Health Care Reform Health Care Explained The health care system in the United States is optimized to compete based on quality of care. Incentives exist to over treat patients, but are limited by the law of diminishing returns. When combined with an inelastic demand curve for patients and an information asymmetry between providers and patients, the problem is compounded. To further complicate the situation, insurance markets without price competition in the health care sector act as subsidies which are directly responsible for rapid health care inflation which was more than twice the general rate of inflation in 2005 (Appleby 2007). Price competition is almost unheard of in the health care industry. Both government regulation and standard practices within the heath care community have crippled price competition through price advertising regulations and disincentives. As a result, the government for all intents and purposes has created what resembles a de facto health care cartel. The implication being that hospitals are charging patients based on their demand curve as opposed to the marginal cost curve which exists in competitive equilibrium. Lack of price competition is not the only problem with health care costs, but it is at the core of it. There are other fringe problems which adversely affect the cost of health care. To highlight just a few, defensive medicine as defined by doctors preforming unnecessary tests to legally protect themselves, health care fraud, and the failure to implement effective prevention based programs are responsible for billions of dollars in unnecessary health care costs every year. Defensive medicine in particular is responsible for roughly three to four percent of health care costs in Massachusetts alone, or 1.4 billion dollars a year according to the "Investigation of Defensive Medicine in Massachusetts" study which took place between November 2007 and April 2008. Assuming these figures are both accurate and consistent across the country, tort reforms which protect doctors from frivolous lawsuits could save the country roughly 37.6 billion dollars every year. Even more significant, health care fraud accounts for between $125 billion and $175 billion annually (Thomson Reuters et al. 2009). Yet these fringe costs still only account for a relatively small fraction of dead weight loss in the health care system and are of secondary concern. Many are quick to blame insurance companies for driving up the cost of health care. Premiums are on the rise, but the fact remains that they are tied to the underlying cost of health care itself and cannot be lowered beyond the actuary fair price which is based upon the cost of health care and the percentage of individuals purchasing insurance. Contrary to popular belief, the average profit margin for the health insurance industry is not exceptionally high and was a mere 3.3 percent in 2009 ranking 86 for profit margin by industry (Perry 2009). Although allowing health insurance companies to compete across state lines would likely bring premiums closer actuary fair price levels, most health insurance markets are already in competitive equilibrium so the impact would likely be negligible. Past solutions involving a traditional single payer system provide the advantage of universal health care coverage, but are of inherently flawed economic design. Single payer insulates the consumer from the actual price of health care, eliminating price competition. To control costs the government will be forced cap health care payments, like in Canada, and then health care rationing is inevitable. In contrast, insurance companies currently act as a mechanism to curtail the cost of health care by using their influence to make hospitals compete for their customers among other methods. Although superior to a pure single payer system, this approach is still inadequate and fails to replicate true free market conditions. The current administration was recently pursuing for the recent health care bill what they like to call the "public option", and it is essentially the government’s idea of competing with the insurance industry to drive down the prices of premiums. As discussed earlier, most insurance markets already approximate competitive equilibrium. Thus, even if successful at marginally decreasing premiums, the public option will have absolutely no impact on the underlying cost of health care. This is impossible though considering the public option contains no restrictions for those with preexisting conditions and will subsequently create a high risk pool. In other words, public option premiums will be far above those of the private insurance market. Upon realizing this, government officials decided to modify the health care bill banning the entire insurance market from rejecting anyone with preexisting conditions. As one can imagine, the insurance companies were not too happy because they could no longer compete and premiums would skyrocket. Subsequently, the bill was adjusted to create a designated high risk pool subsidized by the government essentially bringing them back to square one. The only difference being that tax dollars will be used to make the premiums in the high risk pool affordable. Now consider this, “In 2002, the top 5 percent of the U.S. community population, ranked according to their level of expenditures, accounted for 49 percent of overall U.S. medical spending” (Conwell et al. 2002). To put it in perspective, “medical expenses for these people equaled or exceeded $11,487” and in contrast, the bottom 50 percent of the population by expenditures accounted for below $664 or 3 percent of national medical