The first season of DOGE has been entertaining and transformative. The joy of watching the cronies and the parasites howl has been long overdue for budget hawks like me. But DOGE is just scratching the surface of government waste.
Limiting the size of the federal workforce is child’s play in comparison to taking on the welfare state. Figuring out how to fix the Social Security Ponzi scheme. Fixing the sprawling welfare programs that sign up a lot of people while ignoring those most in need because they are hardest to sign up. Or fixing a healthcare system that drives up the cost while ignoring cost, access, and quality. The spending in these programs threatens to overwhelm all government in the (rapidly approaching) years ahead if nothing is done. This is what DOGE can do to truly shape the government going forward.
Some reforms are easier than others when addressing the welfare state, and it would make sense if they started with some of the low-hanging fruit. One of the easiest fixes is to the current hospital payment structure.
In every market, except healthcare, bigger equals more affordable. This is because as companies increase in size, so does their efficiency. Large hospitals should be able to buy everything cheaper because they buy more of it – all the way down to the Band-Aids, and all the way up to their insurance. It is simple math that we see every day as we drive past Walmart and Target. The greater the volume, the lower the price. That is one of the reasons that businesses vertically integrate, and this type of cost refinement that is one of the first questions asked on Shark Tank.
From a hospital’s point of view, the greed makes sense – why not claim that something is expensive if the government is paying? However, the government’s days of blank checks need to end. If the government pays independent doctors an amount that they think is sufficient because they still take these patients, then large hospitals should be perfectly fine with that same amount of money. In fact, if hospitals were just paid the same amount as independent physicians, they would profit much more.
The policy solution is called Site-Neutral payments. If a patient is getting an injection at a hospital or an independent physician’s office, then taxpayers should pay the same for the treatment at both locations. This simple, rational, and fair idea would save taxpayers an estimated $150 billion over 10 years. That savings alone would get DOGE a significant percentage toward their goal of $1 trillion in savings and wouldn’t affect access or quality in healthcare.
Additionally, this would change the economics of healthcare, helping stop the further erosion of competition. Currently, because of government overpayments, hospitals are buying up independent physician practices around the country. This means that the $150 billion in savings is just the tip of the iceberg on the effect to the system. Correcting this change gives independent physicians a reason to stay solo. It gives them a reason both to innovate and to compete on price – the way Walmart and Target do. This additional competition increases access, increases quality, and hopefully lowers cost even further.
Fortunately, for DOGE this issue has already been discussed and debated on Capitol Hill and the support for reform is bipartisan. Last Congress the Lower Cost More Transparency (LCMT) bill passed out of the House with a bipartisan majority. The LCMT narrowly created Site Neutral payments for drug administration, but even that was forecast to save $50 billion. And the intelligence on the ground was that there was likely enough support to pass something much broader getting at the full $150 billion.
It is almost certain that DOGE will also look at other issues in healthcare policy like Medicare and Medicare Advantage waste, fraud, and abuse and pharmacy benefit managers and their manipulation of drug prices. These issues will also have bipartisan support, but starting an issue that already momentum and offers such large saving seems like one of the easiest decisions that DOGE could make.
This next iteration of DOGE is going to be the test. Can they really reform government, or are their reforms just going to be superficial? Real reformation will come from fixing the welfare state. It also doesn’t mean that the welfare state needs to go away. It merely means that the money should go where it is intended, to help the people that it is intended to help, and most importantly at an amount that actually makes economic and market sense.
Charles Sauer is president of the Market Institute and author of “Profit Motive: What Drives the Things We Do.”
No comments:
Post a Comment
Note: Only a member of this blog may post a comment.