Ancient Egyptians, employing an arduous system of hieroglyphics to represent numbers in their ignorance of zero, displayed a man holding his hands over his head for 1,000,000 in seeming astonishment that numbers ran so high. Americans presented with our national health care bill increasing resemble that hieroglyphic.
We average more than $10,000 per person this year in health care expenses. This collectively amounts to more than $3 trillion, a figure approximating nearly a fifth of our gross domestic product. Few nations pay even half that portion, and similar nations do not expend anything close to such an exorbitantly high percentage of their economy on health care.
Because we pay a high price at the doctor’s office our economy pays a high price. Unless the American people and their elected representatives do something dramatic to limit costs, limits on our economy persist.
The problem remains extraordinarily complex. But some simple solutions exist to bring costs down. Here are 10, which if implemented even in a less than full-throttled way, could bring spending down by $1 trillion:
10. End Billions in Cost-Sharing Subsidies to Insurance Companies
If a private business requires permanent subsidies to make its enterprise profitable, then the investors — be it government or venture capitalists — should abandon the enterprise. Obamacare pays insurance companies $7 billion annually to ignore prudential practices and adopt an unprofitable model. Even with these cost-sharing subsidies, Aetna, Molina, Anthem, and other insurers flee Obamacare state markets. (The exodus hit Wisconsin, Iowa, Nevada, and several other states particularly hard.) In other words, the government offers free money to institutions designed to make money — but they refuse it. This hints at the unworkability of the current system. Fewer insurers mean less competition, which amounts to higher costs for consumers. Requiring Essential Health Benefits, imposing Community Rating, and mandating unfair ratios of what companies can charge the old vis-à-vis the young results in younger, healthier people fleeing the inflated costs of the exchanges and older, sicker people left in them. Rather than abandoning this failure, the bill proposed by Senate Republicans doubles down on it — offering $45 billion over three years, among other bribes, to stabilize the current system.
9. Doctors & Lawyers
A 2010 study by the medical journal Health Affairs estimates that about one in every 40 health care dollars spent in the United States goes to medical liabilities, such as malpractice lawsuits. Aside from reorienting tens of billions of dollars from doctors to lawyers, the litigious culture surrounding hospitals results in more expensive and, often, unnecessary care. For instance, currently one in three births in the United States, versus about one in 20 in 1970, comes via caesarian section. The U.S. c-section rate compares to about one in six in Sweden, one in five in Japan, and one in four in the United Kingdom.
8. Allow Interstate Commerce in Health Insurance
A byzantine series of regulations that varies by state colors the landscape of health insurance. Some states demand that insurance covers chiropractic care. Others mandate that policies pay for visits to the psychiatrist. Apart from artificially imposed demands not always meeting consumer demands and the labyrinth of laws driving up administrative costs for national companies, restrictions on interstate commerce stifle the competition that inevitably drives down price.
7. Repeal Obamacare Tax on Medical Device Manufacturers
The title of the bill stressed making health care “affordable.” The text included a tax hike upon medical-device manufacturers. Never the twain shall meet. The increase in the expense of manufacturers means an increase in doctor bills, which means an increase in policy rates, which means a decrease in take-home pay. Repeal here. Don’t replace.
6. Doctors Overprescribe, Taxpayers Overpay
A new Annals of Internal Medicine study estimates that 38 percent of Americans take opiates at some point in a given year. Obamacare, which deems prescription drugs an “Essential Health Benefit,” and the establishment of Medicare Part D making prescription drugs a federal entitlement during the George W. Bush Administration fueled the boom in the use of pharmaceuticals, particularly opiates, by ensuring that third parties increasingly pick up the drug tabs of users.
A 2016 study in Health Affairs notes “major shifts in expenditures by payer type for these drugs, with private and public insurers paying a much larger share than patients in recent years. Consumer out-of-pocket spending on opioids per 100 morphine milligram equivalents (a standard reference measure of strength for various opioids) declined from $4.40 to $0.90 between 2001 and 2012. Since the implementation of Medicare Part D in 2006, Medicare has been the largest payer for opioid pain relievers, covering about 20–30 percent of the cost. Medicare spends considerably more on these drugs for enrollees younger than age sixty-five than it does for any other age group or than Medicaid or private insurance does for any age group.”
