Question

Healthcare in the United States

Answer 1

The US healthcare system is complicated and regulated by a web of state and federal laws. It is extremely overpriced and the results are worse than most developed countries. The United States pays two and a half times the OECD average costs of healthcare. Australia spends about half as much for what is universally considered to be a better healthcare system than the U.S. The Republican idea to fix this is simple: let the free market handle the healthcare economy. “What’s wrong with the U.S. system is that people are tied to providers and/or insurers,” they argue. “ What we really need is a completely open market, with more choice — this system would drive healthcare costs down. There are entire libraries of books devoted to why free markets don’t automatically lead to lower healthcare spending.

Free markets rely on the idea that everyone has enough knowledge to make informed choices. America is facing an epidemic of over-servicing when it comes to healthcare because of the free market the rationalizations. Doctors who are terrified of litigation (and financially rewarded for doing more tests) refer people for unnecessary tests, which turn into unnecessary procedures, which end up costing billions. Also knowledge is scarce in the Healthcare Market. Most people barely understand health insurance and what it covers. Insurers and the insured are mutually uninformed about one another, which means that, in a free market, the costs just keep going up. If we want a healthcare system that costs less for the patients and also rewards the providers for providing quality treatment, we have to make sure that everyone is insured. Australia has a universal health insurer that covers every citizen in the country, subsidized by a two percent levy on every taxpayer.

Insurance Coverage before and After ACA (Affordable Care Act)

If you look at the states above the US average those with the lowest life expectancies the highest infant mortality rates and the most preventable hospital admissions they all have something in common. A sizable portion of their population doesn’t have health insurance. The most life saving medical care is the regular medical care you get when you have good affordable insurance. That saves more lives than any fancy treatment you see on a television series. Most countries around the world improved their citizens collective immune system with a universal health program. But in America things are different. Imagine every local grocer refusing to reveal the price of the bread unless you are done eating that bread. Welcome to US healthcare system. The price you pay for the same procedure, at the same hospital, may vary enormously depending on what kind of health insurance you have in the US. That’s because of bargaining power.

Government programs, like Medicare and Medicaid, can ask for a lower price from health service providers because they have the numbers: the hospital has to comply or else risk losing the business of millions of Americans. There are dozens of private health insurance providers in the United States and they each need to bargain for prices with hospitals and doctors. The numbers of people private insurances represent are much less than the government programs. That means a higher price when you go to the doctor or fill a prescription. Uninsured individuals have the least bargaining power. Without any insurance, you will pay the highest price. Being poor in America is a death sentence.

In European countries, instead of every private insurance company negotiating with every healthcare provider, there is this big list called Master Price List. The Government basically tells that if you, the healthcare provider want to sell to all the customers, heres what you can charge for a checkup, an MRI or a prescription drug. The bill then goes to the heavily regulated private insurance companies(in Germany) or directly to the government (in UK). Because the government controls access to all the customers, it is an offer healthcare providers can’t refuse. More and more Americans are demanding a single-payer healthcare system.

Lobbying by the American Medical Association (AMA)

There are many states that have great outcomes. States where life expectancy infant mortality and preventable hospital admissions look like European countries. But not every state. This state-by-state inequality is baked into the Medicaid system and the American health system at large. President Franklin D. Roosevelt’s New Deal to help the US beat the Great Depression in the early 1930s was focused way more on unemployment and Social Security than healthcare. And there was a reason for that. The American Medical Association, the largest trade group for doctors lobbied hard against any form of national health insurance whenever FDR proposed it.

Not every European country created a single payer system like Britains. Private insurance really grew rapidly through the Second World War because there were federal wage freezes and there was a labor shortage to fight this war. As in the US private insurance companies cropped up in Germany and France but unlike the US those countries regulated these companies closely. The percentage of Americans who had private health coverage just ballooned from about 1938 to 1950. And thats when doctors started to get rich. President Harry Truman took up the cause again in 1948. He repeatedly asked the Congress to pass a health program. The American Medical Association hired Ronald Reagan back when he was an actor, to star in advertisments where Reagan narrated a record called Ronald Reagan Speaks Out Against Socialized Medicine, a set of screeds against Social Security (as an attack on private savings) and Medicare. He remarks, “The doctor begins to lose freedoms and from here its a short step to all the rest of socialism”. Reagan predicted that the passage of Medicare would make it impossible for Americans to decide where to live or work, and that “from here, it’s a short step to all the rest of socialism, to determining his pay, and pretty soon your son won’t decide when he’s in school, where he will go, or what he will do for a living.” The American Medical Association spent millions on PR and lobbying and Truman’s plan went nowhere.

