Here’s What’s Wrong With Our Health Insurance System
Wednesday, 18 September 2013 05:24
In eight minutes, you can master the topic of why the U.S. health care system is so darn expensive. John Green has done a masterful job of summing it up: it is not a simple problem there will not be a simple solution but he’s probably the biggest single drag on the american economy and it’s vital that we grapple with it meaningfully instead of just reading health care costs as political theater. For those interested in the eight minute version, you can view it at John Green’s blog site.
And for those interested in a two minute written summary, stay calm and read on. John skewers many of the alleged reasons for the high cost and explains how the public isn’t getting better quality health care for the significant premium that we pay. His main points are:
Because in the United States there are a number of insurers who do not have the leverage to negotiate as aggressively as other countries do with health care providers or drug manufacturers or medical device makers for lower cost services. We spend $500 billion more because of this loss of negotiation leverage that other countries use to lower their costs.
Because we end up spending about $90 billion more on the costs of insurance administrative costly paperwork in marketing and negotiating prices all of the health insurers’ services.
Salaries paid to doctors and to a lesser extent nurses are higher in the United States than they are in other countries causing us an extra $75 billion more than other countries spent on their medical personnel.
John’s analysis largely comports with that of David Cutler, a Harvard economics professor who has become a national authority on health insurance costs. In a recent PBS interview, he confirmed that health insurance administrative costs are wildly out-of=line. One example: Duke University Hospital has 900 hospital beds and 1,300 billing clerks. The typical Canadian hospital has a handful of billing clerks. Cutler esimates that about a third of U.S. medical spending is due to waste and inefficiency. He adds that equipment and pharmaceutical costs are also inflated due to insurers’ lesser buying power and that doctors have few economic incentives to forego tests or procedures, thus they resort to needless procedures. Both Green and Cutler argue that unless we can negotiate as effectively with the people providing health care, as done in other Western countries, US health care costs will continue to rise faster than anywhere else in the world and we won’t get better health care outcomes.
The key point is that there is a compelling argument for some degree of government intervention to make health care more affordable: innovation. John offers two anecdotal stories of how innovative capitalist-driven people would not have been able to pursue their respective projects that created untold numbers of jobs had there not been some publicly-subsidized health insurance. The Affordable Care Act and Montana’s state-subsidized $10,000 cap on catastrophic medical costs. Put together all of the investments made by innovative entrepreneurs that don’t work for large corporations and you have untold numbers of new jobs that that could not have ever happened without publicly subsidized health insurance.
You might ask why are Republicans so strongly opposed to the ACA? After all, many of the Republican officials are smart people and presumably they care about people’s access to medical care. Here’s why: ACA isn’t about health care, it’s all about politics, folks. The ACA is designed to provide affordable health coverage to people of moderate or low-income. Most of these people are minorities or young people just getting started in their careers. Many of them are forced entrepreuneurs, i.e. people starting their own businesses because jobs aren’t available to them. These beneficiaries are the voter demographic that the Democratic Party has targeted as being important parts of their constituency in the future. So the Republicans view ACA as a “vote buying” scheme that will hurt the Republicans’ long-term viability. My humble opinion is that ACA-related controversy isn’t about health care. No, its about the two parties positioning for their political futures. Expect the Republicans to work as hard as possible to undermine ACA — it simply isn’t in their political interests.
If you have another five minutes to spend on this issue, I recommend another video by John Green about why excessive health care costs result in less jobs and less innovation in the American economy. It is well stated (although he could have probably cut it to three minutes). In sum, John argues that with our employee-based health care provision system, we have privileged employees over entrepreneurs when we need entrepreneurs to maximize economic growth. It is these creative job creators who have served as the engine that drives job growth in the American economy, not the large corporations. But without the Affordable Care Act or other state initiatives, we force those entrepreneurs to take jobs with corporations or slave away under the constant threat of bankruptcy in case some medical emergency occurs.