expenditures annually. Stated differently from the information above, with a stroke of a pen, tax payers will be paying roughly 1 trillion dollars annually to subsidize the health care costs of 5 percent of the population (the cost of health care annually is 2 trillion (Conwell et al. 2002). Divide by two to get one trillion which is the equivalent of 5 percent of the population), and that does not even include the cost of their own insurance. There are approximately 300 million people in the United States. If the health care subsidy was equally divided between every American they would pay $3,333 each (which is calculated by dividing 1 trillion dollars by 300 million people). Unfortunately, the bill will not be divided equally and the already suffering middle class will be the ones that take the biggest hit. Considering it is unlikely the government will get away with such a substantial tax increase, the government will be forced to ration care or sell bonds to cover the mounting debt. In essence, this approach to health care reform does not reduce the national debt. The fleecing of America aside, the fundamental flaw with the recent health care bill should have been obvious to our leaders. The bill was designed to insure the entire country, as a result once fully implemented it will increase the demand for health care by roughly 16 percent (which is calculated by dividing the roughly 38 million uninsured by 300 million and multiplying by 100). Increasing demand alone will increase the price of a commodity in the short term, but since the bill did not address the absence of price competition in the health care market, health care inflation will rise to unprecedented levels and patients will continue to be charged based upon their demand curves. When this minor oversight is taken into consideration, an estimated three years till a collapse of the health care market is likely from the time the bill fully takes effect. Often the answers to complex problems are deceptively simple, and heath care happens to fall into this category. In order to create price competition in the market, the establishment of a mandatory price registry system is of the essence. A mandatory price registry system would essentially be the holy grail of perfect price information in the market and create the conditions for accelerated price competition between health care providers bringing health care costs toward competitive equilibrium. When health care providers are working in competitive equilibrium the conditions are perfect for pushing the limits of innovation to cut costs. When times are good there is no reason to care, but when some pressure is added to cut costs a company must either become resourceful or get left behind. As every economist knows, supply is demand induced. Thus with increased demand from health care providers to cut costs, medical equipment suppliers will compete to reduce the cost of their machines as well as make them cheaper to operate. Over time, the cost of treatments will gradually decline like every other market with price competition. Health care costs will then eventually reach a price point where coverage is not a big issue because the cost of care is negligible. This same outcome does not happen in a single payer system because the government caps how much it will pay for health care and hospitals do not stand to gain more patients via price competition because the patients are insulated from the cost of health care. With incentives to increase efficiency, a separate program must be established to ensure quality of care is not compromised. Currently Centers for Medicare & Medicaid Services (CMS) maintains a complete electronic physician history archive. This valuable information goes for the most part unused and is far from being implemented to its full potential. A combination of algorithms and data mining software can be used to red flag suspicious, inefficient, as well as potentially dangerous activity. This approach also allows for both random and systematic audits. In addition, algorithms can also be utilized to objectively rank physicians resulting in incentives for physicians to provide optimal standards of care in line with the ideals of evidence based medicine. Establishment of a standardized universal EHR database The best approach would be to expand the preexisting EHR system used by the U.S. military called the Armed Forces Health Longitudinal Technology Application (AHLTA). AHLTA in its current form provides doctors with access to key information about patients and shows great promise for the future. Additionally, the patient should be able to easily access their health care records at any time via the Internet. Benefits of the above includes but are not limited to: Prevents duplication of services Easier to identify health care fraud, waste and abuse Patient access to medical records creates a form of oversight Universal access to Health Care information Standardization Full implementation of evidence based medicine Currently Centers for Medicare & Medicaid Services (CMS) maintains a complete electronic physician history archive. This valuable information goes for the most part unused and is far from being implemented to its full potential. A combination of algorithms and data mining software can be used to red flag suspicious, inefficient, as well as potentially dangerous activity. This approach also allows for both random and systematic audits. In addition, algorithms can also be utilized to objectively rank physicians resulting in incentives for doctors to compete to be the best. As a byproduct patients will enjoy the benefit of superior