The Healthcare Affordability Dilemma

Gil Gutknecht
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Posted: Oct 25, 2017 11:47 AM
The Healthcare Affordability Dilemma

Editor's note: This column was co-authored by Mytheos Holt.

Remarkably, it was called The Affordable Care Act. It quickly was rebranded ObamaCare. Since it was to be an important part of his legacy, President Obama didn't seem to mind.

For some Americans, the generous subsidies did make healthcare much more affordable. For the majority of Americans, it did not. Premiums, co-pays and deductibles skyrocketed. Congressional town hall meetings became free-for-alls as angry constituents stormed the meetings with copies of their bills. Democrats blamed Republicans for creating the protests, but that would be giving them far too much credit.

Instead of making it more affordable, it simply redistributed money from the young and healthy to the sick and old. It robbed Peter to pay Paul, chasing Peter into the waiting arms of Republicans. It was the key to retaking the House, then the Senate and finally the White House. The Democrats’ grand plan became their Waterloo.

After years of demonizing ObamaCare and promising to repeal it on the stump, Republicans hit a snag. For all the talk of creating a market based solution, Republicans seem incapable of passing even the most modest reforms. Their few token ideas, like making insurance available across state lines will help, but they still avoid the matter of runaway costs.  They seem wed to the wrongheaded Leftist assumption that insurance companies are the all-powerful arbiters, able to dictate the terms of trade in the entire healthcare sector. In truth, they are messengers.

The core issue is the high cost of healthcare!

Can we continue to spend double what the rest of the industrialized world spends on healthcare?  Consider this, total healthcare spending grewby 818 percent over the past 50 years, while real wages only inched up by 16 percent. The canard that our healthcare system is superior to the rest of the world is dangerously oversimplified. Yes, we may wait a shorter time for a certain tests and procedures here. But, you can expect to live four years longer in countries like Switzerland, which spend far less on healthcare than the US. Yes, our system is very good for wealthy people in need of fast access to expensive treatments. But, honest comparative analysis of outcomes is less complimentary.

This is not to say that we don’t enjoy great healthcare, nor should accede to the progressive Left’s appetite for socialized medicine. Our healthcare system is not some laissez faire jungle: it has become a tightly controlled system of sometimes predatory, monopolistic corporatism. Community and religious hospitals as well as family medical practices have been gobbled up. Smaller, research-based pharmaceutical companies have been acquired by the giant conglomerates. Those same conglomerates have conspired to shut out competition by abusing the patent system. When that fails, by  denying generic drug companies the ability to compete. The resulting bureaucratized system is neither compassionate nor cheap. The confusing smokescreen they create allows healthcare executives to pass along ever-increasing costs to unsuspecting consumers and third party payers.

As market forces are defeated, costs grow.

You might think that staffers on Capitol Hill and in conservative think tanks would want to do some comparative analysis. Surely they’d want to know, say, why an average hospital stay in Switzerland lasts two days longer and cost half as much as it does here. Or, how is it that the administrator of a medium sized hospital in central Minnesota makes three times as much as the Chief Justice of the State Supreme Court? Or, why does a month of Lipitor cost $124 here and only $13 in Spain? Or, why does Sovaldi, the treatment for hepatitis C cost 80 times more here than in India? Perhaps they would be curious about a study by Clear Health Cost that found that the cost of a simple mammogram can balloon by over 5400% within our own country, depending on where you live and whether you pay cash?

Sadly, few of these questions have been asked much less answered.

In those areas where real markets exist in healthcare, costs are controlled. Procedures like plastic surgery, where there is little third party payment and most services are provided by independent practitioners, have seen little price inflation over the past decade. Cash only clinics thrive. And consumers paying their own bills ask about prices and they compare. Suggesting we can learn from these data points is not to suggest a return to the days when large hospitals were run by nuns as charitable missions. Though we certainly have something to learn from that model: after all, Rochester’s famous St. Mary’s hospital was built without government money and it was open to all, regardless of ability to pay.

If complete healthcare reform is too large for Congress to tackle all at once, maybe they could start with the low-hanging fruit, like pharmaceuticals. Few sectors have done more to limit transparency, block competition and raise prices than Pharma. Pharma is busily working to prevent Americans from buying online. They keep both consumers and providers in the dark concerning real costs. Shame on us for excusing Pharma’s manipulation and non-transparency as something a private company has an inviolable right to do. Such abuses erode the underpinnings of the free market system, and undermine faith in our ability to self govern. They also hobble conservative reforms like Health Savings Accounts to control costs.

At minimum, Pharma must be compelled to follow the few laws that do control their behavior. President Trump’s courageous decision to revive the rule of law on immigration enforcement has sliced illegal border crossings by 70 percent, even without walls or new legislation. Imagine what the same commitment could do if it were applied to antitrust enforcement against Pharma. What if Pharma companies eager to get Medicare and Medicaid money were forced to deliver on what few conditions the government does set. Imagine if their monopoly power, obtained through patent and REMS abuse were curtailed by strict enforcement and pro-market legislation. These actions would send a clear message that we expect the rest of the healthcare sector to play by the rules and compete, just like every other industry.

The Affordable Care Act didn’t make American’s healthcare more affordable. The higher premiums, co-pays and deductibles have opened their eyes. They will not simply accept pious platitudes about the free market. We will either create real markets that demonstrate the virtues of competition firsthand, or surrender the voice of reform to those who want VA healthcare for all. Americans can't afford that either.

Gil Gutknecht served six terms in both the Minnesota and the U.S. House of Representatives.  He lives in Rochester MN with his wife Mary where he advises several clients on communications and marketing issues.  The views expressed are his own.

Mytheos Holt is Senior Fellow in Freedom to Innovate at the Institute for Liberty. He writes frequently on health issues. He hails from Big Sur, CA and now lives in Arlington, VA.