We've described a simple transaction between patients and providers. We wanted to facilitate an interaction where patients who needed health care are able to get that care from healthcare providers, the people, and the institutions that can provide it. We provided for this simple interaction with a transaction, health care in return for compensation. This was working more or less fine for a long time. People who were interested in health care could find it, could find someone to provide it, and one way or another buy the services. Then things happened that started to break this down and we couldn't continue with justice structure anymore. What happened? It's a long story if you want to get into all the parts of the history. But a short, maybe somewhat over-simplified version is that health care providers became increasingly able to do useful things for patients. If you go back into, let's say the mid 1800s, there were real limitations in the actual value of the services that healthcare providers could offer. Lots of things that were done didn't make patients better. Some of them made patients worse. But then health care started to become more sophisticated. The germ theory of disease, better surgical techniques, new medicines, better and more organized training for physicians, new and useful hospitals. All of these things started to come along as early as the late 1800s and into the early, even the mid 1900s. There's a whole transformation of medical care in that time period. That does two things for us. First, when people have health problems, that makes it more and more important to them, and even to the public at large, that they get access to professional health care. Second, healthcare is also becoming more expensive. More sophisticated providers with better treatments cost more. So now it becomes increasingly possible that a person could come to want, may even really feel they need medical care, go see a provider, more than one provider maybe, and end up with a big bill. Maybe a bill they'd have trouble paying. Since health care is not always predictable, it could be a big bill they didn't see coming. More and more they, and societies more broadly, felt that they didn't have an easy choice simply to not use the care. So now we get two problems for patients. A large unplanned bill is certainly uncomfortable in the moment, even more uncomfortable if you can't really pay it. This has longer-term consequences, since it would start to affect their future interest in, and willingness to use a health care system. If the last time you went to see the doctor, you got this huge bill, then maybe next time you are not so willing to go, which starts to defeat the purpose of even having a sophisticated and really capable healthcare system with health care providers in it. The second problem is for the providers. When patients have problems affording health care, it's not great for the physicians or the hospitals or the other folks involved, because they just been providing care for these patients, and then the patient says, "Hey, I'm not really able to pay this bill. I can't afford this care I just got." Then the providers end up not getting paid, and they're not happy either. In the long run, this would affect their ability to provide services at all. We give this problem a name. In health policy and healthcare systems we call this the problem of risk. Risk is an important term and it's an important concept. It'll come up a bunch as we talk about health care systems. We define risk as the possibility of facing a financial loss associated with the use of healthcare. Sometimes when we use this term, will be okay if we include any financial loss in the meaning. But often we also want to particularly note and call out losses that would be hard to predict, the ones that would be more random, more risky. Risk is common and widespread today. Many people would not know in advance if they'll only have small health issues in the next year, maybe go to the doctor once or twice, or if they'll end up with more serious issues and need a lot of care. Maybe they can plan for some bills that are coming, but they may not be able to anticipate everything, and the risk can be quite significant. These days, with health care being a sophisticated and costly as it can be, it's very easy to find situations where someone can benefit from health care, with a very big price tag, that they would not be able to afford. The arrival of notable amounts of risk is what started to break, eventually really broke, the original transaction and our ability to treat healthcare as just a simple good or service, like a loaf of bread or a taxi ride, where when you need it, you find someone you can get it from and you buy it. We couldn't do that anymore with healthcare, because of the problem of risk. We need to dissolve that and we'll talk about that later.
