The symptoms of an ailing US healthcare system include costs that for years have risen faster than the rate of inflation, expensive private insurance premiums that consume an ever larger portion of one’s paycheck and the lack of access to basic healthcare services for millions of Americans. President Barack Obama’s reform, Obamacare, attempted to solve these issues but supporters of the law failed to make the correct diagnosis of the causes of the malaise. Contrary to popular belief, the US healthcare system is not overwhelmingly private. While it is true most healthcare providers are not government employees and the central government does not own and operate a vast healthcare infrastructure such as in European nations, public financing of the total annual medical care expense in the country is now equivalent to 50 percent. The rest of medical care spending is paid for by private insurance companies or directly ‘out-of-pocket’ by individuals but heavily influenced by government regulation.
Obamacare backers viewed the problem as a failure of the free market and proposed expanding access to government provided insurance and greater regulation of private insurance companies as the answer. Expanding the public healthcare obligations of the already debt-ridden central and state governments threatens the very long-term solvency of the country. Just societies absolutely must care for their poorer citizens and surely the government has a very legitimate role to provide a safety net for the less fortunate. However, to systematically reject innovative market-oriented solutions in favour of greater and greater government control of the healthcare system is to miss an opportunity for private/public partnership that would more likely alleviate the system’s defects.
At the heart of the problem of spiralling costs is the ‘fee for service’ structure in public programs such as Medicare whereby healthcare providers receive the same payment from the government for each service regardless of quality, outcome or patient satisfaction. Providers have little incentive to innovate and improve since they are paid the same government-fixed prices no matter what. This prompts providers to generate volume as opposed to quality. Healthcare consumers are shielded largely from the direct impact of costs and, therefore, have little incentive to self-regulate and economize or keep an eye on what providers are billing. Fraudulent invoicing to the government is estimated in the billions of dollars and may represent as much as 10 percent of the public expense on healthcare. Overall, this structure simply stimulates over-consumption of healthcare services and resources.
The private insurance market has been completely distorted by government intervention that mandates many additional benefits beyond essential care unnecessarily increasing the cost of ‘basic’ medical insurance and reducing flexibility for the consumer. Rules also limit insurance provider competition among the fifty states. As a result, insurance is made less affordable and somewhere between 8 and 14 million Americans simply cannot afford to purchase it.
The Obamacare reform law hardly addresses any of these fundamental problems and, therefore, will not reduce healthcare costs nor achieve universal access for American citizens. Ironically, Obamacare moves the United States closer to a European style government-controlled system at the very moment that European nations are struggling with the solvency of their national healthcare plans and considering a greater role for private providers and individual responsibility. We may find that each may learn from the other and they might just meet in the middle.