Replacing ObamaCare

After two years, the fate of the Patient Protection and Affordable Care Act of 2010 (aka ObamaCare) is still gray and uncertain.  No matter what the Supreme Court does, this Schrödinger's cat will end up back in Congress's lap.  Whether ObamaCare is completely replaced or improved (for the next twenty years), there is still the pressing question: replace it with what?

As was written two years ago and is still true, no committee in Congress has made any in-depth study to determine what is wrong with health care, or what might be done to fix it.  Even worse, while all the talk is about repeal-and-replace, very few are asking, "why replace?"  With the preliminary dictates and mandates of ObamaCare worsening the health care crisis, driving up insurance and provider costs while causing employers to drop insurance, perhaps we should consider that big government is the big problem with health care.

While the single greatest symptom of the "health care crisis" might be argued about, there is one thing we all seem to agree on: the American health care consumer does not receive value for his money.  Health care costs far more than it should.  It is common practice in industry to contract highly trained, experienced, and specialized doctors (Ph.D.s), working with equipment that costs tens of millions of dollars, whose abilities are shared by perhaps twenty people worldwide, to spend a full day of their time, along with the support staffs of their companies, to make you a product on a best-effort basis, for all of $2,000.  Replace that Ph.D. with an M.D.; replace his uniqueness with mundane expertise; replace the tens of millions of dollars of equipment with a few million dollars of equipment; keep the facility, support staff, best-effort basis, and number of hours; and the bill increases from $2,000 to $40,000.

Something is horribly wrong with health care costs.  One trip to the emergency room could cost enough to build two or three cars, or 20% of a house, but the patient receives one tenth of the time and resources to do such things.  The costs are horribly inflated, but what is inflating them?  There is no single cause, but there are big contributors.

Talk to any old-timer, and he will tell you that just 40 years ago, it was rather uncommon for an employee to have "hospitalization," and no one had what we call "insurance."  We were literally a country of uninsured, but there was no crisis.  Day-to-day health care was affordable, but a major event could cause problems, so some people carried insurance against long-term hospitalization or extensive trauma.  The price of care was determined by market forces; you cannot have patients if you drive them away with ridiculous prices.  Now, over 90% of us have "insurance," but it is nothing like insurance at all -- more like cost-averaging, and not just hospitalization, but day-to-day care as well.  

Everything is covered by "insurance," so 90% of consumers have no vested interest in the cost of service.  Rather than shop and haggle for the price of service, it has become common to receive service and then complain about price.  Most "insurance" is provided by government and employers, so the patients have little vested in the cost of insurance, either.  The Law of Supply and Demand is completely inapplicable, so the cost of care is unbounded.  There is no study as to how much excess cost "insurance" adds, but in talking with doctors who operate cash-only clinics and are subject to market forces, one learns that it is somewhere near a doubling.  A visit to a doctor's office should cost $30 to $50.

One solution to halve the cost of health care would be to switch from "insurance" back to hospitalization coverage, but in most states (or in all of them under ObamaCare), dictates have removed that option.  Under the Tenth Amendment, states have the right to force their employers to provide "insurance" and the right to force that "insurance" to cover everything, or they may make no requirement.  The federal government has no say in the matter, but it has taken power upon itself to say anyway.

Dictates and mandates also directly increase the cost of medical supplies and add indirect costs to the price of services.  In 2004, a CATO institute study estimated that government "regulation" cost between $340 billion and $660 billion of the $1,900 billion dollars spent on health care.  The study estimated that only $170 billion actually protected health, leaving between $170 and $490 billion (10% to 25% of the total) as excess due to over-regulation.  Hospital consultants in private conversations estimated that "regulations" account for half of the bill.  Medical equipment manufactures in private conversations estimated that "regulations" and liability account for 90% of their prices.  Most of these costs come in the form of record-keeping and verification to give the government paper-chasers paper to chase, but when somebody screws up, the paper chase usually reveals that everything was fine, or paper was forged, or paper was wrong, or someone screwed up, all while failing to prevent the screw-up, which was the original reason for requiring the paper.

