No progress on fixing healthcare system

Reader feedback at the end

There are ample reasons to be dissatisfied with the US healthcare system, but little agreement as to how it should be improved. We reviewed the state of play 18 months ago, in the wake of the Republican failure to “repeal and replace” GovCare, and were unable to identify a path forward that could garner the necessary political support. Rethinking the healthcare system – Part 1,
1/22/18.

Having since regained control of the House of Representatives, Democrats believe GovCare is here to stay. They are now aiming to further expand the government’s role in the healthcare sector and will push this issue in the 2020 elections.

1. Overview – Total healthcare spending in the US as a percentage of Gross Domestic Product has nearly tripled since 1970 and now stands at about 18%. Peterson-Kaiser Health[care] System Tracker & Dashboard, accessed 9/5/19.


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This level of healthcare expenditures currently works out to about $10,000 per year for every man, woman and child in the US, which is nearly double the average per capita expenditures in other developed countries. Ibid.


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All the other countries on the chart have some sort of universal healthcare system, while the US doesn’t, so one might infer that higher US healthcare costs are due to stinting on government funding for healthcare. And indeed, progressives have implicitly made this argument. Miami debates foreshadow hyperpartisan presidential campaign, Part B,
7/1/19.

Medicare for All would require a tax increase, [said Senator Bernie Sanders,] but Americans would still come out ahead as healthcare costs would be lower under government management. No premiums, deductibles, copays, or out of pocket expenses!

Note, however, that the US is currently supplying about the same level of government funding as other countries do – coupled with higher private spending on healthcare than anywhere else. Peterson-Kaiser,
op. cit.


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It is not apparent that the overall results of the US healthcare system are superior to the healthcare results in other developed countries, many of which have longer average life expectancies, etc., that we do. Accordingly, SAFE has faulted the US healthcare system for being “unreasonably expensive” and producing “indifferent results.” Rethinking the healthcare system,
op. cit.

Reinforcing this January 2018 conclusion, US life expectancy (from birth) has been declining for the past three years. Key factors appear to be drug overdoses (opioids and also illegal drugs), increased incidence of liver disease (which often stems from unhealthy lifestyles), and a rising suicide rate (which might suggest failures in the mental health area). US life expectancy, Uptin Saiidi, cnbc.com,
7/9/19.

2. Reform strategies - Two fundamentally different approaches have been suggested for getting US healthcare costs under control: (A) top-down management that would identify “best practices” and drive them throughout the system (thereby effectively “rationing” healthcare services); and (B) payment system reforms that would give healthcare consumers more ability and incentive to monitor whether the money involved is being spent wisely (if one’s healthcare services are primarily being paid out of someone else’s pocket, this can foster a “cost is no object” mindset).

Big government fans tend to favor the first approach, while fiscal visionaries (including SAFE) prefer the second. But in fairness, either option might work if it was intelligently and consistently employed.

Some countries with “universal healthcare” systems have achieved fairly good results. Maybe we could benefit from their experience by learning to provide government assistance for healthcare in a more effective way.

On the other hand, there could be a huge potential payoff from dialing back government mandates and subsidies while allowing more choice and competition in healthcare insurance and delivery systems.

Note, however, that the present US healthcare system may combine the worst (rather than the best) features of government control versus free enterprise. See, e.g., Americans can’t do healthcare like Europe, Meagan McArdle, News Journal,
2/26/19.

•This isn’t the first time Americans have looked enviously abroad at some other country’s universal healthcare system and tried to import it here, that’s basically what the Obama administration did ten years ago. GovCare was designed along roughly the same lines as systems in Switzerland and the Netherlands, both of which have achieved universal coverage while spending a substantially lower fraction of their national income than America does.

•[But] attempts to reform the US healthcare system are inevitably subject to the constraints of the US political system, which is more fragmented, and easier for interest groups to lobby, than most other systems in the developed world. So Democrats wound up passing (1) “a weak, flawed version of other systems, because American voters wouldn’t stand for a stiff mandate or stiff new taxes to pay for subsidies,” and (2) failed to impose “robust cost controls that would threaten the income of politically powerful hospitals and healthcare professionals.”


