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Healthcare – Something Must Change!

The U.S. healthcare system is the most expensive in the world, although the results achieved (e.g., average life expectancies) lag those being achieved in many other countries.  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.  See The Last Well Person, Nortin M. Hadler, M.D., McGill-Queen’s University Press (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 major problem is that healthcare reimbursement rates are for the most part determined by government bureaucrats.  The current Medicare reimbursement schedule (developed over the past several decades) provides lucrative compensation for some medical procedures (e.g., 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 the payment for healthcare services is typically made by third parties (government agencies and/or insurance companies) rather than by healthcare consumers.  As a result, medical tests, medical treatment, prescription drugs, etc. tend to be requested without regard to cost.

Government healthcare benefits (Medicare, Medicaid, SCHIP, etc.) are already straining government budgets, and further expansion of government healthcare coverage is proposed.

With healthcare costs rising faster than prices in general, coupled with rapid growth in the number of retirees, the fiscal pressures will increase inexorably.

Some experts say enormous 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 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, we agree that government should not be relied on to do this job.

 Given the deleterious effects that government involvement has had on the healthcare system thus far, it is hard to see why the government should be granted even greater authority over the system.  Talk about “the triumph of hope over experience.”  Although healthcare costs might well be contained, as a matter of economic and fiscal necessity, the result would presumably be achieved – as it has been in other countries with universal healthcare – by de facto rationing.

Although SAFE sees no “silver bullet” solution to the relentless growth of Medicare/ Medicaid outlays, the following steps could help. For a pamphlet that explains these proposals and puts them in context, 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 income tax exemption for the value of employer-provided healthcare benefits with the idea that corporate and government employees would typically make their own arrangements for healthcare services and insurance.  In any case, they should not continue to enjoy this unjustifiable tax preference.

3. Encourage the use of catastrophic coverage insurance combined with Health Saving Accounts (HSAs) to cover outlays for routine healthcare services.  As an exception to item 2, HSA contributions and the associated insurance premiums should be payable out of pretax income or tax deductible.  Also, to break the state-by-state stranglehold on healthcare insurance (precisely what treatments should be covered, etc.), people should be permitted to purchase catastrophic 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 providing block grants.  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.

For further discussion, see our blog entries listed below.

Blog entries

3/29/10 – Raising the ante: America’s future is at stake

3/22/10 – A tangled web: we must enact GovCare to reduce the deficit

1/25/10 - A setback for GovCare, now what?

12/21/09 – Two crises and a partridge in a pear tree

12/14/09 – Healthcare: down to the wire

11/9/09 – GovCare: good intentions are not enough

11/2/09 – Healthcare insurers: imperfect yes, demons no

10/26/09 – Crunch time in the healthcare debate

10/12/09 – Déjà vu: Scoring a healthcare bill

9/7/09 – A conversation about healthcare

8/24/09 – Healthcare: deal or no deal?

8/10/09 – A national conversation about GovCare

6/1/09 – We interrupt this program for a special announcement

4/6/09 – SAFE plan for healthcare reform is “government-lite”

3/30/09 – A “ready, aim, fire” approach to healthcare reform

3/23/09 – Healthcare plan will not pay for itself

3/16/09 – A tale of two summits [re fiscal responsibility and healthcare, respectively]

2/9/09 – Looking ahead to the Fiscal Responsibility Summit [SCHIP expansion bill passed]

10/20/08 – Both candidates offer “pie in the sky” healthcare plans.

4/7/08 – Straight thinking about Social Security [Medicare & Medicaid are growing even faster]

3/17/08 – A winning strategy for healthcare insurance

3/10/08 – With liberty, justice, and healthcare insurance for all

2/11/08 – If you want good answers on healthcare, ask good questions!

11/26/07 – The key to a better healthcare system: empower patients

10/15/07 – Refundable tax credits: not the answer for healthcare

10/8/07 – The SCHIP veto: a “Pyrrhic victory” at best

8/20/07 – The future of healthcare finance; choosing a path

8/14/07 – Healthcare by the numbers

8/6/07 – Universal healthcare: we don’t want it

7/7/07 – Low share of medical outlays paid by patients leads to waste

Summer 2003 – Healthcare costs are out of control, and we’re not going to take it any more!

http://www.s-a-f-e.org/nwsltr30.htm#HEALTH

Spring 2003 – It’s a muddle, it’s a train wreck, it’s Medicare.

http://www.s-a-f-e.org/nwsltr29.htm#medicare

Summer 2002 - The effectiveness and future of Medicare.

http://www.s-a-f-e.org/nwsltr26.htm

Spring, 2002 - Creation and funding of Medicare.

http://www.s-a-f-e.org/nwsltr25.htm

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