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The More Things Change, The More They Stay the Same

June 15th, 2012 – Yesterday a new government report on national healthcare spending said that President Obama’s healthcare law will have little effect on the nation’s total healthcare bill.

The report said that American spending on healthcare is expected to continue to increase over the next 10 years, growing to consume 20% of the US economy. That means that 20 cents of every dollar spent in America goes to healthcare. Currently healthcare consumes 17% of America’s Gross Domestic Product (GDP), which is already the highest in the world.

Supporters of the federal healthcare law point out that even with the government spending hundreds of millions of dollars to guarantee most Americans health coverage for the first time, spending is expected to increase spending just 1%. The economists that produced the report estimate that 30 million more people will gain health coverage during the next 10 years.  The report claims that healthcare spending will slow after the major tenants of the healthcare law come into force in 2014.

While economists can twist numbers to support virtually any agenda, these estimates also show how little the law will do to fundamentally change the trajectory of healthcare spending.

“This is the biggest failing of the healthcare reform law, in that it did very little to rein in the ever-increasing costs of healthcare that keep driving up health insurance premiums. As America’s percentage of GDP attributed to healthcare keeps going up, American businesses ability to compete in the global market is diminished,” according to Mark Erickson of Colorado Health Insurance Brokers.

America spends more per capita on healthcare than any other developed nation. While we have some of the best technology in the world, that does not necessarily translate into increased longevity or reduced infant mortality rates.

Three core problems that must be addressed are:

  • The practice of “Defensive Medicine” in which healthcare providers recommend expensive and non-essential tests to reduce their odds of a malpractice lawsuit.  This waste accounts for about 20% of all healthcare costs and tort reform to protect doctors is the answer.
  • A lack of price transparency for consumers of healthcare services sector that makes it difficult for free market economic efficiencies to be realized.  Online rating systems (like a Yelp for doctors) and standardized systems in which providers are required to publish prices on websites will empower consumers to make informed choices as they shop for healthcare services.
  • The public’s addiction to unhealthy food which leads to costly lifestyle related illnesses like diabetes and heart disease.  No one wants the government to tell them what they can and can’t eat, but clearly something has to change, as the American public is no match for addictive foods marketed through clever “Madison Avenue” advertising campaigns.

What are your ideas on how to fix this mess?  Share your ideas below…

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