If the worst of both worlds view is descriptive of the status quo, it might be better to change the existing healthcare system decisively in one direction or the other than to seek compromise solutions that will please moderates in the middle. Does either side have an attractive healthcare plan to offer, however, or is the debate about this subject simply political posturing?

After having been on the defense for years, Democrats feel they have gained the upper hand. Their goal now is to (a) expand GovCare, further reducing the number of Americans without healthcare insurance (HCI), or (b) scrap GovCare entirely in favor of a universal healthcare system. What to make of Medicare for All [MFA],
3/4/19.

We fail to see that MFA or any of the other progressive plans that have been outlined would represent a real step forward. And beware of relying on experience in other countries, because the merits of their healthcare systems have reportedly been exaggerated. Healthcare system Democrats want has already failed in Sweden, Daniel McLaughlin, affluentinvestor.com,
7/30/19.

The Swedish government pays about 84% [of healthcare outlays], with fees and co-pays paid by families making up most of the rest, but the systems are in a state of crisis. *** As the people of Sweden are finding out, you can’t have unlimited free stuff and also increase access, decrease costs, and increase quality of care at the same time. Something has to give. Supporters of universal healthcare don’t like to recognize the reality of rationing, but even free markets ration goods and services. The difference is who does it – [consumers or bureaucrats].

Even if MFA were well thought out, supporters have glossed over the fact that it could only be paid for by hiking taxes and tanking the economy. Democrats to seniors: Drop dead, Betsy McCaughey, townhall.com,
8/7/19.

Bernie Sanders, Elizabeth Warren and other backers of [MFA] are making big promises with no way to pay. Sanders has proposed several tax hikes, but altogether, they wouldn't foot the bill for even half the estimated cost of his program. It's make-believe math.

For their part, some Republicans are banking on a legal challenge to the constitutionality of GovCare; the goal would be to clear the way for a GOP-sponsored healthcare plan that Americans would be willing to accept. For reasons discussed in the next section, however, this seems like a bad bet.

3. Legal “Hail Mary” – Seven years ago, in a 5-4 decision, the US Supreme Court held that the Affordable Care Act (which created GovCare) was constitutional. Chief Justice John Roberts provided the margin of victory by characterizing the penalty for declining to obtain HCI (i.e., comply with the individual mandate) as a “tax” rather than a “fine.” Assessing the GovCare decision, 7/9/12.

A second challenge reached the Supreme Court in 2015, this one based on the supposedly unauthorized issuance of GovCare subsidies (tax credits) to residents of states who hadn’t established state-run insurance exchanges. GovCare was upheld again (with the chief justice authoring the decisive opinion), this time on grounds that the language of the ACA should, if possible, be construed to support its validity. GovCare weathers another legal challenge,
6/29/15.

Never say die! GovCare critics thought they might finally have a winning issue when – as part of the Republican tax bill enacted in December 2017 without a single Democratic vote – the “tax” rate for failure to comply with the individual mandate was reduced (effective in 2019) to zero. It the ACA had been upheld based on the taxing power of Congress and the tax in question was then eliminated, how could this statute still be viewed as valid?

Technically, this seems like a respectable argument. And after US District Court Judge Reed O’Connor ruled in favor of the plaintiffs (attorney generals of some 20 states), the US Department of Justice advised of its agreement with the decision. The validity of the ACA is now being defended by Democratic attorney generals from a number of states.

The Texas v. Azar decision was appealed to the 5th District Court of Appeals, and a three-judge panel heard oral arguments in July. Although the outcome is unknowable at this point, the panel may well uphold Judge Reed’s decision. The latest legal challenge to the Affordable Care Act, Li Zhou, vox.com,
7/11/19.

Judge Jennifer Elrod, one of the two Republican appointees on the panel, wondered whether the elimination of the health[care] insurance penalty — known as the individual mandate — did effectively invalidate the law. “If you no longer have the tax, why isn’t it unconstitutional?” she asked. Elrod and fellow Republican appointee Judge Kurt Engelhardt also noted that Congress hadn’t explicitly said it intended to preserve the law when it undid this piece of it in 2017.

