Democrat Health Care ‘Reform’ is a Fool’s Paradise
The free market in health care was borderline comatose 40 years ago when Richard Nixon passed his Medicare reform package and it’s been on life support ever since.
In reality, health care is one of the most highly controlled sectors of the economy and a prominent example of how poorly conceived government policies can neutralize the forces of free market competition.
Here are just four ways in which government policies have subverted our health care system:
>> 1,900+ government imposed benefit and provider mandates prevent health insurance companies from selling the types of policies most people would prefer to buy.
>> Certificate of Need regulations allow hospitals to block competitors from building the specialty hospitals that could radically improve health care delivery.
>> Shortsighted reimbursement formulas reward doctors for the treatments they provide, but not for the savings they could produce by re-bundling services to deliver integrated patient care.
>> The perverse incentives created by our tax code have created a consumer who – armed with an employer-sponsored health care policy as a major part of his compensation package – is insulated from price considerations to the point that he has no reason to ask the one question guaranteed to halt health care inflation: “How much does it cost?”
If there are problems with our health care system, and there are, they exist largely because each of the key players identified above is responding to the counterproductive rules and incentives currently in place.
"The Pelosi-Reid-Obama plan to fix health care is a fool’s paradise precisely because it does nothing to restore the conditions that encourage rational decision making."
If health insurance companies don’t offer competitively priced products it’s because government won’t allow it; if hospitals keep innovators at bay it’s because the law permits it; if doctors fail to provide integrated patient care it’s because the rules discourage it; and if patients with private insurance are never told the cost it’s because they have no reason to ask!
The Pelosi-Reid-Obama plan to fix health care is a fool’s paradise precisely because it does nothing to restore the conditions that encourage rational decision making. The Democrat plan, with its ‘Health Choices’ Czar, its various ‘mandates’, its redundant insurance ‘exchanges’ and its top down ‘do-as-I-say-and-take-the-blue-pill-instead-of-the-red-pill’ regimentation would only make things worse.
If you really want to squeeze out the waste and excess while building a patient-centered health care delivery system, here are six common sense reforms that could fix most of what’s broken:
1. Reform the tax code to create a level playing field by extending the tax benefits of employer sponsored health insurance to every American.
2. What we call “health insurance” is actually overpriced, prepaid medical care. It’s like having homeowners insurance that pays for cutting the grass. Americans should be encouraged to purchase Major Medical Insurance to protect against high cost illnesses and injuries. The enormous amount saved could then fund personal Health Savings Accounts.
3. Health Savings Accounts put patients in control. Funded largely with pre-tax dollars and sold as part of a Major Medical Insurance package, these interest bearing accounts would provide the money needed to pay deductibles and out-of-pocket expenses. Unspent savings would accumulate from year to year and would provide protection for a lifetime.
4. Reform insurance regulations to make health insurance products less expensive, easier to buy and more responsive to consumer needs:
>> Affordability: Eliminate the insurance mandates that force consumers into policies with benefit and provider requirements they may not want and that drive up insurance costs by as much as 50%.
>> Portability: Your health insurance policy should belong to you, not your employer. Making insurance portable also eliminates the “job-lock” that keeps workers from seeking better jobs with better pay.
>> Availability: Allow health insurance companies to operate across state lines. Companies that operate regionally can create larger risk pools and will have correspondingly lower costs across the board.
>> Accountability: Develop pricing models that reward people for healthy behaviors. Consumers who avoid risky lifestyles, or who are willing to change them, should get a break on health insurance.
5. Create financial incentives for hospitals and physicians to provide integrated patient care; a treatment approach where providers re-bundle services to coordinate all aspects chronic disease management. Duke University Medical Center used this strategy for patients with congestive heart failure and cut costs by 40% in one year. Unfortunately, Duke was compensated using standard reimbursement formulas that paid only for the specific medical services that were actually provided, not for any of the savings it produced by making other medical services unnecessary.
6. Eliminate the state permitting requirements that allow hospitals to block the construction of new health care facilities within their market. 35 states require these special permits, called “Certificates of Need”, artificially restricting supply and impeding innovation. The damage is immense. The 15 states without these requirements have 83% of all specialty hospitals, the very hospitals we need to provide the “integrated patient care” that will cut costs.
With patients in control, the reforms above will work to drive down costs and expand access by increasing supply, moderating demand, promoting competition and rewarding efficiency. The best part is that every one of these reforms is either no cost, low cost or, in the case of tax exemptions for the purchase of insurance, simply a reconfiguration of existing policy for the purpose of producing a better result.
There’s one other major benefit to market based reform: By reinvigorating the 70% of the market that’s still made up of private payers, we’d be able to create the kind of efficient and responsive health care delivery system that could better serve Medicare beneficiaries. What’s the preferred model for serving our Medicare population? A high functioning market based system competing for Medicare’s business, or a command health care economy governed by global budgets and bureaucratic diktats; the kind favored by Mr. Obama?
Now is not the time for massive new government intervention. Medicare, faced with $68 trillion in unfunded liabilities, is on the brink of financial collapse precisely because the Federal government can’t be trusted to manage anything larger or more complex than a cell phone kiosk.
If we really want to fix our sclerotic and inefficient health care system; if we want to turn it into a dynamic, job producing sector of the economy; and if we want to do it without (further) busting the budget, the only way to do it is by restoring the free market conditions necessary to allow common sense to reassert itself.
Here in Jacksonville the voters I talk to have pretty much figured all this out. When will the policy wonks in D.C. catch up?