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How to fix the healthcare system in America

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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 the healthcare market.

Lets look at the major changes in the Federal and State governments that changed the health care marketplace from the U.S. Department of Health & Human Services:

(Since I wasn’t going to go though each order and reform, I found a website that found them for me: MAJOR CHANGES IN HHS LINK)

  • 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.
Health Care Spending in the U.S. (Source: US Census 2013)

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.

Increase in demand = increase in price for healthcare

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 Applicants have been fluxuating with the demand, but the acceptences haven’t, causing a major shortage.

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.

Increasing supply would decrease the total spending

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).

Conclusion

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?

Quotes

“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
a government bureaucracy to administer it.”

-Thomas Sowell

Creator:

Sources:

Works Cited:

Blumberg, Yoni. “Here’s the Real Reason Health Care Costs so Much More in the US.” CNBC, CNBC, 3 Sept. 2018, www.cnbc.com/2018/03/22/the-real-reason-medical-care-costs-so-much-more-in-the-us.html.

Brown, Theresa. “Fixing America’s Health Care System.” The American Journal of Nursing, U.S. National Library of Medicine, Nov. 2018, www.ncbi.nlm.nih.gov/pubmed/30358603.

“Can the U.S. Health Care System Be Fixed? – History, Problems & Solutions.” Money Crashers, 5 Apr. 2019, www.moneycrashers.com/fix-us-healthcare-system-history-problems-solutions/.

Care, Health. “To Really Fix Health Care, GOP Must Get At What Spurred Obamacare.” The Federalist, 30 Mar. 2017, thefederalist.com/2017/03/30/really-fix-health-care-republicans-must-get-spurred-obamacare/.

Epstein, Lita. “6 Reasons Healthcare Is So Expensive in the U.S.” Investopedia, Investopedia, 12 Mar. 2019, www.investopedia.com/articles/personal-finance/080615/6-reasons-healthcare-so-expensive-us.asp.

Hahn, Matthew. “Fixing the American Health Care System Is Simple. Here’s How to Do It.” KevinMD.com, KevinMD.com, 17 Oct. 2017, www.kevinmd.com/blog/2017/10/fixing-american-health-care-system-simple-heres.html.

Kanopiadmin. “How Government Regulations Made Healthcare So Expensive | Mike Holly.” Mises Institute, 9 May 2017, mises.org/wire/how-government-regulations-made-healthcare-so-expensive.“Medical Malpractice Claims and Structured Settlement Payouts.” Annuity.org, www.annuity.org/structured-settlements/medical-malpractice/.

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COMMENTS: 3
  1. April 25, 2019 by Laura Reysz

    James, you present a lot of information here about a topic for which you are obviously passionate. I appreciate all your research and your quotes are quite effective.

  2. April 26, 2019 by Chanamon.Chaivaivid

    James, I think this is very well thought out presentation and a lot of information are provided. Keep up the good work.

  3. April 28, 2019 by Aria.Chang

    Hi James,

    I appreciate the research that you have done in the creation of this project! One question that I had is regarding the actual implementation of a different healthcare system. Clearly it would not happen overnight, but how do you recommend/have you looked into how we could start repealing the policies that limit the supply of healthcare?

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