Don’t Copy Europe’s Mistakes: Less Government Is the Right Way to Fix Healthcare

In this CF&P Foundation video, Eline van den Broek explains that government interference is driving up healthcare costs in America and warns that European style health “reform” will make the situation even worse. Watch this short video to find out why.

Here are the main points of the video:

Eline vandenBroek, of the European Independent Institute says that that the US healthcare system needs reform. It is complicated with too many third party payers and as the chart below depicts, is the most expensive in the world. Making the US healthcare system more like Europe’s is a big mistake.

Obamacare establishes universal insurance coverage financed by tax increases and restrictions on Medicare. This is not the correct approach. Many politicians say that Europe’s healthcare is better and cheaper. This is not the case for three reasons:

1. Universal healthcare means the right to get into a waiting line.
2. Universal insurance mandates means that politicians and bureaucrats decide what is covered and what is not. This grows the government bureaucracy and limits patient choices.
3. Price controls do not work or reduce costs. They merely create shortages.

Medicare and Medicaid account for over 50% of US healthcare costs. This is leading to socialized medicine. Furthermore, private health insurance acts like a prepaid healthcare account, in which routine medical care is covered. This leads to overuse and a lack of concern for what it costs. (What would happen if auto insurance included gasoline and oil changes? Consumers would no longer care what gasoline and oil changes would cost because the insurance company would paying for it).

In the US we have a third-party payer problem. 90% of healthcare costs are paid by the government or insurance companies. However, cosmetic surgery and laser eye surgery do not have a third-party payer problem, and as a result the costs are much lower, as the chart below depicts.

Health insurance should cover large unanticipated healthcare calamities, like auto insurance covers car crashes and homeowners insurance covers fires, etc. The consumer should directly pay for routine healthcare costs.

Repealing Obamacare and Restoring a Free Market in Healthcare

Government programs and intervention were making a mess of the healthcare system, even before Obamacare was enacted. Repealing Obamacare is a good idea and will prevent a bad situation from becoming worse. This CF&P Foundation video explains, however, that repeal is just the first step if we want to genuinely restore a free market and create an efficient and cost-effective healthcare system. Restoring a free market in healthcare will lead to lower prices.

Here are the main points of the video:

Eline vandenBroek, of the European Independent Institute says that Obamacare is transforming the US into another welfare state like Europe. What is needed is a free market in healthcare.

Most of healthcare payments are made by third-parties, not the consumer. When payments are made by somebody else, you are not as careful about what things cost. As the chart below depicts, government pays for 49% of healthcare costs in the US.

Even private financed healthcare is paid by a third party. As the chart below depicts, only 12% of healthcare costs are paid directly by the consumer. 88% is paid by third parties.

What is needed is:

• Eliminate the healthcare exclusion in the tax code
• Lower tax rates
• Shift Medicaid entirely to the states
• Transform Medicare with vouchers

The Netherlands is a good example of bad policy. In 2006 the Dutch implemented a universal insurance mandate much like Obamacare. Here’s what’s wrong with it:

• No consumer choice
• More third-party payers
• Costs are going up, not down.

Governments do not provide services more efficiently than the private sector. Only competitive free markets can generate efficiencies and bring healthcare costs down. To accomplish this, we must reduce third-party payers. Routine medical costs should be paid directly by the patient. Insurance should be used to protect against catastrophic illnesses.

Obamacare’s Impact on Doctors

In this short video, Dr. Martha Boone, an Atlanta urologist, explains the consequences of the new health care law. Because of her fears about Obamacare, Boone moved to a less-expensive office so she could avoid dropping Medicare patients or laying off an employee.

Here are the main points of the video:

Dr. Martha Boone, an Atlanta urologist, has practiced medicine for 25 years. She has two employees working full-time fighting Medicare to obtain reimbursement for work performed. She never imagined that she would have to fight a third-party to get paid for work she has done.

She accepted Medicaid patients until four years ago. Medicaid did not pay her for 18 months. Their payments are so low she would have to see 20 patients an hour to make money. She doesn’t know of any other doctors that are taking Medicaid patients.

Medicaid pays $30 for an office visit. Her overhead is $350 an hour. That’s why she would need to see 20 patients an hour. Now, these patients must go to the emergency room for treatment.

If a doctor with over $300,000 invested in education cannot afford to operate a 1500 square foot office, what does that say about our healthcare system? This will become worse under Obamacare.

Costs Of “Free” Healthcare — Stossel In The Classroom

What happens when there is a free give-away? Demand goes up. In countries where healthcare is free, governments deal with that increased demand by limiting what’s available. Wait times increase. Watch this short video to find out more.

Here are the main points made in the video:

When healthcare is “free,” no one has to worry. Right? What happens when there is a free give-away? People wait in line to get it. The law of supply and demand says that lowering prices will increase demand.

In countries where healthcare is free, governments deal with the increased demand by limiting what’s available. For example in England, wait times for hospital care are 18 weeks (more than 4 months). Rather than wait, some people do it themselves, like pull their own teeth.

Canadian doctor, David Gratzer, author of The Cure, became demoralized by the waiting that Canadian patients were enduring. Other Canadian doctors say the Canadian system is cracking. All hospital beds are taken, so people must wait, even for emergency treatment. More than 1 million Canadians say they can’t find a family doctor. There are towns that hold a lottery to obtain a family doctor.

Some Canadians seek treatment at private clinics, even though they are illegal in places. One private clinic was started by the president of the Canadian Medical Association. Other Canadians arrange to go to America for treatment.

