America Cannot Afford Socialism

 

During the American Revolution, the cry was often heard, “The British are coming! The British are coming!” Today, we should be just as vigilant in declaring, “The Socialists are coming! The Socialists are coming!” We can’t afford to let that happen.

The New York Election Results

Recently, ten-term Democratic Congressman Joe Crowley was beaten by socialist Alexandria Ocasio-Cortez in New York’s 14th congressional district primary election. Ocasio-Cortez is a member of the Democratic Socialists of America and a former organizer for Senator Bernie Sanders’ presidential campaign.

Like Sanders, she is a vocal advocate of “Medicare for All”, the socialized medicine legislation introduced by the Vermont senator. This would be a government takeover of all America’s healthcare. Also known as single-payer healthcare, this plan has become a main feature of the Democratic Party platform.

Can America afford “Medicare for All”?

Sally Pipes, writing in Forbes, says a reality check is in order. Sanders tried to implement such a plan in his state of Vermont in 2014. Then-governor Peter Shumlin pushed a single-payer system in the state legislature until he learned the plan would cost $4.3 billion annually. That equaled 88% of the entire state budget. To fund this would require a 12.5 percent state payroll tax and a sliding-scale individual tax of up to 9.5 percent of income. Shumlin pulled the legislation, admitting it “might hurt our economy.”

Last month, in North Carolina, Democratic state representative Verla Insko promoted her own single-payer bill – until she faced reality. An analysis by the state legislature’s Fiscal Research Division estimated the cost of single-payer at $70 billion, $42 billion of which would have to come from the state. That would have been almost double the state budget. This estimate was actually conservative. The Civitas Institute, a free-market think tank in North Carolina, has estimated the first year cost of implementing single-payer at $101 billion!

California had a similar experience last year. California State Assembly Speaker Anthony Rendon, a Democrat, pulled the plug on the single-payer legislation passed by the state Senate after deeming it “woefully incomplete.” The bill was estimated to cost $400 billion each year with no means to pay for it.

Even Senator Sanders admits “there will be pain” if the nation adopts his Medicare for All plan. The plan he touted on his 2016 presidential campaign would have cost $1.4 Trillion per year – even by his own estimates. He called for a new 2.2 percent income tax, a 6.2 percent tax on employers, and higher income taxes on the wealthy. The Urban Institute, a liberal think-tank, estimated Sanders’ plan would cost $32 Trillion over 10 years.

This is a good time to quote former Prime Minister of Great Britain Margaret Thatcher who once said, “The problem with socialism is that eventually you run out of other people’s money.”

Pipes points out that America is already struggling to afford our current Medicare system for the elderly and disabled only. In 2017, the federal government spent more than $700 billion on Medicare – a 65 percent increase over just 10 years. Annual costs per capita are expected to increase 4.6 percent per year over the next decade. The latest Medicare Trustees report released in June states the part A Trust Fund, which covers payment for hospital care, will be depleted in 2026.

Pipes says, “in other words, America is struggling to pay for “Medicare for Some” – much less “Medicare for All.” As single-payer candidates like Ocasio-Cortez will soon discover, no amount of enthusiasm for single-payer can overcome basic math.”

Democratic Backlash

Even some leading Democrats have their concerns about socialist candidates like Ocasio-Cortez. House Minority Leader Nancy Pelosi was quick to reject media descriptions of Ocasio-Cortez as “the new face of the Democratic Party.” Pelosi said, “They made a choice in one district. It is not to be viewed as something that stands for anything else.”

Former Democratic Senator and Vice-Presidential candidate Joe Lieberman writes in The Wall Street Journal to encourage Democrats to vote for Joe Crowley in November since his name will still be on the ballot. He is the endorsed candidate of the Working Families Party.

Lieberman says about Ocasio-Cortez, “Her dreams of new federal spending would bankrupt the country or require very large tax increases, including on the working class. Her approach foresees government ownership of many private companies, which would decimate the economy and put millions out of work. . . She has received the most attention for calling to “Abolish ICE,” Immigration and Customs Enforcement. This makes no sense unless you no longer want any rules on immigration or customs to be enforced.”

Recent surveys suggest 40 percent of Americans, mostly young people, favor socialism over capitalism. For those who naively support socialism, and haven’t learned the lessons of history, they need look no farther than Venezuela today where rampant inflation, food shortages, and rioting in the streets demonstrate the outcomes of a socialist economy. This should be solid evidence that America cannot afford socialism.

Healthcare Price Transparency Still Lacking

 

Nearly two years ago I wrote a post on the lack of healthcare price transparency (Healthcare Price Transparency Needed). Since then not much has changed.

A little known case before the Supreme Court, Gobeille v. Liberty Mutual, concerned a challenge to the right of states to collect healthcare data from insurance carriers under the Affordable Care Act. I mentioned this important case in my earlier post.

Unfortunately, SCOTUS found in favor of Liberty Mutual by a 6 – 2 vote. This decision upheld the opinion that states cannot force insurance plans to provide healthcare data, because ERISA protects these plans from all but the most trivial state recordkeeping requirements. This deals a blow to state efforts to increase transparency.

