Getting It Right: True North in Healthcare Reform

Kevin Mowll

Editorial by Kevin Mowll, Executive Director, The RISE Association

The movement to repeal and replace "ObamaCare" created so much political noise that clear thinking has been hard to come by. The 2010 legislation that created the marketplace for individuals and small business (the Affordable Care Act or ACA), has almost evolved into a political Rorschach test.  The more that politicized options and alternatives to repealing, replacing, or repairing it were discussed, the harder it was to put into focus the original problems the legislation was designed to address.  Nevertheless, the rancorous divisions over what needs to happen to fix problems in the individual insurance market remain a distraction from the real issue at hand: the cost of healthcare weighing down the economy and what we need to do to fix it.

 With all the intense debates swirling around this topic, an impression emerges that “solving the ObamaCare issues” is something that must be accomplished as an isolated matter, discrete and independent of other problems.  The heated debates concentrate on the mechanics and tactics required to solve the "uninsured problem", the "under-insured problem", and for some, the federal budget problems created by the subsidies for low-income enrollees in these plans. This single-issue mono-vision obscures a reality that must be addressed. This perspective completely misses the fact that something is going on that is far more corrosive to the wellbeing of all of us as consumers of health care, as taxpayers, and as a nation: something that overshadows the tug ‘o war over ObamaCare.  

 The critical and overlooked issue is that health care expenditures in the U.S are at least twice as expensive as other nations, which consume so much of the national economy that we are no longer competitive in the global economy. Further, this creates financial distortions in our economy and has ruinous effect on jobs and the standards of living in America. And, if that were not enough, we receive terrible outcomes in terms of the health care results as a nation.  Thus, the whole of the American population is affected by this poisonous factor.  Those without insurance coverage suffer doubly as they share the general pain plus the specific financial and health consequences from lacking some buffer from direct health care costs.  

 When health care spending was more in balance many decades ago, we were not so integrated into a global economy.  Progressively, over the last forty years, the critical faults in our healthcare system drove our costs at a pace that exceeded consumer price index levels, ever-diverging from other major economies in the world while, at the very same time, our economies became inextricably entwined with each other developed nation. Along with the accelerating job replacement forces of technological advances, labor costs forced the shifting of manufacturing and replaceable jobs to third world producers with lower cost structures and lax regulations.  This trend continues its vicious course, unabated, shifting labor to China and India, and then to Viet Nam and other less developed countries. Therefore, in view of this much larger backdrop, the debate about ObamaCare is only one of the many signposts along the road we have taken towards decline in prosperity and well-being as a nation.  Schumpeter’s term, “constructive de-construction”, is an apt way to view this international phenomenon. With the fierceness and relentlessness of what Adam Smith refers to the “invisible hand of the market”, this amounts to a Darwinian process that seizes upon inherent flaws and leverages them remorselessly to a logical conclusion. In our case, the inherent faults in our healthcare system have been leveraged to our disadvantage, exaggerating the root problems in an escalating pattern.

Returning to the original topic, the fate of the ACA legislation, we must connect the dots between the global market forces with the problems that afflict our market for healthcare in the U.S. It is ironic that one of the philosophical stumbling blocks in the current debate over the repeal, replacement, or repair of ObamaCare often features arguments in favor of free market competition.  This is as if what the ACA has brought us has lost sight of that quintessential American value placed on free markets, and must be rectified by tearing down the ACA.  But, in fact, what has happened to us is the result of the de facto marketplace for healthcare, given the way we have allowed the market to default to “auto-pilot”.  It is not as if there is no marketplace, but the default mode continues to take us off course. What we are missing is a functional market for healthcare, a market based upon the value-received for the expenses incurred.  Instead, this article argues, the old teetering fee-for-service (FFS) healthcare system is the defining feature of our healthcare marketplace, one that is based exclusively upon payment for units of service at piece rate levels, unfettered by any requirements to produce evidence of the quality or acceptability of health care results.

 Unlike when we buy a car or a refrigerator, we generally assume that what we get in our purchases of health services is good and made-to-order.  This leap of faith is based upon an uncritical approach to healthcare, as we assume that it is too complicated for the average citizen to comprehend or evaluate. It is true that there is a lack of credible information to make such judgments, and thus we meekly consume what is prescribed for us. This is the very thing that must be torn down and replaced with a new paradigm of value-proxies across the board, if we are to realize systemic relief.  If we want to reverse the stifling spiral towards economic suffocation by unabated health care spending, we need to take this on.  Healthcare inflation is caused by both demand-side pressures and supply-side forces, and the only way to put the brakes on both is to have benchmarks and value proxies to guide all the actors.

The starting place to fixing this faulty status quo is in creating competitive marketplaces for healthcare based upon evidence of value.  The solution is to harness and channel the constructive forces of healthy competition.  Going backwards to the proven failures of the system that landed us in the current predicament is not the answer.  A competitive framework needs to be pursued to drive out wasteful and unproductive health care, to boost the national scores on health outcomes, and to reverse the ever-climbing costs that choke our economy.  The solutions for what ails us is competition based on useful information and healthy incentives that replace current incentives for waste, abuse, and misallocation of resources, with ones that reward a reversal of those trends.  

Thus, it is not only the 6% of the U.S population enrolled in Obamacare that needs these fixes: it is 100% of us that need it.  Without a large-scale movement in this direction, the underlying performance of the health care delivery system cannot be reversed.  Failing to reverse the perverse old tendencies means that we will continue to get the same old results that drove us to this desperate place in the first place.  


Categories: ACA, Healthcare Reform
Tags: ObamaCare, ACA, AHCA, TrumpCare

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