Reason For Our Health Care Crisis: Government

A long-standing trope on the left about health care is that the United States is the only developed country without national health insurance, leading one to infer that we care less than other countries about whether our citizens have access to health care.

But consider this: mandatory health spending (government spending plus mandated private spending) accounts for a larger share of our health care budget than most other developed countries (85 percent in the United States, compared with an OECD average of 76 percent). Moreover, mandatory health spending accounts for a larger share of our national income than any other country in the world.

Not only are governments more involved in health spending than in other countries, they are also more active in regulating medicine: for example, twice as many of a given group of medicines require a doctor’s prescription in the United States than in Australia.

Trying to solve problems that governments have created

And that’s a problem, says Michael Cannon. Recovery: A guide to health care reform. Cannon argues that all of the major health care programs (Medicare, Medicaid, Obamacare, etc.) were put in place primarily to solve problems created by past government intervention, and the reason calls for further reform continue is that every program that’s supposed to solve a problem just creates a new one.

Take Medicare, for example. Cannon writes that before Medicare began in 1965, many private insurance plans were guaranteed renewable for the beneficiary’s lifetime. People could continue their insurance coverage even if their health declined. Many retirees didn’t have such insurance at the time because government policy encouraged them to sign up for tax-free health insurance through their employers. When they left the workforce, they lost that coverage.

Medicare and Medicaid have created huge amounts of new health care spending. Healthcare costs have not increased overallThere was a shift of resources from the rest of the population to the elderly and poor, but the overall number of doctor visits and hospital procedures remained largely unchanged.

As any freshman economics major knows, when demand increases significantly and supply remains unchanged, prices rise. In the few years since these two programs were put in place, physician fees have risen twice as fast as the economy-wide inflation rate, and hospital fees have risen almost five-fold. One hypothesisMore than a third of this spending is wasted, economists say. No more elderly lives were saved The first 10 years of Medicare.

What was the catalyst for the creation of Medicaid?

Cannon said Medicaid exists in part because low-income families were being shut out of the market by high health care costs, driven by regulations that limit the number of people who can become doctors and the services non-physicians can provide. The American Medical Association (AMA), long considered the pinnacle of physician representation, The Most Successful Guilds of the Middle Ages For more than a century, the health care system in the U.S. economy has disproportionately limited the number of students who can attend medical school and subsequently obtain a medical license.

Most states legally prohibit nurse practitioners and physician assistants from practicing beyond the scope of their training. Even when nurse practitioners provide routine primary care (such as in walk-in clinics), state medical associations lobby to hobble them with costly regulations. Cannon says the AMA boasts that in 2019 alone, it blocked more than 100 attempts to expand practice freedom to non-physicians.

The hospital sector may be even worse. Certificate of Demand (CON) laws make it impossible for new entrants to build new hospitals or medical facilities unless they can prove that the market needs more supply. Existing facilities can dispute such claims and argue that all relevant demand is already met. Cannon cites studies showing that CON laws protect monopoly health care providers, driving up costs and increasing patient bills.

Cannon says another reason Medicaid exists is to provide tax benefits for employer-sponsored health insurance. In 2021, the average employer-sponsored family plan was $22,221. Assuming a 30% marginal tax rate, that works out to a subsidy of $7,333 per year. But historically, there has been little to no tax benefit for low-income families to buy their own health insurance.

For many years, government tax incentives have encouraged over-insurance and excessive medical spending among middle- and high-income families, while hindering access to health care for those at the bottom of the income bracket.

Current Medicaid Finances 20 percent of total medical expenses What do you get for that money in America? Canon Oregon StudyThis is the most comprehensive study to date on the impact of Medicaid. The study found that new Medicaid enrollees Emergency department visits increased by 40% And two years later There is no difference in physical healthThis is the exact opposite of what health policy orthodoxy would have predicted.

Although Cannon doesn’t mention it, 40% of children in this country are on Medicaid or CHIP. These programs pay the lowest rates, which may be why pediatricians earn less than other specialties. Shortage of pediatricians.

Why does Obamacare exist?

Obamacare exists for one reason: its supporters scared people who had employer-sponsored insurance that they would be discriminated against if they left their employer and had to buy their own insurance and had a pre-existing condition. But the only reason that fear never went away was because the federal tax code prohibited employers from funding private and portable health insurance and did not subsidize privately owned insurance to the same extent as employer-sponsored insurance.

Yet during Obamacare’s first decade, the number of people buying private insurance on the exchanges was largely offset by a decline in employer-sponsored coverage. Nearly all of the increase in the number of people with insurance came from Increase in Medicaid enrollmentThis increase gave states a financial incentive (higher matching rates) to enroll healthy single adults, while People with developmental disabilities who are on the Medicaid waiting list.

As with Medicare vs. No increase in medical costs Under Obamacare, health care costs rose nationwide, even as government spending on health care increased dramatically. Services for low-income families increased slightly, while services for the rest of the population decreased slightly. But that was it. The number of doctor visits per person actually decreased In the years leading up to the COVID-19 pandemic.

Cannon said that because private insurance under Obamacare is available at the same price regardless of health status, premiums doubled over the first four years, exposing families to some of the highest deductibles and copayments in the entire health care system. To make matters worse, Cannon cites research showing there is a “race to the bottom” and that insurance plans are not providing quality care to the patients who need it most.

How Congress Saved Obamacare

As a result, the unsubsidized portion of the Obamacare insurance exchanges plummeted (the so-called “death spiral”) as people moved elsewhere in search of better insurance options. Democratic Congresses rushed to the rescue with “increased subsidies,” including “$12,000 for those earning $212,000 a year.”

Remember what that same Congress did not do: It did not use the same funds it spends on healthy adults and high-income families to meet the much greater needs of developmentally disabled people on waiting lists, or to raise fees for pediatricians who care for children from low-income families.

The solution? Canon would provide Medicaid and Medicare funds in the form of cash payments to recipients, and employers would pay employees in the form of generous health savings accounts. I’ll explore these ideas in future columns.