In stating the goals for his health care plan President Obama said the main problem is the cost of health care in America, not the quality. However, all analysis of his plan says that it continues to do what we already do, only in larger measure. In other words, it does not attempt to reduce costs, but seeks more efficient ways to pay them, and for all people.

Perhaps the problem is that we are focused on the insurance angle of health care. President Obama seeks to deliver health care to all Americans by making health insurance mandatory. But extending insurance to all Americans does nothing to control costs, it simply means that more people will be able to pay the costs.

Could it be that we are looking at the problem from the wrong perspective? Maybe we should be looking more at controlling costs, than insuring that all Americans can pay that cost.

I would suggest that we should be looking at extending the Medicaid formula to all people who are not covered by health insurance. By and large Medicaid is delivered to some 50 million Americans by contracts with health management organizatons (HMOs). Since Medicaid is actually administered by the individual states, the exact formula varies from state to state. But essentially the state contracts an HMO to provide the Medicard recipient with health care.

The cost savings here is that HMOs in turn contract with medical services to deliver services at prices set by the HMO. Thus the HMO controls the price of health care. And as I have stated ad nauseum the cause of high health care costs in the USA are the service providers, mainly doctors, who believe they have carte blanche to raise their fees.

And what would be the cost of extending Medicaid to those who do not have insurance? Well Medicaid now costs about $400 billion a year with the Feds paying just over half and the states the rest. Since that takes care of 50 million people, we could cover the 30 million currently uninsured Americans (the 45 million figure is erroneous since it includes about 11 million illegal immigrants and 4 million who could get Medicaid coverage if they applied) would cost in the neighborhood of $240 billion. If that cost is split between the Feds and the states as now done it would cost the Feds about half that amount. I believe a health care plan that covers all Americans at a cost to the Federal Government of $125 billion would be easier to sell than the plan as it now stands.

Now you ask, why would not all Americans want to join this extended Medicaid? My answer is easy, because not all Americans want to be in an HMO. Under this plan no one is forced into a government run plan, one could still buy health insurance that pays his medical bills.

Another option would be to bring into being the famous public health insurance entity. However, instead of simply being another insurance plan to pay medical costs, it would operate as an HMO. This would allow people to choose between a low cost HMO operated by the government or a higher cost insurance plan.

Either plan outlined above goes beyond simply seeking ways to pay for all Americans to have health care, to injecting real competition into health care, that would serve to ultimately control costs, and bring them into line with what is paid in other developed countries with similar standards of health.