A Bipartisan Effort To Reduce Health Care Costs

The American Health Care Act enacted narrowly by the House last week should not be seen as a serious effort to deal with health care but rather as a fig leaf for another effort to cut taxes for the wealthy. The legislation would eliminate about $1 trillion in taxes used to pay for Obamacare.

The House legislation amounts to a bad joke. There are conservatives among the Republicans determined to whittle Obamacare down to nothing and moderates equally determined to continue providing health insurance to almost everyone. There are no magic words to bridge this gap and the legislation reflects that reality. Thus we have what amounts to a legislative mess that the Senate must reject in order to write a new bill.

The core defect of the House legislation, as with Obamacare itself, is abject failure to deal with the issue of soaring medical costs. Until we get a handle on rising medical costs, all legislative efforts to impose order on the system will amount to tilting at windmills. At the end of the day, someone must pay the tab. Lower income people simply cannot keep pace with soaring insurance premiums. If the government does not cover the cost, poor individuals must do without health care until they have an emergency and can fall back on hospital emergency rooms – where medical costs are the most expensive of all.

One might gather from all this that the rising cost of health care and the needs of the uninsured are simply insoluble problems except that all of the other western industrial democracies have solved it. All around us we see working examples of how to resolve this problem in Great Britain, Canada, France, Germany, Australia, Norway, Sweden and others. Generally, they offer universal health insurance at much less cost per person than we pay and achieve much better results in terms of overall health.

The challenge of reducing health care costs is not impossible but as President Trump observed, it is complicated. The two most promising strategies are a comprehensive demand-side strategy that gives consumers incentives and information to make them better purchasers of health care; and an aggressive supply-side strategy that changes the way providers are paid so their profit margins are tightly linked to outcomes and efficiency rather than the volume of services provided. We can and should pursue both in order to provide quality health care at a reasonable cost while covering pre-existing conditions.

It has been estimated by experts that our health care system squanders up to $1 trillion each year: clinical waste that could be reduced by higher quality care that avoids medical errors, administrative complexity that we all encounter whenever we visit a doctor or hospital, excessive costs caused by inefficient suppliers, endless delays for drug approval at the FDA, and of course fraud and abuse that is all too common.

Bipartisan political leadership in the Senate is needed to encourage the application of technology to provide efficient high quality health care while controlling cost.

Jerry Jasinowski, an economist and author, served as President of the National Association of Manufacturers for 14 years and later The Manufacturing Institute. Jerry is available for speaking enagements. May 2017