Home > Business of Medicine, Cost of Healthcare, General, Uncategorized > Healthcare Reform Has It Wrong: Why American Health Care is So Expensive Part 1

Healthcare Reform Has It Wrong: Why American Health Care is So Expensive Part 1

Having been a physician now for 16 years, I have had a first hand view at the variety of healthcare reforms and regulation put into place over that time.   Most recently, the Affordable Care Act has been at the center of our attention, but it is by no means the only thing the government has done over that time.

One-Dollar-Bills.jpgToday, President Trump and the Republicans are working to repeal the Affordable Care Act, and possibly replace it with something else (Something Great if you listen to Trump.)  I have mixed feelings about this.  I think that the ACA did some good things, but also got some things wrong.  At its fundamental core, by forcing all people to buy healthcare through a private insurer (albeit through a government funded network), it was trying to create universal coverage.  Unfortunately, the ACA struggled to get healthy people who would pay more than they consumed to enter the system, thus creating a system where there were often more claims than premiums.

A socialized healthcare model uses the government’s power of taxation to levy a tax on all people and in return pays for some level of healthcare for all.  You are forced to pay a tax, and you automatically get the benefits of a healthcare system that will provide care for you if you need it.  All are covered, even the rich.  The ACA attempted to address this more directly, forcing each individual to pay their premiums in the private market.  But because of the political realities in the US right now, forcing people to buy healthcare was unpalatable to the Republicans, and the creation of a Public Option was also untenable, and so the ACA was gutted of much of what would have made it effective.   As is stands today, there are not enough healthy people in the networks paying for the sick, driving premiums up, as well as deductibles and co-pays.  20 years ago I had a 500 dollar deductible and a 2000 dollar out of pocket max.  Now as a well regarded physician in my community, my rather expensive policy doesn’t kick in until 2500 dollars and has a very high out of pocket max.  The ACA was supposed to not have a tax on the middle class.  This is of course a lie, as the tax is there, it is just paid as higher out of pocket healthcare costs relative to pre-ACA policies.  In effect, as a relatively high earner I pay twice, first on the extended medicare tax and second through my uncovered out of pocket costs.

So the answer is to fix the ACA!  Right??   Isn’t there some magic combination of federal regulations or healthcare provision mechanisms that will fix American healthcare.  There has to be! Or else why would the government be spending so much time trying to figure it out?  Right??

Nope.  I don’t think so.   In fact, I think that 95% of what I hear in government has nothing to do with fixing our problems in American healthcare.   The problem is that America has this problem backwards.

Let me explain.

Let’s say that we decided as a country that every citizen should own an automobile.  We all agreed on this.  Everybody should have a car!   It would be inhuman for anyone to be be forced to do without it.  OK, we agree.   Cars are a human right.

Now what if the only thing you could buy in the country was a $75k BMW, or even worse, a $250k Rolls Royce.  In fact, all you ever see is BMWs and Rolls Royces, so much so that the idea of a completely serviceable $22k Toyota doesn’t even cross your mind.   As far as you know, cars cost at the very least $75k, and no one knows any different.

So working on this incredibly important task of getting a car to every American family, the government gets to work.   The Democrats argue that we should tax the rich to pay for everyone’s cars.  The Republicans think that everyone should be self sufficient, and if poor and middle class families can’t afford a Rolls, or even a middling BMW, then they will just have to walk. Senators and Congresspeople would argue vociferously about these two ideas, and eventually we would figure out some way to get those cars, and we would probably borrow a lot of money to pay for it.  Some people still  would end up walking. Eventually the system would break down, because in the end, there aren’t enough people making enough money to pay for expensive cars for everyone.

And that is the same problem we have in American healthcare.   Our government is flailing around trying to figure how to pay for the Healthcare system we have, when the system is fundamentally rigged in a way to make it incredibly expensive.  The problem isn’t how we pay the cost.  The problem is that the cost is too high.   America spends an incredible amount of money on healthcare, but we don’t have the best healthcare outcomes in the world.  Far from it.

In order to fix American healthcare, we have to get our focus off how we will pay for healthcare, and become focused instead on making quality healthcare less expensive to deliver.

I argue that the problems we face are many.  There are so many systemic issues at play making American healthcare expensive.  Unnecessary and burdensome regulations that do not improve healthcare.  A medical equipment and development system that only incentivizes development of expensive and disposable tools over completely serviceable reusable equipment.  A societal culture that flails against death, spending ungodly sums of money not on preventable disease and remediable illness but on the denial of our very mortality.  A insurance system that is perversely incentivized to spend more money rather than less.  A pharmaceutical industry that is driven by corporate profit over patient benefit.  And a system that completely insulates the only people actually spending money (Doctors!) from ever feeling the effects of their decisions.

Over an upcoming series of essays, I will argue that our healthcare system is designed in a way that every incentive exists to make healthcare delivery as expensive as possible, and there is almost no incentive to make it cost less.  Each essay will point out a particular facet of the problem, with real world examples of this dysfunction at work and how it drives up the cost of healthcare.  And not to be a inactive complainer, I will lay out a potential solution to the problem for readers to chew on.

