Controlling Healthcare Costs

Episode Transcript

Speaker 1 (00:00):
Now that the forty day vacation of the federal government
is ending, did anybody win? Not yet, But at least
we're talking about something important. Healthcare affordability under the label
Obamacare subsidy lies the monster the cost of getting sick.
It's just too high. Here are a couple of thoughts.
Number one, hospital stays are insanely expensive. So here's an

(00:23):
idea cap commercial price is at two hundred percent of
Medicare two hundred percent, which is government money two hundred
percent more as a cap, and in some cases we're
paying much more. If we did that, just a two
hundred percent, Americans would spend one trillion less on healthcare,
nine hundred billion less on insurance premiums, and cut the

(00:44):
deficit by twenty billion a year. Could Nebraska Medicine or
Methodist or CHI live on two hundred percent of Medicare? Currently,
Medicare pays one hundred and twenty five percent more for
a service performed in a hospital outpatient department in compare
into a physician's office or a surgical center. Site neutral
payments reform would reduce Medicare spending by one hundred and

(01:08):
fifty three billion and decrease premiums and cost sharing by
ninety four billion. In the nineties, hospitals merged. Remember well,
at the time we were told the efficiencies would lower
cost and improve outcomes. Well has it. The numbers say
not necessarily. In regions where there are four or more
hospital systems, overall prices are fifteen percent lower. Now why

(01:32):
would that be prescription drugs? Why is the same drug
so much cheaper in other countries. Well, here we limit
drug manufacturer's ability to delay generic competition through new FDA
exclusivity rules known as evergreening, which drastically influences health care spending.

(01:52):
Limiting evergreening would reduce federal deficits by ten billion, private
sector drug costs by nine billion, Medicare Part D seven billion,
and spending on Medicare beneficiaries by four billion. Big Pharma
loves evergreening and they donate to a lot of campaigns.
But why do insurance premiums keep going up? That's complicated

(02:15):
and you're not going to like it. In the Affordable
Care Act, they have what's known as medical loss ratios.
It means insurance companies must spend between eighty to eighty
five percent of all premium dollars on claims. That means
they're limited to fifteen to twenty percent for administrative overhead
and profit. Apparently that's not enough, so they play a

(02:38):
little game. Every year they charge a little bit more. Now,
when was the last time a health insurer's revenues went
down to add profit. The second thing they did to
get around the medical loss ratio is a thing called
vertical integration. Now, what's vertical integration. It's when you start
buying other healthcare related companies like pharmacy and physician services

(03:02):
and physician groups. If I'm the insurance company, I want
to make a look on paper like I'm making my
medical loss ratio because if adult, I got to pay
the government or rebate. So I have this physician over
here who I own, but he and she love working
for me because I pay him so well, I overpay,
So when I overpay them, I'm showing it as an expense.

(03:24):
The money just goes into the other pocket. Same thing
for prescription drugs. I can pay two hundred dollars for
a fifty dollars drug, which gets me around the medical
loss ratio. But if I have interest in the pharmacy,
both pockets get filled. It's all perfectly legal, but somehow
the government struggles to trace that dollar beyond the insurance subsidy,

(03:44):
which is partly why our insurance premiums go up every year.
And in the noble notion of providing healthcare coverage for
those without, the government wrecked the private health insurance system
by requiring all of us to buy it from private
company regulated by the government. You'll recall none of the
private companies owled when Obamacare came to life. So what

(04:07):
can be done well? One idea is for Congress to
set an inflation index for health insurance costs, tied to
what it costs in local markets, but just like an
nine when Obamacare was passed, poor folks cost the most
because they don't have insurance, they must use emergency rooms,
can't afford preventive care. The government has tried to bring
folks out of poverty for sixty five years. We still

(04:29):
have it, and with the cost of living rising every year,
the pool of working poor grows. So it seems to
me the best answer are policies that encourage private competition.
Government money is driving the marketplace, which appears to be
a bad place for it.