Exclusive Interview: John C. Goodman

Introduction: John C. Goodman is Senior Fellow at The Independent Institute and author of the widely acclaimed book, Priceless: Curing the Healthcare Crisis, which provides an alternative to ObamaCare. Most recently John wrote Living with ObamaCare: A Consumer’s Guide (2014). The Wall Street Journal and National Journal, among other media, have called him the “Father of Health Savings Accounts.” He blogs regularly at Forbes. Dr. Goodman regularly appears on TV and radio programs and is frequently invited to testify before Congress on healthcare reform. A libertarian economist, Goodman is former president of the National Center for Policy Analysis, a free-market think tank established in 1983, and former editor of “Health Policy Blog.” In addition to ten books, including Lives at Risk: Single-Payer National Health Insurance Around the World (with Gerald L. Musgrave, and Devon M. Herrick, 2004), Patient Power: Solving America’s Health Care Crisis (1992), which sold more than 300,000 copies, Dr. Goodman is the author of more than 50 studies on health policy, retirement reform and tax issues.

Daily Bell: Thanks for speaking with us. Before we ask about your new book, Living With ObamaCare: A Consumer’s Guide (2014), give us an overview of what led to your particular interest in healthcare.

John Goodman: I got into healthcare by accident. It’s a sleepy field. The best economists are not in healthcare; they’re in monetary policy or growth economics. It was a field that desperately needed radical revision, and most of what I’ve done in health economics has been a radical revision of what was done before.

I was asked to do a study of the British National Health Service and through that I discovered that health economics was a field that desperately needed help and the traditional health economics textbooks are of very little value in analyzing either our own healthcare system or the healthcare systems of other countries.

Daily Bell: You describe Living with ObamaCare as a “shorter and easier to read” version of Priceless, essentially, an unbiased, objective assessment of ObamaCare – “the good, the bad and the ugly.” Where can readers buy your book?

John Goodman: They can buy it at Hudson Booksellers in airports around the country. It can also be found at Borders, Amazon and some other book distributors.

Daily Bell: Who is the intended reader?

John Goodman: This book is intended for everyone. It’s based around questions – What if I’m a doctor? What if I don’t have health insurance? What if I run a small business? – and then it tells you the good, the bad and the ugly about ObamaCare for each of those questions.

Daily Bell: You say the Affordable Care Act (ObamaCare) is “the most revolutionary public policy reform since the War on Poverty in the 1960s.” How so?

John Goodman: For the first time in our history the government is asserting the power to tell all of us what kind of health insurance we have to have. In the process it is the intent of the Obama administration to completely change the way the healthcare system is functioning. The actual result may be to make everything worse, and by worse I mean costs may be higher, quality lower and access more difficult.

Daily Bell: Please elaborate on your free-market orientation to healthcare detailed in your 2012 book, Priceless: Curing the Healthcare Crisis.

John Goodman: The reason for the title of the book is that our healthcare system doesn’t have any real prices. No one ever sees a real price for anything – no doctor, no patient, no employer, no employee – and because of that we all face perverse incentives When we act on those incentives we make healthcare more expensive; we do things that lower quality; and we make access to care more difficult. The solution is to free the market and allow real prices to allocate resources.

Daily Bell: How could that solution be implemented?

John Goodman: I have an approach that I call the “Do No Harm Approach.” We begin by identifying all of the government policies that distort incentives – for patients, for doctors, for hospitals, for insurance companies, for employers. We change those policies so that at a bare minimum the government is not distorting our incentives. My argument is if we could just neutralize government, if we could just keep it from causing harm, the healthcare system would work pretty well.

Daily Bell: You have been called the “father of Health Savings Accounts.” That’s high praise. How did you develop the idea for the tax-free health savings account (HSA)?

John Goodman: I was not the first person to propose Health Savings Accounts. A number of people had thought about the idea through the years. I was the person who promoted the idea and wrote about it and testified about it, so I championed it.

Daily Bell: For those not familiar with HSAs, can you briefly explain what they are and how they work?

John Goodman: They allow people to put money in a savings acct and manage some of their own healthcare dollars HSAs are health insurance and they are the alternative to third-party insurance, which means having an employer or insurance company or government pay all the medical bills.

Daily Bell: Do any countries other than the US allow for HSAs?

