The health care debate has offered much discussion about different ways to bend the cost curve down. While the administration was quick to offer its radical prescription allegedly to curtail health care spending, to this day there has been no attempt to ascertain its etiology. “What” the problem is (ahem, high health care costs) is obvious to all. But after months of speeches and interviews President Obama even now has yet to address the “why.” Why does health care cost so much in this country?
The question is a simple one, but it’s a crucial one. While arguments of increased disease prevalence, insurance, waste, and technological advances certainly warrant mention, most of the blame lies with a third party payer system that isolates patients from cost at time of purchase. Once the initial insurance premium has been paid additional services only require a copayment. The often nominal fee does not sufficiently reflect actual cost or value of the service and hence fails to restrain demand. This throws normal market forces out the window and creates a situation where all the players in the game have no incentive to control costs. Thus costs soar. Insurance companies can increase the initial fee to employers, even though this may decrease worker salary. The insured public also looks the other way because they view it as an employer or insurer expense and not theirs. In the end no one is watching the store.
Contrary to conventional wisdom, the federal government has not been an innocent bystander to this trend. To the contrary Medicare has been the catalyst. In 1965, the year Medicare became law, 52 percent of per capita health care expenditures were out of pocket. By 2005 this had plummeted to only 15 percent. As out of pocket spending declined, the prevalence of third party payers has skyrocketed. Coincidentally, since 1965 real per-capita health care expenditures have increased approximately six-fold.
ObamaCare will put over one trillion dollars into the health care system. To do this without fundamentally reforming the reason for rising health care costs is like trying to put out a fire with gasoline. Further expanding the role of government in the health care sector will only serve to accelerate current trends. It will drown an industry already regulated to death with a slew of new mandates, regulations, red tape, and taxes that simultaneously will hinder patients from receiving desired care.
Limits on out of pocket spending and establishing a minimum standard of mandated benefits will expand the third party payer system that has been key to escalating costs. New taxes on drugs, medical devices, and health insurance will do the same with the added expenses ultimately being taken from the pocket of John Q. Patient. Enrolling more and more into Medicaid with its stingy reimbursement regimen will encourage people to obtain care in the most costliest of venues: expensive and already overpacked emergency rooms.
Mr. Obama has honed in on the main contributor to cost increases. Yet rather than mitigating the third party payer system, his approach will expand it like never before. This will increase costs and increase insurance premiums. It will indeed bend the cost curve, but upwards not down. More importantly the bill that just passed the House will give unaccountable bureaucrats unprecedented power over medical decisions normally reserved for private discussions between patients and doctors.
Today is not the day that saved health care. Rather it’s the day that sent the world’s premier health care system to its grave.
Jason D. Fodeman, M.D. is an internal-medicine resident at the University of Connecticut. A former health-policy fellow at the Heritage Foundation, he is the author of How to Destroy a Village: What the Clintons Taught a Seventeen Year Old.