The Medicaid Program

In 1964, President Lyndon Johnson won the Presidency by a huge margin and his administration declared an unconditional War on Poverty in America. As part of this War on Poverty, Johnson pushed Kennedys Medicare program through Congress and tucked into that bill was a small provision which called for the federal government to give aid to states to help cover medical costs for the poor. And that was the beginning of what we know today as Medicaid. It has gone through a number of changes throughout the years but at its most basic level, Medicaid is a health insurance plan for lower income and disabled adults and children. Unlike the Medicare system which covers all Americans 65 and older, states can decide who gets coverage and what gets covered in their version of Medicaid. There are a few groups of people the federal government says states have to cover children and pregnant women in families below a certain income plus some seniors and people with disabilities. But for anybody else, states get to decide who qualifies.

In California a single person who makes $10,000 a year qualifies for MediCal, the states Medicaid program. When they go to the doctor they show their MediCal card and pay a $4 copay. If they need a prescription they pay $4. The doctor sends the bill to MediCal. The State of California pays half and the Federal government pays the other half. That split varies by state. The federal government would pay a higher share for the same doctors visit in Alabama, because federal payments are calculated based on the states per capita income. But that same person making $10,000 a year wont qualify for the Texas version of Medicaid. In fact if you’re a non-disabled adult with no children its impossible to qualify for Medicaid in Texas. States also get to decide what services get covered by their version of Medicaid. Whether you get dental coverage, vision coverage, podiatry physical therapy, even hospice or end-of-life care. But you may not be able to get a hearing aid or glasses.

There are a lot of services that are highly dependent on what state you live in. One of the goals of the Affordable Care Act was to limit some of this state-to-state variability by making Medicaid available to everyone below a certain income threshold no matter where they lived. But the Supreme Court struck down that part of the law. The court is leaving open to the states to come back and opt in to the Medicaid expansion at their discretion. 31 states and the District of Columbia made Medicaid available to anyone in their state who made less than about $17,000 a year. In exchange the federal government reimbursed those states for the added cost of covering more people.

Some governors in states that didn’t expand Medicaid said they were worried about longterm costs. Although the federal government was paying 100 percent of the cost of expanding Medicaid at first, by 2020 that share will drop to 90 percent. The Medicaid expansion was paid for by a tax increase, one that only affected the top five percent of income earners. They made up 10 percent of federal and state budgets 30 years ago and today that share is more than 25 percent. Part of that increase is a reflection of the rising cost of healthcare as a whole. Health care spending went from about 9 percent of GDP in to 17 percent in. Although its worth pointing out that this increase was much smaller in other countries.

Conservatives worry that if more people on Medicaid that will only increase costs further. Everyone who qualifies based on a given states rules and eligibility criteria is able to get that service or able to get that benefit, and theres no cap theres no limit to how much the federal government will reimburse states. In 1995 under President Clinton and then again in 2017 Republicans in Congress proposed changes that they said would make Medicaid more financially solvent. They would do it by giving Medicaid a fixed amount of cash called block grants, not a guarantee of coverage. Block granting basically says heres a big lump sum, and with that lump sum you can do what you want. What is worrying is that lets say you have Crohn’s Disease, or a rare form of cancer whose medication is super expensive. The insurance company has a financial incentive to stall approval hoping that the patient will die and save them money.

A single-payer system is not an all-or-nothing choice. In Bernie Sanders Medicare for all plan, he expands it to cover vision & dental, and he opens it to nearly everyone(not just people 65 and older), all kids go on medicare automatically and most adults can buy in. That plan on its own wouldn’t get American healthcare spending far down overnight, but it would begin to recognize what we already know and most other countries already do. Healthcare is one of those things the government can do cheaper and better than the private sector. By one estimate, Vermont could save 25 percent by having a single-payer system. But the state government in Vermont needs to raise $2 billion for such a system. And if you look at Massachusetts, their healthcare experiment in 2006 did lead to Obamacare. So if this does work in Vermont, who knows what could be next.