unbrandedcare

Well it looks like the unbranded American Health Care Act is dying that long drawn out death usually only seen in black and white movies. I call it unbranded because no one wants his name attached to it. So we aren’t calling it Trumpcare, Ryancare or GOPcare as the Democrats are trying to do to assign the blame for this attempt to repeal and replace Obamacare.

The reason that both Obamacare and unbrandedcare are such disasters is that they are attempts to cover the gaps and flaws of healthcare in America without reforming the deeply flawed system underpinning these programs. If you look at the two worst performing sectors of our economy (education and healthcare – most money spent with mediocre results at best) you will see that these are the two sectors where the government is most involved. In spite of its good intentions to improve the scope and delivery of these services, the mediocre results and outrageous expense are the unintended consequences of government help (Ronald Reagan’s nine most terrifying words “I’m from the government and I’m here to help”.)

Most of the interest in reforming healthcare is focused on its microeconomic impact: how it affects a person’s ability to receive and pay for good healthcare. In this essay, however, I would like to focus on the macroeconomic impact of our healthcare system. In the US, 17% of Gross Domestic Product is spent on healthcare and medicines. This is far more than any other country. France, Switzerland, Japan, Germany and Sweden spend about 11% of the GDP on healthcare yet their citizens on average live two to five years longer than ours do. This means that 6% of our economy is absolutely wasted and worthless. We get nothing for it. Oh, by the way. That 6% is over a trillion dollars. Every year. Thrown away. Completely wasted.

Worse than that! Healthcare is sapping the strength and productivity of our economy. Healthcare to our nation is like maintenance in a factory. Both healthcare and maintenance are necessary to keep a nation and a factory running. So our factory owner spends money to keep his machines running and his building safe and sound. But maintenance is preventive. It is a cost. If maintenance costs are too high the factory will lose money and eventually shut down. Like maintenance, healthcare keeps our people healthy and productive. But it is a cost.

It is true that the government is heavily involved in healthcare in many countries and completely run by the governments of France, Germany and others. So why shouldn’t the US also have a government run healthcare system? Would it be healthful and efficient? Maybe it would if we could get the Germans to come over and run it for us. Otherwise we might get a healthcare system more akin to the Veterans Affairs (VA) health system.

I suppose that we could try and emulate our European friends and design a government run healthcare system like France’s or Germany’s (don’t do one like in the UK which is going broke). That is what both Republicans and Democrats are trying to do. How they want to do it differs (Democrats want to tax the one percent/Republicans want to give tax credits) but they both want the same thing. A healthcare entitlement for every citizen that wants one (and even for those that don’t want one). I guess Joe Kernan was right when he said on CNBC that “you can’t take an entitlement away.” But this is the insidious nature of entitlements; they just keep growing and growing until they swallow up everything.

Or we could try something different. We didn’t become the greatest nation on earth by being like everyone else. The free market economic system powered us on this rise to greatness but it is the one thing that is lacking in all these healthcare proposals.

Not being a healthcare expert, I can’t tell you exactly how to structure this new healthcare system. But being an economic expert I can tell you some of the elements that need to be included in the plan so that the free market economic system can work its magic.

Some Republicans want to repeal and replace Obamacare right away. Some of the more reasonable Republicans say there needs to be a transition period that could last a year or two. But it took us generations to get in this mess and it will take a generation to get us out of this hole.

We need to make people pay for their own healthcare. However, in order to do this we need to make healthcare affordable. Making people pay for their healthcare will bring competition back into the system that will drive down prices – eventually. To do this immediately or even quickly would be impossible. Many people are fully invested in the current system and a rapid shift would leave them dangerously exposed. Today’s retirees have paid a lifetime of taxes into Medicare and have no way to seek an alternative. We need to honor that obligation while making younger people begin to pay for their healthcare so that when they also retire they will be prepared.

We need to get rid of the double tax benefit for employer provided insurance. This tax benefit is one of the principal causes of the screwed-up mess that is healthcare in the US. Also, it doesn’t match the structure of 21st century employment. Gone are the days when you walk into the factory door at eighteen (or older if a college grad) and walk out when you are sixty-five. Today’s worker can be an independent contractor, part-timer, freelancer, self-employed or other variation. People need their own portable health insurance that goes where they go. If an employer wants to cover that cost as a benefit that’s fine. But don’t force it.

We need to solve the problem of pre-existing conditions, which was a major problem before Obamacare. I can think of several possible solutions so this is a problem that can be resolved in the marketplace. Having portable insurance will also stop people from being trapped with their current employer because currently changing jobs means changing insurance companies.

If oil sells all around the world at the same price (as does gold, silver, copper and many, many other things on the market) then why the hell are drug prices different in every country. Oh, I know the story. In these countries the government buys all the drugs so it can negotiate a sweetheart deal. The marginal production cost of drugs is minimal, the real cost is in research and development. So drug companies can sell cheap drugs at a profit in those countries as long as they can increase their prices in the US to cover their R&D. All those countries are freeloading off of us and that has to stop. That is something the government can do to help control healthcare costs, the companies can’t do this on their own.

Once we get the free market economic system working in our healthcare system we will be able to get the cost of healthcare as a percent of GDP back down to earth and people will be able to afford their healthcare. Then we can get the health insurance companies back in the insurance business instead of being a big costly and inefficient payments system. Healthcare administrative costs in the US are the highest in the world (between 25 and 31 per cent according to several studies). That alone would equal the extra burden on our economy noted above. And administration isn’t healthcare its just pushing paper.

So if Congress and President Trump want to get together and really provide us with a good healthcare system they should include these free market ideas in their plan.

(I have been a little quiet lately in the blogosphere because I have been busy updating Edifice of Trust, which will soon be published in a second edition.)