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Is The Healthcare System A True Marketplace?

The difference between the healthcare system and the medical care system is very clear to me. The stakeholders in the healthcare system are patients, physicians, government, hospital systems, pharmaceutical companies, pharmacies, pharmacy middlemen, and healthcare insurance companies.

Government, hospital systems, pharmaceutical companies, pharmacies, pharmacy middlemen, and healthcare insurance companies are secondary stakeholders in the healthcare system.

The primary stakeholders are patients and physicians. They also comprise the medical care system. Without the primary stakeholders there would be no need for a healthcare system.

The secondary stakeholders have long ago taken over the healthcare system. All businesses and the government deal with the hand they are dealt using their best judgment. The people running the business or government pursue their vested interest. The difference between businesses and government is businesses work to make as big a profit as possible. Government, depending on the political party in power, pursues fulfillment of its ideology.

Since 1942 and the Economic Stabilization Act of President Roosevelt the market place for medical care has been distorted. In 1946 healthcare insurance was introduced. At that time the interaction between the primary stakeholders, physicians and patients, started to be destroyed by secondary stakeholders.

The cost of healthcare has progressively increased since the government passed the Medicare and Medicaid in 1965. Costs increased further in 1980 when the government said we couldn’t keep paying these increasing costs and instituted price controls for Medicare and Medicaid.

This led to cost shifting of the difference to the private healthcare insurance sector.  Businesses providing healthcare insurance for their employees accepted the resulting premiums associated with cost shifting until 1985. At that time they said, “stop.”

The healthcare insurance industry asked corporations what percentage of your gross revenue could you afford for healthcare insurance benefits. The healthcare premiums were 18% of gross revenue.

The corporate answer was they could afford up to 12% of gross revenue. The healthcare insurance industry’s response was, no problem.

HMO pricing became the most economical option for corporate employers. HMO fixed healthcare cost for corporations and healthcare insurers.

HMOs shifted the risk to physicians and hospitals. HMOs failed because physicians and hospital did not know how to assess risk. They accepted risk initially because they were afraid to lose patients.

Hillarycare failed to become law because of the potential for patient abuse, restrictions of access to care, rationing of care and loss of freedom of choice. Patients did not want the government to dictate their medical decisions.

Obamacare was passed by a Democrat controlled congress with a very liberal ideology.

Many congressmen did not read the entire document or debate the potential unintended consequences.

The difference in ideology between liberal and conservative is easy to understand.

“Liberals believe that health care is treated as a market commodity today but should not be, and conservatives think that health care is not treated as a market commodity but should be.”

The healthcare system is not a true marketplace. The healthcare marketplace has been continuously distorted by government regulations and adjusted regulations since Medicare passage in 1965.

All the stakeholders have distorted the market even further by adjusting to government regulations in order to purse their vested interest.

If real repair of the healthcare system is to occur a real marketplace has to be created. Obamacare is another adjustment in an already distorted marketplace. Obamacare is accelerating the dysfunction in the healthcare system until it implodes and results in increasing costs not savings.

The healthcare insurance industry controls costs. Many Democratic healthcare policy experts have ignored the facts. The healthcare insurance industry’s goal is to maximize its profit. It takes 30% of the healthcare dollars off the top.

The healthcare insurance industry should not be in control of the economics of the healthcare system.

Consumers should be in control of their medical care decisions and the money they spend for those decisions.

Personal medical care decisions should not be left to the munificence of the government. The government has never done anything efficiently.

Private and Medicare insurance has kept control of medical decisions out of consumers’ hands.  Consumers purchase healthcare insurance individually or from Medicare. Consumers also can receive healthcare insurance from their employers as a job benefit.

The healthcare insurer directs consumers to use physicians and hospital in its network. The insurer negotiates reimbursement rates for the insured with hospitals and physicians.

Consumers are given little or no information about the comparative cost or quality of any particular doctor or hospital.  Consumers go to a doctor in their network.

Physicians do a history and physical exam and order tests and procedures on patients’ behalf.  When the test and procedures come back physicians prescribe the appropriate medication after a follow-up visit.

The healthcare insurance company reimburses physicians.

Patients receive a copy of the bill from the insurer with patient portion of the co-pay. The explanations of benefits are impossible to interpret.

This is not a marketplace transaction. Patients have no control over the reimbursement. Patients and physicians have little incentive to restrain overuse of the healthcare system. They have no incentive to even scrutinize the bill. Patients’ have no incentive to control costs.

The use of healthcare services is divorced from marketplace forces that constantly assess cost benefit ratios.  Neither physicians nor patients have incentive to get the best care at the lowest price with the best quality.

As healthcare costs increase each year the source of the increase remains opaque. The increasing costs are made to appear to be the result of patients’ and physicians’ overuse of the healthcare system.

The increase in cost could be the result of the healthcare insurance industry and the pharmaceutical industry’s increased profits.

All stakeholders pursue their vested interests. The only way to align vested interests is to have consumers be responsible for their health and healthcare dollars.

Only then will a true market place exist. Entitlements and price controls do not work. The cost of healthcare will skyrocket with Obamacare and create a larger budget deficit.

The opinions expressed in the blog “Repairing The Healthcare System” are, mine and mine alone.

*This blog post was originally published at Repairing the Healthcare System*


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