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Obama is gone, but his fiscal waste is still befouling American health care

For real health care waste, it is hard to beat the Obama administration. Crony capitalists, academic institutions, select nonprofits, and state bureaucracies are raking in enormous sums. Ordinary Americans are paying the price. If government officials cannot find the courage to return control of health care to patients and their doctors, American health care quality will continue to erode.

The Obama administration’s health gurus excoriated U.S. health care for overtreatment, inefficient care processes, administrative complexity, and an inability to coordinate care. Donald Berwick wrote that these failures were responsible for more than 20 percent of total health care costs. Ezekiel Emmanuel bragged that ObamaCare put into place “virtually every cost-control reform proposed by physicians, economists, and health policy experts to consistently improve outcomes, boost quality, and reduce costs as health care evolves.”

{mosads}U.S. academics have lobbied for taking spending power away from patients and their physicians ever since the 1932 Committee on the Costs of Medical Care recommended that medicine be reduced to groups of patients buying care from groups of providers organized around hospitals. As Emmanuel put it, “sustained cost control” requires more “coordinated care.” It requires medical practice restructuring, payments controls, and data systems to track behavior so that planners can ensure that physicians and patients choose “the right tests and treatments for a particular situation.”


The Obama administration spent vast sums on the coordination project. In 2009, it authorized $30 billion in financial incentives to encourage the adoption of electronic health records in everything from large teaching hospitals to solo practices. Due to onerous administrative requirements, two-fifths of the providers who participated in the CMS Electronic Health Records Incentive Program were penalized in 2016 for failing to hit meaningful use targets. The administrative requirements were such a nightmare Congress created a mass escape hatch in 2017.

The problem is that while mandated electronic health records, clinical decision support systems, and computerized order entry may have helped reduce mortality for patients with complex conditions who require extensive cross-specialty care coordination, they have not been shown to produce significant benefit for the median patient. They are expensive to operate and expensive to maintain. Providers who needed them were beginning to use them without government subsidies.

Contrary to popular belief, mountains of historical data from medical records have limited usefulness for guiding clinical decisions because medical innovation makes many past treatment guidelines obsolete in surprisingly short order. Using data on all inpatient hospitalizations at Stanford University Hospital, Chen et al. estimated that data older than four months was not particularly useful for describing current inpatient clinical decisions.

Electronic data security has turned out to be another lie. A 2017 Accenture survey estimated that 26 percent of Americans had their personal medical data stolen from electronic medical records systems. Half of those people ended up as victims of medical identity theft. On average, victims suffered a $2,500 loss in each incident. Huge numbers of people are affected. In 2015, more than 100 million patient records were stolen.

When the Obama administration restructured private individual insurance, it created bloated policies that people would not voluntarily purchase. Not counting the money spent on state and federal exchanges, the federal government spent $341 billion from 2014 through 2016 on subsidizing individual coverage so that people would buy it.

All this spending managed to increase private coverage by just 1.7 million people, slightly less than half of the natural increase in the civilian labor force. That’s $200,000 per person. The feds could have saved money by closing the exchanges and giving people who qualified for subsidies a check for $50,000 for each of the three years. Those people could then have paid $20,000 for their own unsubsidized policy and used the rest to either cover their out-of-pocket costs or buy a nice used car.

More billions could be saved by conserving Medicaid dollars for people who are sick. Medicaid managed care providers receive payments for every person enrolled even if he never uses a single service. From 2014 to 2016, the CMS Office of the Actuary estimated the federal government spent $148.2 billion on the mostly healthy expansion population, most of whom were enrolled in managed care. In 2016, there were 423,735 people on waiting lists for certain Medicaid services to the disabled. Rather than finding funds to pay for services for those people, the Obama administration chose to enroll the healthy.

Over $4 billion has been spent paying researchers to test payment and service models that the government considers innovative. Results have been unimpressive. Relatively small reductions in annual patient costs have been offset by high administrative costs in enhanced primary care programs. When bonuses are included, Accountable Care Organizations have increased Medicare spending.

Then there are the ObamaCare quality measures. In many cases they ignored data weaknesses and unintended consequences. Penalizing hospital readmissions may also penalize a hospital for comorbidities, patient complexity, and socioeconomic status, all factors beyond its control. Some observers believe the readmission penalty has given hospitals an incentive to provide better care. Others find that it has been associated with increases in risk-adjusted mortality rates.

Measures to avoid penalties often increase unmeasured costs. Hospitals are reportedly using observation status to avoid readmitting Medicare and Tricare patients, saddling patients with higher out-of-pocket charges. Even reports of reductions in Central Line-Associated bloodstream infections may not be accurate. It is hard to differentiate between a bloodstream infection and one caused by a central line, creating opportunities for underreporting. A 2009 study in Oregon concluded that underreporting was indeed a problem.

Wasting money on unnecessary care coordination shifts resources and institutional focus away from caring for individual patients. Ordinary Americans are noticing. A Gallup opinion survey found that people believe health care quality is falling. Even if elected officials cannot agree on fixing the insurance market, perhaps they could foster some improvement by continuing their efforts to eliminate the wasteful health-care spending that characterized the Obama administration.

Linda Gorman is director of the Health Care Policy Center at the Independence Institute (@i2idotorg), a free market think tank in Denver.

Tags Barack Obama Healthcare Healthcare reform in the United States Linda Gorman Medicaid Medicare ObamaCare

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