Why is this a problem?

The recent experience of two different people in the State of New York is illustrative. Steve Cohen, writing in The Wall Street Journal, tells the tale of Michael Frank, a 52 year-old Westchester executive, who underwent a left hip replacement in 2015. The Manhattan hospital where it was performed charged roughly $140,000. The insurance company paid the discounted rate of about $76,000, and his share – a 10% co-pay, plus a couple of uncovered expenses, was just over $8,000.

He contacted Mr. Cohen, whose name was noted in the media regarding a lawsuit against a different insurer. Cohen had personally undergone bilateral hip replacements, six months apart, at the same hospital during the same approximate time frame. The cost to Cohen was only his deductible. This difference is accounted for by the differences in their insurance policies.

But here’s the real story. When Cohen researched the actual charges for his two hip replacements, he found he was charged $175,000 for one and $180,000 for the other. The insurance company paid discounted rates of $75,000 and $77,000.

To combat this problem, New York’s then-attorney general, Andrew Cuomo, in 2009 created a nonprofit organization called FAIR Health. Its purpose was to provide consumers accurate pricing information for all kinds of medical services. Cohen contacted FAIR Health and found the out-of-network price for a hip replacement in Manhattan was $72,656, a close approximation to his and Frank’s experience. However, they were both in-network and the FAIR Health estimate for in-network was only $29,162.

Further research found there were no extenuating circumstances, such as medical complications, to explain the disparities. The results of this research discovered the fundamental problem – the data submitted for calculation of these estimates came from insurance companies, not from providers such as hospitals and physicians.

As long as insurance companies are protected from disclosing accurate data on healthcare, and bills are paid by insurers rather than patients, there will be problems in healthcare transparency. Consumers need to become more involved in the process of purchasing healthcare if they are to be influential in healthcare pricing.

Solutions to the lack of healthcare pricing transparency include:

  • Health Savings Accounts – savings benefit patients, not insurers
  • Published pricing by providers – doctors and hospitals
  • National database for medical prices – to allow state comparisons

 

Let me know if you have other ideas for increasing healthcare pricing transparency.

How Healthcare Mergers Affect Patients

 

There is an increasing trend occurring in the healthcare industry that should concern all Americans. Hospitals are consolidating, buying out their competitors. Healthcare insurers are consolidating, merging two or more companies into one. Pharmaceutical companies are doing the same thing.

Recently, Advocate Health Care and Aurora Health Care finalized their $11 billion merger deal to form the nations’ 10th largest tax-exempt healthcare system. Dignity Health and Catholic Health Initiatives are currently moving toward a $28 billion merger. These are hospital consolidation mergers.

Then there are healthcare providers insurers purchasing healthcare providers. Optum, a subsidiary of United Health Group, is purchasing DaVita Health Group, a large group of physicians and clinics, for nearly $5 billion. Medicare insurance giant Humana just bought the 22 clinic Family Physicians Group in Central Florida.

And then there is consolidation of insurers with pharmaceutical suppliers. Aetna is slowly but surely moving toward merger with CVS Health Corp. In a reverse of this move, Walmart is considering buying Humana.

According to a recent report by Kaufman Hall, mergers were up 13% last year. Bloomberg reports mergers are off to their fastest start ever in 2018. Over $156 billion in deals had been completed by the end of the first quarter alone.

When healthcare companies merge, what happens to patients?

Marni Jameson Carey, writing for Medical Economics, says this is driving up the cost of healthcare, especially for Medicare. She cites a recent report by Physician Advocacy Institute, that says hospitals buying doctors is the leading cause of rising Medicare expenses. Carey says, “Between 2012 and 2015, Medicare costs rose $3.1 billion due primarily to the 49 percent uptick in hospital-employed doctors that occurred over the same period. And that study only looked at four procedures. Imagine the tally if all procedures were accounted for.”

The impact on healthcare prices can be dramatic. Martin Gaynor, Carnegie Mellon economist, submitted a report entitled Examining the Impact of Healthcare Consolidation, to the Committee on Energy and Commerce Oversight and Investigations Subcommittee of the U.S. House of Representatives in February of this year. He says prices increase 20 to 30 percent when hospitals merge. In some cases they increase as much as 50 percent. He says this often leads to poorer healthcare outcomes for patients, especially in areas where there is less competition.

Here are some statements from his report:

  • The two largest insurers now have 70% of the market or more in ½ of all local insurance markets.
  • 33% of all physicians and 44% of all primary care physicians are now employed by hospitals
  • Extensive research evidence shows that consolidation between close competitors leads to substantial price increases for hospitals, insurers, and physicians, without offsetting gains in improved quality or enhanced efficiency.

 

If your doctor retired recently, as mine did, you probably had difficulty finding a new primary care physician who was not employed by a hospital. This is a trend that bodes poorly for future healthcare outcomes and costs. Competition leads to lower prices and higher quality. Lack of competition can be expected to produce the opposite.