John Goodman: Singapore, since 1984 has had a pretty well developed system of Medisave accounts, which is a similar idea. South Africa has had what they call Medical Savings Accounts since the early 1990s.

Daily Bell: Those are working out well?

John Goodman: South Africa, under Nelson Mandel, deregulated its health insurance market and as a consequence, every idea we’ve had in the United States made its way over to South Africa – HMOs, Medical Savings Account plans, PPOs, etc. In a few short years, the Medical Savings Account plans captured more than half the market. It’s been a very popular idea in South Africa.

Daily Bell: It’s a good idea that attempts to bring the market itself back to bear on healthcare. Why hasn’t it made more progress?

John Goodman: It’s made quite a lot of progress. There are 30 million people who have either a Health Savings Account or a Health Reimbursement Arrangement, which is a very similar idea. Plans for these two accounts are the fastest growing products in the health insurance marketplace.

Daily Bell: How does ObamaCare affect these?

John Goodman: ObamaCare puts some new limits on the use of these accounts. At the same time, it created an exchange where insurers have an incentive to offer high deductible plans and most of those plans are compatible with the health savings accounts. So ObamaCare may inadvertently lead to a lot more people having the accounts.

Daily Bell: What do you think of the healthcare media and how they’ve been covering ObamaCare?

John Goodman: The coverage of ObamaCare has been atrocious. They have completely ignored some of the most serious problems in the law. Soon after it passed the chief actuary of Medicare said ObamaCare is going to be devastating for seniors. He put out charts in a report that he released showing what was going to happen to doctor fees and hospital fees. All this was ignored by the healthcare media. To this day they’ve never reported on how health reform is going to affect the elderly.

Daily Bell: It’s been used as a political football so it’s been hard to get accurate information from any source.

John Goodman: The Obama administration has put out a lot of propaganda. They paid Andy Griffith to go on TV and talk about how wonderful ObamaCare was going to be for seniors. The healthcare media never report on the real facts.

Daily Bell: Tell us about some of your other books. Your writing was helpful in defeating Hillary Clinton’s early 1990s healthcare plan. How so?

John Goodman: The most important book at that time was my book Patient Power. The Cato Institute distributed 300,000 copies of an abridged version of Patient Power. Many people think that was very, very important in helping to defeat HillaryCare. According to Brent Bozell, the three most important people in defeating HillaryCare were Phil Gramm, Bill Kristol and me.

Daily Bell: You quipped in a blog post: “It’s a law of human nature. Whenever people start discussing health policy, their IQs fall by 15 points.” What did you mean by that?

John Goodman: When people start talking about healthcare they get less rational and they tend to make more mistakes. I don’t know why that’s true. Uwe Reinhardt, who is a liberal health economist at Princeton, responded to this observation of mine by asking, “Is this law true for Goodman, as well?” I had to admit that maybe it is but I’m at least aware of it. So I’m careful.

Daily Bell: Your basic idea is that empowering both patients and caregivers via the market itself helps control healthcare costs while supporting better patient outcomes. This sounds reasonable to us. Is it finally finding an audience?

John Goodman: Almost all large businesses are now offering HSA plans and the employer community has decided that the HMO approach doesn’t work and empowering patients and giving them more responsibility over healthcare dollars does work.

Daily Bell: Under ObamaCare, doctors are quitting in larger numbers. Why is that happening?

John Goodman: Doctors are being pressured to give up their private practices and become employees of hospitals. Increasingly, third-party payers are going to force them to follow protocols rather than use their own good judgment in treating patients. The practice of medicine is becoming less and less fun and doctors are becoming more and more like bureaucrats. That’s why so many of them are discouraged and why so many are retiring early. By the way, when they go to work for hospitals they change their approach to medicine. Instead of working nights and weekends they work 8 to 5 and play golf on the weekends.

Daily Bell: Are you seeing that doctors are also being forced to change the way they treat patients medically?

John Goodman: They’re being pressured to follow protocols, which is what I call cookbook medicine, rather than their own good judgment. A lot of the pressure is monetary and it’s explicit. Medicare is going to start paying doctors more money if they follow protocols and less money if they don’t.

Daily Bell: Do you see doctors coming together in any attempt to change that?

