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The Stock Reveals Obamacare's Real Winners and Losers

Fat chance patients will have better health care.

2:30 PM, Mar 24, 2010 • By STANLEY GOLDFARB
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To be sure, a cheaper insurance policy, if that actually occurs, would not make Tenet Healthcare Corporation’s stock rise. Rather, this reflects a clear understanding by sophisticated investors that there will be more business for doctors and hospitals. What will happen here is this: Since more health care is funded, more health care is desired, and this will result in less health care being available per patient. This will drive up prices and utilization.

The new, “independent” medical commission

This commission will determine care and decide what services are “in” and what are “out.” Congress supposedly can only cancel these recommendations if it finds a substitute mechanism to fund the activities it restores. Now, one might believe this system would work, but our experience with Congress gives little confidence that it will be able make hard choices. Moreover, just envision the first bone marrow transplant patient that this commission consigns to “no therapy.” Insurance companies tried this in the 90s and were vilified. Just imagine that particular congressional hearing

In addition to Ezra Klein’s five step plan, there are other proposals to save costs. Medicare Advantage will go away with our new health care legislation, but that accounts for $200 billion of the $500 billion to be eliminated from Medicare. Most of the rest is to come from increased efficiencies and productivity.  Increased productivity means less is spent per patient. This means we deliver less care per patient. There are those who say less care is better care. It is true that there are treatments that do not prove to be effective. Unfortunately, we cannot identify what treatment does not work well until it is introduced, utilized, and, finally, assessed. We might eliminate some treatments with this approach but new treatments are then proposed and need to go through the same cycle before we know their true benefit. This cycle of assessment of benefit is a rational approach to care, but it is not very likely to reduce costs unless we also stifle innovation as we eliminate older approaches to care.

Some assume that we will now have a European style system and reduce the cost of care just as they do. Sounds great until one learns that the rate of escalation of health care costs in the U.S. is about in the mid-range of cost escalation rates in the developed nations. Spain, for example, has more rapidly increasing health care spending than the U.S. Our care is more expensive per patient than any other nation, but it is not growing faster.

What is next, then? A reasonable health insurance plan is about $5,000 per year. If 30 million people get such a plan, that will cost $150 billion per year and 1.5 trillion per decade. This may be paid for with taxes, fees, Medicare cuts and student loan savings. But bend the cost curve? Fat chance. 

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