Jeff Bredthauer

Jeff Bredthauer

Neither Democrats nor Republicans are framing the health care debate effectively.

Democrats frequently describe health care as a right. Republicans would like us to believe that by allowing the purchase of insurance across state lines that a market equilibrium could be found to reduce health care prices. Both are wrong!

Nowhere in the Constitution is health care defined as a right. Similarly, since demand for health care is perfectly inelastic (i.e., regardless of price, when you’re really sick, life or death, most of us will pay anything to get better), and because of price distortions from 50-plus years of subsidization from Medicare and Medicaid, there is no way to arrive at an equilibrium price in a free-market construct. The notion that buying insurance across state lines will somehow bring prices into equilibrium is ridiculous; however, Republicans would like us to believe that this will somehow help lower health care prices.

Health care prices are so far removed from their fundamental intrinsic values that no insurance market place will ever bring prices into equilibrium. What we need to bear in mind is that the insurance companies want to maintain the status quo because it keeps the consumer from having any real negotiating power, which goes against their profit motive.

It’s essential to understand that we’re already paying for everyone else’s health care -- we’re just doing it the most expensive way possible.

Regardless of whether you have insurance or not, if you need medical care you cannot be turned away from a hospital; they must treat you. The problem is that when an indigent, or uninsured, person visits the hospital for treatment, they’re most likely to be admitted to the emergency room, which just happens to be the most expensive way of getting treatment in our health care system.

Additionally, when an indigent or uninsured person seeks treatment at a hospital, they typically need urgent care since they frequently have an ailment that’s been neglected because they don’t seek regular medical care due to the lack of insurance. So, the hospital inevitably treats some very sick people who otherwise might have had minor illnesses were they to have had access to preventative medicine.

After the hospital treats an individual, it tries to collect on the treatment, but, most often, those treated this way are unable to pay for their care. The bill either turns into a financially devastating event (i.e. bankruptcy) or the hospital runs the unpaid bill through a bad debt collection process.

When the hospital fails to collect on this unpaid debt, it uses that as license to raise prices on other health care services to offset the loss incurred. Ultimately, those costs are passed onto the rest of society either through increased health care prices or the bankruptcy of the uninsured person.

What’s deceptive about this practice of offsetting costs is that emergency departments have among the most expensive services performed by hospitals. Therefore, these enormously expensive services get passed on to the rest of us.

This problem, combined with profiteering by insurance companies and pharmaceutical companies -- both of which have very strong lobbying influences in Washington -- plus an overly litigious society, have created an untenable system in which we’re all paying for the most expensive health care in the world while only receiving average health care outcomes compared to other developed countries.

Here's the solution: Since we’re already paying for everyone’s healthcare, what we need is a coordinating entity that could represent all U.S. citizens, which could negotiate health care services to their consumer price index inflation adjusted prices (i.e., pre-Medicare and Medicaid).

This would go a long way toward reining in health care prices to more rational levels. Whether that coordinating entity would be a single payer or a public-private cooperative, we need the ability to negotiate prices collectively because at present the U.S. health care system is taking advantage of us.

The discussion should be about the fact that, since we’re already paying for everyone’s health care, let’s do it in a way that saves us all a lot of money and provides better outcomes.

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Jeff Bredthauer is an associate professor of finance at the University of Nebraska at Omaha. He lives in Lincoln. The views reflected in this piece are solely those of the author and not his employer.


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