Liability is another cost-increaser.  Every health care provider and supplies manufacturer carries its own insurance.  The cost of that insurance is poorly tracked.  For care providers, it tallies only around 0.5% of health care expenses ($10.6 billion of $2,600 billion in 2010, according to the National Association of Insurance Commissioners).  The NAIC also reports that about $5.8 billion was spent on trial awards and costs, with big jury payouts increasing.  While insurance and awards are small, annual costs are increased by $70 to $126 billion (2.7% to 4.8%) through defensive medicine -- the unnecessary tests and procedures performed to avoid malpractice claims.  For manufacturers, the costs of liability could be much higher, but they seem to be unstudied.

One proposed solution has been to cap jury awards, but at a national level, this would be highly unconstitutional, and it is expected to harm the quality of care.  Punishing malpractice is important.  Health and Humans Services found that 1 in 7 Medicare patients experience an "adverse event" when in hospital, that 1.5% of patients die from those adverse events, and that 44% of those events were preventable.  In other words, of 1,000 Medicare patients admitted to a hospital, one of them will die due to "oops."  All of them will be killed by licensed and regulated professionals.

The key to solving the expense of malpractice is to weed out the bad practitioners.  Remember, no medicine is guaranteed, and all medicine is practiced as a best effort.  Just because the outcome was bad does not mean there was malpractice.  A workable solution to malpractice might be to send all malpractice claims through some sort of consumer and industry review board to determine merit, before any consideration of out-of-court settlements or actual trials.  Fraudulent and weak claims are filtered, while bad doctors and facilities accumulate black marks and find their licenses pulled.  Unfortunately, our system of professional regulation and medical training makes this difficult to do.

It has been suggested that professional licensing of doctors and providers increases costs (through reduced competition) and decreases the quality of care (through institutionalized poor training), all while failing to protect consumers from incompetence.  For example, the standard treatment for chronic indigestion is a prescription for antacids, followed by invasive (therefore presenting some risk) tests and biopsies.  Most indigestion is the result of poor motility caused by neurological impairment, so the antacid is a cover-up, and the invasive tests will usually reveal nothing but symptoms.  On the other hand, an acupuncturist or upper cervical chiropractor may be able to correct the underlying neurological impairment and, by extension, the indigestion, but due to rules of professional regulation, said chiropractor or acupuncturist cannot make any claim as to this ability.  State-sanctioned medicine must train and practice symptom-cover-up voodoo, while unsanctioned what-may-not-be-called-medicine must remain silent.  Professional regulation is handled by states.

What about all of those people receiving free "emergency" care under Medicaid and mandates to provide services?  The increased costs to other consumers was estimated at $36 billion in 2008.  Of hospital costs, these uncollected bills represent about 10% of the $364 billion in that area, but it amounts to only about 1.4% of all health care costs.  The worst part is that this $36 billion is spent on what would normally be considered non-emergency care.  If Medicare were restricted to only life-threatening conditions and restricted to only those who could not afford it (in Illinois, you can earn $89,000 and still qualify), and if there were some means to detect fraud, then significant savings could be realized.

Medicare is prone to fraud.  Most people think this fraud is in the form of unnecessary procedures or claims of procedures the doctor never performed, but they are wrong.  This fraud comes in a form similar to credit card fraud.  Fake doctors at fake addresses are submitting bills for fake patients, with billing accounts at foreign banks, while using the Medicare provider numbers for real doctors at real addresses seeing real patients, with completely different billing account numbers.  When your credit card gets charged with a mail order sent to someone else's address, you get a phone call.  When Medicare gets charged with a bill payable to someone else's foreign bank account, Medicare pays it without question, to the tune of $50 billion annually.  When the fraudulent claims are discovered, the real practitioner gets blamed.

In conclusion, if government got out of the way, by eliminating mandates on insurance coverage and burdensome and ineffective "regulations," health care costs could be quartered.  If states then implemented some sort of review process to filter out frivolous and weak lawsuits and bad practitioners, another 10% might be saved.  Add in proper reimbursement for the "deadbeat" patients emergency rooms are forced to treat, along with some changes to combat fraud, and another 10% might be saved.  Although it is largely unstudied, loosening licensing requirements so that alternative practitioners and alternative schools of medicine could compete to offer medical services might also drop prices.  Just by eliminating some government and being smart with the rest, we might take that $40,000 hospital visit down to $8,000, and improve the quality of that visit at the same time.

These changes are for the states to make.  Washington, D.C. is largely out of this problem, apart from fixing Medicaid and Medicare and following the Commerce Clause properly.

