The Midterms And Medical Mythology

The generated uproar over the health reform efforts has been remarkable in its ability to completely miss the point. We the people were told that “Obamacare” would insert the government between us and our doctors. We the people were told that “Obamacare” was a government takeover of a free market. We the people were told, again, that the market could take of itself with the help of tax cuts. As the implementation of the Affordable Care Act continues, and as the rhetoric of the midterm elections escalates, it is time for a reminder of the facts of the medical marketplace.

Currently, insurance companies come between most patients and their doctors. Insurance companies dictate what treatments and which drugs a patient can receive, and they do it on the basis of financial calculation rather than patient need. The only way to change that paradigm, is to force insurance companies to compete for patients on a low-margin, high-volume basis. Such a competition will encourage improvements in service and cost. The principle structures created by the Act are the insurance exchanges that will come into being in 2014. The broad investment controls of the Act (companies must spend at least 80% of premiums on their customers), along with the bans on preexisting conditions and rescission, are designed to compress the operating margins of these firms. To maintain the same net revenue, insurance companies will have to find and get more customers.

The Affordable Care Act does not take over anything; insurance companies, hospitals, and doctors are still in charge. More importantly, the medical marketplace is not a free market. One failure of this legislation was the fact that it did not repeal the insurance industry’s anti-trust exemption. The House voted to strip the industry of the exemption, but the measure could not get past the Republican block in the Senate. This exemption means that insurers act as a cartel to control prices, exercising near complete control over doctors and hospitals with no other options to turn to. While this arrangement is great for insurance companies, it is terrible for every other business in our nation.

If we have learned nothing else over the past few years, we should know without reservation that markets will not police themselves. Furthermore, it is ludicrous (especially by profit motivated capitalists) to contend that any industry would intentionally limit its own profit potential. I expect insurance lobbyists to flood Capital Hill in an attempt to stall legislation that would interfere with their stunning profit levels; it is the lawmakers who listen to them that I question. There is not a small business owner, or individual who aspires to such standing, that has benefited from our nation’s medical structure. The marketplace as it is currently modeled is also an anchor around the necks of the major corporations of our nation. Our businesses must contend with the highest medical costs in the world, while the exporters of the Asian Tigers and European Union are free to kick our industrial ass.

Two other major areas were not touched by health care reform. Both are principle cost drivers in terms of both our public and private debt. The patent protections of the pharmaceutical industry support windfall earnings at least 7 times greater than the amount those firms invest in research. Those protections also guarantee that much of the research is devoted to products that bring limited health gains while maximizing profits (research that supports, for example, exercise or food choices over pharmaceutical interventions are not desirable for a for-profit drug company). Repealing such protections, while raising a small tax to support $30 billion per year in research, would result in the savings of more than $140 billion in drug costs. It is fair to say that this would be redistributive; it would redistribute billions from pharmaceutical coffers to the operating budgets of every other “job-producing” firm in the United States.

The second issue relates to the supply of doctors in our nation. One issue agreed on by most observers, regardless of party affiliation, is that there are far too few general practitioners in the United States. This issue could be addressed by dropping the protectionist attitudes towards foreign-born doctors. We currently erect barriers to foreign doctors far in excess of what it takes to enforce quality and standards of care. It is clear from the wages of doctors, and the wait times to get an appointment, that there is room for more without compromising their standards or just rewards. In any case, increasing the supply of well-trained doctors must continue to be a priority for our nation. Are there any reading this post, for example, that would object to more being spent on doctor training than for the development of more lawyers?

As more Americans learn the truth about the Affordable Care Act, its popularity increases. But the issues surrounding the medical marketplace, the industry with the highest inflation rate in our nation over the last two decades, remain. Some have been addressed in full, and some have been partially met, but more work needs to be done. The Rational Middle hopes that the next phase is marked by more data and less mythology. We have had enough Death Panel stories around our campfire, haven’t we? It is time to come in from the woods and darkness.

The Rational Middle is listening…

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