In healthcare, failure is rewarded

In healthcare, failure is rewarded
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In the world of commerce, the market rewards success with profit and punishes mismanagement with bankruptcy. In health care, mismanagement is rewarded. Witness Medicare, which provides medical care for 51.2 million Americans aged 65 years and older, as well as 8.8 million disabled.

The latest report about the Medicare Trust indicates that the “depletion date” of Medicare hospital insurance is 2026. Simply put, Part A of Medicare program will be insolvent within seven years and will not have the funds to pay for senior hospital care.

Whether you blame the influx of baby boomers (long known in advance), the explosion of expensive technologies such as life-saving cancer treatments, or inaction by Congress, the Trust has been mismanaged.

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Working Americans contributed into the Medicare Trust for 40 years or more. They expected Washington to make good on its promise of necessary medical care in their golden years. Due to mismanagement, that promise will inevitably be broken.

But what do Democrats want to do with soon-to-be-insolvent Medicare? They want to reward its mismanagement by expanding Medicare to all Americans. Rep. Pramila JayapalPramila JayapalTrump: Fox News 'panders' to Democrats by having on liberal guests Overnight Health Care — Presented by Johnson & Johnson – House progressives may try to block vote on Pelosi drug bill | McConnell, Grassley at odds over Trump-backed drug pricing bill | Lawmakers close to deal on surprise medical bills Hillicon Valley: FTC rules Cambridge Analytica engaged in 'deceptive practices' | NATO researchers warn social media failing to remove fake accounts | Sanders calls for breaking up Comcast, Verizon MORE (D-Wash.) introduced H.R. 1384 that mimics what Senator Bernie SandersBernie SandersHow can top Democrats run the economy with no business skill? Biden rallies with John Kerry in early primary states Buttigieg campaign says 2000 people attended Iowa rally MORE has long advocated, Medicare-for-All. They want to take a failing program and expand it to include everyone. That way, all Americans can all be equal — no one will get care.

Medicare isn’t the only example of rewarding failure and mismanagement in Washington.

Medicaid was created in 1965 to protect medically vulnerable Americans — the aged, disabled, blind and severely impoverished. Medicaid has failed both medically and fiscally.

Medical outcomes in Medicaid enrollees are either no better than privately insured and sometimes worse. For instance, cancer victims, surgical patients, and those infected with Hepatitis C that “have public insurance have independently higher mortality” than privately insured.

Medicaid finances are also problematic for two reasons: the crowd-out effect and reducing access to care. After New Mexico expanded its Medicaid program, the costs of compliance of federal mandates was greater than the financial support provided by Washington. The resulting budget shortfall, $417 million, forced the state to reduce already low reimbursement schedules even further. This reduced the pool of physicians willing to care for Medicaid patients.

Because Medicaid spending is federally mandated, it tends to crowd out spending on other state priorities. Additionally, federal support for Medicaid insurance can crowd private insurance out of the market.

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Washington handled Medicaid mismanagement the same way as Medicare. Rather than restructuring or canceling the program, failure was rewarded again with expansion. The ACA expanded Medicaid and sought to entice states to do so by offering financial support. Never mind that the cost of ACA insurance mandates was greater than the amount of federal support (as shown above). But even with the predictable shortage of physicians willing to care for Medicaid enrollees (as documented in New Mexico and Texas), some states that did not initially expand Medicaid are now seeking to do so.

Politicians both in Washington and some state capitals seem to ignore Santana’s warning, which is often paraphrased as, “those who do not study history are doomed to repeat it.” They behave insanely — defined by Albert Einstein — as doing the same thing over and over and expecting a different result. They repeatedly reward failure in health care, expect success and promise us that all will be well. 

The sane response is to identify the root cause for failure and address it. Medicare is failing financially because it lacks free market forces. The solution is to infuse these forces: At retirement, the program should begin returning to its enrollees the money they contributed over the years, and let them purchase their own insurance and care. That’s how Social Security works; it sends a check — it doesn’t purchase recipients’ food for them.

The largest segment of the Medicaid population, more than 70 percent of enrollees in Texas, are the children of impoverished families. The best solution is to improve the economic condition of these families with gainful employment so they can be independent of government medical welfare, Medicaid. When families make more money, that is good not only for them, but also for government, because reducing the Medicaid caseload reduces mandatory spending on Medicaid.

Rather than rewarding (or even punishing) failure, we should identify the root cause and treat that. The root cause is Washington with its one-size-fits-all approach to health care. The best solution is to remove Washington from health care. Let the states decide what health care is best for their residents — they are more in touch with both local needs and local resources than Washington. State-specific healthcare replacing federal one-size-fits-all is the cure for the sick U.S. health care system.

Dr. Deane Waldman, MD, MBA, is a Distinguished Senior Fellow in Healthcare Policy, and David Balat is Director of Right on Healthcare, both at Texas Public Policy Foundation.