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A Road Map to Implementing U.S. Healthcare

Posted: 07/25/2012 2:33 pm

Now that U.S. Healthcare is constitutional, the success of its implementation largely depends upon breaking up the medical cartel(s), and separating it from the political process, in order to make it cost affordable. The most recent figures report that the U.S. per capita healthcare cost is $8,233, which is over 152 percent that of the OECD $3,268 average, yet the health indicators of comparable rich countries are about equal that the U.S. (78.7 years of life expectancy for Americans, and 79.8 years for Europeans). If unchecked, U.S. healthcare costs will further exasperate the U.S. deficit and national debt, frustrating the implementation of national healthcare program. In order to implement a sustainable U.S. healthcare program, we must first identify the source of these high costs and apply viable solutions.

Ostensibly the U.S. healthcare industry is fraught with political process oligarchy, and economic oligopoly. By definition, healthcare is an issue of public service and humanity, not politics. However, political powers have manufactured (rendered) healthcare a campaign (political) tool, stripping it of its humanitarian purpose. This was no more apparent during the recent Supreme Court deliberations and decision, where six members of the Court demonstrated their adherence to ideology rather than the welfare of the nation. Judge Roberts's courage to rise above the fray, abandon political innuendos, and establish the legality and constitutionality of healthcare was miraculously admirable. The creation of a sustainable healthcare program was long overdue as the U.S., the world's super power and leader of the rich and poor countries, was without one.

But we are not home free yet. There remains the ideological discord between our two major political parties, who continue to put their political gains in front of the national interest of healthcare. While Obamacare passed through the Supreme Court, the American public is still confused on the merit of the plan due to its prospective cost. This comes as no surprise as both parties have turned the humanitarian issue of healthcare into a campaign weapon, further polarizing the nation, and complicating the implementation of any healthcare program.

Parenthetically, a major concern surrounds the affordability of the Obamacare healthcare plan. Making up 17.9 percent of GDP5, and growing at a rate higher than inflation, the sustainability of any U.S. healthcare program at current costs is questionable. The underlying reason for the egregious cost is the oligopolistic market structure of the healthcare industry, and its strong lobby, which assures monopolistic costs. The culprits include the American Medical Association's monopolistic practices, hospital oligopolies, and pharmaceutical monopolies, which as a result are limiting the supplies of products and services, pushing prices far above the CPI to the point of choking the economy.

The first step to reducing the cost is to recognize that healthcare is not a political ideology, but rather an issue of humanity. Healthcare must be removed from the political process in order to eliminate the stronghold of lobbyist and monopolists, who are largely responsible for the towering cost of U.S. healthcare. The Independent Payment Advisory Board (IPAB), and any other government agency, must be independent of any political influence; maintaining focus on cost/benefit rather than political agendas. Second, the IPAB should expand Medicare and Medicaid programs to cover all citizens, which will eliminate the need for creating new costly bureaucracies. Third, it is necessary to increase the supply of all medical services and products throughout the country, via imports and subsidization of domestic production. This increase in supply and competition will effectively drive down costs, and encourage efficiency throughout the industry.

Indeed, it will take time to shift from the current costly oligopolistic market structure to a more accessible and economical healthcare system. However with proper leadership and focus it is possible to create a sustainable, cost-efficient healthcare program, while preserving U.S. leadership and innovation in biomedical research, development of new drugs, new procedures and equipment. Nonetheless, steady progress must be made to reduce cost. If no change is made on the cost front, our huge healthcare system could easily be derailed due to inadequate funds for healthcare.


Nake M. Kamrany is professor of economics and director, program in Law and economics at the University of Southern California and a member of California Bar. Jessica Greenhalgh is an Economic and Biological Sciences student at USC and a research member of the Global Income Convergence Group at USC. Justin McGinnis holds a B.A in Economics, and is a Ph.D. student in Pharmaceutical Economics at the University of Southern California.

 
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