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Memo To Mitch McConnell: Let's Get Real About Health Care Costs

Protesters wait for the arrival of Senate Majority Leader Mitch McConnell, R-Ky., at the Hardin County Lincoln Day Dinner, Friday, June 30, 2017, in Elizabethtown, Ky. Congressional Republicans are stymied over health care. But after seven years of promising to repeal and replace former President Barack Obama’s law, they risk political disaster if they don’t deliver. (Timothy D. Easley/ AP)MoreCloseclosemore
Protesters wait for the arrival of Senate Majority Leader Mitch McConnell, R-Ky., at the Hardin County Lincoln Day Dinner, Friday, June 30, 2017, in Elizabethtown, Ky. Congressional Republicans are stymied over health care. But after seven years of promising to repeal and replace former President Barack Obama’s law, they risk political disaster if they don’t deliver. (Timothy D. Easley/ AP)

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Slouching towards Kentucky and this week’s July 4th recess after failing to pass his health bill, Republican Senate Leader Mitch McConnell learned a hard-knocks lesson. Controlling health costs by stripping insurance from millions makes your handiwork as popular as a rectal exam.

Memo to Mitch: Get real.

If you want to rein in what the government pays for health, focus on America’s highest-in-the-world medical prices instead of denying folks coverage. And the ineluctable lesson of experience is that curbing prices requires government intervention, no matter how it nauseates the libertarians in your caucus.

By “government intervention,” I don’t necessarily mean the GOP must swallow the ideologically contraindicated pill of Bernie Sanders’s beloved single-payer system, in which government is the only insurer. True, that approach controls costs; in 2014, single-payer Canada spent $5,292 per person on health care. The U.S.? $9,403.

But experience also suggests that single-payer systems don’t match our knack at fostering medical innovation, and anyway, an insurance takeover by Uncle Sam is a pipe dream in a nation wary of big government. That’s why Barack Obama consciously rejected single-payer in drafting his namesake law (and contrary to Republican lies and hysteria, Obamacare is not in critical condition. It simply needs manageable improvements.)

If you want to rein in what the government pays for health, focus on America’s highest-in-the-world medical prices instead of denying folks coverage.

Fortunately, single-payer is not the only way to skin the price cat. Germany spent $5,411 per person in 2014 on health care, even though it has roughly 200 non-government, nonprofit insurance funds. In that country, whose health care system is perhaps the one most similar to Obamacare, insurance funds in each state bargain for reasonable prices with doctors, setting uniform fees as opposed to the varying mish-mash charged by American hospitals and health care providers.

Such top-down regulation would make McConnell and House Speaker Paul Ryan vomit. But they should glance across the Potomac at Maryland.

That state began regulating hospital charges in the 1970s to standardize them. One result: The state’s health care inflation rate over the next three decades would have translated, if the other 49 states had experienced it, into $2 trillion less in national health care spending. Now, Maryland has begun capping hospitals’ annual spending.

Maryland corroborates the lesson from overseas: No industrialized country has completely unregulated, laissez-faire medicine — not even Switzerland, which has the closest thing to consumer-driven health care. The economics of health care demand government’s muscle in holding down costs. Nowhere is the Republican disconnect from this reality more evident than when comparing the Senate and House GOP Obamacare repeal bills to Singapore, another health care model admired by conservative thinkers.

The city-state subsidizes health savings accounts (HSAs) for all, applying consumer pressure to the cost of routine medical care. The Senate bill would expand HSA contribution limits but wouldn’t subsidize HSAs, leaving them a rich person’s indulgence and limiting the reach of the price competition they’d  create.

Singapore approves few drugs for use, demanding good deals from drug makers who hope to make the cut. Here, Republicans prohibited Medicare from negotiating cheaper prices with drug makers. Killing that prohibition should be a priority. (Since private drug industry profits support an inordinate amount of pharmaceutical R&D, increasing federal research funding also deserves Washington’s attention.)

If McConnell and Co. can’t see their way to accepting these facts of life, they should take a vacation from monkeying with health financing and focus on smaller-bore reforms.

In this June 27 photo, Senate Majority Leader Mitch McConnell, R-Ky., tells reporters he is delaying a vote on the Republican health care bill. (J. Scott Applewhite/AP)
In this June 27 photo, Senate Majority Leader Mitch McConnell, R-Ky., tells reporters he is delaying a vote on the Republican health care bill. (J. Scott Applewhite/AP)

One possibility: Use the law of supply and demand to rein in doctors’ pay, by setting immigration policy to allow more foreign doctors into the country to spur competition. The Center for Economic and Policy Research, a progressive think tank, estimates we’d save almost $100 billion annually if our docs, who average north of $250,000 each year after expenses like malpractice insurance, made the same as physicians elsewhere (Germany’s and Canada’s make about half as much). Eliminating that differential would nip a couple of percentage points off our health spending, while still giving physicians a solid income.
One reason our doctors need to earn more is that U.S. medical education costs more than in other countries. Low or free tuition at public medical schools, a la Europe, could help medical students graduate without crushing debt, avoiding the need for lavish pay levels.

America’s mix of care is screwy, too; specialists provide services that less-expensive general practitioners could do. Laws aimed at rebalancing that equation are worth considering.

Meanwhile, the thoughtful conservative David Frum suggests saving some money by spending some money on public health: “Enforcing seat belt and helmet laws, curbing the use of narcotics, raising alcohol taxes, reducing consumption of sugars and processed foods, better nutrition programs for pregnant women and new mothers, making even some minimal progress to gun safety standards.”

There are many other ideas, but it’s dubious that Mitch will be a mensch and embrace them. His caucus has ultra-right cranks who want to purge Obamacare root and stem, even if the fireworks many heard this week were from angry constituents rather than Independence Day parades. The equally noxious House health bill came back from the dead earlier this year, so why shouldn’t McConnell dream that his own legislative zombie will rise again? Unless the public outcry continues, America may not be able to skip that horror movie.

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Rich Barlow Cognoscenti contributor
Rich Barlow writes for BU Today, Boston University's news website.

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