What Big Government Chernobyl Looks Like
The cost of an MRI in China is a tiny percentage of the cost of an MRI in the U.S., and the machine and training of the technicians is the same; so why does it cost 25 times more for an MRI here? Because there’s a pot of “free money” available to tap. If the entire system collapsed and everyone paid cash, the cost of an MRI would be $100 or so, regardless of any other conditions. Or, the owners of the MRI machines could declare bankruptcy, sell the machines at auction and let someone else provide the service to those who decided it was worth the expense.
(HT: Charles Hugh Smith)
No aspect of America’s quasi-socialist economy exemplifies Big Government Chernobyl more perfectly than our so-called healthcare system. Yet our efforts on reform just entail our massive state apparatus leaning into a series of bad bets like The Tower of The Cathedral of Pisa. It’s a Known Fact™ that every problem that the US “Healthcare” system currently has was solved by the passage of ObamaCare. Oh wait, one of the senators who, umm, helped write the fiasco described it as a train wreck. In what way would O-Care= Train wreck? Here are some of the fulsome scurvy details.
President Barack Obama and his fellow Democrats sold many Americans on the Affordable Care Act largely by emphasizing two arguments: The law would help to reduce overall health-care costs, and it would provide health insurance to those who, for financial or health reasons, cannot get it now. Unfortunately, both of these arguments are flawed. The law creates market distortions that will significantly raise premiums and costs for many Americans — including some middle-income families. And there are less costly, less distortionary and less intrusive ways to address the problem of the uninsured.
Don’t get me wrong. I like O-Care about as much as I like getting a prostate exam. The bill is typical of unthinking, boilerplate socialism’s response to the negative externalities that result from market failure. We should therefore trash Obamacare, but let’s just make that the warm-up set. The real heavy lifting required to fix our healthcare system involves addressing the causes of a market failure so catastrophic that something as obviously stupid as Obamacare seemed like a palatable solution.
Karl Denninger explains why poor people often can’t afford health insurance. The care provided is so badly overpriced that health plans are paying out more vastly more than the goods and services provided can possibly be worth. He describes the price mark-up of a common chemotherapy drug below.
Let me give you just one example — a relatively common chemotherapy drug. I won’t name the drug as it might expose my source, but those in the practice of medicine are well-aware of the truth in this regard. It has a cost including a market profit of about $30/dose. You can’t buy it in the United States for under $100, however. As a patient you will likely pay 50% to 500% more in a clinic or hospital for that drug. If you go to one of the nations where it is produced, however, you can buy it over the counter for $30. So why does it cost $150-500 in the United States? Because drug makers colluded with the US Government to make it a crime to buy that drug in some other nation and then bring it into the United States and sell it for whatever you wish to sell it for. You must have a valid prescription to possess it at all and since that prescription must be for your personal use possession for any other purpose without explicit government permission (such as, for example, arbitrage of price between a high and low priced location) is a criminal offense for which you can be (and will be) prosecuted and imprisoned.
OK, so that’s just one drug. How does this work out on a macro level? That chart atop the post is what annual per capita health care expenditures look like since 1980.
Is there any wonder that a lot of people can’t afford insurance? Is it any wonder that ObamaCare can’t provide them with decent insurance without executing a full-on hostile operation against your wallet? Care providers essentially operate in an uncompetitive market. They are paid by insurers, not by consumers. This means that the people receiving the care do not see what these bills cost unless they actually take the time and go to the effort to map what they pay in premiums to what procedures actually cost. The end result of this disconnect is predictable. We lose an entire Iraq War worth of money on healthcare every year.
The massive annual waste is the takeaway from a new report by the Institute of Medicine (IOM), which estimates that the country loses some $750 billion annually to medical fraud, inefficiencies, and other siphons in the health-care system. In comparison, the Defense Department budgeted $757.8 billion for the war in Iraq over the eight years it was there.
The Cost of Free Money
So how does one fix this? What can be done to stop the massive hemorrhage? Here goes:
1) Lot’s of anti-trust litigation. Make drug makers, drug prescribers, ambulance operators and medical device manufacturers obey anti-trust laws and stop writing exceptions into healthcare “reform” legislation. Bristol Myers Squibb should operate in the same legal environment that Exxon-Mobil and Ford Motors are required to. Regardless of what they manufacture, they are a corporation. They are no better, no worse, and not terribly different than anyone else listed on the S&P 500 or the DJIA. Destroy all the perks drug companies and medical device manufacturers enjoy that Coca-Cola wouldn’t get.
2) Loser pays tort reform. I’m not too worried about having a lot of malpractice suits. What I am concerned about is that lawyers can often foist class-action lawsuits on people and bully them into settling and paying out a Dane Geld of sorts because the people bringing suit don’t suffer adverse consequences from a loss. I just asked for more litigation in step 1 above. In step 2, I’m asking for a logical restraint that makes sure that litigation is actually honorable, rather than an act of system-trolling blackmail.
3) Insurance Flexibility. Employers should have the option of not buying health insurance for their workers. They should be able to offer a cash addendum to the employee salary equal to the median cost of their contribution to the plans they provide now. The employee could then choose to do whatever he wants to do with that cash. Insurers should be able to sell any plan they want to in any US State or Territory they want to. Conversely, no insurance company should ever get to be the only company licensed to sell a certain group of employees insurance in the State of Alabama (or anywhere else in the US).
4) Of Course, Nuke Ocare From Close Earth Orbit. Get rid of all minimum requirements for what a plan must cover. Let insurers sell what they want. Let employees and employers buy what they are willing to pay for. Do not mandate what exchanges these transactions must occur in. Ditch all the taxation used to pay the new bureaucrats. Get rid of each and every one of the stinkin’ bureaucrats. Our healthcare system needs new bureaucrats the way Beijing suffers from a lack of Tropospheric Ozone during the summer. And what *possible* business does the IRS have in participating in the US healthcare system?
5) Reduce The Barrier To Entry Med-School Costs Impose On New Doctors – A topic for another diary on education on another day.
6) Base Medicaid/Medicare Reimbursements on market survey costs. – Make Medicaid pay the same thing as non-Medicaid. Make welfare patients as transparent as possible on in their market impact. Maybe that way doctors will voluntarily treat them rather than dumping them on the emergency room staff.