Coverage, cost, portability, catastrophic care, tort reform, end of life, healthcare v sicknesscare, choice, pre-existing conditions, etcetera, ad nauseum. Part of why the healthcare debate is a zoo is because the healthcare legislation is a zoo. Too many things being addressed in one bill. 1,017 pages. Ridiculous.
If improving the American healthcare system is really the goal, it should be addressed along three avenues. Everything being argued over today could be categorized as either being cost-oriented, coverage-oriented or portability-oriented. Since we are constantly being told that if we do nothing, healthcare costs will destroy us, let’s address that one first.
Of the various reasons given by the White House as to why a revamping of healthcare must happen before lunch, the most consistent is cost – if nothing is done, we are told, healthcare will bankrupt the economy. While that Malthusian thought may or may not be true, it is increasingly clear that the proposed legislation in the House will snatch national bankruptcy from the jaws of the status quo. Any objective reading of the America’s Affordable Health Choices Act of 2009, HR 3200, concludes that nothing in its 1,017 pages has anything to do with cost containment. Indeed, the non-partisan Congressional Budget Office estimates that it will cost an additional $1 trillion to $1.4 trillion over the next 10 years. Remember that President Clinton told us the same thing on the eve of his attempt – “if we don’t do this, any other efforts to improve the economy will be for naught.” Well, the economy improved in spite (because?) of the failure of HillaryCare. The Chicken Little argument lacks credibility.
Cost is, however, a problem that can be addressed in absentia of dismantling the world’s preferred profound healthcare delivery system. The largest single factor in allowing healthcare costs to accelerate faster than general inflation is the third-party-payer dynamic. Markets merely quantify human behavior – if insurers are picking up the bill, and the employer is (tax-exempt) paying half the premiums, where is the incentive to hold down costs at the point of delivery? To hold down premium increases? Nobody is playing with their own money, vastly weakening any natural constraints on cost, and introducing the third-party payer from hell – federal government – won’t do anything to re-establish them. Indeed, with no need to show a profit and a bottomless pit of taxpayers from which to demand payment, any natural tendency for cost constraint will all but disappear.
It turns out that there is something that could be done to re-introduce market forces that wouldn’t cost the government (read: you and me) a dime – remove the prima facie unconstitutional bar to healthcare insurers from competing in interstate commerce. We can buy automobile insurance from a lizard in New Jersey, or life insurance from an elk in Massachusetts, why can’t we buy health insurance from another state?
We should also treat individuals like we do employers as far as protecting income spent on health insurance from taxation. While this provision would reduce tax revenues by that amount, it is a rounding error compared to the trillion-plus unfunded entitlement that is HR3200. Any given price defines its natural market as being between those who would pay more for more quality and those who can’t afford that price. Lowering price will include more at the lower margin. In other words, lowering the real cost of health insurance will allow more people to take advantage of the white market. That’s just how it works.
The first provision (interstate sales) reintroduces true competition (between private players), which always tends to lower cost and raise quality – look at what’s happened to largely uncovered Lasik eye surgery. The second provision (shielding insurance premiums from taxable income) is a necessary step in removing health insurance from being tied to employers. These provisions should be crafted, debated and voted separately, allowing them to be judged on their merits and not held hostage to each other (or any other non-germane provisions).
The largest single factor in the doctor’s bottom line is malpractice insurance – which for some specialties can top $150,000 a year – and, as we know, the only way they can survive is to pass costs along to consumers (read: you and me). Aside from that direct cost, the threat of ruinous litigation is responsible for, conservatively, $178 billion being spent on defensive medicine – statistically unnecessary tests and redundant procedures. This all goes onto the bill before the costs of the actual indicated treatment and drugs are even considered.
