Remedies for Our Ailing Healthcare Policies

By: Barry_Elias

What is the importance of $148 and $7,285?

Answer: Both represent the U.S. healthcare expenditures per capita: the former in 1960, the latter in 2007.

In 2007, the United States spent more per capita on healthcare than any nation in the world, excluding Luxembourg, Monaco, and Norway, which spent slightly more. Yet, the mortality parameters suggest otherwise: our worldwide ranking for life expectancy and infant mortality are 50 and 45, respectively.

During the same period, Health and Human Services indicate healthcare expenditures as a percentage of GDP (income) increased from 5.2 percent to 16.2 percent. In 2006, the World Health Organization (WHO) reported this percentage ranged from 8 percent to 11 percent for the following seven countries (in descending order): France (11 percent), Germany, Canada, Sweden, Australia, the United Kingdom, and Japan (8 percent).

After 47 years, the U.S. urban consumer-price index increased six times while per capita health expenditures increased 48 times, and our mortality statistics remain lackluster.

Healthcare performance parameters don’t strongly correlate with our expenditure profile: a poor return on investment.

Twenty years ago, I told a friend it is in my interest to utilize health services efficiently, otherwise my insurance premiums would increase. "That is true, but most people don't think like that," he replied.

The repercussions outlined above seem a result of misguided policies: third-party payment mechanisms, which began in 1929.

This methodology created the moral hazard: it provide disincentives to the consumer from performing an effective cost/benefit analysis for healthcare purchases. The industry was essentially decoupled from a competitive resource-allocation model, which is paramount for long-term, stable and sustainable operations.

Healthy competition (which includes proper transparency, regulation and responsibility) ensures that our values are translated by the market into effective and efficient delivery systems.

The policy prescriptions being promoted by the current administration and legislative majority represent a shift toward less market competition, the antithesis of prudent economics to increase quality of life.

While not yet incorporated into the legislation, a government-sponsored public option would crowd out private enterprise. It would achieve this by consistently underselling the competition. This can occur, not because government is more efficient, but because it can subsidize any potential loss through decreased spending for other programs, along with increased taxes and borrowing.

Once government becomes the sole provider, it will tend to operate inefficiently for the same reason third-party mechanisms do. That is, the consumer of the products and services is far removed from the purchasing analysis required for effective decision-making.

Historically, at best, government tends to manage resource allocation inefficiently; at worst, it serves to enhance the personal power and finances for decision makers at the expense of the public good.

Moreover, it is ironic that the creators/enablers of the problem are now offering the solutions (which are similar to the original cause).

A recent CBS "60 Minutes" piece identified $60 billion in annual fraud within the Medicare program, representing 15 percent of its annual $400 billion budget. Apparently, entities submit fictitious bills to Medicare, which are routinely paid without oversight. One perpetrator said he "stole" $ 20 million and compared the scheme to "taking candy from a baby."

U.S. Attorney General Eric Holder seemed flummoxed that individuals would violate such a well-intentioned program.

If this were my personal business, before mailing $60 billion per year for services allegedly rendered, I would want to certify the validity of the invoices.

The government has less incentive to do so, since it continues to operate, ad infinitum, via transfer payments, taxation, and/or debt creation, none of which are available to individually owned entities that are failing.

The real remedies for the healthcare debacle, and the financial crisis in general, are based on market-oriented principles, steeped in proper transparency, regulation and responsibility.

The remedies include, but are not limited to, a focus on the following: greater consumer responsibility when purchasing healthcare (e.g., higher co-payments and lower premiums) and preventive measures that reduce the cause and inception of disease. It would be myopic, and irresponsible, to focus only on symptom treatment, since this is more costly and may not provide a positive quality of life.

When applying for an insurance plan, someone posed the question: "How can we guarantee proper claim submissions so our premium won't go up?" My response produced a strong nod from the insurance agent: "Require some form of payment by the consumer at the time of service."

This methodology would likely reduce emergency visits for nonemergency procedures. In the event of a nonemergency scenario, the patient may opt to purchase food that day, and wait a day or two to see how their body is adapting before seeking professional services. By that time, the issue may have subsided.

Four or five disease processes consume nearly 80 percent of our healthcare expenditures. A significant cause of these ills typically involves excess weight.

Humana, a large health insurer, estimates excess weight adds nearly $120 billion per year in healthcare expenditures and lost productivity. This translates to roughly $20 per pound each year. It excludes the food expense to accumulate the weight ($5 per pound) and the cost to maintain the weight ($10 per pound).

With more prudent lifestyles that incorporate healthy eating and exercise, we can reduce healthcare expenditures while increasing economic productivity and quality of life (and reduce food consumption and expense as a byproduct).

While desirable results may take many years, it can ensure long-term, stable and sustainable prosperity for our society.

By Barry Elias

eliasbarry@aol.com

Barry Elias provides economic analysis to Dick Morris, a former political adviser to President Clinton.

He was cited and acknowledged in two recent best-sellers co-authored by Mr. Morris: “Catastrophe” and “2010: Take Back America - a Battle Plan.” Mr. Elias graduated Phi Beta Kappa from Binghamton University with a degree in economics.

He has consulted with various high-profile financial institutions in New York City.

© 2010 Copyright Barry Elias - All Rights Reserved
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