John Goodman: Unfortunately, the American Medical Association sold out to the Obama administration and they are a supporter of ObamaCare. But you have to remember that the American Medical Association makes far more money by selling its billing codes to the healthcare providers than it makes from membership dues. Without the government okaying those billing codes for Medicare, the AMA would not be able to do what it’s doing. It’s an unholy alliance.

Daily Bell: Is that also true with the medical associations of other countries?

John Goodman: I’ve not heard of that, but it is true that the medical association in almost every developed country tends to be supportive of socialized medicine or some form of national health insurance.

Daily Bell: Why can’t complex systems like healthcare be managed from the top down?

John Goodman: By definition, a complex system is a system that no one person can ever fully understand. No one knows all the parts; there is no model to tell you all the parts; and therefore, it is by definition complicated. So the best thing we can do with such systems is start at the bottom and make sure that everybody has the right kind of incentives and get rid of public policies that give people perverse incentives.

Daily Bell: Do we even need an overarching national healthcare policy?

John Goodman: No. And that’s what ObamaCare tries to do. It tries to force on the whole nation the bureaucrats’ idea of what health insurance should look like and how it should be bought and sold. And ultimately, it’s going to try to tell every doctor how to practice medicine.

We don’t need government to tell us what kind of health insurance we have to have or how we can buy it or sell it, and we don’t need government telling doctors how to practice medicine.

Daily Bell: You write, “True reform requires liberating doctors and patients by allowing them to interact in innovative ways to help meet unique individual medical needs.”

John Goodman: Doctors are the only professional in our society who are not free to repackage and re-price the services they offer to the market. What type of services they offer and what’s going to be paid for them are basically dictated by the large third-party payer bureaucracies – insurance companies, employers and government. What liberation means is: doctors should be free to change what they offer as technology changes, as demand changes and as patient needs change.

Daily Bell: What are the two false beliefs that figure prominently in the way modern US healthcare has been constructed?

John Goodman: Number one is the belief that the market can’t work in healthcare. In fact, the market works very well in healthcare as long as third-party payers are not involved. Wherever there’s no Blue Cross, no Medicare and no employer, you probably have a market that works very well. That would include, for example, the market for cosmetic surgery, the market for laser eye surgery, online pharmaceutical mail houses and walk-in clinics.

The other false belief is the idea that patients can’t make good decisions on their own behalf. In fact, there’s a lot of evidence that when patients are managing their own care the results are better than when conventional doctors do it. And there’s also evidence that if they’re allowed to manage the dollars that pay for that care that they make good decisions.

Daily Bell: Requiring providers to post price information – you write – is virtually useless. Why?

John Goodman: We don’t have any real prices in the conventional healthcare system. Every price is an artificial price. We often hear proposals to require doctors and hospitals to post their prices but that is really worthless information. How does that help me if I’m a Blue Cross patient to know what the Aetna patient is paying or what the Cigna patient is paying? This is not helpful information.

Daily Bell: You offer common-sense solutions in the book. Can you summarize?

John Goodman: Everybody in the system needs to bear the cost of the bad decisions and reap the benefits of the good ones. So if patients decide to waste dollars on healthcare, those should be their own dollars. If they do things to conserve resources and eliminate waste, they should profit from that decision. The same thing is true on the provider side.

Daily Bell: Wouldn’t the most reasonable solution be to simply go back to an old-fashioned doctor-patient relationship? Why isn’t it sufficient for the doctor to be a vendor and the patient to be a consumer?

John Goodman: If you mean can we go back to Marcus Welby medicine, the problem is that medicine is so much more advanced. That is why we have specialists. If the condition is complicated, one doctor can’t usually solve all the problems. So we need a way for doctors to share information and cooperate in dealing with patients and for that reason, the Marcus Welbys aren’t going to be able to handle every problem.

Daily Bell: Why shouldn’t medical services be treated like any other commodity?

John Goodman: You don’t want to think of medical care like you think of the market for corn. Those are totally different markets and one of the problems with the health economics textbooks is that they tend to treat medical services as though they were like the market for corn and they’re not. But one thing is true of both markets: They’re going to work better if government is not interfering with people’s choices and not giving people perverse incentives.

Daily Bell: How much influence does Big Pharma have on the modern medical system?

