One Small Cut for Health Care Costs

The ACA, or Obamacare, does nothing to reduce the cost of health care or even stem the cost increases.  It’s a numbers game to get more people with policies, even if they can’t afford to use those policies when they get sick because of high deductibles and copays.  Now I’d like to look at a few ways those costs could be reduced.

Drug prices are skyrocketing, even for generic varieties.  That’s because many countries have price controls on drugs while the US does not, so US patients are subsidizing drug development.  US patients are subsidizing something else too: advertising.  Many doctors don’t like it when patients come to their office demanding a drug they saw on TV or even self-diagnosing, and many countries don’t allow prescription drug advertising.  Advertising contributes nothing to our health, so let’s end the practice and save some money.  The second way to reduce drug costs is to end a form of price fixing.  When a patent on a popular drug expires the manufacturer can pay off (bribe) generic drug makers to delay introducing generic versions, thus continuing their profits to the detriment of patients.  This needs to stop.

You can’t reduce health care costs by increasing taxes on health care, so abolish the medical device tax permanently.  Right now that tax is only on hold.  A 2.3% tax on medical devices would cause immediate price inflation of more than that amount because of the overhead required to process it.  See my post “Just Because You Can Make It Complicated Doesn’t Mean You should” for the argument against excess overhead.

The country needs tort reform.  Medical malpractice insurance is expensive, in fact, so expensive in some specialties that doctors are leaving their practices.  In our lawsuit-happy country jury awards have become virtually unlimited so insurers have no way of estimating costs.  Doctors are human, sometimes they make mistakes and victims deserve compensation, but that compensation should be reasonable.  With tort reform victims would be entitled to full compensation for actual losses including any out-of-pocket medical expenses but “intangible losses” would be capped at some multiple of the actual loss, possibly in a range of 2-10 times.  The cap could even depend on whether the intangible loss was temporary or permanent.  With a 5x cap a person who suffered $50,000 actual loss would recover the full loss but they couldn’t get more than $250,000 for an intangible award.  This may sound unfair but the “lawsuit lottery” is equally unfair because two people with similar injuries can get very different awards depending on the composition of the jury.  Negotiated settlements are fair but mandatory arbitration is not because it deprives victims of their day in court.  When arbitration pits an individual against a company the company is likely to win.  The cap would be lifted if the harm was intentionally inflicted, in which it would also be a criminal case.  Since few people enter the medical profession to inflict harm that shouldn’t be a common occurrence.  Insurance is a business of numbers and as long as one of  those numbers is “infinity” costs can’t be controlled.

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