Within this small website, we will be discussing the ways the US politics have affected the healthcare system and what we can do to fix it.
Since the 1900s, medical interests have been lobbying politicians to reduce the supply (competition). In the 1980s, it got even worse as the United States restricted the supply of physicians, hospitals, insurance and pharmaceuticals companies. All while subsidizing demand, causing a large increase in inflation in
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- In 1910, the physician oligopoly was started during the Republican administration of William Taft after the American Medical Association lobbied the states to strengthen the regulation of medical licensure and allow their state AMA offices to oversee the closure or merger of nearly half of medical schools and also the reduction of class sizes. The states have been subsidizing the education of the number of doctors recommended by the AMA.
- In 1925, prescription drug monopolies begun after the federal government led by Republican President Calvin Coolidge started allowing the patenting of drugs. (Drug monopolies have also been promoted by government research and development subsidies targeted to favored pharmaceutical companies.)
- In 1945, buyer monopolization begun after the McCarran-Ferguson Act led by the Roosevelt Administration exempted the business of medical insurance from most federal regulation, including antitrust laws. (States have also more recently contributed to the monopolization by requiring health care plans to meet standards for coverage.)
- In 1946, institutional provider monopolization begun after favored hospitals received federal subsidies (matching grants and loans) provided under the Hospital Survey and Construction Act passed during the Truman Administration. (States have also been exempting non-profit hospitals from antitrust laws.)
- In 1951, employers started to become the dominant third-party insurance buyer during the Truman Administration after the Internal Revenue Service declared group premiums tax-deductible.
- In 1965, nationalization was started with a government buyer monopoly after the Johnson Administration led to the passage of Medicare and Medicaid which provided health insurance for the elderly and poor, respectively.
- In 1972, institutional provider monopolization was strengthened after the Nixon Administration started restricting the supply of hospitals by requiring federal certificate-of-need for the construction of medical facilities.
- In 1974, buyer monopolization was strengthened during the Nixon Administration after the Employee Retirement Income Security Act exempted employee health benefit plans offered by large employers (e.g., HMOs) from state regulations and lawsuits (e.g., brought by people denied coverage).
- In 1984, prescription drug monopolies were strengthened during the Reagan Administration after the Drug Price Competition and Patent Term Restoration Act permitted the extension of patents beyond 20 years. (The government has also allowed pharmaceuticals companies to bribe physicians to prescribe more expensive drugs.)
- In 2003, prescription drug monopolies were strengthened during the Bush Administration after the Medicare Prescription Drug, Improvement, and Modernization Act provided subsidies to the elderly for drugs.
- In 2014, nationalization will be strengthened after the Patient Protection and Affordable Care Act of 2010 (“Obamacare”) provided mandates, subsidies and insurance exchanges, and the expansion of Medicaid.
Overall this inflated the healthcare market by affecting the supply and the demand. The main cause of this inflation was the increase in demand by the creation of government healthcare. The monopolization and nationalization around 1965 which created a war between the government and the healthcare market on prices.
The monopolization of the healthcare providers was to take control of the market and be stronger against the government. Monopolies are sometimes good and bad, in this case, it’s hard to tell. The nationalization of the healthcare market forced the already existing monopolies to charge more as they were fighting the government in prices. Increasing the demand significantly pushes the prices up in the market, which is exactly what they did. Disappointingly, they don’t realize that the more they continue to subsidize the healthcare market, the higher the prices are going to increase.
How can we fix the healthcare system?
Throughout the history of the U.S. health-care market, it looked like it followed the basic economic laws of supply and demand until the 1980s. Government subsidies for the elderly and the poor are beneficial to the public good and provide a social surplus for those specific populations. Morally, I believe it should be in place just like everyone else in America so let’s look around that and find out other important inefficiencies which caused the price to get out of hand. The cause of the healthcare cost crisis is that the government didn’t allow the supply of hospitals and doctors to react and respond with the increased total consumer demands. This is due to politicians believing that basic markets would not be able to work in the healthcare sector.
So how do we increase the supply to lower the equilibrium point to bring down the prices? Increase the supply of doctors and hospitals, which is easier said than done. Even if medical schools choose to double their class sizes it would still take over 20 years to reach the number of doctors per population found in most other Western Countries. A faster solution could also be relaxing the licensing requirements on foreign-educated doctors/paramedics, allowing them to compete with the U.S. physicians to however much they are qualified. Below we can see the reason for failure to meet the demand of physicians within the U.S. healthcare market. We see that the Medical School
To keep some of the government health care programs such as Obamacare, would prolong the time of decreasing the costs in the market because of how it creates additional demands. What we should do is repeal all major healthcare policies implemented by the U.S. government after 1965. This will thus ease the market and level the playing field allowing new entrants to come and compete against the previously subsidized and entrenched providers (who increased the prices for everyone). Increasing the competition would lower the costs for the consumers.
We can clearly see needed shifts within the supply and demand graph which are needed to fix the demand shifts since 1965. With the solutions I presented, the supply shift would result in greater access to medical care, increased efficiency, market growth, a higher quantity of medical care supplied, as well as lower prices. Due to basic economic laws, total medical expenditures must decrease (spending area 1 to 2).
In the last 50 years, the U.S. has wasted almost 2 trillion dollars per year (2012 dollars). All this for just denying competitors into the healthcare market by setting up various barriers to entry. The costs are the biggest contributor to the tens of trillions of national debt (through spending on Medicare, Medicaid, and Social Security). Do we allow these government organizations to expand greater by taking more and more of our money just to have medical care, or do we remove them and allow for higher quality, cheaper and more available medical care for everyone?
“Much of the social history of the Western world over the past three decades has involved replacing what worked with what sounded good.”Thomas Sowell
“It is amazing that people who think we cannot afford to pay for doctors, hospitals, and medication somehow think that we can afford to pay for doctors, hospitals, medication and-Thomas Sowell
a government bureaucracy to administer it.”
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