Avik Roy’s resume’ as a healthcare thinker is unquestioned. His recent focus has been working with nationally known politicians and writing books with step-by-step instructions on how to unwind the economy killer known as Obamacare. Jason Hartman picks Roy’s brain on episode #65 of The Longevity & Biohacking Show with regard to how we can create free market healthcare from the expensive mess we currently don’t enjoy.

Avik’s Background

Avik Roy is a senior fellow at the Manhattan Institute. He is also the opinion editor at Forbes, and has advised Florida Sen. Marco Rubio on policy. In 2015, Roy was a senior advisor to former Texas governor Rick Perry; in 2012, he served as a health care policy advisor to Mitt Romney. He is the founder of Roy Healthcare Research, an investment research firm, and previously was an analyst and portfolio manager at Bain Capital and J.P. Morgan. Roy is the principal author of The Apothecary (the Forbes blog on health care policy and entitlement reform), as well as author of “Transcending Obamacare: A Patient-Centered Plan for Near-Universal Coverage and Permanent Fiscal Solvency” (2014) and “How Medicaid Fails the Poor” (2013). His research interests include the Affordable Care Act (better known as Obamacare), universal coverage, entitlement reform, international health systems, veterans’ health care, and FDA policy.

Obamacare: The Big Picture

Prior to Obamacare, healthcare was already the government’s largest expense. The primary effect of the new program has been to take a bad problem and make it worse. What many Americans’ haven’t internalized yet is just how bad. If you have concerns about our national budget deficits and rising debt, you have to care about the healthcare system and how it can be administered more efficiently. If free market healthcare is the goal, as Roy says it should be, we’re at the one yard line on the wrong end of the field.

Is Free Market Healthcare the Solution?

There are some pretty impressive (depressing) statistics associated with Obamacare. The first is that the federal government presently spends $1.4 trillion in its attempt to provide a working healthcare system. According to Roy, if it just took that money and restructured how it was spent, we’d be much  better off. This is the central point of his “Transcending Obamacare…” book: spend less money and enjoy a better product.

Insurers and the State Line Problem

Under our current system, insurers are not allowed to market their services outside their state. As is obvious to even the most dense among us, this rule restricts competition and results in higher prices. Allowing insurers to compete without regard to geographic restriction would result in an immediate 9% cost saving. Significant as that number is, it’s small potatoes compared to the real problem hampering free market healthcare, namely, regional hospital monopolies.

American Healthcare is Monopoly Driven

Have you noticed that one brand name seems to operate all the hospitals and physician facilities in your area? Roy calls these regional hospital monopolies and they are prevalent in many areas of the country. These systems dictate prices and are as far from free market healthcare as you can get. The best way to unlock competition and drive down healthcare costs would be to bust up the monopolies. It’s a time-honored American tradition.

Mr. Roy is of the firm belief that doctors, hospitals, and pharmaceutical companies – like most other industries – should be forced to compete for the consumer dollar. How large of a problem is it? A recent study divided up areas where regional monopolies existed against areas where they did not. Costs for the same services were 44% higher in non-competitive areas. That’s a big deal! Judging from this example, an absence of free market healthcare results in an almost 50% price hike.

It’s the same problem that was created when the federal government took over the student loan market. Colleges and Universities knew the new guarantors would pay whatever they (colleges) said the tuition rate was. Is it a surprise to anyone that the cost of attaining a college degree has skyrocketed ever since?

Why Medicaid Fails the Poor

The Medicaid program spends $450 billion annually in an attempt to pay for healthcare for the poor and indigent. From many angles the program, along with Medicare (a 1960’s legislative relic signed into existence by President Lyndon Johnson), has been a miserable failure.

The original plan was to have Medicaid jointly administered at the federal and state level. The end result is that each tries to offload costs on the other, resulting in a grossly mismanaged program with no one in charge.

Here’s how Medicaid gets screwed up. As states see costs rising, they can either make cuts in other budget areas (unpopular) or tell doctors and hospitals they must accept a percentage of cost for a Medicaid patient as full payment. Right now most states pay .58 cents on the dollar, but some – we’re looking at you, California – have gone as low as .29 cents. What’s the incentive for a doctor or hospital to accept Medicaid patients? None! That’s the problem. More and more drop out, making it hard for poor people to even find a place to receive medical care.

The Bottom Line

If we had a free market healthcare system, as Avik Roy advocates, entrepreneurs would insert themselves into the mix and figure out how to deliver the best care at the lowest prices. If you’re interested in reading the down and dirty details about Roy’s plan to fix the healthcare system by transcending Obamacare, you can download the book from the Manhattan Institute website (www.Manhattan-Institute.org). Follow Avik Roy at www.Forbes.com/opinion(Image: Flickr | charlesfettinger)

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The Longevity Show Team

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