After two years, the fate of the Patient Protection and Affordable Care Act of 2010 (aka ObamaCare) is still gray and uncertain.  No matter what the Supreme Court does, this Schrödinger's cat will end up back in Congress's lap.  Whether ObamaCare is completely replaced or improved (for the next twenty years), there is still the pressing question: replace it with what?

As was written two years ago and is still true, no committee in Congress has made any in-depth study to determine what is wrong with health care, or what might be done to fix it.  Even worse, while all the talk is about repeal-and-replace, very few are asking, "why replace?"  With the preliminary dictates and mandates of ObamaCare worsening the health care crisis, driving up insurance and provider costs while causing employers to drop insurance, perhaps we should consider that big government is the big problem with health care.

While the single greatest symptom of the "health care crisis" might be argued about, there is one thing we all seem to agree on: the American health care consumer does not receive value for his money.  Health care costs far more than it should.  It is common practice in industry to contract highly trained, experienced, and specialized doctors (Ph.D.s), working with equipment that costs tens of millions of dollars, whose abilities are shared by perhaps twenty people worldwide, to spend a full day of their time, along with the support staffs of their companies, to make you a product on a best-effort basis, for all of $2,000.  Replace that Ph.D. with an M.D.; replace his uniqueness with mundane expertise; replace the tens of millions of dollars of equipment with a few million dollars of equipment; keep the facility, support staff, best-effort basis, and number of hours; and the bill increases from $2,000 to $40,000.

Something is horribly wrong with health care costs.  One trip to the emergency room could cost enough to build two or three cars, or 20% of a house, but the patient receives one tenth of the time and resources to do such things.  The costs are horribly inflated, but what is inflating them?  There is no single cause, but there are big contributors.

Talk to any old-timer, and he will tell you that just 40 years ago, it was rather uncommon for an employee to have "hospitalization," and no one had what we call "insurance."  We were literally a country of uninsured, but there was no crisis.  Day-to-day health care was affordable, but a major event could cause problems, so some people carried insurance against long-term hospitalization or extensive trauma.  The price of care was determined by market forces; you cannot have patients if you drive them away with ridiculous prices.  Now, over 90% of us have "insurance," but it is nothing like insurance at all -- more like cost-averaging, and not just hospitalization, but day-to-day care as well.  

Everything is covered by "insurance," so 90% of consumers have no vested interest in the cost of service.  Rather than shop and haggle for the price of service, it has become common to receive service and then complain about price.  Most "insurance" is provided by government and employers, so the patients have little vested in the cost of insurance, either.  The Law of Supply and Demand is completely inapplicable, so the cost of care is unbounded.  There is no study as to how much excess cost "insurance" adds, but in talking with doctors who operate cash-only clinics and are subject to market forces, one learns that it is somewhere near a doubling.  A visit to a doctor's office should cost $30 to $50.

One solution to halve the cost of health care would be to switch from "insurance" back to hospitalization coverage, but in most states (or in all of them under ObamaCare), dictates have removed that option.  Under the Tenth Amendment, states have the right to force their employers to provide "insurance" and the right to force that "insurance" to cover everything, or they may make no requirement.  The federal government has no say in the matter, but it has taken power upon itself to say anyway.

Dictates and mandates also directly increase the cost of medical supplies and add indirect costs to the price of services.  In 2004, a CATO institute study estimated that government "regulation" cost between $340 billion and $660 billion of the $1,900 billion dollars spent on health care.  The study estimated that only $170 billion actually protected health, leaving between $170 and $490 billion (10% to 25% of the total) as excess due to over-regulation.  Hospital consultants in private conversations estimated that "regulations" account for half of the bill.  Medical equipment manufactures in private conversations estimated that "regulations" and liability account for 90% of their prices.  Most of these costs come in the form of record-keeping and verification to give the government paper-chasers paper to chase, but when somebody screws up, the paper chase usually reveals that everything was fine, or paper was forged, or paper was wrong, or someone screwed up, all while failing to prevent the screw-up, which was the original reason for requiring the paper.

