by Joe Flower
[This is a letter I sent to Gary Cohn, appointed by President Trump to head the National Economic Council and, among other things, come up with a plan for reforming healthcare. Formerly president of Goldman Sachs, Cohn may be a wizard at finance, but healthcare economics are wildly different and famously opaque.
So I thought I would help him out. As things are going with the Republicans’ health plan on Capitol Hill, Trump may need a Plan B.]
Healthcare economics are weird, opaque, and convoluted. The business of healthcare is unlike any other business. The politicians and pundits arguing about how to fix healthcare in the United States don’t understand what they are trying to fix. Neither do you, probably, because almost no one does.
So let me help with this explainer. Here’s the promise: This will be non-partisan, factual, and some parts at least will be different from anything you have heard before. This is a version of a letter I sent to the White House economists charged with coming up the new, better replacement for the Affordable Care Act.
Subject: Your best eight minutes on healthcare economics.
- Why healthcare economics are different.
- What would work
Who I am: An independent healthcare author and analyst since Jimmy Carter’s administration, speaker, consultant across the industry at all levels, including insurers, hospitals, device manufacturers, employers, the Veterans Administration, the pharmaceutical industry, the World Health Organization, the Department of Defense, a real insider.
Core problem: The core problem in fixing healthcare is the actual cost of medical care.
- Healthcare in the U.S. by any measure costs about twice what it should and is twice more than in most other countries.
- Medical prices are completely disconnected from the cost of production.
- Few medical providers even know the true cost of their products, their tests, therapies, and surgeries because they reverse-engineer their prices based on reimbursements
- By a number of highly respected analyses at least one third of that (well over $1 trillion this year) is waste, paying for things that we don’t need and that don’t help and often hurt.
- Solving just the federal part of this would completely wipe out the deficit.
Trying to “take care of everybody” will always be impossible politically and economically as long as healthcare costs twice what it should and wastes trillions of dollars.
Solvable: This is a solvable problem. If we manage to stop paying for waste, over $1 trillion per year in unneeded overtreatment will disappear. Prices will drop to something like a true market price. This will not happen overnight, but it could happen over five years with vigorous implementation.