heath care. Also, given not only the vast amount of medical knowledge available, but the rapid advances in treatments it is imperative that we establish an interactive medical database for licensed physicians. The objective should be to create an easily accessible repository of medical information for doctors which continuously evolves to reflect the most cutting edge approaches and standards in medical treatment. Additionally, the platform should allow for social network functionality in order to keep the medical community connected. Benefits of the above includes but are not limited to: Decrease and deter unnecessary care Prevent and successfully manage fraud and abuse Rewarding genuinely good doctors Competition increases quality Allows doctors to easily access cutting edge information Creates an environment where doctors around the world can collaborate Prescription Drug Abuse An unfortunate reality we need to deal with is that of prescription drug abuse among adolescence. Be under no illusions, this is a problem of epidemic proportions. The first and still widely popular prescription medication to be abused is Adderall. Many college students use it for a studying advantage, and others crush Adderall into a powder and snort it for a cocaine high. There are other abused medications, but only a handful have made it onto my radar. In addition to Adderall, Xanax and most recently Klonopin (Clonazepam) have made a strong appearance. Xanax, referred to as "xanny bars" is in the benzodiazepine class and typically prescribed for treatment of panic attacks, general anxiety disorder, and in some cases mild forms of depression. In combination with other drugs, alcohol, or in high enough doses Xanax abuse results in not completely understood phenomenon of instant death. Klonopin (commonly referred to as "clown-o-pin" or "clown pills"), a nitrobenzodiazepine (a benzodiazepine derivative), acts as an anticonvulsant, muscle relaxant, and anxiolytic. It is prescribed for multiple purposes including but not limited to Epilepsy, Panic, and Anxiety disorders. Like any other drug it is used for its euphoric properties. Given the level of abuse I think it is imperative we rethink regulations on prescription drugs. I do concede though that at the end of the day the parents of these children are at fault for being oblivious or indifferent to what their children are doing and traditional regulation will likely make only a small impact. The D.A.R.E. program has shown to be ineffective too, but other programs which incorporate parent involvement have been show to make a statistically significant difference. Based upon my psychological background I will restructure programs such as D.A.R.E. to be in line with research findings and take steps to promote parent awareness. Water Supply There is a hidden danger in our drinking water that needs to be addressed. Trace amounts of pharmaceuticals which include but are by no means limited to anti-depressants, birth control pills, tranquilizers, painkillers, estrogen replacement therapies, antibiotics, etc. have managed to find their way into our drinking water as well as contaminating our entire ecosystem. Up to 90 percent of ingested pharmaceuticals end up being execrated through the digestive system. The treatment plants which process this waste were not designed to eliminate pharmaceuticals and thus a contaminated final product is released back into the waterways which are also the source of our drinking water. The implications of this are not fully understood, but preliminary findings have shown adverse effects on microbiological environments. As a result, I am in favor of modernizing both our waste processing plants and water treatment facilities to deal with this threat. Until then, the two residential filtration systems on the market which can eliminate all harmful compounds from you drinking water are Nano-filtration and reverse osmosis systems. Given what passes for clean water these days I highly suggest purchasing one especially for women who may be nursing or pregnant. Due to the feminizing effects of some contaminants, a reverse osmosis system is especially important for women pregnant with or nursing a male child. Another concern I have is the relationship between the Fluoride we add to our water and Brain tissue damage. I do not argue the positive effects Fluoride has on tooth decay, but rather question whether the benefits outweigh the costs. I have read a substantial amount of research for and against fluoridation and would like to create an ad hawk committee to determine whether or not we should rethink our water fluoridation policies. I personally drink reverse osmosis filtered water which eliminates fluoride from my water and suggest others do the same. Additional Problems to Address Medical Tort Reform -To decrease the cost of defensive medicine -To eliminate frivolous lawsuits Health Care Fraud -Both physician and externally based Prevention Based Medicine Education Environmental enhancement Tax Deductions for Doctor's who offer free care Doctor's Discount = Min - X Tax Deduction = X Technology -Medical GIS Overlays on Google Earth to virtualize trend data -Social network capabilities for physicians to share information The information which led to my conclusions are rooted in my study of health care economics, interviews with multiple physicians and health care consultants, as well as insurance professionals. For the purpose of space conservation, this document does not address how all the economic mechanisms utilized above work in detail. For questions or comments feel free to contact me at any time at Teammohyi@Gmail.com