Tim offers some ideas to fix the U.S. healthcare system
By
Timothy Lutts, Chief Investment Strategist and Editor of
Cabot Stock of the Month Report From Cabot Wealth Advisory 3/9/09
Sign up for free Cabot Wealth Advisory e-newsletteOur healthcare system is broken. Insurance costs, for both consumers and businesses, have risen inexorably. Doctors are frustrated at being paid less than they are worth. Millions of Americans are unable to afford basic insurance. And Americans are in terrible health, above all because of obesity and all its side effects.
Yet previous attempts to fix the system have failed.
So President Barack Obama, who is intent on using every bit of his political capital while he is still popular, is hunting for a less expensive system that will keep more of us healthy.
I say, "Good luck," sincerely but skeptically, because while I truly desire a better system I believe the institutionalized powers will make achieving change very difficult. In fact, I think what we need for this challenge is not a president but a dictator.
If I were dictator, for example, I'd address health care at its root by targeting nutrition first, making it a mandatory subject in school. I'd teach kids the benefits of a healthy diet heavy in vegetables, fruits, nuts and whole grains. Furthermore, I'd teach about the real costs, both financial and health-wise, of a diet rich in refined sugars, saturated fats, processed grains and red meat. The sugar industry would protest loudly and the beef lobby would have a cow, but I wouldn't stop there. After donning my bulletproof vest and checking on my Secret Service protection, I'd then tax junk food, incurring the wrath of the shareholders of Coke, Pepsi, Kraft, Nestle and more.
After all, we tax alcohol and cigarettes because they're bad for your health; why not tax Doritos and Mountain Dew as well?
I wouldn't actually outlaw any foods; I do believe in the right to choose. And if your Super Bowl tradition involves a pile of nachos and a case of beer, I say enjoy it. But I also believe in taking responsibility and in paying a price for your actions, so my tax, which would be funneled to the health care system just as cigarette taxes are, would work to do that.
After that I'd target the Food and Drug Administration, the American Medical Association, the drug industry, the medical devices industry and the insurance industry.
For starters, I think the FDA, with a budget of roughly $2 billion, is a bloated federal bureaucracy that makes drug development more expensive and slower than it should be. I'd slash their budget and trust the market to do more of their work.
I'm sympathetic that the doctors in the AMA have suffered at the hand of the insurance companies, who control the purse strings of the industry these days. But I think the AMA should open its doors to practitioners of alternative medicine like chiropractors, osteopaths, acupuncturists and more. And I think they should get behind the move to practice simple medicine in drugstores and other retail outlets that are far more efficient than hospitals.
As to the drug industry, which has enjoyed many wonderful decades as they persuaded Americans to buy pills to address their various complaints when in many cases a drink of water and a long walk would have served as well, they'd suffer once my junk food taxes and nutrition education kicked in.
Ditto for the makers of medical devices. The ride was fun while the money flowed, but a concerted focus on maintaining health will shrink demand for their products.
Finally, we get to the insurance industry, which has thoroughly imposed itself between the consumer and the doctor. If these insurers had actually improved Americans' health in the process, I'd applaud them for the achievement. But they haven't. Decades ago, they came up with the idea of the HMO (Health Maintenance Organization), the first two words of which suggested their focus, and their results, might change. But they didn't.
The insurance industry, in my opinion, provides little value while adding complexity. It's made itself the gatekeeper to the medical establishment, collecting a fee for access, and those fees have made the insurance industry very rich...but they haven't made us healthier. The best way to reduce the insurance industry's power from here is to not get sick.
And that's exactly what would happen under my dictatorship. More attention would be paid to health, not disease, and the institutions that have prospered in recent decades by addressing disease would shrink.
And I'm not alone in this prescription. Exactly two months ago, the Wall Street Journal printed an opinion piece coauthored by Deepak Chopra, Dean Ornish, Rustum Roy and Andrew Weil. In it, the authors put forth the thesis that the best cures for our afflictions will come from changes in diet and lifestyle, writing, "Last year, $2.1 trillion was spent in the U.S. on medical care, or 16.5% of the gross national product. Of these trillions, 95 cents of every dollar was spent to treat disease after it had already occurred. At least 75% of these costs were spent on treating chronic diseases, such as heart disease and diabetes, that are preventable or even reversible."
Furthermore, the authors noted that Americans spent more than $100 billion for 1.3 million coronary angioplasty procedures (at an average cost of $48,399) and 448,000 coronary bypass operations (at an average cost of $99,743) in 2006. Yet there's growing evidence that coronary bypass surgery prolongs life in only 3% of the patients who receive it, while angioplasties and stents fail to prolong life or even prevent heart attacks in the 95% of patients who are stable when they receive them.
That's a lot of wasted money (perhaps $103 billion!) on heart procedures.
And what bothers me is that Obama and the medical establishment at his summits seem not to recognize this.
They appear to be focused on getting more Americans into the insurance-centric healthcare system than on actually making Americans healthy. In effect, they're just re-jiggering the flow of money.
What we're likely to end up with, in my opinion, is a two-tier system that provides a basic level of rationed care for everyone, with the option of paying more for either higher levels of insurance or actual services. In effect, this would be a partial single-payer system. The insurance companies, of course, complain that moving to a single-payer system would unfairly compete with them, but I'm guessing that we'll end up with a system in which the insurance companies still have plenty of power and that other parts of the medical establishment see minimal changes.
And that's a shame. Obama knows about healthy living habits, and he's chosen to upend the apple cart in many other places where the benefits are questionable, but it appears to me that he's going to leave most of our expensive medical establishment intact.
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