Mark Green Commentary: To Solve the American Healthcare Crisis We Must Correctly Incentivise Care

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by State Senator Dr. Mark Green (R-Clarksville)

 

There has a been a lot of discussion lately about the healthcare crisis in America. Unfortunately, largely missing in that discussion is a real diagnosis of the problem–and thus, also missing is a real solution. If the diagnosis is cardiac disease, and you treat the person for cancer, you’re probably doing more harm than good. Having been an emergency medicine physician, CEO of a large ER staffing company, and cancer survivor, I’ve been on both sides of the stethoscope and have seen the problems firsthand.

Most Americans want to help the poor and the elderly to have access to quality healthcare. No one argues that the current system is working. Yet, Obamacare and the prevailing attempts to fix it all fall prey to the same underlying principles, which led to our current healthcare crisis.

There are three major issues with the current healthcare system in America: The first is inherent in the basic human response to incentives. The second is the impact of government price fixing and its impact on health insurance. And, lastly, defensive medicine is adding costs to those who ultimately pay the price for everyone’s health program. I’ll address the first issue in today’s op-ed.

When the government or any third party entity – like an insurance company – picks up the cost of someone’s healthcare, the result is a decreased concern for costs. People become incentivized to spend. In many cases, they spend well beyond what they would be willing to pay themselves even if they had the resources. With no cost barrier, and as the supply demand curve of Economics 101 shows, demand exponentially increases as the price falls. At a price of zero, or free, demand is practically infinite.

At the same time, the supply curve falls, which leads to a significant shortage. Or, in other words, when there is no cost barrier, there is no end to the demand. With unlimited demand, there is no supply that can ever meet the demand. If you look at the current situation at the VA, this is an excellent example of demand exceeding supply at a given price.

The evidence of this is easy to find by looking at a healthcare system where 100% of people are covered for “free.” Across the pond, mortality rates for most diseases significantly exceed those here in the U.S. Two examples are: prostate cancer, where mortality is 19% in the U.S. and 56% in the U.K., and breast cancer, where mortality in the U.S. is 25% while in the U.K. it is 46%. As demand exceeds supply, rationing must occur. The result is a system where screening occurs later in life. Early detection is essential to cure in nearly everything. A shortage of caregivers at a lower price will lead to increased mortality and poor quality of care. For more acute problems, it means you wait six months for an MRI in Canada.

Current abuse of the emergency department and other visits to physicians for conditions that our grandparents would treat on their own is substantially taxing the system. Much of the increased costs in our current system are due to unnecessary visits. For those on “free” or low cost systems, which include even Cadillac healthcare plans, there is no incentive to save, and again, no supply that can ever meet the demand.

Consequently, simply throwing more taxpayer money at this broken system without addressing  incentives will not lead to decreased costs. In fact it will only exponentially add to costs and further bankrupt the country. In order to truly fix health care, we must address the root problems–the first of which, the need to address the issue of a system that incentivizes spending regardless of price, I discuss here, . In the coming weeks, I’ll address the next two underlying issues with the healthcare system in America as well as a solution that will lead to lower costs and higher quality care for all.

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State Senator Dr. Mark Green (R-Clarksville) is the Republican nominee for the 7th Congressional District seat in the U.S. House of Representatives.

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2 Thoughts to “Mark Green Commentary: To Solve the American Healthcare Crisis We Must Correctly Incentivise Care”

  1. […] The healthcare crisis in America is rightly one of the top issues on voters’ minds this election cycle. Unfortunately, missing from all the political rhetoric from most candidates is what is actually causing it. This is my second article in a three-part series where I seek to address the root cause of the crisis. You can read the first part here. […]

  2. Ralph

    Spot on – a review of the data compiled by the Center for Medicaid and Medicare Services supports that – https://www.cms.gov/research-statistics-data-and-systems/statistics-trends-and-reports/nationalhealthexpenddata/nhe-fact-sheet.html

    Since 1960, the USA increased the amount it spends on health care from 6% to almost 18% of our GDP, just about trebled The insurance industry is where to look – they’ve made money hand over fist and if you go one step further, you will discover that the insurance industry is one of the largest financial contributors to political campaigns – that’s no coincidence. roll the clock back to 1965 and you will see where the policies of the Johnson Administration was the catalyst.

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