Health-care reform requires competition, cost reduction
By Jay Stooksberry
Imagine a condemned house. The foundation is cracked and has been sinking for years. The siding is rotted and falling off. Cardboard and plywood replaced the windows that were long ago smashed. The property is surrounded by a forest of weeds where you could easily lose a medium-sized terrier.
Standing outside this home are a married couple who spent way too much money on the purchase of the property, and they are in the midst of a knock-down, drag-out fight about what color to paint the building.
This is our current debate about healthcare in the United States.
Republicans and Democrats have been locked into a war of attrition on how to best central-plan health care for the better (or worse, depending on your perspective) part of a decade now. An inordinate amount of banter fixates on details related to insurance coverage: who has it, who doesn’t, who wants it, who can’t afford it, etc.
However, what isn’t discussed enough is what makes health care as a whole so expensive. Both sides of the aisle continue to miss the mark in addressing the root problem of the issue: health-care markets and how bad policy makes them malfunction. You can have all of the health insurance in the world, but if there is not a sustainable business model that can survive in the marketplace then all of your coverage is wasted. If Congress cannot address health-care costs, all future conversations are moot and pointless.
One of the biggest expenses in health care is the administration of it. Our country spends $361 billion annually on health-care administration according to the Institute of Medicine. Unfortunately, this problem continues to be aggravated by public policy. Prior to the Affordable Care Act, the administrative cost of one insured person was $414. During the rollout of the ACA exchanges, the federal government spent $9.75 billion to enroll 6.34 million people — roughly $1,537 per person. More than half of that $1,537 — $893 per person to be more exact — went toward covering administrative costs.
Our litigious society has incentivized “defensive medicine.” To avoid malpractice lawsuits, risk-averse doctors overtreat and overtest their patients, just to make certain that they don’t miss some rare disease whose symptoms will be scrutinized in front of judge and jury. The Harvard School of Public Health estimates that the $55.6 billion a year is spent in the United States in addressing malpractice — $45.6 billion of which goes toward excessive medical practices completed to avoid malpractice. Each unnecessary fee-for-service charge adds up, creating a costly system that awards wastefulness and inefficiency. Discussion about tort reform that protects individual rights and avoids fraud has been virtually nonexistent.
The costliness of market entry for medicine is also routinely ignored. Mylan, producers of the EpiPen, received vociferous condemnation last year when prices for their product skyrocketed 400 percent overnight. Mass outrage targeted the multinational corporation for its ravenous greed, but ignored the fact that competitive alternatives — comparable products offered by Teva Pharmaceutical Industries, Windgap Medical, and Adamis — were all denied market entry by the Food and Drug Administration (FDA). Simply put, Mylan price gouged because it could. The complete absence of competition only guarantees high prices for consumers.
Though “Big Pharma” has done little to earn our sympathy, market risk for this industry is primarily the result of federal overreach. The average time for FDA approval — where a new drug goes from the lab to your bathroom cabinet — is 12 years. The average price for the research and development for the first produced pill is $2.6 billion. The cost of regulatory scrutiny continues to be passed down to customers.
As Congress prepares to debate and vote on its next legislative monstrosity, voters should be demand that their representatives address the root of the problem. Without addressing the rising price of medical care, we are only adding insult to injury — both figuratively and literally.
Jay Stooksberry is chairman of the Libertarian Party of Delta County, a freelance writer, business owner, and community activist based in Delta.