The problem with the U.S. healthcare system can be explained by three numbers.
The first is the average annual cost of healthcare for every American, which comes to $9,024, according to the Organization for Economic Co-operation and Development (OECD).
The second data point comes from Britain, which has a comparable free market economy. It spends just $3,971 per person on healthcare, some 56 percent less than the United States.
And the third, surprising, factoid: Longevity data shows that Brits actually live about two years longer than Americans, even though they pay far less for healthcare.
These data points demonstrate just how broken the U.S. healthcare system remains. Donald Trump didn't create this situation, he inherited it.
This inheritance came from President Obama, whose Obamacare focused on universal coverage, but did little to control healthcare costs.
The new House plan, as first proposed, makes some substantial modifications to Obamacare but does not fix the underlying problem of out-of-control costs.
In fact, evidence suggests the House plan will grow healthcare costs across the board for the poor, working Americans, and even the wealthy.
As I explained in my recent blog post, the House plan seeks to eliminate Medicaid expansion, pushing more Americans into private healthcare with the help of tax credits.
I am not a big fan of entitlement programs like Medicaid. But I am also pragmatic.
The average cost of Medicaid per adult person is $4,986, including all of their blanket coverage under federal and state funding.
This Medicaid cost is 45 percent less expensive than the approximately $9,000 being spent on healthcare per person, including premiums and out of pocket expenses.
More than 9 million Americans have opted for Medicaid on the exchanges. Under the House plan, these will be phased out under a process that pushes them into the private insurance market.
But the private insurance market is much more expensive.
President Trump championed the idea of truly competitive insurance markets across all 50 states. But such provisions are not included in the first version of the House bill.
Truthfully, there is little mechanism for cost containment in the proposed legislation.
The House bill does eliminate the annual penalty for failing to get private insurance. But without the mandate requirement, the insured pools will lack the infusion of healthy payers to offset the plan’s feature that allows persons with pre-existing conditions to get insurance.
This is why the Congressional Budget Office is predicting the House plan will drive up premiums its first year by 15 percent to 20 percent. While the CBO number may be inflated, it is a fair conclusion that premiums will rise.
Currently, the House and Senate, along with the White House, are attempting to hammer out a compromise plan.
It seems to me that the quickest and cheapest way to move forward on healthcare is to keep and improve the cost-friendly Medicaid expansion while opening it up to lower-income Americans.
At the same time, mechanisms to drive down costs need to be implemented.
These include truly competitive insurance offerings across all 50 states, modest tort reform, programs to increase the number of qualified doctors and medical professionals, and a national system of primary care centers for the poor, reducing the burdens being put upon hospital emergency rooms.
President Trump should be applauded for tackling this most difficult program first.
He needs to continue to trust his instincts and push Congress for a practical bill that controls health costs.
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