Actually, Health Care Costs Are Under Control
The PPAHCA ("Obamacare") is back as daily front-page news now that the Supreme Court will decide its fate. It is important to recall the primary reason why the president claimed we needed this legislation: an unsupportable health scare cost spiral, or as economist Robert Samuelson opined, "health care costs are completely out of control."
While most of us would hesitate to argue with the president of the U.S. or a Nobel Prize-winner, they are both 180 degrees wrong. Health care costs are under control -- very tight control -- by Washington.
"Health care" as two words refers to goods and services delivered by hospitals and providers to be consumed by patients. The word "costs," when referring to what providers and institutions must pay, is determined primarily by government regulation and bureaucracy rather than by labor costs, supplies, or MRI machines. Payments to providers and institutions -- what the government calls "costs" -- are predetermined by the government. The bill submitted by a provider is generally irrelevant.
Whether you describe excessive national expenditure of money as costs or as payments (reimbursements), spending is controlled by government. It is not "out of control" at all.
When the PPAHCA reduced Medicare "costs" by 21%, it cut Medicare payments (to providers). Thus, such cost-cutting actually cuts services to patients. As Robert Moffit of the Heritage Foundation testified before Congress, "you cannot get more of something by paying less for it."
Meanwhile, PPAHCA increased the costs of the federal healthcare bureaucracy by six whole new agencies, hundreds (perhaps thousands) of bureaucrats added to the payrolls, and many thousands of new rules and regulations. So the government controls and increases spending to/on itself while controlling and decreasing spending on patients.
Need proof? Of all the money spent on "healthcare" in 2010, 40% -- that is, over $1 trillion -- just disappeared. It went into healthcare but provided no health care. That statistic was before PPAHCA, which could raise the disappearing dollars to half (!) of all healthcare spending.
Samuelson uses the recent OECD (Office for Economic Cooperation and Development) report to explain U.S. overspending: steep prices and abundant provision of expensive services. Hogwash! As Dr. Samuelson knows, "price" is meaningless in healthcare.
As a doctor, I can "charge" whatever I like for doing a heart catheterization procedure in a baby. The actual bill can read $2,000, $4,000, or sometimes over $5,000. Regardless of what you call my price, charge, or bill, I get $387. That is what the government says it will pay. So the price may seem steep, but the payment is peanuts.
For Medicare, just as for my caths, payments are now lower than the cost of doing business. So if you want to know why your Medicare doctor can no longer see you and is not accepting new patients, it is because she gets paid less by Medicare than her costs to keep the office doors open.
How much of health care spending is for administration and for regulations? No one knows because no one measures. Government administration guesses at how much it directly pays itself, and conveniently ignores the costs -- to providers and the public -- of the ever-expanding mountain of regulations.
Samuelson rightly asserts that "the system needs a fundamental overhaul to deliver more value for money." No one disagrees...except those in charge. In order to determine value, one must measure cost, measure benefit, and compare the two. Does the government measure either the benefits of health care or the benefits of healthcare? The answer is a resounding "no!"
So how can you, the consumer, whom I call We the Patients, assess value? If you know only part of the numerator and none of the denominator of a cost-benefit ratio, you can't.
Finally, Professor Samuelson practices really bad medicine...on healthcare. He jumps directly from symptom identification (overspending) to treatment plans (vouchers or single-payer) without going through the critical step of root-cause analysis.
If you want to cure anything, whether it is a sick person or a sick system, you must treat the cause(s) of illness. Overspending is only one part of the sickness in healthcare. If we try to fix it without resolving its root cause as well as the other causes of illness in the system, we are certain to fail, just as Obamacare -- with its expanded control -- is certain to make healthcare, We the Patients, and America sicker.