1,018 page health care bill
I think we can all agree that America’s health care industry needs help. Costs are rising quickly, the system is riddled with inefficiencies, and many people aren’t receiving needed care. Getting people to agree on what is causing these problems and how to fix them is harder than breaking the land speed record on Lake Michigan. In my previous post I described what I believe some of the problems are and argued that President Obama’s plan will do little to fix them and may even aggravate them. In this post, I offer some alternative solutions.
But before we can talk solutions, we must first paint a picture of a better health care world. Consider the following hypothetical story that illustrates the kind of health care system we could have:
Herbert, a 33 year-old mechanic, does not get health insurance from his employer; in fact, nobody he knows does. Instead, he went on-line, researched various options with companies in four different states, and purchased a “catastrophic” insurance policy that costs only $500/year for himself and his family. He uses this insurance to cover only major medical expenses such as long-term hospital stays, high-tech laboratory tests, and surgeries. For all other expenses like routine checkups, prescriptions, and dental work, he uses money he invests in a health savings account (HSA).
Herbie and his family know that doctor visits might cost a little more than today’s $10-30 co-pay, so they make sure to eat well, exercise, and avoid hazardous situations. When they do need professional care, however, Herbie can afford to pay for it because his insurance premiums are low and medical costs are not exorbitant. Why are costs not exorbitant? Because doctors compete with each other for individual customers rather than answering mostly to insurance companies and the government.
Herb chooses any doctor he wants, even specialists, based on the quality of the services they provide and the prices they charge for them. When he needs to fill a prescription, he shops around various pharmacies to find the best value available. When he is dissatisfied with a product or service provided, he goes elsewhere. This shopping around forces medical providers to offer the best products and services they can for the lowest price possible.
One year, Herb lost his job but still paid his medical bills the same way because his insurance wasn’t connected with his job. Although unemployed for a year, he was able to survive using funds in his HSA. Toward the end of unemployment, his HSA was exhausted and he was low on cash, but he was able to receive charity care at a free clinic in his neighborhood. Once he found a job, he started replenishing his HSA.
In Herbert’s world, health care is high-quality and affordable. He has the freedom to choose what products and services he wants and knows exactly how much he pays for them. Doctors, hospitals, drug companies, and insurance providers are accountable to customers who hold purchasing power.
Herbert is very familiar with this type of system because it generally mirrors his work as a mechanic. He charges his customers specific prices for basic repairs and only deals with insurance companies when a customer has had an accident. Government’s involvement is limited to simple regulations regarding safety and emissions and some guidelines to keep insurance companies honest. This system is much like every other market for any product or service. In most cases, the best way to get it to work is to leave it alone.
To help America develop a system this efficient would require some major reforms and many years. But here are some specific initiatives government can take to get started:
1. Eliminate the employer-based system. For now, money spent on employer-sponsored health insurance is excluded from federal income and payroll taxes. Government could stop encouraging employers to offer insurance as a benefit by removing this tax break.
2. Encourage HSAs. Government could offer a limited tax credit for money spent on insurance and HSAs. It could also encourage individuals to participate in a guaranteed medical loan program to help fill any gaps between HSA savings and insurance coverage. This reform would give individuals more opportunity to pay for their own medical expenses.
3. Reduce government intervention. The federal government could gradually phase out Medicare, Medicaid, SCHIP, and other programs that fund health care for specific populations. Doing this would help make doctors and insurance companies more accountable to patients which would reduce costs. If nothing else, the feds could at least reform these programs so they don’t go bankrupt in the next decade or two.
4. Reform medical malpractice laws. In most states, patients can sue medical practitioners for unlimited amounts of money for mistakes made and often for “frivolous” claims. To be sure, doctors should have some liability for mistakes, but excessive legal awards drive up the costs of health care. State governments can help reduce excessive awards and false claims through various reforms, such as putting caps on damages awarded for malpractice.
5. Eliminate state barriers. For now, people can only buy insurance from companies approved by their own state. Allowing insurance companies to compete across state lines would help lower costs and give individuals more options.
These reforms won’t fix everything, but they will put us on a path to productive change. Remember that people are the answer to most of our problems, not government.
What do you think?
Related post: How not to fix health care
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