If the panel upholds GovCare, the dream will be over. If it doesn’t, the appellees will likely petition for an en banc review of the case that could uphold GovCare after all. In any case, the final 5th Circuit decision would probably be delayed until, say, March of 2020.

Then there would be a further appeal to the US Supreme Court, but probably too late for a ruling before the 2020 elections. So much for the prompt settlement of legal issues.

When the Supreme Court finally ruled, moreover, our guess is that the ACA would be upheld again. Certainly that would be the expected result if the chief justice had anything to say about it.

4. Incremental improvements – The current healthcare system is not only ruinously expensive but also delivering deteriorating results, so changes will inevitably come. If conservatives are hoping for changes to their liking, they should roll up their sleeves and start proposing reforms that might conceivably catch on.

For example, the Trump administration has been pushing for lower prescription drug prices, which have soared in recent years along with drug company profits. Potential solutions include faster approval of new drugs, crackdowns on abusive practices being used to extend the period of patent protection, and efforts to encourage our trading partners to pay more for US-developed and produced pharmaceuticals that they import under price-ceiling decrees. The high cost of prescription drugs,
5/28/18.

Regrettably, the administration now seems to be warming to a rule that would effectively subject US drugs to price controls by limiting US prices to the prevailing prices in Canada, etc. Trump has plenty of good options on prescription drugs, why’d he pick a bad one? Charles Sauer, Washington Examiner,
8/2/19.

Trump’s idea is to peg drug prices to the same price that third-world countries pay. His plan is to peg prices to the same prices that socialist countries pay. His plan isn’t going to lower drug prices. At best, it is going to lead to fewer drugs being provided to other countries and at worst it is going to lead to drug shortages — fewer new drugs in the U.S.

Another thrust is efforts to create additional healthcare insurance choices that may better meet the needs of individuals who have found their HCI options under GovCare to be economically unattractive. While 2020 Democrats fight a civil war, Republicans are fixing health[care] insurance, Whitney Munro, townhall.com,
8/28/19.

• State legislatures have expanded access to short-term plans, bridging the gap between coverage for patients, and association health plans (AHPs), freeing up businesses’ money and allowing owners to grow their businesses while offering their employees health insurance. AHPs alone could benefit up to three million Americans, who may see premiums up to $10,000 lower per year than individual market plans.

• The White House took strides to protect the wallets of millions of Americans suffering from chronic conditions by expanding HSA-eligible high deductible health plans and empowered workers with more choices by allowing employer-sponsored health reimbursement accounts to pay premiums for private insurance plans—tax-free.


Would it be better to repeal GovCare and avoid all this complexity? In a perfect world, probably so, but changes like these may make GovCare less onerous for some of the people who have been adversely affected.

One more example was suggested by a recent column in the News Journal. It involves efforts to stem the growing shortage of primary care doctors in Delaware by, among other things, switching Medicare billing from a traditional “fee for services” basis to “value-based contracting” in which reimbursement would be based on a combination of cost and quality metrics. Such an approach may prove rather tricky, but eliminating the incentive for healthcare providers to maximize the number of medical procedures performed could be a big help in controlling healthcare costs. What we can do to combat state’s primary care doctor shortage, Wayne Smith, News Journal,
9/1/19.

Note that the value-based contracting initiative isn’t being managed by government bureaucrats, but rather by healthcare professionals at Delaware’s hospitals working through or in conjunction with a federal Affordable Care Organization, not by government bureaucrats. Maybe this will turn out to be the start of something big!

**********FEEDBACK**********

#I was appalled by this statement, which rests on a premise that the government can run complicated operations more efficiently than the private sector: "Medicare for All would require a tax increase, [said Senator Bernie Sanders,] but Americans would still come out ahead as healthcare costs would be lower under government management. No premiums, deductibles, copays, or out of pocket expenses!"

Consider all the federal programs that have failed, such as: VA, Post Office, HUD, Great Society, Obamacare, Pell Grants, Rent controls, not to mention many failures at the state and local levels. – SAFE director


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