Liability is another cost-increaser.  Every health care provider and supplies manufacturer carries its own insurance.  The cost of that insurance is poorly tracked.  For care providers, it tallies only around 0.5% of health care expenses ($10.6 billion of $2,600 billion in 2010, according to the National Association of Insurance Commissioners).  The NAIC also reports that about $5.8 billion was spent on trial awards and costs, with big jury payouts increasing.  While insurance and awards are small, annual costs are increased by $70 to $126 billion (2.7% to 4.8%) through defensive medicine -- the unnecessary tests and procedures performed to avoid malpractice claims.  For manufacturers, the costs of liability could be much higher, but they seem to be unstudied.

One proposed solution has been to cap jury awards, but at a national level, this would be highly unconstitutional, and it is expected to harm the quality of care.  Punishing malpractice is important.  Health and Humans Services found that 1 in 7 Medicare patients experience an "adverse event" when in hospital, that 1.5% of patients die from those adverse events, and that 44% of those events were preventable.  In other words, of 1,000 Medicare patients admitted to a hospital, one of them will die due to "oops."  All of them will be killed by licensed and regulated professionals.

The key to solving the expense of malpractice is to weed out the bad practitioners.  Remember, no medicine is guaranteed, and all medicine is practiced as a best effort.  Just because the outcome was bad does not mean there was malpractice.  A workable solution to malpractice might be to send all malpractice claims through some sort of consumer and industry review board to determine merit, before any consideration of out-of-court settlements or actual trials.  Fraudulent and weak claims are filtered, while bad doctors and facilities accumulate black marks and find their licenses pulled.  Unfortunately, our system of professional regulation and medical training makes this difficult to do.

It has been suggested that professional licensing of doctors and providers increases costs (through reduced competition) and decreases the quality of care (through institutionalized poor training), all while failing to protect consumers from incompetence.  For example, the standard treatment for chronic indigestion is a prescription for antacids, followed by invasive (therefore presenting some risk) tests and biopsies.  Most indigestion is the result of poor motility caused by neurological impairment, so the antacid is a cover-up, and the invasive tests will usually reveal nothing but symptoms.  On the other hand, an acupuncturist or upper cervical chiropractor may be able to correct the underlying neurological impairment and, by extension, the indigestion, but due to rules of professional regulation, said chiropractor or acupuncturist cannot make any claim as to this ability.  State-sanctioned medicine must train and practice symptom-cover-up voodoo, while unsanctioned what-may-not-be-called-medicine must remain silent.  Professional regulation is handled by states.

What about all of those people receiving free "emergency" care under Medicaid and mandates to provide services?  The increased costs to other consumers was estimated at $36 billion in 2008.  Of hospital costs, these uncollected bills represent about 10% of the $364 billion in that area, but it amounts to only about 1.4% of all health care costs.  The worst part is that this $36 billion is spent on what would normally be considered non-emergency care.  If Medicare were restricted to only life-threatening conditions and restricted to only those who could not afford it (in Illinois, you can earn $89,000 and still qualify), and if there were some means to detect fraud, then significant savings could be realized.

Medicare is prone to fraud.  Most people think this fraud is in the form of unnecessary procedures or claims of procedures the doctor never performed, but they are wrong.  This fraud comes in a form similar to credit card fraud.  Fake doctors at fake addresses are submitting bills for fake patients, with billing accounts at foreign banks, while using the Medicare provider numbers for real doctors at real addresses seeing real patients, with completely different billing account numbers.  When your credit card gets charged with a mail order sent to someone else's address, you get a phone call.  When Medicare gets charged with a bill payable to someone else's foreign bank account, Medicare pays it without question, to the tune of $50 billion annually.  When the fraudulent claims are discovered, the real practitioner gets blamed.

In conclusion, if government got out of the way, by eliminating mandates on insurance coverage and burdensome and ineffective "regulations," health care costs could be quartered.  If states then implemented some sort of review process to filter out frivolous and weak lawsuits and bad practitioners, another 10% might be saved.  Add in proper reimbursement for the "deadbeat" patients emergency rooms are forced to treat, along with some changes to combat fraud, and another 10% might be saved.  Although it is largely unstudied, loosening licensing requirements so that alternative practitioners and alternative schools of medicine could compete to offer medical services might also drop prices.  Just by eliminating some government and being smart with the rest, we might take that $40,000 hospital visit down to $8,000, and improve the quality of that visit at the same time.

These changes are for the states to make.  Washington, D.C. is largely out of this problem, apart from fixing Medicaid and Medicare and following the Commerce Clause properly.

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