Why We Hate the Healthcare System: Obamacare, Lobbyists, and Fraud - Michael Cannon

Quick Overview

The American healthcare system suffers from ubiquitous fraud because it is fundamentally structured around moral hazard, where consumers control only 16% of spending (84% is controlled by the government), leading to a system where politicians and industry lobbyists actively resist anti-fraud measures that impose inconvenience on patients or providers.

Key Points: Government controls 84% of US health spending, placing it just five percentage points away from Cuba's 89% control, which fosters moral hazard and rampant fraud. Fraud in government health programs, such as Medicare and Medicaid, is estimated to be at least 10% of spending, with some experts suggesting it could be much higher, as illustrated by Somali childcare scams and Armenian crime syndicates running Medicare fraud. The primary reason fraud is rampant is that "nobody spends other people's money as carefully as they spend their own," and anti-fraud measures create inconvenience for providers and patients who see none of the savings. State politicians engage in legal fraud to secure more federal Medicaid money by running scams that make it appear the state sacrifices more than it actually does, accounting for an estimated $160 billion per year in the Medicaid program. The political economy reason Doge could not easily address this waste is that every dollar of fraudulent or wasteful spending is revenue for somebody who employs lobbyists; the health sector spends more lobbying Congress than any other sector. Obamacare exchanges exhibit massive fraud, with the Government Accountability Office finding that 96% of invented fake applications were accepted, allowing fraudsters to steal subsidies because insurance companies and pro-subsidy advocates resist serious fraud controls. The Oregon Medicaid study revealed that increased utilization of healthcare services due to free access yielded no discernible difference in objective physical health outcomes like blood pressure or cholesterol, suggesting health insurance does not equal health.