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Sunday, December 23, 2012


MINOT, NORTH DAKOTA -- It is an amazing mindset that Americans have adopted. Some argue that it comes from an enlightened outlook on the world. Others, less blind, argue that the American mind is not equipped to think logically and rationally -- that it is capable only of spouting clichés and regurgitating rhetoric gleaned from sitcoms and talking heads.

 A recent discussion I had illustrates this point. The well-educated individual with whom I spoke insisted that to keep insurance premiums down, everyone must be required to buy a medical policy. This is exactly what Congress and the Supreme Court have imposed on every American through the Affordable Care Act (Obamacare). Proponents assure us that this imposition is for our benefit and ensures that everyone has insurance and will pay his or her fair share.

The obvious flaws in the health care debate are the assumptions that medical costs need to be covered through insurance and that employers are in some manner obligated to fund health care insurance. The Affordable Care Act assumes all medical costs will be paid through insurance, with certain deductibles and/or co-pays. No other insurance works this way. Auto insurance does not pay for gas, oil, and tune-ups; it covers liability exposure and property damage. Home insurance does not pay the costs of replacing appliances, re-painting, re-carpeting, or maintaining lawns; nor does it cover utility costs.

Let's take a step back and look at the broader picture. Prior to the federal government's entrance into the medical insurance business with Medicare in the early 1960s, there was no health care funding crisis.  Medicare is the natural outgrowth of the well-intended but ill-conceived Social Security program instituted under FDR. That program eventually led people to believe that Social Security would provide a living income when workers entered retirement. Of course, it does not. 

Lyndon Johnson's Great Society realized that Social Security would not fund retirement costs. This realization was exacerbated by Congress's borrowing from the Social Security trust fund.  As more people retired, they realized that Social Security did not provide sufficient income to pay for living costs and medical costs. The result was Medicare. Again, while possibly well-intended, the program was ill-conceived and poorly implemented.

Now we have two federally mandated programs that forcibly require every working American to participate. These programs are managed by an unaccountable bureaucracy and overseen by an even more unaccountable Congress. Both programs are failing, and Congress has chosen to do nothing to fix either.

Rather than looking to see why medical costs are rising so rapidly, Congress has instituted a third ill-conceived plan -- the Affordable Care Act. It ignores all fundamentals necessary to help any business to succeed. It is a classic government mandate based on ignorance; arrogance; and the refusal to recognize the basic laws of nature, human nature, and finance. Like Social Security and Medicare, it will fail.  Unfortunately, since this program is designed to control 100 percent of medical services, its failure will fall heavily on all Americans -- except those politicians who have exempted themselves. 

Serious efforts to address the explosion in the cost of medical services must focus on the real causes. The Affordable Care Act ignores possible solutions and, in fact, focuses on reducing access to services and the quality of said services. 

Prior to the Affordable Care Act, the federal government directly or indirectly controlled approximately 60 percent of health care payments. Fewer than 10 percent of all medical bills are reviewed and approved by the individuals receiving the service. Third-party payers, who have no knowledge of what services were actually requested or provided, pay more than 90 percent of all bills. Thus, there is no effective control or oversight of medical services. The otherwise well-educated person mentioned above defended the third-party payer system. Her reasoning: "These billings are so complex, if I had to review them I wouldn't have time to work at a job." 

Medicare studies consistently show that up to 30 percent of all Medicare payments are for services that either were not provided or that were unnecessary. Third-party payers are simply unable to review medical service billings and thus send them through the system to be paid. The consequence is inflated medical costs and resulting premium increases. The Affordable Care Act fails to address this fundamental problem.

Further, the Affordable Care Act ignores tort liability issues. Litigation expenses and damage awards add 30 percent or more to the cost of medical services -- even more to the cost of pharmaceuticals. 

The American Medical Association (AMA) has controlled entry into the medical profession for more than 100 years. Like all unions, it has restricted entry in an effort to raise the income of those entering the profession.  

Until the American public demands that government and the AMA get out of the way of health care reform, we had better prepare ourselves for some very bitter medicine.




  A Voice from Fly-Over Country is copyright (c) 2012

by Robert L. Hale and the Fitzgerald Griffin Foundation, fgfbooks.com. All rights reserved.

This column may be published or posted if credit is given to the author and fgfBooks.com.


Robert Hale's biographical sketch and photo



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