Obamacare repeal has become the subject of the day, and it should be repealed. But we should not lose sight of the fact that Obamacare is a small part of the problem and much more needs to be done. This misguided idea was actually an attempt to fix problems in the economics of our medical care that have been developing gradually because of government policies over the past 50 years. It was a government solution to a government caused problem.
The government in its tax policies since the end of WW2 encouraged full medical insurance paid by employers. That was well-intentioned and might have been OK in the 1950's with an entirely different kind of work force. Today expecting that everyone will get all their medical care through their employer doesn't work. Nowadays our economy is far more diverse. People change jobs frequently, or work for small employers or are self employed. Medical care is far more complex and variable and so requires the efficiency and adaptability of a true market.
And then since 1965 there's the big elephant in the room, Medicare (and it's little sister Medicaid) which has become the dominant force in shaping medical care. This program as I've been complaining incessantly has been a major factor in preventing price competition, in stifling of innovation, and in causing misalignment in services. In addition it is killing us financially. And its determined efforts to correct its problems by ever more bureaucratic regulation is becoming nightmarish and absurd.
President Obama and his supporters saw one small aspect of our problem, namely that those who are not covered by employer insurance, such as it is these days, or by one government program or another, are left out of the game. Their solution was to force everyone to play, and to make things even worse by mandating that insurances cover things that people don't need. Evidently, as smart as they are, they have their noses right up against one of the trees and don't see the forest.
The Republicans are touting repeal and replace. There is nervous tittering among the Democrats who think their opponents have a tiger by the tail and won't be able to come up with anything better. Their problem of course has been that they've always been unable to think out of the box of government control. There are some good plans out there, such as one recently proposed by Dr Rand Paul. Also Trump's new HHS Director Dr Tom Price and CMS Director Seema Verma understand the problems well and I think the Repubs will coalesce around a comprehensive plan.
So what do we really need? Here are the components:
First and foremost we need prices to come down. Across the board they're many times higher than they would be if they were based on market forces. Providers of medical goods and services base their prices on insurance reimbursements rather than on their costs and return on investment. Competition to lower prices is absent since everyone gets the same reimbursement from the payers and are paid only for things that are covered. Overhead costs to comply with regulation are going through the roof. Lower prices will be a boon for all medical consumers but especially for those with lower incomes.
A big way to accomplish lower prices is to reduce our dependence on insurance and third party payment. Insurance should be for big, unexpected items, not for everyday expenses. Everybody knows this. No one would buy homeowners insurance that covered blocked sink drains. Paying for ordinary items by insurance causes price inflation and decreases choice. But our problem is that we've got a system where someone else buys the insurance for us even though we're still paying the price through decreased wages. So then we have a high priced system which leads to demands for more insurance. And those who don't have insurance are really stuck paying ridiculously high prices that no one else has to pay. It's a vicious cycle.
So as far as insurance is concerned preferably we should buy our own and own it ourselves so it's ours no matter what job we have. But before that happens the insurance market has to have major revisions to bring the cost down such as Drs. Paul and Price are proposing. When we buy our own we'll want cheaper high deductible insurance and we'll demand that all the regulations on where we buy it and what needs to be covered be eliminated.
We need to get government out of the way except for people that need help. That's a problem for now because we're all adjusted to the present system. But if the government is going to divvy up tax money for medical care it ought to at least be distributed fairly and at present it isn't. This is a big part of the maldistribution in medical care in our country that Obamacare was supposed to address. And whatever subsidies are given should allow for the broadest possible choice of their use. These are all features of the present Repub plans so hopefully we will see some good changes. Personally I think start up government funding of Health Savings Accounts would be an interesting idea.
The government in its tax policies since the end of WW2 encouraged full medical insurance paid by employers. That was well-intentioned and might have been OK in the 1950's with an entirely different kind of work force. Today expecting that everyone will get all their medical care through their employer doesn't work. Nowadays our economy is far more diverse. People change jobs frequently, or work for small employers or are self employed. Medical care is far more complex and variable and so requires the efficiency and adaptability of a true market.
And then since 1965 there's the big elephant in the room, Medicare (and it's little sister Medicaid) which has become the dominant force in shaping medical care. This program as I've been complaining incessantly has been a major factor in preventing price competition, in stifling of innovation, and in causing misalignment in services. In addition it is killing us financially. And its determined efforts to correct its problems by ever more bureaucratic regulation is becoming nightmarish and absurd.
President Obama and his supporters saw one small aspect of our problem, namely that those who are not covered by employer insurance, such as it is these days, or by one government program or another, are left out of the game. Their solution was to force everyone to play, and to make things even worse by mandating that insurances cover things that people don't need. Evidently, as smart as they are, they have their noses right up against one of the trees and don't see the forest.
The Republicans are touting repeal and replace. There is nervous tittering among the Democrats who think their opponents have a tiger by the tail and won't be able to come up with anything better. Their problem of course has been that they've always been unable to think out of the box of government control. There are some good plans out there, such as one recently proposed by Dr Rand Paul. Also Trump's new HHS Director Dr Tom Price and CMS Director Seema Verma understand the problems well and I think the Repubs will coalesce around a comprehensive plan.
So what do we really need? Here are the components:
First and foremost we need prices to come down. Across the board they're many times higher than they would be if they were based on market forces. Providers of medical goods and services base their prices on insurance reimbursements rather than on their costs and return on investment. Competition to lower prices is absent since everyone gets the same reimbursement from the payers and are paid only for things that are covered. Overhead costs to comply with regulation are going through the roof. Lower prices will be a boon for all medical consumers but especially for those with lower incomes.
A big way to accomplish lower prices is to reduce our dependence on insurance and third party payment. Insurance should be for big, unexpected items, not for everyday expenses. Everybody knows this. No one would buy homeowners insurance that covered blocked sink drains. Paying for ordinary items by insurance causes price inflation and decreases choice. But our problem is that we've got a system where someone else buys the insurance for us even though we're still paying the price through decreased wages. So then we have a high priced system which leads to demands for more insurance. And those who don't have insurance are really stuck paying ridiculously high prices that no one else has to pay. It's a vicious cycle.
So as far as insurance is concerned preferably we should buy our own and own it ourselves so it's ours no matter what job we have. But before that happens the insurance market has to have major revisions to bring the cost down such as Drs. Paul and Price are proposing. When we buy our own we'll want cheaper high deductible insurance and we'll demand that all the regulations on where we buy it and what needs to be covered be eliminated.
We need to get government out of the way except for people that need help. That's a problem for now because we're all adjusted to the present system. But if the government is going to divvy up tax money for medical care it ought to at least be distributed fairly and at present it isn't. This is a big part of the maldistribution in medical care in our country that Obamacare was supposed to address. And whatever subsidies are given should allow for the broadest possible choice of their use. These are all features of the present Repub plans so hopefully we will see some good changes. Personally I think start up government funding of Health Savings Accounts would be an interesting idea.
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