Back in January, I put together some ideas on how to fix healthcare.
I put together six problems and proposed fixes for all of them. I thought it was interesting that most of the comments were about my mention of the Affordable Care Act. The exception was a regular reader who said it was, “Best. Article. Ever.” (*blushing*). I found it notable that no one seemed to argue for the $629 bandage from an emergency room stay or the high cost of medicine because the United States subsidize the rest of the world.
In the last month, the healthcare talk has ratcheted up. That’s probably a direct cause of the House pushing through a bill before the Congressional Budget Office could do analysis on it. It’s expected to get changed in the Senate and then I think it goes back to the House. It seems like a silly process to me because when it gets back to the House, they’ll probably say, “We’ve got it this far, we have to send it through.” So the Senate could do a bunch of things that the House originally didn’t want and the end result would be they have to accept them anyway.
There are worse political systems out there and this one has worked well for a long time, so maybe I’m just off-base here.
If the House can add amendments to their original bill, I can add amendments to my previous healthcare article. And that’s what I’ll do. Some of these are free-form thoughts, not problem solving like before. Let’s dig and see how we can improve health benefits.
Why We Need to Fix Healthcare
Short answer: Warren Buffett says so.
Longer answer: Since the 1950-1960s, corporate taxes went from 4% of the GDP to 2%. Healthcare went from 5% of the GDP to 17%. So while politicians are beating the drum about taxes, it’s silly. Here’s the key quote to the article:
“Our bloated health care system, Mr. Buffett asserted, is the true barrier to America’s world competitiveness as well as ‘the single biggest variable where we keep getting more and more out of whack with the rest of the world.'”
In short, we can’t “Make America Great Again” without fixing healthcare. And fixing healthcare doesn’t necessarily mean a “repeal and replace.” It means addressing those sky-high medicine prices we have subsidizing other countries. I haven’t heard either political party address that. It means a bunch of other things too, many of which I addressed in the previous article.
The only point I want to make here is that we should work on getting that 17% GDP number down to 5% again.
The Price of Doctors’ Education
I was chatting with a high-ranking pharmacist friend of mine about healthcare and I mentioned the cost of medicine. He was quick to point out that it really is the high cost of staffing that makes healthcare so expensive. I think he said that drug costs are only 20% of the problem. He knows a lot more than I do in this area, but it makes sense.
Medical professionals have to go to school for a long time. Colleges and universities have been raising rates for a long time. It seems to me that the medical professionals get out of school with more debt. I know a couple of doctors who have had $250,000 or more of student debt at one point or another. It’s reasonable that they’d want a return on their investment… and it’s reasonable they’d want to get out of the debt fairly quickly.
So it got me thinking, “Is healthcare a bubble within a bubble?” Could it be that at least part of the reason our healthcare is so expensive is simply because we let the costs of education spiral out of control? I view the costs of college today similarly to when people would get interest-only, 50-year fixed mortgages so that they could a home. The main idea seems to be, “With enough loans you can afford anything, which gives us license to greatly raise the price.”
It didn’t work out well for those mortgages and I think we can see it isn’t working well for recent graduates. If my friend is right (and it seems logical enough), it isn’t working well for our quest to create an affordable healthcare system.
What About Teeth?
Ironically, I’m writing this paragraph about 5 minutes away of getting in the car to go to the dentist.
Fortunately, recently published a great article about teeth and dental insurance. There’s a big divide of the “haves” and “have nots” when it comes to dental care.
Oh and the article points out that the average dentist starts out with $260,000 in student loans. I read after I wrote the above section.
I don’t have any magic fix for dental insurance, but I think it should be included with regular healthcare. When 1/3 of Americans are going without insurance and it can lead to greater health problems this needs to be part of the fix as well.
I’m back from the dentist and I guess the military changed dental insurance providers on May 1st. They didn’t have the courtesy to let me know. So my cleaning that had out-of-pocket costs of $0 is now around $30. It’s not a big deal, but it seems like all our dental costs are going to go up. Maybe a different dentist will be in-network and we can get our costs covered 100%. It still seems weird that for years they’d cover 100% and now it’s closer to 66%.
