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The Real Solution to the American Healthcare Problem

Updated on May 15, 2017

There can be no doubt that healthcare and related laws are dominating the spotlight of American politics. Unfortunately, both the leading Democratic and Republican plans (ACA and AHCA, respectively) fail to address the real problem with American healthcare which is the cost. Healthcare costs have been outpacing inflation. According to the National Conference of State Legislatures, the cost of healthcare in the United States has grown at a rate between two and three times inflation as measured by the Consumer Price Index. Healthcare spending, including the use of federal funds, accounts for 32% of all spending across all state budgets. The bottom line is that healthcare has not only become too expensive for individuals and families, it is also not affordable for the federal government. Healthcare related expenditures such as premium subsidies and Medicaid, substantially contribute to the each year's budget deficit, increasing the national debt.

The 2017 Long-Term Budget Outlook according to the CBO.
The 2017 Long-Term Budget Outlook according to the CBO. | Source

ACA, compared to the proposal AHCA, spends more and provides more benefits. Many people see this as a more generous and benevolent plan while AHCA is cruel and deadly. However, the cost of current benefits for both ACA and AHCA are funded by public debt. When public debt exceeds the limit investors are comfortable with, the system will collapse and benefits will disappear.

The only choice is to be cruel now by cutting benefits or be cruel later by adding to the debt and letting the next generation deal with it. Thankfully, there is a better option: reduce healthcare related expenses.

What are the main cost drivers in the healthcare industry? Technology, facilities, staffing. These are all major costs that have been and will continue to be. No one wants poorer technology or dirty hospitals. However, there are other large cost drivers which could be better controlled or eliminated. Principally, they are liability, education, and compliance.

Doctors and healthcare organizations spend huge percentages of revenue, sometimes as much as 50%, on liability insurance to protect themselves against malpractice lawsuits. As the number and payouts of lawsuits increase, so do the insurance premiums that doctors and hospitals must pay. This requires doctors and hospitals to charge more for services, including services that many patients see as trivial such as renting a wheelchair.

Organizations must also spend considerable resources, primarily in staffing and legal counsel, to keep up with government regulations and comply with federal agencies. This compliance creates a double burden on citizens who must fund the enlarged government agencies and pay the increased costs of compliance which are passed on to patients and health insurance customers.

Education, another industry where cost increases far exceed inflation, also plays a role since doctors and nurses must spend more for their degrees thereby increasing their student loans and salary expectations. Education costs, like that of healthcare, are, in part, influenced by increased government intervention. The cost of complying with the Department of Education has become a larger burden for colleges and universities across the country.

Both liability and compliance are ultimately controlled by the federal government. The court system oversees malpractice lawsuits while the executive and legislative branches control agencies through management and funding, respectively. Several of the primary cost drivers in the healthcare industry are controlled by the federal government; yet none of the options presented by either party strive to reduce or eliminate government influenced costs. This should be concerning to all citizens, regardless of party affiliation.

Both the ACA and AHCA have major weakness because they do not address industry cost drivers which are controlled, at least partially, by the federal government. The AHCA, though it reduces benefits from a federal perspective, gives more power to individual states regarding healthcare and insurance regulation and reduces the scope of federal government power and control on healthcare. It also strives to increase competition by encouraging a more "consumer mindset" through the use of Health Saving Accounts. It is perhaps a first step, but not a complete one.

Rather than jumping the bandwagon of being for or against parties and people, why not support common sense ideas that would not only improve the situation for the current generation but also ensure that future generations are not burdened with a debt they cannot pay? Write or email your senator or representative today and ask them to develop legislation which aims to reduce costs rather than spreading or passing the costs off to others.

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