at, http://www.forbes.com/sites/sallypipes/2016/01/11/the-way-out-of-obamacare/ – 2715e4857a0b937c0bc1ff48 (Accessed 1/24/2016).

[xxx] Susan Dorr Goold and Mack Lipkin, Jr., “The Doctor-Patient Relationship: Challenges, Opportunities, and Strategies,” Journal of General Internal Medicine 14 (supplement 1): S26-S33 (1999), available at: http://1.usa.gov/1BvBYij. (Accessed 9/11/2014).

[xxxi] Jason Fodeman, “The New Health Law: Bad for Doctors, Awful for Patients” (Institute for Health Care Consumerism), available at: http://bit.ly/1tNTBIW. (Accessed 9/1/2014).

[xxxii] EHR Incentives & Certification, “Meaningful Use Definition & Objectives,” HealthIT.gov, http://bit.ly/1nORGgg (Accessed 9/11/2014).

[xxxiii] University of Wisconsin, Population Health Sciences, “Improving Population Health: What Is Population Health?” available at: http://bit.ly/1CXl4ut. (Accessed 5/22/2015).

[xxxiv] U.S. Food and Drug Administration, “Med Watch: The FDA Safety Information and Adverse Event Reporting Program,” available at: http://www.fda.gov/Safety/MedWatch/ (Accessed 5/22/2015).

[xxxv] David C. Goodman and Elliot S. Fisher, “Physician Work Force Crisis? Wrong Diagnosis, Wrong Prescription,” New England Journal of Medicine 358: 1658-61 (2008).

[xxxvi] John C. Goodman, Priceless: Curing the Healthcare Crisis (Oakland, CA: The Independent Institute, 2012), Chapter 11, pp. 171-88.

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Dr. Fisher graduated from Tufts University in 1962 majoring in chemical engineering, and with distinction from George Washington University School of Medicine in 1968 having been elected to the Alpha Omega Alpha honor medical society in his third year. He was a resident, and then chief resident in Internal Medicine at the Mount Sinai Hospital in New York City, and a fellow in Kidney Diseases at Yale University, finishing training in 1974. He was employed at a number of teaching medical centers throughout his career. He has been an insulin-requiring diabetic since 1963. Dr. Fisher has been the program director for two internal medicine residencies and two nephrology fellowships and has published several scientific papers on nephrology along with many articles and a chapter regarding health policy. Dr. Fisher was also a consultant nephrologist in Kalamazoo, Michigan and the Medical Director for the Free Clinic in Kalamazoo from 2007 till its closing in 2010. He is the author of In Defiance of Death: Exposing the Real Costs of End-of-Life Care, Praeger, Westport, Connecticut, 2008 (amazon.com/author/kennethafishermd), and The Ten Questions Walter Cronkite Would Have Asked About Health Care Reform, (2011) a free e-book available at: http://drkennethfisher.com/The10Questions.pdf along with this book, Understanding Healthcare: A Historical Perspective available: freedominhealthcare.org.

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