However, there is one place in Canada where cutting edge, lifesaving technology is provided without long wait times 24/7:  veterinarians. Dogs only wait one day to get a CT scan; humans must wait one month.

Third-Party Payer is the Biggest Economic Problem With America’s Health Care System

This short video from the Center for Freedom and Prosperity Foundation explains that “third-party payer” is the main problem with America’s health care system. This is why undoing Obamacare, while desirable, is just a small first step if we want to reduce costs and boost efficiency.

Here are the main points from the video:

Consumers do not directly pay for health care. Instead they use a third party payer system, as shown below.

When we buy goods and services with our own money, we are careful about how much we spend and how we spend it. We shop around. When somebody else foots the bill, we do not have an incentive to be a smart shopper.

Consumers used to pay for healthcare services themselves. Now, as the chart below shows, the percentage of healthcare paid directly by consumers has fallen from over 55% in 1960 to only 11% today. Medicare and Medicaid have contributed to this trend.

As the chart below shows, government now finances 49% of healthcare costs in the US. Government has pushed aside the private sector.

During World War II, the government decided to make employer-provided health care deductible for employers, and group hospital plans shot up from covering 7 million people to 26 million people. This led to “Cadillac” health plans. As a result, people today only pay a small co-payment when visiting the doctor.

Healthcare providers boost prices and obscure transparency, which leads to inefficiency. People do not behave logically when they do not bear the full cost of their actions. The third party payers have insulated people from the true cost of healthcare.

The average doctors visit costs $199 but the patient only pays $28 out of pocket. Most of us have no idea what visits and procedures actually cost. We don’t bother asking because the insurance company is going to pay.

In 1960 the government only covered 21% of personal medical care expenditures, private individuals covered 55%, and insurance covered the rest, 24%. Healthcare was considerably less expensive back then. Total personal medical spending has increased 10 times over the last 50 years. Studies show that about half of this increase in cost is due to health insurance coverage.

Contrast this to cosmetic surgery and laser eye surgery, two procedures typically not covered by health insurance. Therefore, people pay out of pocket for these surgeries. As the chart below shows, the cost of cosmetic services has risen at a much lower rate than the cost of other insurance-paid healthcare services.

As the chart below shows, the cost of healthcare has skyrocketed over the last 50 years. Healthcare providers would be forced to lower prices and be more efficient if consumers were in charge of paying for routine procedures out-of-pocket.

Health insurance should only be used for catastrophic events. It should not be used for routine procedures. Health insurance should be about risk management, not prepaying healthcare costs.

Here are some steps to reduce healthcare costs:

1. Provide tax deductions for healthcare for individuals (now only for businesses)
2. Reduce excessive coverage mandates by state governments
3. Reform Medicare and Medicaid

Healthcare And Profit — Stossel In The Classroom

This week’s lesson will provide a short video each day explaining why a market-based, not government-run, healthcare system is better. Today, watch this short video by John Stossel that explains why healthcare costs are so high and what will solve the problem.

Here are the main points conveyed in the video:

Business shouldn’t make money off of sick people, should they? Liberal film maker, Michael Moore says get the profit out and get the private insurance companies out of healthcare.

Insurance companies do want to make a profit. Insurance is a risk pool. People pay premiums into a pot. The people who don’t get sick pay for those who do. The more sick people insurance companies take on, the less chance they have to make a profit. To protect themselves from fraud, insurance companies require a lot of paperwork. Dr. Melvin Gerald has to pay four employees just to do insurance paperwork. On average doctors spend 14% of their income on it.

However, the biggest problem with insurance is that it creates nasty incentives. It encourages us to spend more and not think about what things cost. What if your car insurance covered oil changes and gasoline? You wouldn’t care how much gas you used or what it cost. Mechanics would sell you $100 oil changes. But that is how it works in healthcare, and some people demand “oil changes” whether they need them or not.

What if you had grocery insurance? Why buy hamburger when you can buy steak since you aren’t paying for it. John Mackey, founder of Whole Foods, agrees. Grocery insurance would change shoppers’ behavior. People would buy a lot more since they are spending other peoples’ money.

The profit model is dismissed as evil, but when Henry Ford started, cars cost more than houses. In eight years he cut the price of a car by half. There are Henry Fords in healthcare, but they need the profit incentive to innovate.

Government regulated phones were all black and rotary dial. Unregulated companies earning a profit have created the smartphone. When government makes products, you get the Trabant produced in East Germany, mocked throughout the world as one of the worst cars every produced. Government is good at things like national defense, which is a legitimate role for government. However, government cannot do things better than the private sector because government does not compete.

Drug companies looking to make money create things to save lives and improve our quality of life. Profit drives innovation. Government is responsible for only 4% of the drugs on the market today. Most important inventions have come from the private sector, such as the artificial heart and limbs, all invented for profit in the US.

Every year thousands of people from countries with government healthcare come to America for treatment. The famous tenor José Carreras left Spain to come to the US to receive cancer treatment. King Hussein of Jordan, a sheik from the United Arab Emirates, an Italian Prime Minister, and Archbishop Desmond Tutu all have come to the US for medical treatment.

Our country is the source of medical innovation. Death by cardiovascular disease has dropped by two-thirds over the last 50 years. However, you must pay the price for that type of advancement. Dick Cheney has had four heart attacks. Today, he can walk up a flight of stairs and hold down fulltime employment. Fifty years ago he would have been forced to lead a sedentary lifestyle. The key to reducing costs in the healthcare industry is free enterprise.