In recent elections, health care has been an important issue. For 2020, the Democratic presidential candidates have offered several proposals and the Republicans have regurgitated their proposal to repeal Obamacare with a “market-based” alternative.
Each party perpetuates its own political mythology without offering a truly viable solution.
The Democrats on the far left seek a Medicare for all system, which they claim will reduce costs by eliminating private insurance. They believe that the government can administer our health-care system more profitably.
Two years ago I turned 65 and was required to switch to Medicare. When I reviewed the explanation of benefits statements I received from Medicare, I found that my physicians were paid about 20% to 50% less than what they were paid under my pre-Medicare private health coverage.
Several physicians have told me that, if all their patients were covered by Medicare, they could not stay in business.
I also inspected a recent tax return filing by Henry Mayo Newhall Hospital. That filing showed that the hospital collected approximately $96.7 million from Medicare, but incurred costs of $123.4 million providing services to Medicare patients.
In other words $26.7 million of the hospital’s costs of serving Medicare patients was subsidized by other sources—principally patients with private insurance.
It’s no wonder that Medicare is an apparent bargain for participants; a substantial portion of the costs are funded by others. If we adopt a Medicare for all approach and eliminate private insurance, we will kill the goose that laid the golden egg.
The Republicans, on the other hand, seek to create marketplace reforms, but their proposals fail to consider a number of important factors.
Our current health-care system is controlled by dueling oligopolies of providers, pharmaceuticals and insurers. A marketplace system simply cannot work for either the consumer or health-care workers in a system that is stacked in favor of these other stakeholders. The health care distribution channels are convoluted in a manner that obfuscates pricing. In other words, there is no transparency for the consumer.
Furthermore, the Republican plan favors the use of health savings accounts, which are a big boost for upper-middle class people who are in good health, but they do little for the chronically ill or low-income folks.
I suspect that most Americans do not want cheap low-quality health care — but quality health care costs more. Solving our health care problems is challenging and will require painful decisions that adversely affect the special interests who support both political parties.
The Affordable Care Act was a decent first attempt at solving our health care dilemma. Its origins can be traced to a Heritage Foundation study in the 1990s. Unfortunately, it was loaded with pork for special interests and there are some structural flaws that need to be addressed before we can see meaningful health care reform.
Here are some ideas worth considering:
Perhaps the biggest change we can make is to include everyone in a unified risk pool and base insurance costs on that pool, so insurance pricing is not discriminatory against the sick.
You cannot ask the insurance companies to do this without mandating participation by all. It is actuarially impossible to cover the sick without including the healthy in the same risk pool. Numerous studies have shown that most people are incapable of properly assessing their health care needs and risks. Consequently, they will either underinsure or will avoid purchasing insurance altogether.
This increases everyone’s costs because the uninsured and underinsured frequently are unable to pay their medical bills. An insurance mandate is needed.
Along with implementing a single risk pool, implementing volume pricing for medical services and prescription drugs for everyone in the single pool is essential for cost containment. Other counties obtain quantity discounts by employing volume pricing strategies. Conversely, ours is a fragmented system where smaller segments of the market negotiate prices separately.
Insurance companies need to pay a higher percentage of their premiums on claims and the insurance risk collar needs to be reformed.
The FDA is the world’s de facto consumer protection mechanism that is funded by U.S. consumers. We need to spread the approval costs globally.
Generic drugs are supposed to reduce prices by offering lower-cost alternatives, but byzantine distribution channels prevent this. There is a lack of transparency with respect to hospital costs. We must adopt regulatory pricing oversight similar to that of utilities.
Pharmaceutical benefit managers do not deliver their purported benefits to drug pricing. Instead, they supply substantial profits to their owners. They should be outlawed.
We spend billions annually subsidizing the production of corn and soybeans, which are used in foods that promote diabetes and heart disease — two of the largest drivers of health care costs. Reforms are needed.
Until you hear the politicians address these types of issues, we will not overcome the prevailing political health-care mythology, which impedes implementing viable solutions.
Jim de Bree is a semi-retired CPA who resides in Valencia.