Someone once said “The definition of insanity is doing the same thing over and over and expecting different results.” Although the definition of insanity it isn’t, it will do for what we are going to talk about today. The quote sounds really good and so it stuck. It sounds more like “perseverance” that doesn’t work. If you want to know the real definition of insanity, google it.

In the first article we discussed the pitfalls of socialized medicine in a National Healthcare Policy https://myind.net/national-healthcare-policy-pitfalls-socialized-medicine Books have been written about dysfunctions of American healthcare. World Health Organization (WHO) recommends 5% of a nation’s GDP towards healthcare but we spend 18% on healthcare. Yet neither we are the healthiest, nor live longest nor top any other healthcare related studies and charts. Is the spending even related to these outcomes? Or it is related to healthy living and eating habits? Do we really know?

Republicans have tried to repeal ACA for different reasons but they too have not come up with any alternative plan. Why? Because problem is complex and effective solution that actually works, helps neither politics nor the business. After all it only needs a quick look at spending on lobbying efforts and we can tell whose interests are taken care of through ACA. Between year 2009 and 2010, over a billion dollars were spent on healthcare lobbying (See: here for the chart reference) and none on behalf of the patients.

The US healthcare system is full of excesses and high costs. When my son was 2 years old, he had ear tubes put in. One of the ear tubes dropped off and healed as it was supposed to while the other left a long term hole in his ear which needed a surgery 5 years later. Two months later, I found out that the surgery was not completely successful i.e. he still has a hole in his ear although a bit smaller than the last time. I have problem with all of this at several levels.

First, the cost of ear tubes to us was more than $1500 after insurance paid its portion. The cost of surgery to patch the hole was more than $2500 after insurance paid (or not). The cost itself is a problem but think about the opportunity costs: my son could not take part in swimming, had to stay away from many other activities and still has potential of significant hearing loss.

Second, the failure on the part of the provider generates more business for everyone – in terms of follow up checkups, tests, and surgery still without a guarantee of success.

Third and most important of all, nobody is thinking about: why was the first surgery needed at the first place? There are more than half a million such surgeries done each year. Approximately 1 in 7 kids will have such a surgery done. I am not a doctor and cannot talk about the validity of each case and I am sure there are valid cases of such surgeries but I don’t believe that these are all valid cases. In fact these questions have been raised before here by none other than NPR in 2007.

Going back to our rational actor/alignment of incentive paradigm, it is clear that reimbursements (or incentives) are aligned towards doing more surgeries and making mistakes (deliberately or not). Healthcare is unique in this case that they financially benefit from their own mistakes.

I have learned a lesson now: I run away from doctors who recommend unnecessary surgeries and tests and dentists who recommend routine x-rays and braces for kids. Recently I declined x-rays for my kids at their recent dentist visit. Thankfully dentist was completely fine with it. I think yearly x-rays are overkill for young ones and recommending braces for people who have perfect teeth is robbery on their pocket books.

I don’t have to share more stories to prove American healthcare is costly, suffers from affluenza, and serves financial interests of incumbents. So what does all of this have to do with Affordable Care Act aka Obamacare?

First, it perpetuates the current dysfunctional system to even more population. We already know our system is dysfunctional and perpetuating it further with even more regulation does not fix anything.

Second, it increases cost – the more people will now be able to get care at “higher” cost. I think this point needs a little elaboration. My father-in-law recently told me what happened to him recently. He needed a Cholecystectomy (surgical removal of gallbladder) in India. The provider (a big hospital in Mumbai) asked whether he will pay through insurance or on his own. You see the price is different based on the method of payment. It is not because of medical loss ratio (MLR – the administrative cost of insurance) but because they think in case of insurance, someone else is paying for care. So everyone is on board to skim the insurance – everybody wins except of course the insurance company. Which in turn means what exactly? Increased cost of premiums and increased cost to everyone because insurance companies are not in the business of charity and to improve their bottom line, they will increase premiums. They will have to increase their investment in fraud detection and overall administration. Rest assured that in a few years it will look like a bloated American healthcare system.

Third, it punishes poor people – forces them to buy insurance that ensures less money for other important necessities in life.

Fourth, it punishes the healthy and young as they are required to subsidize the system for others.

Fifth, again the incentives – what is the right thing for the employers to do now? Of course stop providing insurance to employees and pay penalties – it is cheaper for them this way. I don’t think majority of employers will do it right away due to the fear of losing talent to their competitors but it will start a trend.

Finally the biggest point is – it does precious little to actually make care “affordable”. Will it force hospitals to charge less for stays, procedures, tests, surgeries? Will it help reduce the excesses of the system? ACA is largely a political and financial origami. Folding the financial instruments by taking from healthy and passing it to the sick perpetuating the same bloated and inefficient system to more people.

Next – Problems of the current healthcare model – mistakes that should not be repeated

By Suryakant Misra