Fixing US Health Care Inflation Industry Analysis (28)
The US health care crisis was discussed in my previous video (#27). This video is about fixing the health care runaway inflation, which is in fact the heart of the problem. The following shows how to address the different causes of the inflation.
New Technology
Unlike the hi-tech industry where a new technology always brings down the price, the opposite is true when a company invents a new drug or testing equipment. The obvious reason is the five-year patent, which allows the company to charge a high price necessary for recovering the development costs. When the patent period expires and the generic products start to compete, the price may not come down because the company continues to market or hype its new brand for saving your life. The consumers do not have the expertise to question them and tend to accept what they say.
An easy solution is to mandate all health care companies to publish their prices online to let the consumers compare. This will inject competition into the market. When a big price difference is shown to the public, the company charging a high price will try to mark down in order to compete. The key is transparency that will make the health care industry more competitive.
Powerful Lobby
Many legislators do not have the backbones to face the powerful lobbyists. They pass laws that favor the drug companies and other special interest groups. A concerted effort is required for the public, supported by employer, labor and other associations to counter the lobbyists. Remember the public has the votes to kick out any legislator who kowtows to special interests.
Aggressive Lawyers and Defensive Doctors
Trial lawyers like the present situation to continue because there is no limit to compensation awarded due to medical malpractice or drugs that do permanent damage. This results in an uncertain business environment where the malpractice insurance for doctors skyrockets, thus contributing to the cost inflation. A law must be passed to limit the damage compensation to a reasonable amount so that doctors can operate without constant fear of being sued for exorbitant sums. This fear makes doctors extra defensive causing them to order unnecessary lab tests for the patient to guard against a lawsuit.
Health Insurance
The purpose of insurance is to cover for accidents or major events that do not occur everyday so that the insured are protected and the insurance companies can stay in business. Health care does not fit exactly into the regular insurance model, except for infrequent or catastrophic events such as pregnancy, cancer, heart attack, or traffic accidents. In these cases, health insurance can be less expensive and more affordable because of low occurrence of such events.
However, another aspect of health care involves personal responsibility. What do you do when someone follows an unhealthy lifestyle that leads to frequent medical treatments? What do you do when someone often sees a doctor for the slightest body discomfort? If those people are required to pay for their own expenses each time, it will teach them a good lesson not to put extra strains on the entire health care system and push up its costs.
Health insurance companies are no good in handling these two situations as described above. The result is higher premium for everybody, insuring only the healthier ones, complicated procedures, and refusal to pay without a valid reason. Even if the government takes over the insurance business, the problems will not go away. The key to solving this problem is more difficult including public education, personal responsibility, and disease prevention.
Bureaucracy
The streamlining of paperwork and bureaucracy in a huge industry like health care can always save billions of dollars. This is especially true if medical records are digitalized and centralized in secure databases.
Fraud and Corruption
Every year, the government has uncovered large sums of money wasted due to fraud or corruption. Tighter enforcement will further cut down this waste.
Individual Health Accounts
Many experts advocate individual saving accounts for health care. This has little effect on the runaway cost inflation. It merely opens doors for financial companies to tap into consumer savings. Remember the billions of dollars lost in 401k retirement plans in the 2008 financial meltdown? Consumers should beware of getting swindled for a second time.
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