Healthcare - Something Must Change!

US healthcare is the most expensive in the world, yet in many respects (e.g., average life expectancies) other countries achieve comparable or better results. Could less healthcare be better in some cases?

It is common experience that drugs tend to be over-prescribed (perhaps by several different doctors, none of whom is aware of all the drugs being taken), medical procedures are employed in cases where they have limited if any benefit, and people overlook the health benefits of regular exercise, adequate sleep, a sensible diet, etc.
The Last Well Person, Nortin M. Hadler, M.D., 2004. (Caveat: Dr. Hadler surveys a wide range of medical problems/ treatment options. For a balanced view, we recommend that you also consider the opinions of other medical professionals.)

One big problem is that healthcare reimbursement rates are for the most part determined by government bureaucrats. The Medicare reimbursement schedule (developed over the past several decades) provides lucrative compensation for some medical procedures (such as x-rays, MRIs, & surgical procedures) and inadequate compensation for others (e.g., monitoring health and helping patients to stay well).

A second problem is that payment for healthcare services is typically billed to third parties (government agencies and/or insurance companies), with patients paying only a residual share. This dulls concerns about, or even awareness of the cost of medical tests, medical treatment, prescription drugs, etc.

Healthcare costs have risen faster than prices in general or economic output, and the senior population is growing rapidly. Government healthcare benefits (Medicare, Medicaid, SCHIP, etc.) are straining government budgets as a result, and the fiscal pressures will increase dramatically in years to come.

Some experts say major savings in healthcare costs could be achieved by restructuring the system to redress the balance between treating illness and preserving wellness. The overarching change would be to restrict the fee for service model, which currently applies for almost all medical services, to areas (diagnosis, acute care for conditions without a clearly defined mode of treatment) where it properly applies. See
The Innovator’s Prescription, Christensen, Grossman and Hwang, McGraw-Hill (2008).

The required changes would be systemic, and as such beyond the capabilities of discrete sectors of the healthcare system (hospitals, doctors, etc.). Some entity or entities would have to drive the change on a system-wide basis; the most logical candidates are the government, progressive employers with a financial stake in keeping their employees healthy, or integrated healthcare providers like Kaiser Permanente.

Christensen et al. suggest that progressive employers should take the lead. Viewing the lifetime employment model as defunct, we consider the integrated healthcare provider to be a better bet. But in any case, given the negative effects that government involvement has had on the healthcare system thus far, we agree that government should not be granted even greater authority over the system.

Talk about “the triumph of hope over experience.” Although healthcare costs might well be contained under government supervision as a matter of economic and fiscal necessity, the result would presumably be achieved – as it has been in other countries with government-run healthcare – by de facto rationing.

Although SAFE sees no “silver bullet” solution to the relentless growth of government healthcare outlays, the following steps could help. For comprehensive discussion, see
In Search of Real Healthcare Reform (May 2009).

  1. Scrap proposals to use the government’s clout (and our money) to mandate near universal healthcare. The problem with healthcare that needs fixing is not the number of Americans without insurance per se, it is soaring costs that penalize everyone.
  2. End the tax exemption for employer-provided healthcare benefits with the idea that private sector and government employees should make their own arrangements for healthcare services and insurance. In any case, those whose employers provide healthcare plans should not continue to receive this unjustifiable tax preference.
  3. Encourage the use of catastrophic coverage insurance combined with Health Saving Accounts to cover outlays for routine healthcare services. As an exception to item 2, premiums for such plans should be payable out of pretax income or tax deductible, which would put all taxpayers on an even footing. Also, to break the state-by-state stranglehold on healthcare insurance (precisely what treatments should be covered, etc.), people should be permitted to purchase coverage from insurance companies located anywhere in the country.
  4. Have the states take full responsibility for their Medicaid and SCHIP programs, with the federal government supporting the programs with block grants. Once established, the aggregate amount of federal grants would be indexed for inflation, but not allowed to continue growing in real economic terms.
  5. Repeal the federal statute requiring hospital emergency rooms to admit all comers, which inflates hospital costs and has been much abused, while supporting other measures (such as walk-in clinics) to more efficiently respond to the medical needs of the poor and disadvantaged.
  6. End traditional Medicare coverage for all seniors retiring after a given date, e.g., January 1, 2012, providing capped funding for private insurance coverage of future retirees.
  7. Cap punitive damage awards for medical malpractice, which are driving up insurance premiums and inducing doctors to order every medical test known to man whether needed or not.

None of these ideas were reflected in the Patient Protection and Affordable Care Act of 2010 (GovCare), which in our view represented a big step in the wrong direction. Many Americans agreed, and over half of the states plus others organized legal challenges - but none of these challenges has been upheld. See, e.g., GovCare weathers another legal challenge,

GovCare has been largely implemented at this point, and opponents will necessarily shift their focus from championing repeal to proposing changes that would arguably improve it. Much discussion of this subject can be expected in the run-up to the 2016 elections.


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