Thursday, 19 October 2017

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The Healthcare Question Revisited

Posted by
March 26, 2010
in Blog

A few weeks ago, I wrote a piece on the effect the new healthcare bill will have on your money, namely, the inflation that will result when the new system begins to run over the budget. This week, I’d like to address a few of the reasons why I believe that the expenses will be larger than so far admitted.

In the state of Washington, private companies like Walgreens have already begun to phase out Medicaid patients. According to the Seattle Times, “Walgreens said its decision to not take new Medicaid patients stemmed from a ‘continued reduction in reimbursement’ under the state’s Medicaid program, which reimburses it at less than the break-even point for 95 percent of brand-name medications dispensed to Medicaid patents.” State budgets are already tight, and others, like Washington, will be looking for ways to lower their own budgets. Paying a smaller percentage for Medicaid reimbursements is one option. However, the new healthcare bill has increased the Medicaid coverage to millions of Americans. A system that is already overburdened will have to cope with the addition of these new patients. When the states cut back their percentage for reimbursements, fewer private pharmacies will accept new Medicaid patients. Once this begins to occur, there is a choice to either leave these patients without the reimbursements or have the federal government step in to subsidize the program further (spending more money).

Yet another cost concern will be the loss and/or stagnation in the area of physician owned hospitals. Under the new legislation, these hospitals will find it increasingly, and in many cases impossible, to enter the field or expand if they are already in place (see here and here). The overall cost of this situation will be fewer hospitals to accept the new increase in patients that the healthcare bill will push into the market. Once again, there will be a choice between leaving these patients in long lines for medical care or have the federal government step in to further subsidize the construction and staffing of new hospitals.

In either of these two situations, the incentives will be for the government to further subsidize the healthcare industry. The incentives for private industries to take the burden off of the government budget have been taken away, and if Congress and the current President are serious about providing universal healthcare, the federal government will be forced to step in and pay the additional costs. As I stated in my earlier article (see link above), once these costs are introduced into a world of uncertainty where other nations refuse or are unable to loan money to the U.S., inflation will be the method of payment.

Tom Duncan
Sound Money Fellow
Atlas Economic Research Foundation