Let’s talk Cigarettes
Quartz Media put out some interesting statistics about cigarettes. The big takeaway for me was this:
People are smoking less – Yay! Cigarette companies are making more money – Boo! How is that happening? Those addicted to cigarettes are willing to pay for the huge increase in costs. Americans spent more on cigarettes than beer and soda combined. Think about that for a minute.
I know there are substantial taxes on cigarettes, but maybe we need to raise them even more to subsidize healthcare. Why are cigarette companies profiting so much on something that grows the high risk pool?
What If… We Just Ate Better?
I don’t want to be all doom and gloom when it comes to healthcare. There’s still a lot of things we can do.
For example, there was a great article covering Michelle Obama’s attempt to get kids healthier foods in school. This is a common sense start to a long term plan for a healthier America. A healthier America means less money spent on healthcare… and cheaper plans and deductibles.
I can find no reason why anyone wouldn’t support that. The only thing that makes any sense to me is that special interests (food companies) are paying off politicians.
Eating healthy doesn’t have to be a long-term solution either.
NPR has a great story about how it’s cost-effective to GIVE away $1000 worth of food a year to people with Type 2 diabetes. They find that spending that $1000 can save them as much as $24,000 in healthcare costs.
I don’t think the patients are complaining about getting free food either. Is it a “hand-out” that some politicians would fight against? Sure! However, lowering the healthcare costs for some, lowers the insurance premiums for all. I wrote a bit about this in my previous article, but this is one clear-cut example of a working system.
What Do Think?
Sound off in the comments below. The great thing is that you don’t have to be political about it. No one is keeping tabs on you. (Also, I don’t think any lobbyists are likely to pay you to write an opinion here.)
You’re on drugs if you think that increasing the taxes on a pack of smokes will increase funding for healthcare. while i’m the first to agree that smoking is a bad thing and causes all sorts of problems, insurance premiums take all this into account with the actuary tables. An insurance premium for a smoker is 3x the price for a non-smoker. Ok, I just made that up – but we all know they are substantially higher.
Completely disagree that government intervention (taxes) is the answer to this problem. If you were born in the last fifty years in America you already know smoking is bad for you. But so is drinking and so is fast food, and a multitude of other things that people do anyway. I’m content to let the free market drive the price of coverage and if the insurance company wants to raise the rates for “sinful” living, they’ll either live or die with the results. They’ll have higher rates for sinful living, perhaps those people will find other carriers (or change their behavior), resulting in less insurance payouts for complications related to sinful behavior. Everybody wins. Assuming that the government will increase the tax on sin (and one man’s sin is definitely not another’s) and that tax will find its way to a commercial insurance carrier? hahahahahahahahaha. That’s a good one.
Having said all this, I enjoy your blog. :)
I agree that insurance premiums are higher for smokers. The focus of my idea was that cigarette companies are getting richer. So if the taxes were greater, maybe the cigarette companies couldn’t get away with raising prices so much (I could be wrong there). In any case, those taxes could be directly poured into a fund to subsidize healthcare.
It might be a drop in the bucket, but if Americans are paying more for cigarettes than soda and beer combined, maybe it would be significant.
You are right that people are going to live unhealthy either way, but taxes have been shown to impact behavior. There are stories that Philly soda sales are reduced as much as 50%. Maybe people are just importing the soda from outside Philly, but maybe they are simply saying, “Hmmm, this is healthier and it’s less money.”
I wonder what the average person thinks when they enter a McDonalds and see a 250 calorie salad for $4 and 375-ish calorie McDouble for $1.69. If a sin tax switched up the prices there, I think more people would consider the salad. I know I would. Instead, I typically say, “Ehh, I’m not here often. The 375 calories isn’t too bad and the price is right.”
