This week’s California on Your Mind commentary presents a question and answer session with Scott W. Atlas, MD about health care policy. Dr. Atlas is uniquely positioned to explain what is wrong with our current health care policies and what should be done to reform the system. Dr. Atlas is the David and Joan Traitel Senior Fellow at the Hoover Institution at Stanford University.
Dr. Atlas is also one of the world’s leading radiologists and previously served as Chief of Neuroradiology at the Stanford University School of Medicine. His most recent book is Restoring Quality Health Care: A Six-Point Plan for Comprehensive Reform at Lower Cost (Hoover Press, 2016). He is also the editor of the leading textbook in the field, the bestselling Magnetic Resonance Imaging of the Brain and Spine, now in its 5th edition and officially translated from English into Mandarin, Spanish, and Portuguese.
- How has the Affordable Care Act impacted health care markets, particularly in California?
The Affordable Care Act (ACA), also known as Obamacare, has imposed substantial new regulations, costs, and taxes on the economy, and this has had a particularly large impact on California. Both individuals and families are experiencing enormous increases in insurance premiums. In its first four years, ACA insurance premiums for individuals doubled and for families increased by 140 percent. This occurred even though insurance deductibles increased by over 30 percent for individuals and by over 97 percent for families. Insurance options are also rapidly disappearing, which significantly diminishes individual choices of coverage and of doctors and hospitals. This year, in approximately half of all US counties, only one ACA exchange insurer offered coverage.
The ACA regulatory framework has reduced competition in medical care by generating substantial consolidation through mergers of doctor practices and of hospitals. Many studies have shown that this reduction in competition increases health care costs considerably.
Within California, the ACA has greatly increased reliance on government-provided health care. Fourteen million Californians are now enrolled in Medi-Cal (Medicaid), which would represent the country’s fifth largest state. This growing reliance is problematic for several reasons. One reason is that Medi-Cal is taking an increasing share of the budget, as it now accounts for nearly 38 percent of tax revenues. Moreover, health outcomes for Medicaid patients also tend to be worse than other patients, and finding a physician who will accept Medicaid patients is becoming increasingly difficult because payments for that care often do not even cover costs.
There is also substantial inefficiency and mismanagement within the Medi-Cal system. According to the Office of the Inspector General, Medi-Cal spent over $1 billion in a six-month period on ineligible and possibly ineligible beneficiaries when it expanded under Obamacare. Spending even more taxpayer money on government-administered health care would seem particularly ill-advised.
- What will happen if health care policy is not reformed in California?
In the absence of reform, California will be extremely vulnerable to a budget crisis and health care will become even more regulated, resulting in reduced availability and lower quality for all those unable to circumvent the system. This reflects two factors. One is that even more Californians will become Medi-Cal patients over time as Medi-Cal eligibility income levels rise. The second factor is that Medi-Cal reimbursements will ultimately have to increase, because a shrinking number of physicians are willing to take government-insured patients. Both of these factors will significantly increase the share of state tax revenues required to fund Medi-Cal. This share may approach 45–50 percent in the future, which clearly would be unsustainable. Moreover, increased reliance on Medi-Cal will result in even worse health care outcomes than we are seeing now, as well as rationing of care. This is because it is unlikely that the supply of physicians accepting Medi-Cal will keep up with the growth in demand by Medi-Cal patients.
- Newly elected Governor Gavin Newsom has supported a single-payer system. You have argued that a single-payer system produces poor outcomes. What are some of those deficient outcomes, and why do they happen?
Implementing a single-payer system in California would create an extremely expensive and very poorly performing heath care system. The very positive portrayal of single-payer health care that is presented by its advocates is simply wrong. Moreover, this positive portrayal is very dangerous because many are understandably attracted to its simple, but extremely misleading, premise that the government “guarantees” health care for all.
There is enormous evidence, however, to the contrary. Single-payer systems are deficient on almost all availability and quality dimensions. This research is drawn on a half-century of failure of single-payer health care systems in many countries to provide timely, quality medical care in an efficient manner. Here in the US, one needs to look no further than our own single-payer Veterans Affairs system to see how poorly this system performs, and how deadly the results can be.
The truth is that single-payer systems, including those in the UK, Canada, Sweden, and other European and Nordic countries, have used unconscionable wait lists—virtually never found in the US—for doctor appointments, diagnostic procedures, drugs, and surgery, specifically as a means of rationing care to hold down costs. For example, in England, there are now 4.2 million patients on the National Health Service’s waiting lists to receive care following an initial diagnosis. This includes 95,252 who have been waiting for more than six months. In single-payer systems, patients needing urgent cancer treatment, heart surgery, and brain surgery often wait several months after referral. And the consequence of delayed access to treatment in single-payer systems is significantly worse outcomes from virtually all serious diseases.
The dismal record of single-payer health care is clear; in fact, countries with the longest experience increasingly rely on privatization to solve their problems.
- How can market-based reforms create a much better health care system?
Reducing ACA regulations and allowing health care markets to operate more freely than they do now can significantly reduce health care costs without compromising quality.
The first critical policy step is to instill far stronger incentives for patients to save money when considering health care and to equip consumers with the tools to do so. This needs to be coupled with breaking down anti-competitive regulations, so providers would then necessarily compete on price and quality. Enhancing patients’ incentives to consider price will have a substantial impact, because most health care dollars are spent on outpatient care, which is amenable to price-conscious purchasing. Note that emergency care accounts for only about 6 percent of all health care spending. Competition would lower prices for everyone, improving access for those covered by both private and government insurance.
To put patients in a position to economize on health care, I recommend that high-deductible health plans with fewer mandates be widely permitted. These have premiums that are as much as four times lower than plans currently permitted in the ACA.
To help patients finance health care spending and empower them, we should adopt large, liberalized health savings accounts for everyone. Better than tax deductions, HSAs incentivize saving. When people have savings to protect in HSAs, the cost of care declines without harmful impact on health. The fundamental purpose of an HSA is not simply to provide a tax-sheltered benefit for individuals to cushion the blow of high health care expenses—HSAs reduce the price of care for everyone, including those who do not have HSAs.
I estimate that with these market-based reforms, Californians could privately save about $330 billion over the next ten years on health care without compromising quality.
Economic Policy Challenges Facing California's Next Governor provides more information about Dr. Atlas and his proposals for health care policy reform.