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Health care reform and $48 milk

By Jay MacDonald ·
Tuesday, May 21, 2013
Posted: 6 am ET

In a world that increasingly moves at digital speed, we humans are painfully slow and selective processors of information.

We'll get through a couple of paragraphs of, say, a Paul Krugman op-ed in The New York Times about fiscal policy. But then we see something shiny in the marginalia about, oh, Jennifer Lawrence or Bradley Cooper, and faster than we can process the meaning of "Keynesian," we're off to tangent city.

Which explains, in part, why surveys indicate that many of us don't "get" health care reform.

President Barack Obama's historic Affordable Care Act of 2010 is an ambitious, tightly woven road map intended to eventually lead most Americans to better care while controlling costs, all without scrapping what passes for a free market in the health care world.

While we've been singularly focused on the constitutionality of the "act" portion of the Affordable Care Act these past three years -- a matter settled last summer by the U.S. Supreme Court -- I spotted a shiny bit of insight recently that might refocus our collective attention on that underappreciated "affordable" part.

A report by a pair of nonprofits, the Health Care Incentives Improvement Institute and the Catalyst for Payment Reform (love the acronym, CPR), graded each state based on how its laws shield medical billing from public view and thus make it difficult to comparison shop. (Lest you think this a guerilla attack, the nation's largest employers, including Boeing, General Electric and Wal-Mart, are all part of the CPR collective.)

How did the states fare? The report gave 29 of them an F and seven a D, meaning that 36 out of 50 states in our union think you can't handle the truth when it comes to the true cost of your own care. Only those annoying overachievers Massachusetts and New Hampshire earned an A.

So how do these obscure laws translate to the price of milk? Funny you should ask, because there's a report for that, too.

In 2011, the nonprofit Institute of Medicine issued "The Healthcare Imperative: Lowering Costs and Improving Outcomes." It found that since 1999, health care costs had increased by 131 percent while everyday salaries had risen by an average of 35 percent.

If groceries had gone up as fast as health care costs since 1945, the report says, you'd be paying around $48 for a gallon of milk, $55 for a dozen eggs and $134 for a dozen oranges today.

Here's the capper from the institute's report: Based on the $2.5 trillion the nation spent on health care in 2009 -- which at 17 percent of gross domestic product far exceeds that of any other country -- we blew nearly a quarter of the money ($765 billion) as follows: $210 billion for unnecessary services, $190 billion for excessive administrative costs, $130 billion for inefficiently delivered services, $105 billion on overbilling, $75 billion on fraud and $55 billion on missed prevention opportunities.

What's the Affordable Care Act really after? Just think of your shopping list.

Follow me on Twitter: @omnisaurus

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Jay MacDonald is a Bankrate contributing editor and co-author of "Future Millionaires' Guidebook," an e-book by Bankrate editors and reporters.

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May 22, 2013 at 1:17 pm

I'm sorry, but the ACA does very little to bend the cost curve related to health care. Through a record size bureaucracy, it is basically moving the third party payor from private insurers to the government, basically shifting the chairs on a deck.

The article mentioned over $200 billion wasted on unnecessary services. Much of that is due to defensive medicine, yet the ACA does nothing to reform medical malpractice torts.

Before the law, there were an estimated 49 million uninsured. By 2019, the number will be 29 million without health insurance. Is all this trouble really worth it? Wouldn't a simple voucher system be cheaper, more effective and efficient?