We pay increasing amounts to feed addictions and then pay increasing amounts for rehabilitation. Stopping the former expense alleviates the latter expense. Here’s a bold idea: pay for your own pills.
5. Community Rating
One way to encourage such a trend toward healthy habits and lower insurance costs involves abandoning a pure fidelity to so-called community rating, which forbids insurers from offering rates that vary by risk factors such as obesity, within Obamacare. HealthCare.gov defines “community rating” as a “rule that prevents health insurers from varying premiums within a geographic area based on age, gender, health status or other factors.” Others find this the definition of stupidity.
Community rating directly leads to the ongoing “death spiral” that drives insurers out of state markets. In turn, this led essentially to legal bribes — the Senate bill sought to allocate $45 billion over three years — to coerce insurers to stay in unprofitable markets. “As high-cost patients enrolled in private plans in greater numbers, premiums went up, and healthier patients dropped out because of the high premiums, which drove premiums even higher because of the concentration of sicker patients (the death spiral of insurance premiums),” Dr. Don McCanne, a single-payer proponent, wrote in 2014. “The net number of people enrolled in the private insurers’ risk pools quite understandably declined.” Individuals paying the financial consequences for their bad choices makes people less likely to make bad choices. Not doing so makes people who make good choices pay the consequences for their neighbors who make bad choices — that’s a prime reason why healthy people leave exchanges, which causes premiums to rise, which causes subsidies or collapse.
4. Make Essential Health Benefits Truly Essential
The more services the government forces private insurers to provide, the higher the cost of insurance becomes, which defeats the titular purpose of the “Patient Protection and Affordable Care Act.” Obamacare dictates that plans cover 10 Essential Health Benefits that not everybody finds essential. This necessarily inflates costs for everybody as it mandates coverage for a range of services few use. For instance, most people do not regard birth control and mental-health services as essential to their well-being. Why not, beyond catastrophic coverage, allow consumers to determine essential and nonessential, which necessarily differs from person to person?
3. Controlling Behavioral Diseases by Controlling Behavior
A study published in the Journal of the American Medical Association in late 2016 showed that the most dramatic increases in health care spending come as a result of largely preventable diseases. “Modeled estimates of US spending on personal health care and public health showed substantial increases from 1996 through 2013,” the study notes, “with spending on diabetes, ischemic heart disease, and low back and neck pain accounting for the highest amounts of spending by disease category.” The average age of Americans going from 28 to 38 since the 1970s provides an unsatisfying answer to part of the rise in costs about which neither individuals nor government can do much. But obesity, which skyrocketed to more than one in three from one in 10 in the 1950s, appears as a problem that government, and more so individuals, can do something to alleviate. Rates of smoking declining from 42 percent a half century ago to about 15 percent today occurred because of a combination of factors, including governmental pressure and personal responsibility, modifying unhealthy behavior. Should this happen with obesity, costs on the three most expensive health problems plaguing Americans decrease substantially.
2. Hospitals Waste Billions Annually
Hospitals waste, by one estimate, $765 billion annually. “This is money.” Elizabeth McLellan, a registered nurse, tells ProPublica of her warehouse filled with unused medical equipment. “This is one of the reasons why your health insurance is so expensive.” Institutions often trash equipment, whether used or unused, once newer models come on the market. A 2017 study in JAMA Surgery demonstrated how introducing something as unburdensome as a cost-reduction scorecard saves enormous amounts of money.
1. Everyone Pays — or Everyone Pays
When somebody else picks up the check, the tab tends to become heavier. This applies to medical bills as well as bar bills. Nobody chants “co-pays for all” the way they do “free health care for all.” But what works as mantra often fails as policy. When people pay, even for a small portion of their treatments through deductibles or copays, they tend to pay attention to cost. By mandating some payment for services rendered for holders of private insurance plans and enrollees in public welfare programs, we transform spendthrift dependents into cost-conscious consumers.
Hunt Lawrence is a New York-based investor. Daniel Flynn is the author of five books.
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