John Goodman: Drug therapies are the most cost effective therapy and the drug companies are coming up with new remedies all the time. Unfortunately, the FDA makes it really expensive to bring a new drug to the market and so drug companies often can get a drug approved in Europe three or four years before it’s approved in the United States. So I don’t have a problem with what the big drug companies are doing. I wish they had not done what they and all the other interest groups did back in 2010 and supported Obamacare.

Daily Bell: How much influence does the FDA have over how doctors are able to practice medicine?

John Goodman: Actually, doctors are free to prescribe almost any drug they want. For example, if a drug is approved for one purpose and there’s literature that shows that drug may work for some other purpose for which it was never approved, the doctor can still prescribe that drug for the second purpose. And that happens a lot.

In fact, I think more than half the cancer drug prescriptions are for off-label usage, which means they’ve never been approved by the FDA for those uses.

What is bad here is that the drug companies themselves cannot communicate to doctors about the benefits of off-label drug use. So if there’s an article in the New England Journal of Medicine saying that this drug we originally thought would be good for diabetics has tremendous success for prostate cancer a drug company cannot send that article to doctors. If it does, it’s violating the law.

Daily Bell: How could the drug market be changed in keeping with your other suggestions?

John Goodman: Certainly I would think patients with incurable diseases or patients who are expected to be terminal ought to have wide latitude in taking any drug that they want to take. So I would roll back the powers of the FDA to restrict our drug choices.

Also, I would roll back the powers of the FDA in the area of medical devices. For instance, the only artificial hand the FDA has ever approved costs $50,000 or more and it’s really for adults. There are artificial hands for children that can be made with 3-D printing for about $50. They’re being distributed right now but all that is apparently a violation of federal law because the FDA has never approved them.

Another example is long-distance monitoring of blood sugar levels of diabetic children. By hacking into existing systems the private sector has figured out how parents can monitor their children even though they’re playing with other children a block away. That’s another system that’s never been approved by the FDA. So the FDA is prohibiting children and adults from therapies and some devices that would greatly improve their lives.

Daily Bell: Would you include medical marijuana and other non-pharmaceutical medicines in that group of medicines patients should be able to choose to take?

John Goodman: I really don’t think I should have to ask permission from the government to take any drug and I certainly shouldn’t have to ask permission to be able to consume marijuana.

Daily Bell: What do you think of medical journals these days? Are they being corrupted by pharmaceutical money?

John Goodman: The bigger problem is that medical journals are publishing studies that would never be published by an economics journal. So they do a kind of research that compares an experimental group with a control group but they tend not to ask any other questions about the individuals, about their medical history, their parents’ medical history or other factors that we know affect health. So the research tends to be very poor, at least based on what we economists expect to see in an economics journal.

Daily Bell: Can you address the existing health system for US veterans?

John Goodman: The Veterans Administration healthcare system is very bureaucratic. They ration by waiting. They were one of the first large systems to use computers and therefore they have information that other hospitals don’t have. But they do a very poor job of meeting the needs of the patients, especially in the mental health area and they operate like the Canadian system. The bureaucracy determines the priorities, not the needs of patients.

Daily Bell: How could it be improved?

John Goodman: I would privatize the system and let the veterans hospitals compete against other hospitals. Let’s let the patient choose where he wants to go for his care. You always get better service if you have competition.

Daily Bell: Are there other special populations in the US in need of a particular healthcare system separate or different from ObamaCare?

John Goodman: I think the way we make healthcare available to poor people is atrocious. There are 50 million people or more on food stamps that can go into any supermarket you and I can go into and they pay the same price you and I pay. When they reach the limit on their food stamps allocation, they can add cash to the bill. You never hear of any supermarket refusing to accept any more food stamps customers. We have another 50 million people, basically the same people, who are on Medicaid and their biggest problem is finding doctors who will see them. If they go to Minute Clinic and Medicaid only pays $35 but the charge is $75, it’s illegal for them to add money to the Medicaid fee and buy healthcare the way they buy food. Therefore, they have to go to community health centers and the emergency rooms at safety net hospitals where they can wait many, many hours for routine care. We could radically improve access to care for low-income people if we would simply let them buy healthcare the way they buy food.

Daily Bell: We hear horror stories about the British National Health Service.

