Fast track to a health care train wreck

The Denver Post - - PERSPECTIVE - By Vince Markovchick and Richard D. Lamm

With the im­pend­ing re­peal of Oba­macare, Amer­ica is headed to­ward a pub­lic pol­icy train wreck.

Three seem­ingly un­stop­pable trends in Amer­ica are on col­li­sion course: 1) the in­ven­tive­ness of the pro­mot­ers of med­i­cal tech­nol­ogy; 2) health care in­sur­ers and providers’ ex­ces­sive costs; and 3) the health care ex­pec­ta­tions of the Amer­i­can pub­lic.

Amer­ica is sleep­ing as this col­li­sion draws nearer. As Win­ston Churchill warned us 70 years ago, democ­ra­cies al­ways seem to wake up 20 years too late. We be­lieve that even if Amer­ica awoke to­mor­row, it would be too late to avoid many as­pects of the com­ing col­li­sion.

But what an op­por­tu­nity! If we spent what other de­vel­oped nations spend on health care, we could bal­ance the bud­get and fund a myr­iad of other im­por­tant pub­lic needs.

In 2015 we spent $3.2 tril­lion on health care, which was $10,000 per per­son in the U.S., ($25,000 for a typ­i­cal Amer­i­can fam­ily). This is 17.5 per­cent of the U.S. Gross Do­mes­tic Prod­uct (GDP). To put this in per­spec­tive, this is more than twice what most other de­vel­oped nations spend on health care while in­sur­ing all of their res­i­dents. This year we are on track to ex­ceed that amount with it be­ing 18 per­cent of GDP.

Even with the im­ple­men­ta­tion of the Af­ford­able Care Act, we still have 28 mil­lion peo­ple with no health in­sur­ance, and many more are un­der-in­sured due to ris­ing co-pays and de­ductibles. Most fam­i­lies are un­aware of the mag­ni­tude of spend­ing since their em­ployer pays most of their $17,000 fam­ily an­nual health in­sur­ance pre­mi­ums. Be­cause most do not need to be hos­pi­tal­ized, they are un­aware of the ex­tremely high cost of med­i­cal care.

Of the $3.2 tril­lion in health spend­ing, 70 per­cent goes

di­rectly to fund the cost of our health­care. The re­main­ing 30 per­cent is spent on ad­min­is­tra­tion and profit, which is more than twice that of any other nation. In 2014, stud­ies pub­lished by the In­sti­tute of Medicine, Rand Cor­po­ra­tion, and the Cen­ter for Medi­care/ Med­i­caid Ser­vices es­ti­mated that out of to­tal health care spend­ing, as much as $900 bil­lion, or about one third of our to­tal spend­ing, can be at­trib­uted to waste, fraud and abuse.

Over the past 25 years, health care in­fla­tion has been three to four times the rate of over­all in­fla­tion. This has forced em­ploy­ers to pay more and more for health in­sur­ance, which is one of the ma­jor causes of wage stag­na­tion dur­ing this pe­riod. Dur­ing this same pe­riod em­ploy­ees have had to pay a higher share of their health in­sur­ance pre­mi­ums as well as higher co­pays and de­ductibles.

This cur­rent sys­tem is un­sus­tain­able, but who will tell the Amer­i­can pub­lic? We sug­gest that the so­lu­tions to the real prob­lems of health care are hardly be­ing talked or writ­ten about.

The ideal health in­sur­ance sys­tem is one that: pro­vides free choice of hos­pi­tals and doc­tors; pro­vides in­sur­ance cov­er­age to all at all times (i.e., not tied to an em­ployer); is af­ford­able and will re­move all risk of med­i­cal bank­ruptcy. This sys­tem should have an ad­min­is­tra­tive cost of less than 5 per­cent and have ev­ery­one in the risk pool, thus mak­ing pre­mi­ums af­ford­able. We have such a sys­tem now: Medi­care cov­ers all per­sons over 65, those on to­tal dis­abil­ity, and all re­nal dial­y­sis pa­tients.

Cur­rently 20 per­cent of the pop­u­la­tion ac­counts for 80 per­cent of our to­tal health care spend­ing, most of this com­ing from Medi­care and Med­i­caid. Medi­care should be im­proved by al­low­ing the gov­ern­ment to ne­go­ti­ate for pre­scrip­tion drug prices, and to pay di­rectly for pre­scrip­tion drugs, thus elim­i­nat­ing the pri­vate health in­sur­ance pre­scrip­tion drug cov­er­age. This im­proved Medi­care will elim­i­nate the need for costly Medi­care sup­ple­men­tal in­sur­ance and the large sub­sides to Medi­care Ad­van­tage pri­vate in­sur­ers. It will also dra­mat­i­cally re­duce waste, fraud and abuse. It would be funded by an in­crease in the Medi­care tax and by cost sav­ings.

Medi­care, with all the fraud and other is­sues, still op­er­ates with about 3 per­cent to 4 per­cent over­head. That is much less than the profit and over­head added by U.S. health in­sur­ers, which is in­stead 15 per­cent to 20 per­cent. In ad­di­tion, Oba­macare, Veter­ans Af­fairs and Med­i­caid each add another en­tire layer of ex­pen­sive bu­reau­cra­cies. All these, along with the gov­ern­ment be­ing un­able to bid for drugs pur­chased un­der Medi­care, add up to un­nec­es­sary cost and waste in our sys­tem.

These costs would be dra­mat­i­cally re­duced if the VA and Med­i­caid cov­er­age could be put un­der Medi­care in­stead, and if drugs could be bid for on a com­pet­i­tive ba­sis. Sim­i­larly, there would be tremen­dous cost sav­ings if un­der Medi­care as a sin­gle payer, it is au­tho­rized to ne­go­ti­ate for hospi­tal care on a more cost-ef­fi­cient and more com­pa­ra­ble ba­sis across the nation.

This is where we need to go to avoid the loom­ing dis­as­ter that we face in the fu­ture.

Vince Markovchick is pres­i­dent of the Health­care for All Colorado Foun­da­tion. Richard D. Lamm is for­mer gover­nor of Colorado.

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