Should Obamacare Be Scrapped?

(This is the Second Segment In A Four Part Series)

The healthcare system that Obama and other liberals preferred was a single payer expansion of Medicare that covered everyone. However, Obama learned a valuable lesson from previous democratic presidents who had attempted to take-on the various healthcare interests, and failed. Being a pragmatist, he realized that any change in healthcare would require the buy-in of all major players: the pharmaceutical, hospital and health insurance industries; and of course, the powerful American Medical Association.

If Obama could have garnered the support of all democrats, even without a single republican vote, he could have passed any bill he desired. But, the democrats from red and purple states were representing voters that were less liberal and therefore more skeptical of a system run by the government, so the compromise plan that he settled on was a nationalized version of Mitt Romney’s Massachusetts program, including sweeteners that lobbyists believed would increase their revenues and profits.

The Affordable Care Act was never a shoe-in. Even with the support of lobbyists and moderates, the bill was never very popular with the public and barely squeaked through congress.

Obama’s main goal was to decrease the huge number of uninsured Americans, not to fix the costly and fragmented systems and organizations that controlled healthcare. To accomplish this mission, he reinvigorated individual health insurance by setting up a state to state network of health insurance exchanges and then mandated that everyone in the country be covered under some form of government approved health plan. This was a necessary ingredient, because to induce insurance companies to include preexisting conditions there needed to be a huge pool of participants. Children could continue under their parent’s policy up to age 26. Anyone choosing not to participate were to pay a special mandated penalty (or as the Supreme Court ruled, a tax). Low income participants qualified for graduated federal subsidies; paid for through a series of new or increased taxes to help pay the cost of insurance premiums. There was also an expansion of Medicaid payments to the states.

The result has been mixed. Many of the provisions are very popular and about 17 million more Americans are now covered by health insurance than before Obamacare. And the rate of increase in healthcare costs has been slightly lower in recent years, however, the fundamental flaws that existed before, have not gone away. While healthcare expenditures are increasing at about 5.5%, healthcare premiums for individual plans are increasing at a rate of about 25%! Although, taxpayers may groan, almost 85% of plans purchased through the various marketplaces receive federal subsidies. This is to help participants pay for otherwise unaffordable health insurance premiums. Of course, to qualify their incomes must be below federally determined thresholds, the lower your income, the greater the subsidy.

I admire Obama’s goal of providing everyone with health insurance, however, all he accomplished was to load more and more people onto an incredibly expensive and inefficient system. The poor may benefit, but at a huge and growing cost to the federal government, which is already stretched to the breaking point. And many who don’t qualify for subsidies won’t participate. And finally, if insurers can’t cover expenses, then one by one they will drop out of the various individual marketplaces.

If we compare the health outcomes with other developed countries, we still have a long way to go:

Costs

There are many reasons for the big increases in individual healthcare plans. First, Obamacare did very little to halt healthcare inflation, and in fact contributed to the huge rise in pharmaceutical prices. This is because, under the law, Medicare is banned from purchasing generic drugs, only name brand products; and second, Medicare is also banned from negotiating drug prices, which has allowed the pharmaceutical industry to raise retail prices to obscene levels — for Medicare and the uninsured — while offering attractive discounts to big group insurers. Second, many young and healthy Americans have found it cheaper to incur the penalty, rather than pay the high cost of individual health insurance plans. And this trend will likely increase as premiums purchased through exchanges continue to soar. Thus, with fewer participants in the pool, premiums will rise even further. Third, Obamacare created a new and untested model for insurance company actuaries and executives. They simply overestimated the actual number of participants and underestimated the loss ratio and the costs of participating in the various exchanges. The result has been huge losses for smaller insurance companies that primarily focused on individual plans; and huge profits for the big insurance companies that focused on group plans. Many big companies were smart enough to see the “writing on the wall” and have dropped out of the exchanges, refusing to participate in the unprofitable individual healthcare markets. And fourth, by adding 17 million newly insured consumers there was logically more demand for hospital services, clinic visits and prescription drugs. In 2015 we spent $3.2 trillion on healthcare, almost $10,000 per person in the United States, representing 17.8% of our Gross Domestic Product. The fact that healthcare as a percent of GDP keeps rising means that, as a nation, a greater percentage of our national resources are diverted from other sectors of the economy.

Healthcare in America is collapsing under its own weight. The administrative costs (including services that are ultimately written off as bad debts) are enormously inefficient, cumbersome and must serve a myriad of requirements by federal and state governments; as well as numerous insurance plans; including the coding and pricing of countless medical services and prescriptions. Nothing is easy or uniform. The price of every service and product is based on thousands of separate negotiations. And of course, if you are not included in a plan (or covered by Medicaid) then you pay the retail, listed price for everything. To give you some comparisons: French hospitals have about 67% fewer administrative personnel than the U.S.; Our health insurance industry spends 20 cents on every dollar for non-medical costs, France spends a nickel. In America, we spend about $3.2 trillion dollars on healthcare. 20% of that figure comes to $640 billion dollars. If we could bring down our non-medical costs to 5% that would be an annual savings of $512 billion or over the next ten years: $5.1 trillion!

Aside from administration, other drivers of increasing costs are the American Medical Association (AMA) and drug prices. First of all, as a nation, we need a huge increase in the number of qualified doctors and other medical professionals. On the other hand, the AMA wants to greatly limit the number of doctors to keep their member’s salaries high. General practitioners have felt the squeeze between higher operating costs, including high medical malpractice insurance and the ability to raise prices. Many have found it in their best interests to form group practices, own their own labs,hire their own technicians and replace MD’s or DO’s with Physicians Assistants; doctors, therefore become more managers than practitioners, resulting in poorer care for patients. There is also a logical tendency to over-refer their patients for testing and lab-work. Many of these tests may be justifiable and reimbursable, but not medically necessary or even desirable. Every time there is a new study that questions the value of some test or procedure, the AMA immediately refutes the study. Unfortunately, then, every visit to your doctor becomes a game to see how much money can be extracted from the insurance company. Still the general practice doctors are not making a fortune and many are struggling. The specialists, however, are making a fortune and their prices continue to rise well above the rate of inflation. It is not surprising then, that in England about 60% of medical doctors are general practitioners, but in the United States about 65% are specialists.

My experience with a Urologist provides a good example. When I was about 60, my primary care physician discovered that I had a slightly enlarged prostate and my Prostate-specific Antigen or PSA was high enough to cause concern (In England PSA tests are rarely given, as they are not considered a reliable test for prostate cancer screening). Therefore, I was referred to a Urologist, who started asking questions about erectile dysfunction and how many trips I made to the bathroom at night. He then scheduled an ultrasound for my prostate, which apparently wasn’t conclusive, so he then scheduled a biopsy, which showed no cancer. In the meantime, he also scheduled an ultrasound of my bladder to determine how much fluid remained after urination and then scheduled a separate test to determine the strength of my urine flow. These tests resulted in the prescription for a drug, the side effects of which were worse than the minor annoyance of a couple of trips to the bathroom at night. Two years later I was diagnosed with colon cancer. As part of the surgery, a Urologist was needed to insert stents. A pre-op consultation was required in the doctor’s office (the same office that I had visited a couple of years earlier), at which time the Urologist asked about my PSA, my nighttime bathroom habits and if I experienced erectile dysfunction. After finishing with his initiated Q and A, he got up to leave. I had to stop him, sit him back down and ask: “What are stents and why are they important to my procedure?”

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