Friday, September 4, 2009

Healthcare "Reform" Fiasco

As the Democrats frantically try to salvage their health care "reform" initiative, it is import that American’s understand one thing. The free market didn't create the problems with our current healthcare system. The government did.

In the U.S., the person receiving the benefit (the patient) is not the person who is paying the bills (employer or government). So, patients have few incentives to use the system wisely. Why? Because government started corrupting the system in the 1960s. In 1960, before the creation of Medicare and Medicaid, healthcare spending was 5% of GDP. 55% of that was paid out of pocket. Private insurance paid 24% of the tab. Government picked up the rest at 21% of total costs. Today, healthcare costs are a whopping 18% of GDP. The mix of who pays has been completely turned upside down with the government providing between 45% and 56% of healthcare costs, depending on the state, while out of pocket expenses are less than 17% of the total.

Even our "private" system of employer paid health insurance was an unintended consequence of government wage and price controls during WWII. Employers competed for short supplies of labor by offering new benefits like healthcare insurance because they weren’t allowed to compete by raising wages.

Government regulations restrict competition and price shopping by prohibiting companies from selling health insurance across state lines. Auto insurance and home owner's insurance are sold across state lines, why can't health care insurance???

Onerous regulations dramatically drive up the cost of bringing drugs to market. Drugs costs are a major component of escalating healthcare costs. New drugs are often available in Europe, Japan, and elsewhere years before they are available here. Are the Europeans and Japanese dying more frequently than Americans from unsafe drugs? No.

Our legal system is also driving up healthcare costs due to excessive punitive damages that have driven up medical malpractice insurance. In many states, for example OBGYNs are leaving the profession because of the rising cost of medical malpractice insurance, which is a consequence of America's legal system.

It should be obvious that it's a complete myth that America has a "free market" healthcare system. A free market healthcare system would place patient choice and responsibility at the center of the system, not government bureaucracies.

Singapore reformed their socialized healthcare system to one where choice and responsibility were center stage and the cost of healthcare in Singapore has fallen while quality has risen. Their system is based on mandatory medical savings accounts, catastrophic health insurance, copays, information transparency in prices and outcomes, and means tested government subsidies for the poor. On every measure from infant mortality to life expectancy, Singapore is better than the U.S. Their costs are less than 1/3 of ours per capita.

Here's the funny thing: Singapore got a lot of their ideas from the U.S. -- medical savings accounts were proposed by U.S. economists in the 1970s. Singapore adopted them in 1984 and costs have fallen while quality and patient satisfaction have increased.

Of course, the politicians who believe that the government is the answer to every problem don't want to hear the facts. They only want to hear how they can gain more power and control for themselves.

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