John Goodman: The horror stories are true. It’s very bureaucratic. People who need care don’t always get the care they need. People are dying early because they don’t get access to the best cancer drugs. People die because they don’t get dialysis who would have lived had they been in the United States. It is a bureaucratic system that nonetheless allows people to go to the private sector provided they have the money to pay for private care or provided they have an employer that provides private health insurance.

Daily Bell: How about the Canadian system? What’s the difference between the two, if any?

John Goodman: The Canadian system is another bureaucratic system. Like the British system, they have long waits for care. Canada did not until recently allow a private sector. There was a Canadian Supreme Court ruling that is allowing some private medicine in Quebec and it’s begun spreading to some of the other provinces but it’s still basically a socialist system.

Daily Bell: Is the US headed down this same road?

John Goodman: Absolutely we are. What everyone needs to understand is that our system is a lot more like Canada and Britain than it is like a free market. Basically, we don’t buy healthcare with money in this country just as the Canadians and the British don’t. We mainly pay for healthcare with time. When a Canadian sees a doctor it’s free; when we see a doctor and spend a dollar, only 10 cents is coming out of our own pocket and the other 90 cents is paid for by a third-party payer. So we’re already very much like the other countries in the way we pay for care. What’s going to start happening under ObamaCare is that we’ll start having much longer waits. People who get their health insurance from the government or subsidized health insurance in these exchanges are going to find that waiting for care in the United States is going to look more and more like waiting for care in Canada.

Daily Bell: What are some bright spots? Is your message getting through? Can you give us some optimistic details? Is political change possible? If not, what will bring about a change in US healthcare?

John Goodman: Along with help from my colleagues, I basically convinced the employer community of the value of Health Savings Accounts and I think I’m beginning to convince employers of insurance companies of the value of using the markets to control the price of expensive procedures like hip or knee replacements rather than trying to control those costs through bureaucracies.

I have made less progress in Congress, but there seems to be no push by the Obama administration or by Democrats in Congress to get rid of health savings accounts. In fact, the Obama administration has really gone in the other direction by making a little bit of progress in allowing $500 in Flexible Spending Accounts to rollover year to year. So those accounts will begin to look a little like Health Savings Accounts. That’s not a small thing. Thirty million people have a Flexible Spending Account and the current rules are use-it-or-lose-it: you have to spend all the money by year-end. But Obama administration is now going to allow $500 to rollover. It’s a timid step in the right direction.

Daily Bell: What is the reason for any limit at all on year-end carryover of an individual’s Flexible Spending Account?

John Goodman: This was never an act of Congress. This was a decision by the Treasury Department and the Republicans have been just as bad as the Democrats. Obama at least is moving in a good direction but he’s doing so very timidly.

Daily Bell: How do we keep up with what you’re doing?

John Goodman: Go to my blog at Forbes and my author page at the Independent Institute.

Daily Bell: Thanks for your time.

After Thoughts
By Anthony Wile

This is a dense interview full of information: It is also a damnable indictment of the US healthcare system.

In fact, for those old enough to remember when doctors made house calls, the evisceration of the medical marketplace is especially painful. And it continues. ObamaCare is not especially progressive; it is, instead, a disaster building on previous legislative disasters.

Medicare and Medicaid effectively severed linkages between prices and services. Big Pharma and other healthcare vendors love government interference in the marketplace because instead of being exposed to market forces, they can create beneficial (for them) price agreements that attain the force of law.

ObamaCare will surely have the effect of further freezing medicine in its current form. If you create a new treatment, good luck getting paid for it if it’s not recognized by a plethora of fedgov agencies.

Thus another part of US creative thinking passes away. Bureaucracy, sloth, inefficiency and a gradual, steady decline in what is left of US medical innovation will likely be the legacy of ObamaCare.

Hopefully, Dr. Goodman and people like him can help turn the tide. The ideas are innovative and he’s to be congratulated for making progress. And here’s a thought that occurs to us: If Dr. Goodman’s ideas are more widely adopted, it is likely that acceptance of cannabis treatments for various medicinal purposes will speed up as well.

Perhaps the 21st century will see advancements in natural, non-pharma treatments for numerous conditions and concomitant reductions in what is now a radically expanding US healthcare bureaucracy.