Please share these essays widely.  I hope that our government leaders might read them, be inspired not to fight over how we pay for a Rolls Royce for every person, but instead create a system that delivers great healthcare for less money.

So stay tuned for Why American Healthcare is So Expensive Part 2 – The Problem with Medical Equipment.

  1. David Benltey
    February 20, 2017 at 9:16 am

    Thanks for this; especially from a doctor’s perspective.

    I agree with your underlying premise, but would like to correct one of your background facts since an accurate description of the problem is imperative to formulating effective solutions. In particular, you state: “forcing people to buy healthcare was unpalatable to the Republicans, and the creation of a Public Option was also untenable, and so the ACA was gutted of much of what would have made it effective.” In fact, ACA was passed by a Democrat controlled Congress & signed by Democrat President Obama without 1 GOP vote/supporter; accordingly, asserting the “ACA was gutted” because of Republicans is factually incorrect. The main reasons Obamacare / ACA is such a disaster is the Obama Democrat’s arrogant refusal to negotiate with GOP or make modifications and the fascist methods used to pass the legislation, i.e. lying repeatedly & deliberately to the American people, then shoving it down our throats.

    As to the underlying issue of reducing health care costs, the elephant in the room is a human/emotional/cultural issue that will require very heavy lifting by policy makers, which our hyper-partisan environment won’t allow. Specifically, who is going to carry forth the argument (harsh truth) that we can’t afford to keep people alive so long nor provide everyone with the “life-saving” drugs and/or surgical procedures that promise to save/extend/improve their lives?

    On a related issue, any plan/law that forces people to pay for services/coverage they don’t want or need – one of ObamaCare’s major flaws – is an untenable mandate that falls outside the bounds of individual liberties & economic freedoms that are so important to our system. If we’re going to agree to “buy everyone a car”, then we need to admit we are supporting a socialist/government controlled system and all elements of that system, including doctors & other health care worker pay, will be controlled by politicians & bureaucrats who know little to nothing about what constitutes the best medical care for individuals.

    If I may be so bold as to offer the skeleton of a practical solution: First, if Medicare isn’t broker, don’t fix it but make sure it is financially sound & paid for by the beneficiaries. Second, let people (individuals or through employers) buy the best health insurance plan they can with the benefits/coverage they want. Third, use Medicaid, block-granted to states, to cover those who can’t afford “regular” insurance under the condition that Medicaid only provides very basic “survival” coverage. Simultaneously work on financing mechanisms and cost-reduction programs that make the system more “affordable”. Toward that end, let market/economic realities force the “cultural changes”.

    In the end, we need to realize we can’t all have a Roll-Royce, no matter how “unfair” we think it is, or how emotionally charged the arguments are. The more we can eliminate or at least reduce middle-men, particularly government bureaucracies & insurance companies, the better the odds are we’ll be able to control costs.

    Like

  2. Elizabeth Black
    February 20, 2017 at 2:32 pm

    How do I make sure I get part 2. You are of course on to something. Keep it up.

    Like

    • February 24, 2017 at 4:42 am

      You can subscribe to the feed in a blog reader like Feedly; I think you can also request to have new posts sent to your email.

      Like

  3. February 21, 2017 at 11:21 am

    Where to start? First comparing owning a car to health care is a false equivalence. No one could potentially be less healthy from not owning a car. Second, attacking regulations designed at improving privacy and safety not only for patients, but also for physicians and staff is disingenuous at best.Next attacking inexpensive disposable tools vs reusable tools again aimed at promoting safety for patients and staff is disingenuous. And finally, stating that physicians are the only ones “actually spending money” is laughable from someone who used to spend $1,000 a month on my two childrens’ health care. Let’s reveal some real and true reasons why health care is so expensive.

    1: Physicians are continually raising rates due to medicare-approved rates. This states that physicians can’t charge more than a certain amount for a procedure. And all procedures have a code and are billed accordingly.

    2: Physicians spend entirely too much on their own liability (malpractice) insurance. They pass the costs on to patients.

    3: Hospitals subsidize the cost of their insurance as well as insolvent patients by overcharging for routine supplies and medicines to those with health insurance.

    I certainly agree with you that for-profit health care is a problem.

    Like

  4. February 24, 2017 at 4:48 am

    Wow, Dr. Fogelson, I agree with you almost 100%! I was so surprised, I had to make sure I was reading your blog in my feed, and not the blog from Dr. Keith Smith of the Surgery Center of Oklahoma. Almost everything you said was in line with what he said.

    He has solved part of the problem by posting his prices online, and by keeping overhead low (in part by not accepting govt “help” that requires the doctor’s office to use costly and ineffective systems to be eligible to receive it). Most of his surgeries are about 1/10 of what most hospitals charge. People in America have found that they can pay out of pocket for the entire surgery (and also travel and hotel expenses) for less than what they’d pay if they stayed at home — sometimes if they paid only the copay part of the bill that their insurance doesn’t cover.

    I hope you’ll look him up — you can also find him on Facebook. I don’t want to include a link in case it causes the email to go to spam, but it’s easy enough to search on Google or Facebook.

    Keep up the good work! Cheers.

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