Recently Amazon, Berkshire Hathaway and JP Morgan Chase announced that they were going to establish a healthcare company for their employees. This sent stocks prices for many health insurers and pharmaceutical companies plunging. Medical care consumes an increasing percentage of our GDP and threatens the economic well-being of families and businesses. Although large corporations are sometimes able to negotiate volume discounts for their employees, insurance premiums and deductibles (out of pocket expenses) have increased steadily. There are a number of reasons for the rising costs of healthcare. The big three corporate alliance is attacking one of the major reasons for higher costs, inadequate competition. The Affordable Care Act contributed to the exit of insurers from large regions of the country. Without competition insurers are able to raise premiums and deductibles with a “take it or leave it” approach to patients. In addition to inadequate competition between insurers there is often little competition between hospitals and other medical care facilities such as laboratories, radiology centers and physical therapy departments. Once again without competition these medical facilities can charge whatever the market will bear. All medical providers should be required to inform patients what each test and procedure will cost beforehand. Expansion of HSAs (health savings accounts) would permit patients the opportunity to “shop around” for the best price on a given service. There is often a two-tier pricing policy in healthcare: an insurer price and a “cash” pay price. If more patients were paying cash facilities could lower costs by avoiding the extra time and paperwork of filing for insurance reimbursement.
Finally we must reform our malpractice legal system. Healthcare employees are human and subject to error but million dollar settlements will not undo the error nor prevent future errors. Patients deserve restitution but not retribution against the care giver. Texas has a system of evaluating malpractice lawsuits to determine the legitimacy of the case for civil court hearing. A good percentage of lawsuits are frivolous and unnecessarily tie up our civil courts. Settlements should be limited and based on the degree of disability and lost wages incurred. Exorbitant settlements increase costs to consumers in the long run. Laws are made by lawyers therefore I do not see changes to our system of torts any time soon. We can help lower costs by taking better care of ourselves, including improving our diet, exercising, refraining from smoking (including marijuana) and limiting alcohol intake. A primary principle in economics is Cost = Supply + Demand. If we decrease the demand for healthcare through healthier lifestyles, then costs will decline for everyone. This isn’t rocket science!