Opinion: Prager University is Right on Why Healthcare is So Expensive

Within two days of Senate Majority Leader Mitch McConnell (R-KY) introducing the draft for the Better Care Reconciliation Act Prager University released a video titled “Why Is Healthcare So Expensive” which is a video I highly recommend for every Republican Senator to take two and a half minutes out of their day to watch (especially Mitch McConnell).

They begin by recognizing that although the Affordable Care Act had noble motives, it failed to reduce costs and even worse those costs have gone up by double digits every year since the Affordable Care Act was signed into law. They also make clear that the big government approach to solving health care will not work and that the best way to reduce costs is with the free market.

Although rather than spending the entire video merely criticizing Obamacare which they easily could. They do what is right rather than politically useful by providing solutions that would bring down healthcare costs. Information Station, the group that presented this video offer three solutions and all three are correct.

Solution one is to roll back the tax burden on insurance companies; they point out that Obamacare placed a $60 billion tax burden on insurance companies. What this additional tax burden has done is force insurance companies to raise their premiums to keep up with the money that they have to pay in taxes. Taxes always roll downhill so if the government raises taxes on companies they are indirectly raising taxes on consumers.

Solution two is to deregulate health plans. The ACA requires all insurance companies to cover an extensive list of what Barack Obama, Harry Reid, and Nancy Pelosi considered “essential health benefits” but what these regulations do is raise prices and criminalize people (usually young and healthy people) who want to buy low-cost catastrophic health insurance. These regulations raise prices because when they start requiring so many benefits be covered they cannot be paid for by smaller insurance companies and this forces them out of the market thus reducing competition which is what truly raises prices.

Besides, that it just doesn’t make very much sense to force this one size fits all approach on consumers. My grandma just turned 81, and I don’t see any reason why if she were to buy insurance she should have to buy a plan that includes birth control. The way to cut costs is by allowing more insurers into the market so they can compete for business but the ACA does the opposite by regulating insurers out of the marketplace.

Solution three is to encourage medical innovation. According to Information Station, the cost to bring a new drug to the market is $2.5 billion, and the ACA adds $22 billion dollars to the cost of bringing new drugs to the market by increasing taxes on innovator drug companies. This has a similar result as the $60 billion dollar tax increase did to insurance businesses. Which first forced a price increase but to an even greater extent than with insurance companies innovation is suppressed due to a dis-incentivization to bring new products to the marketplace. If these innovative drug companies were encouraged rather than punished for all the great work they do. Then that would lead to many more breakthroughs and lower costs for consumers.

Lastly, Prager University ends with the same point that it began with:

Healthcare costs are skyrocketing and the best way to rein in these costs is with the free market.