States are beginning to tackle part of the problem on their own. Mississippi, Missouri, New Jersey, Texas and West Virginia have instituted caps on non-economic (i.e., “pain and suffering”) awards in professional malpractice litigation (to between $250,000 and $400,000), and the results have been dramatic. Doctors are moving from uncapped states into states with caps, and professional (and therefore individual) insurance premiums are dropping in states with caps. Insurance companies are also moving into states with caps, further increasing competition.
This state-by-state approach is far superior to having a federal Congress set one-size-fits-all rules for the entire country. We have fifty laboratories with which to experiment and we should take advantage of that. The closer to the problem that you position problem-solving, the more accountable are the problem-solvers and the better chance you have of arriving at a workable result. This isn’t rocket science.
One of the public whipping boys on healthcare has always been the pharmaceutical industry – greedy, always placing profit above the lost souls dropping dead on their doorstep. It’s an easy sell.
Drugs are expensive.
What they won’t tell you is that, at average, it takes around two decades and a billion or so dollars to bring a new drug to market, and only one in three new drugs actually make it to market. Critics compare how much a drug costs per pill versus how much a pill costs to produce, simply overlooking what it cost to develop the drug and build the facility to manufacture those pills. If these companies aren’t allowed to recoup these costs, how many companies do you think would undertake the research in the first place?
It is true that the sooner generics can come to market, the less expensive will be the gross national bill for drugs, and that could be addressed by revisiting the patents granted for pharmaceuticals. Drug makers routinely apply for patent extensions for trivial changes (sometimes just in the packaging), and they are routinely granted. This practice should be eliminated, and patent-life limited to 10 years for pharmaceuticals. This would bring generics to market sooner and allow drug makers to recover R&D costs while they have a monopoly.
Beyond that, there isn’t much that can be done that wouldn’t dry up the very drugs that some demand be given to all who need them. The world is on the brink of breakthroughs in gene therapy, nanobiologicals and space-based manufacturing, and America is leading those efforts. Sacrificing these advancements on an altar of demagoguery would be nearly as criminal as myopic.
Over half of healthcare spending goes to the elderly, as healthcare maintenance naturally increases toward the end of life. Part of the bankrupting of Social Security and Medicare is that we do Social Security and Medicare exactly upside-down. Benefits (not contributions) should be means-tested, and contributions (not benefits) should be open-ended.
FICA and Medicare should not be cut-off at some arbitrary income level (and all FICA and Medicare revenues should be earmarked for Social Security and Medicare – not general revenues), and Social Security and Medicare benefits should be cut-off at, say, the national median income. Bill Gates (not to mention Members of Congress) do not need Social Security and Medicare, but they get them, and Bill Gates (not to mention Members of Congress) don’t contribute beyond $106,800 of taxable income. Why is that?
Those who know me, know that I am not a fan of “soaking the rich”. The fact is, we have two programs that aren’t going away but are going bankrupt, and that will affect us all. The purposes of both programs are admirable and can be said to be reasonable governmental responses to the problem of aging in a society of 300 million people. The problem is in how these programs are funded and administered.
Each of the provisions herein discussed should be crafted, debated and voted individually, each on their own merits. Much of the negative public reaction to ObamaCare is the vastness and breathless manner of approach – too many things being passed in one bill, and too quickly, to understand. This couldn’t have been more clearly demonstrated than the timely collapse of Cash-for-Clunkers. If government can’t get a simple rebate program right, how in the world is it going to responsibly revamp a sixth of the economy?! Each discrete segment of reform should be crafted, debated and voted separately. Each proposal standing or falling on its own merits.
We should put an end to 1,000-page bills that are voted but not read.
 See Houston Chronicle, March 17 2005; The Perryman Group, The Impact of Judicial Reforms on Economic Activity in Texas Overall Economic Impact on State’s Economy; Scott Hensley, Doctors Flock to Texas After Tort Reform, in Wall Street Journal, May 19 2008.
 I’m considering only drugs that make it out of Level I testing. Most don’t get that far, but the decades and billions don’t really kick-in until after laboratory testing of the compound.