Thanks for at least trying to suggest fixes. I know I don’t have the answer, but what is happening with healthcare(both before and after the ACA) is a mess. I have a “good” job with “good” benefits, and I still pay over a $1,000 a month for my family’s healthcare. While I’ve typically not voted Democrat, if not for the ACA my 20 and 23 year old kids would have no insurance. So like many I stay in a job I don’t really like because I can’t hang my wife and kids(and me) out without insurance. What a crazy system. We can’t have the “best healthcare in the world” if so many can’t afford to access it.
I think the answer is trying to figure out how to get that 17% GDP number to 5% like it used to be. That’s really what I’m trying to do here… figure out how to bring down the overall cost of healthcare.
The topic of needing a job for healthcare is a big one among bloggers who are looking to be financially independent or retire early. Historically health insurance has been tied towards employment for many people. This simply doesn’t work in a gig economy. If you want to make and sell jewelry on Etsy, there’s no health insurance there. It seems that the assumption is that your employer will foot the bill. As Buffett noted, this is crippling America’s companies ability to compete.
I think that assumption needs to be taken off the table and we need real comptrollers looking to cut costs.
My suggestion on fixing healthcare and taxes and whatever else is Term Limits for politicians. A politician should have a term limit where they can make their difference and them move on. Then, they pass the baton to someone else who is given the same opportunity. The politician would go into their position to make a difference not collect a paycheck for life.
I like your post but you have a lot more faith in our government than I do. Taxing things that are quote unhealthy is a very dangerous thing. Who decides what is healthy? Is a salad with ranch and cheese really a healthier choice than a McDouble?
What if we went to all cash medical care? Perhaps have some catastrophic coverage. People will then be motivated to take care better care of themselves. This would also drive down the cost as you do away with the paperwork and red tape insurance creates.
Things like plastic surgery or laser eye surgery are cash only. Laser eye surgery has improved dramatically while prices are a fraction of what they use to be. The reason is they have to compete in a free market. If you need to get a cast for a broken arm you have no way of knowing that cost until after the procedure.
Currently my family would have two options on the ironically name AFFORDABLE Care Act and it would cost $1000-1500 per month with a $7500-15000 deductible.
I don’t think anyone has suggested I have faith in our government in quite awhile. I understand what you are saying, but I don’t see another solution. Telling people to eat healthy simply doesn’t work. Even educating them on what it healthy doesn’t work. Motivating them to eat healthy seems to work (see the success of soda taxes).
And yes, taxing “unhealthy” is dangerous. I don’t have a perfect answer for that. However, I think the USDA already has a lot of work done one what is “healthy.” It can be measured in protein, carbs, saturated fats, fiber, amount of processing, and other factors. There wouldn’t be a perfect formula, but it wouldn’t be hard to come up with something that fairly good 80-90% of the time. Over time the formula could get better. I’d put IBM Watson on it (kidding… not really kidding… I own IBM stock).
I’ve thought about all cash, but you’d need that catastrophic coverage. Figuring out what’s a catastrophe could be as difficult as defining what’s healthy. I don’t know if people will be that motivated to take care of themselves in such a system. I think they’d say, “I’ll eat healthy tomorrow. I’ll start exercising next week.”
I don’t think anyone should look at the current ACA and say, “My situation today is [X].” I understand that’s tempting. I’m instead saying… imagine if we fix the other stuff. Imagine if we don’t subsidize every other country’s medication. Imagine if we make medical school affordable so that doctors don’t graduate with $250K in loans. Imagine if they didn’t have to pay so much for malpractice insurance because lawyers are looking to make their money on mistakes. There are countries where all this stuff works.
Once you deflate the healthcare bubble that’s made it 17% of the GDP and bring it back to the 5% it used to be, you can put an ACA on there at 30% of what you currently pay.
The ideas in my articles are idealistic. They aren’t practical in this government environment. They obviously can’t be implemented overnight. For the sake of this exercise, I’m thinking that you have to look at it as, “What if we were starting fresh today?”