The Challenges of American Health Care II. Specific Problems to Overcome


My last post, “The Challenges of American Health Care,” describes the huge demographic and cost pressures facing American healthcare  and lays out a comprehensive reform plan by the Hoover Institution’s Scott Atlas to address them.  Today I will give more details about these pressures on both private care as well as care subsidized by the Affordable Care Act.
Capture6For example:

  • The cost of providing health care to an average American family surpassed $25,000 for the first time in 2016, $1,155 higher than last year, and triple the cost in 2001.
  • A significant cost driver is the rapid growth in what health plans and insured people are paying for prescription drugs, now comprising $4,270 annually, or 17% of the total.
  • 80% of healthcare costs come from just 20% of the population.
  • The insurance company United Healthcare announced that it is withdrawing from most ACA exchanges because it lost $475 million on plans sold in 2015 and expects to lose another $650 million in 2016.
  • Overall $2.5 billion was lost by insurance companies on the exchanges in 2014. The government’s “risk corridors” program is insufficiently funded to reimburse these losses to the insurance companies involved.
  • The fundamental problem is politicization of the marketplace. Insurers were pressured to set premiums low initially to ensure that the rollout was not a flop. Now premiums are increasing rapidly to cover the initial losses. Households with income over 250% of poverty already find the plans offered on the ACA exchanges unattractive.

Conclusion: The overall rapid increases in the cost of healthcare, public and private, is unsustainable for individuals, families, employers and government. Something has to give.  We need a total reform of healthcare spending in the U.S.  Many good suggestions have been made for how to do this.  Now is the time to act!

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The Challenges of American Health Care


America is facing great challenges in healthcare. Our national health expenditure is $3.1 trillion per year, 17.4% of GDP, and is projected to reach 19.6% of GDP by 2024.   Some 34% of Americans are obese (BMI>30), far more than in any other country. Their medical expenses will soar in the years ahead.  Medicaid now covers over 70 million low-income people at a cost of $500 billion per year.  Medicare spends $615 billion per year on the 42 million Americans over age 65.
CaptureThe Hoover Institution’s Scott Atlas has just published “Restoring Quality Health Care: a six-point plan for comprehensive reform at lower cost.”  He claims that his plan will save $2.75 trillion over a decade for private healthcare and an additional $1.5 trillion per decade for federal healthcare programs such as Medicare, Medicaid and the Affordable Care Act.
The elements of his plan are to:

  • Expand Affordable Private Insurance by allowing all insurers to offer high deductible, limited-mandate catastrophic coverage (LMCC) to all citizens, which would be owned by individuals and portable.
  • Establish and Liberalize Universal Health Savings Accounts (HSA) for all citizens, individually owned and portable.
  • Instill Appropriate Incentives with Rational Tax Treatment of Health Spending equal for all, whether individual, self-employed or employer-based, requiring LMCCs for all.
  • Modernize Medicare for the 21st Century by establishing a private insurance option with defined-benefit premium support based on regional benchmarks featuring cash rebates to individual HSAs if premium is less than benchmark, otherwise additional cost paid by enrollee.
  • Overhaul Medicaid and Eliminate the Two-Tiered System for Poor Americans by permitting all insurers to offer LMCC plans to entire state population as well as setting up government seeded HSAs for all Medicaid enrollees.
  • Strategically Enhance the Supply of Medical Care While Ensuring Innovation by stimulating private retail clinics and loosening practice restraints on nurse practitioners and physician assistants.


A plan along these lines would go a long way towards both improving the quality and lowering the costs of American healthcare.

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