Lower Cost Healthcare is the Solution – Not Insurance Coverage

 

Last post I said that the problem in healthcare is poor access to treatment, not healthcare insurance coverage. Today we’ll talk about the solution.

The Bureau of Labor Statistics gives us some useful information about changes in the healthcare industry between 1970 and 2010:

  • Healthcare administrators grew more than 3000 percent
  • Physicians grew by only 200 percent
  • S. healthcare spending grew by 2300 percent
  • Doctors’ fees account for only 8 cents of every healthcare dollar spent

 

Add to these statistics that since 2010, when ObamaCare was passed, the number of hospital administrative jobs created has increased by more than a million to handle the new bureaucracy. There are now 10 administrators for every one doctor.

Marni Jameson Carey is the executive director of the Association of Independent Doctors, a trade organization that represents those doctors not employed by hospitals or governments. She writes in Forbes that the United States spends far more on administrative costs than any of the next eight leading countries. She points to a recent study that concludes that if the U.S. per capita spending for hospital administration were reduced to Scottish or Canadian levels we would save more than $150 billion a year.

I’m not certain this is a fair comparison since those two countries have socialized medicine systems that have access to healthcare problems worse than ours. But she does point to the high administrative cost of healthcare in this country and that certainly is a problem.

Cost of Consolidation

The reason for this trend is the cost of consolidation. ObamaCare changed the dynamics of healthcare in a way that forces providers (especially hospitals) to consolidate. Hospitals have been purchasing physician practices, medical clinics and smaller hospitals in a wave of consolidation to improve their bottom line.

These consolidation efforts enable hospitals to charge higher fees for the same treatments previously performed by doctors in their own offices. They are permitted to add “facility fees” that private doctors cannot charge. They can control the referrals of these doctors to their own doctors and hospitals in a way not possible when doctors are independent. The result is they get paid more for the same services.

Consolidation also limits competition – which permits even higher charges. All of this results in higher costs of healthcare – but at no additional benefit to patients.

The Solution is Lower Healthcare Costs

As stated in the previous post, the problem in healthcare today is poor access to treatment. The solution is lowering healthcare costs.

Carey says healthcare costs could be lowered by these changes:

  • Eliminate facility fees
  • Mandate insurers pay all doctors the same amount for the same procedure
  • Enforce antitrust laws
  • Require true price transparency

 

Healthcare should be treated like any other commodity and let the free market determine the price. But for this to happen there must be a level playing field. Independent doctors must be paid the same amount as hospital-employed doctors. Hospitals must not be permitted to charge more than the price charged for the same procedure outside the hospital. Prices must be transparent so patients can shop for the best deals. The lowest price is not always the best deal but consumers can choose the price they want to pay.

When prices come down, patients will have improved access to healthcare. New healthcare legislation that incentivizes patients to choose the lowest cost healthcare will fuel this change through Health Savings Accounts and other innovations.

Carey concludes her article with these insights:

“Moreover, these moves, by driving costs down, would put access to care in reach. Because coverage isn’t the problem. The problem is that America is being crushed by a top-heavy system of profiteers who are exceptionally good at extracting money and convincing the rest of us that they deserve it.”

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