The Imminent and Assured Failure of "The Patient Protection and Affordable Care Act", or...
..."It ain't what you don't know that gets you into trouble. It's what you know for sure that just ain't so." -Mark Twain
That fee-for-service medicine is a cause (if not the cause) of the "health care" cost explosion is a matter of received wisdom for establishment policy wonks. Consider these recent examples:
Really? Then why aren't the costs of haircuts, dry cleaning, and lawn care also overwhelming the economy? These services, like virtually all services in a free economy, are provided on a fee-for-service basis. With all due respect, the conventional wisdom has it completely wrong. The problem is not how charges are generated. The problem is how they are paid.
"Insanity: doing the same thing over and over again and expecting different results." -Albert Einstein
The total cost of "health care" is calculated as shown below:
N x U = C
It is time to face the music and admit that the insurance model adopted from other casualty loss protection products simply doesn't work as an effective way to pay for medical care. Claims against an automobile, homeowners, or life insurance policy are initiated as the result of an external event over which the insured has no control such as an accident, a fire, or death. In the case of insurance for medical services, the insured controls the claims initiation from start to finish. This is a recipe for disaster. It is also one of the two primary reasons that health care costs have grown to crisis proportions. Here's the other.
When potential consumers of any highly desirable service are shielded from the financial consequences of the consumption decision, demand for that service will be virtually infinite.
Programs and plans that insulate patients from the real costs of medical care (especially Medicare and Medicaid) are the primary cause of exploding health care costs, not fee-for-service medicine. National health expenditures in the U.S. reportedly reached $2.7 trillion in 2011. Of that amount approximately $555 billion was expended by Medicare and $398.6 billion by Medicaid, both of which are technically bankrupt. Moreover Medicaid, which consumes an average of 21% of state revenue, threatens to bankrupt states from California to Illinois and beyond.
As Medicare and Medicaid are propelled by immutable economic laws and unforgiving demographic realities toward their mathematically-inevitable demise, defenders of these so-called "entitlement programs" have redoubled their efforts to conceal health care costs from patients by expanding socialization of those costs. "The Patient Protection and Affordable Care Act" manages to worsen a very bad situation on both the demand and supply side of the total expenditure equation. It fuels service demand ("N") by expanding the number of "insured" people even as its resource-consuming regulations constrain health care delivery and drive up unit costs ("U") for hospitals and physicians. This is public policy insanity. It is time to rethink our health care assumptions before the nation spends itself into oblivion in pursuit of an impossible dream. It is time for a Plan "B".
"Estimate of the Situation" is a reality-based information resource for hospital decision makers. Every week subscribers receive candid "unspun" news and informed opinion to help navigate within the short reaction time frames that characterize today's unprecedented and unpredictable times. To subscribe (there is no cost), just send us an e-mail with your name, title, and organization. Please feel free to forward a copy to anyone that might benefit from its content.
Brady & Associates 7667 N.W. Prairie View Road, Suite 204 Kansas City, Missouri 64151 (816) 587-2120 • http://bradyinc.com
© Brady & Associates 2012