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Tuesday, January 28, 2014


Healthcare system is very sick and dysfunctional. It is going to implode and Obama care is only speeding that up. It is a problem of rapidly rising costs which reflects too much demand and too little supply. When we hear of many trillions of dollars of unfunded liabilities looming over future government finances - think healthcare. If you reduce medical inflation down to the same inflation rate in the general economy then those unfunded liabilities mostly go away. NO plan, whether Dem or Rep addresses these issues.
Any genuine and effective reform they might propose has to be able to increase supply and reduce demand in order to kill the inflation cancer in the healthcare system. Lots of votes can be gained by giving people more access to services but as many votes can be lost by inducing them to reduce their demand. So, at best, we get unbalanced "reforms" that only further increase demand while avoiding offending the medical industrial complex by increasing supply which implies more competition and lower profits. I include a by-no-means-comprehensive short list of changes that will do these things. They are not going to be popular so they will not be done until the system implodes and we are forced to act like adults and make hard choices.
To reduce demand you need RATIONING in one of two forms.

1) There can be external rationing via bureaucracies and rules that limit what, how much and when you receive medical services/treatments. This is how the European single payer systems do it. They are very popular and provide better medical outcomes for the entire population at literally half the price of our current system. They also spend only 10% of the money on paperwork while ours costs over 25% spent on bureaucracy.
2) Alternatively, individuals can ration themselves. This is accomplished by spending their own hard earned money via deductibles or co-pays. If a insurer or government single payer system covers all our costs then demand explodes. We run to the doctor for every little thing without regard to cost. If we spend our own money then we self treat at home, take better care of ourselves, or search for lower priced providers which induces price competition among doctors, hospitals etc. This competition does half the job of stopping medical inflation.
The other half of the equation is increasing supply. A check list for way to do this includes...
1) End the AMA's control on the number of med schools and number of DRs graduating. This is cartel behavior and keeps up prices by reducing the supply of doctors. Invest some public seed money into increasing the number of med schools so as to eventually drive these prices down thru increased supply.
2) Increase supply by ending the license monopoly which MDs have. For example, a few states license naturopathic physicians to practice and prescribe drugs and tests. We need to do this for well trained NDs, homeopaths, ortho molecular doctors etc. and make them part of the insurance system. Let the patients decide what they want rather than have the AMA maintain a monopoly on licensing with government collusion.
3) Offer expedited green cards and licensing for doctors who move here from abroad. This will increase supply and drive down prices. If we can import people to push down the cost of restaurants' wages for their dishwashers then why not do the same for the labor market for doctors?
4) Eliminate or reduce patent rights on new drugs. Most R&D spending on new drug research comes via government funds but the drug companies are then allowed to finalize it and make their own monopoly in terms of a patent on a drug which the taxpayer mostly paid to develop. If a medicine is discovered by public expenditures then the results should be made public domain on the internet so any drug company can make it and sell in a competitive market.
One hybrid reform, similar to what has been done with great success in Singapore, is a catastrophic-coverage version of the European single payer system. The traditional model of insurance is for you to be responsible for routine medical care from your own pocket with the insurer only stepping in for catastrophic expenses that would ruin you financially. This model worked pretty well before it was eroded with lower and lower deductibles. We also know that single payer systems work well in terms of streamlining, getting bulk purchase discounts and covering everyone equally. So, we establish a single payer system which only covers catastrophic medical costs with each person or household paying a yearly deductible equal to, say, 10% of their income. This combines the best features of both. People spending their own money will induce price competition and self rationing. Combined with the cartel/monopoly busting described above, it would make a huge dent in medical inflation. If made universal, it would likely cost less taxpayer dollars than the current hodge pog of medicare, medicaid, veterans programs etc while giving everyone peace of mind and the freedom to change jobs without worrying about loss of insurance. In Singapore, a system similar to this produces similar health outcomes as our own while costing much less than half what we are spending. What's not to like about that?
So, there is a good remedy which neither public or politicians will support because people are aghast at the novel idea of paying for some of their own care and will not vote for a politician who forces them to do so. Politicians will also resist because, aside from losing votes, they will lose campaign contributions from the AMA and the drug companies and the whole medical industrial establishment. Lose votes and lose contributions. What politician wants to support that? So, we wait for the big implosion which draws nearer...

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