The Dog Catches the Car

“Repeal and Replace” has been the Republican mantra for Obamacare since the day it became law. After more than 50 show votes to repeal, one has to believe that they will now want a real vote as early in the next administration as possible. That day the Republicans in Congress will be like the dog who finally catches the car he has been chasing. Now what do they do with it?

Since whatever they vote on will likely pass both houses, not be vetoed and, therefore become a law impacting us all, it is might be useful to refresh them (and us) on why Obamacare was passed in the first place.

Prior to its passage, our country was facing a macro-economic crisis. We were as a nation paying way more than we could afford on healthcare and getting far less than we were paying for.

The high costs of healthcare had become an anchor on the national economy. Those costs were a drag on economic growth and the major reason our businesses were not cost competitive globally. We were spending 17% of our total economic ouput to pay for healthcare — 50% more than our competitors in Europe. Those competitors were spending their “50%” on making their economies more productive and their countries stronger. We were wasting it on healthcare.

To make matters worse, our high healthcare costs were increasing at a rate almost twice that of total economic growth. Our macro-economic crisis was getting worse every year.

For more than 25 years the accepted strategy of our government (Federal, state, local) and of insurers and employers had been to hit the healthcare cost problem with a hammer — to limit the amount of care provided, reduce the amount we paid the providers of that care and then cost shift in a useless game of musical chairs among providers, payors and the insured. Hitting it with a hammer never worked, the cost curve never bent, but before Obamacare a hammer was the only thing in our tool box.

Our healthcare crisis, though, was more than just cost.

While costs were unaffordably high (and becoming more so every year), the healthcare outcomes we were were getting for all that cost, were quite underwhelming. By almost any outcome measure, the benefits delivered by our costly healthcare system were well below mediocre. While we were spending 50% more on healthcare than our European competitors, we were ranked dead last (no pun intended) in life expectancy, infant mortality and overall quality of health outcomes.

As a country, we were paying much more than we could afford and getting so much less than we deserved.

Why?.

Healthcare in the U.S. was and is a cottage industry. We have tens of thousands of providers, dozens of federal, state and local agencies, hundreds of insurance companies, thousands of benfit plan designs and different pricing between virtually every provider and every payor. At an individual level, it is impossible not to get lost in this complexity. At the national level, it is pretty easy to see what the root causes of our cost problem are:

  • With so many players in the cottage, each with a different self-interest, none with critical mass to get others to follow, we had multiple layers of hand-offs, redundancies and waste with few resources left over to invest in standardization and improved systems of care.
  • We spent most of our healthcare dollar on sickcare. But, we spent virtually nothing to prevent you from getting sick in the first place. (Have you ever owned a car and just waited for it to break down before calling the mechanic for an oil change and tune-up?)
  • We had a system that left 40mm of our friends and neighbors without health insurance and then designed another system that sent those 40mm to the single most expensive place in the system (the ER) to get their healthcare — for free, if the patient could not afford it. Of course that care was not free so the system just raised prices on those of us who could pay to cover their costs for those who could not.
  • We had a “free mrket” system for pharmaceuticals to reward those companies for the risk of R&D. In that system, we prohibited the Federal government from negotiating purchase prices nationally. No other country did what we did. Every other country negotiated lower prices. The result was that while only about 1/3 of worldwide pharamceutical revenue was made on sales in the U.S., 2/3 of global earnings came from those sales. We were subsidizing the rest of the world.
  • We paid our healthcare providers like piece-rate garment workers — exclusively on volume. It made no difference whether the care provided was necessary, done well or even helped the patient at all. We rewarded effort, not results.

Obamacare was enacted to address these problems. It expanded access to insurance, eliminated restrictions on pre-existing conditions, introduced pay for value, demanded quality and improved outcomes as conditions for payments, included funding for preventive care, funding for doctors to implement electronic heath records, funding for innovation, and on and on. To pay for all these new benefits, it also included less popular provisions, like mandates to have insurance.

Obamacare is a flawed law. Any legislation trying to address so many long-standing problems in such a large and complex part of our economy, would be. A responsible Congress would have enacted a series of technical amendments over the last 6 years to fix those flaws. The Congress we had chose not to try to fix it. That is the same Congress that will now vote to “repeal and replace”.

If they do it right, we will continue to make progress. If they fail, we will return to the macro-economic crisis that destroys our global competitiveness and limits our ability to grow.

Maybe the reality of finally catching the car they have been chasing will force Congress to now act responsibly. Let’s all hope so. A vote to only “repeal” would be so irresponsible as to be unpatriotic. A vote to “replace” with something that retains what works and fixes what doesn’t will require leadership not often demonstrated by today’s Congress.

I hope they surprise me!

Closing thoughts: Many people (including me) believe that there is a moral argument for healthcare reform (affordable access should be a basic human right for all, not just for the priveleged) and a constitutional argument for healthcare reform (affordable access is essential to “life, liberty and the pursuit of happiness”.) Some others find these arguments offensive and polarizing. Since the economic arguments for reform are compelling per se, I hope focusing only on those increases the odds that people on both sides of the issue will read this and rationally debate the alternatives.