The WSJ had an interesting article today called “Sick and Getting Sicker.” The article basically says that healthcare costs are sinking businesses, especially small businesses and start ups.

This is an especially relevant topic in the US today, because President Obama has made it a goal to reform healtcare, and one of his stated beliefs is that every business should be required to provide healthcare.

Now, this article caused me to do a little thinking about why healthcare costs so much, and what we might be able to do about it. While I was searching around, I stumbled across this video from Humana, which happens to be my insurance provider.

The video summarizes what we have all heard about before. There are a lot of costs that go into practicing medicine, some of which we can fix, some of which we cannot. Let’s take a look at these and see what sense we can make of them.

1. Research Costs: The biggest chunk of these costs is recouping research and, more importantly, clinical trial costs. There’s not a whole lot we can do about this one, and perhaps not much we should do about this one. The US spends so much money on medical research because we can afford to. We want to discover the cures to every disease, and without that profit motive we wouldn’t be making progress. For all that people hear about the lower cost of medical care in other countries, frankly, those countries aren’t advancing medicine. We are, and we’re paying for it. I don’t think any of us would be happier if no new medicine was invented, so I can accept this portion of medical costs. Perhaps some reform to the FDA to streamline clinincal trials, allow products to come to market sooner, and allow generics to enter the market sooner, could lower costs to the consumer while preserving innovation. However, while I’m sure there could be efficiency gains in the FDA, I certainly don’t want lax oversight of pharmaceuticals.

2. Defensive Medicine: This is a big one. We need to take a long, hard look in the mirror about defensive medicine. It’s unreasonable to say that consumers shouldn’t have the means to seek restitution in the case of medical malpractice, but we need to define reasonable limits on damages to discourage people from filing frivilous lawsuits in the first place.

3. Administration Costs: Here’s where Government can make a benevolent difference. Turn to a group like the ISO and let them standardize all the medical and insurance paperwork. Pass a bill requiring a timeline for the creation of industry standards and interoperability between electronic databases, and then require the use of these standards when they’re ready. The government can foot some of the bill for the creation of these standards, as they should result in a significant lifetime savings.

4. Profit: Well, without a profit margin we won’t have medical care at all.

5. Doctor’s fees: This one really boils down to lifestyle. The best thing here is to have a more consumer-driven healthcare system, one that makes people more individually accountable for their own health.

This last one is where we find the most potential for improvement. The more people are in control of their own healthcare, the more they will naturally keep the costs in check.

My employer does not provide healthcare, and I have an HSA-Compatibile health plan. This is a great option for my wife and I, although it does occasionally cost more than I’d prefer at the Doctor. I guaruntee you, however, that since I’ve been funding my own health-insurance I’ve been more health-conscious overall and have taken steps to improve my own health. At the doctor’s office I’ve both ordered tests above what the doctor recommended (for peace of mind) and declined tests the doctor said were optional (to save money). Most people would behave this way if they were engaging in free-market medical care.

This makes me wonder… would we in fact be better off if employers were required not to provide healthcare to their employees. Take the benefits, pay them out in salary instead, and let people shop for healthcare on their own.

There are two things we could couple with a program of ‘everyone shopping for their own insurance’ to make it the most effective.

First, implement the standardization program I mentioned above to make it simple and painless for a person to move from one insurance plan to another, or from one Doctor’s office to another.

Second, price for lifestyle. If you’re a healthy weight, you should pay less. If you’re active, you should pay less. People should be able to reap the rewards of a healthy lifestyle -- and in a market-driven system they would.

Lastly, we should focus more attention on promoting healthy living in schools. Daily exercise should be part of any education, and very healthy lunches should be served in all schools. Teach kids to live a healthy life and not only will they live longer, they’ll do better in school.

Now, Houston is a big city with a huge healthcare industry. You’ve heard my thoughts on the matter, let me know what you think by leaving a comment!