HealthCare Reform 2.0 – False Economy

The ACA – ObamaCare is failing, and will surely fail, but not for the populist reasons being discussed so readily today!

False Costs!

Dan Munro states, in his article “Annual U.S. Healthcare Spending Hits $3.8 Trillion,” published in Forbes Magazine, February 2, 2014, that the nation’s true healthcare spend needs to be calculated to include both the National Healthcare Expenditure ($3.093 trillion) and the Sustainable Growth Rate ($0.116 trillion) deficit that is accumulating on our books.  He further is adds two numbers, recently calculated by Deloitte Center for Health Solutions, “The Hidden Costs of U.S. Health Care: Consumer Discretionary Health Care Spending,” Additional Direct Costs ($0.129 trillion) and Imputed Indirect Costs ($0.492 trillion).  This is how he gets to the staggering projection for 2014 of $3.8 trillion in total healthcare costs. He is correct and wrong!

Do we really know how much America’s healthcare costs?

The short answer is, NO – we don’t. We just think we know what it costs because people produce a number that is nationally reported.

The real number is likely far less than what is reported; but getting to the real number is very difficult.  Here’s a few of the reasons:

  1. We do not collect consistent comparable data – it includes both prices invoiced in some cases and actual reimbursements in other cases.
  2. Much of the reimbursement data that is collected, is tainted by the false economic structures in place that both influences its price and affects the reporting.
  3. Some of the data reflects what is charged at invoice; but what is typically paid to providers is a significantly smaller number – averaging 22 cents on the dollar invoiced.
  4. The numbers that are calculated based on what is reimbursed to providers for the service – actually paid, not invoiced – are tainted by a number of hidden and, in some cases, arbitrary calculations and mechanisms that drive up the reported reimbursement price.

Circular Math Drives Inflated Costs

Let’s look at one program, in one state, California’s AIDS Drug Assistance Program (ADAP), they report that they paid $500 million for drugs delivered in 2009. Since CA “reimbursed” pharmacies for these drugs you would think the cost was accurate. Again, you would be wrong!

California, did report that is spent $500 million but that is not what the net cost really was. In this case, about one-half of the funding came from the federal government and about one-third of those funds came from a mandatory rebate program paid by pharmaceutical companies, who supplied the drugs, to the federal government who passed the funds back to California.  The other half of the funding came from two different sources in the California budget; about one-half is from the General Fund (taxes) and the other half is from a “Special” Fund (CA’s mandatory rebate from the same Pharmaceutical companies for the same drugs). So, even with government provided reimbursement cost data, the actual number spent is not correct – often, not even close.

Pharma created the funds to pay all these rebates by increasing prices. This is only one example of dozens throughout healthcare. The ACA has added many

similar taxes and fees creating the funding to pay subsidies. No one seems to see it continually drives prices up!

Employer Sponsored Insurance, Co-Pays and Deductibles = Price Obscurity

At first grouping numbers of employees together in an employer pool provided for group purchase discounts and, larger employers were able to offer better benefits. Soon, this advantage was consumed with rapidly expanding benefit offerings.  Employer A offered vision. Employer B responded with vision and dental. Next, benefits increased to include expanded dental coverage and more. Each year, employees demanded better coverage – more things covered – and each year employers responded by demanding more from their insurance plan to satisfy employees. Insurers responded by adding more covered items into the policies and raising premiums.

As policy costs grew, at first employers assimilated them and reduced salary increases.  The continual demand for more benefits moved beyond just good basic healthcare to items that were more weighted toward quality of life and desired additional care.

Along the way, employers needed a mechanism to offset the rising costs. Insurers responded with the idea of deductibles and co-pays.  As employees asked for more, or as the providers invented new more expensive ways to treat illness, accident and disease, costs were shifted to the employee and the provider payment was reduced by the insurance company. This was then predictably picked up by the patient in the form of co-pays.

The system now places an undue burden on the insured as routine deductibles, without subsidies – costing as much as $12,000 for a family of four – can alone bankrupt many families.  The concept of affordable care practically goes out the window. But it need not be this way.

We believe we can develop a system that will eliminate the need for copays and deductibles and replaces ESI with a tax incentivized stipend system coupled with lifetime health savings accounts. We believe we can do this while lowering premiums for everyone and creating an accessible, accountable, efficient and effective healthcare system, including a safety net for all, while preserving individual choice.

We have developed a dual market approach. A needs based LifeCare market on one side provides efficient, effective and affordable care to all with no networks. The choice based Quality of Life Care market provides easy access to all the additional care people want and provides portability, price transparency and certainty. We integrate both markets in a unique single point of access and administration that will lower cost of care in America by at least one-third.

If you would like to read additional information or the current draft of the whitepaper go to http://tloker.wordpress.com.

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