Thursday, July 23, 2009

Public Healthcare? As A New Proposition? We Haven't Had Private Healthcare in AGES.

I have taken quite a considerable hiatus since the short time ago that I started this blog (time is a limited commodity nowadays). So, it may seem a little odd that I return with a topic that seems purely political: Health Care.

Unfortunately for us, it also has exponential economic ramifications, and this is something that is not properly articulated often.

Here's the thing - the primary reason that health care costs are so high, that there are so many uninsured, that the quality of care is incongruent to the prices paid - is that government is already too deeply involved.

Re-read that. It's important to know that the cause of a problem cannot also be the solution. Over many decades, our government has so heinously overstepped their boundaries into the alleged free market system that we have, that they have ruined the healthcare system that could have been. If you think that we have a free market healthcare system, and it was itself to blame, you are seriously mistaken.

Each step along the way, as government escalated the problems with their ineptitude (and attempts to appease their constituency), they have become more deeply engrained, producing a vicious circle.

I cannot say this any more simply: The problems will be solved when government detracts itself from healthcare (like all industries), NOT entrenches further.

Government already severely limits competition in ways that are not discussed, but are ENTIRELY relevant.

Five Steps to Real Health Care Reform

Although the bill currently being considered by Congress is being advertised as health care reform, it actually includes very little in the way of real reform. It is a thousand-page disaster which attempts to address problems which were created by government regulation with more government and more regulation at an enormous cost. There are real problems with high costs and millions of citizens with no health coverage, but raising costs even higher and mandating insurance for those who cannot afford it, enforced with draconian penalties is not a rational solution. It is a crude attempt to address the symptoms without looking at the causes. It's like giving a patient with skin cancer some makeup to cover his unsightly moles instead of removing them and curing his cancer.

The root problem in health care in America today is massive over-regulation, government interference in the marketplace and a lack of essential competition which would keep the costs of care and insurance reasonable. Past attempts to address problems in health care have consistently taken the wrong approach and have built on each other to create a tottering house of cards where everyone pays too much and the quality of service is too low. Real reform cannot be achieved by adding more bad ideas on top of old failures. Real reform requires tearing down all the old, failed measures and starting over again. It requires creative thinking and charting a course which is almost exactly opposite of what Congress and the President are currently considering.

We need to start over from scratch, tear away the mistakes of the past and really rethink how we manage health care in America today. It can't be done overnight, but here are five simple and powerful ideas which would be the beginning of substantial change in the right direction.
  • Insure individuals, not groups. The current system of giving businesses tax credits for contributing to employee insurance takes away free choice and discourages competition which would encourage insurers to provide better service. Plans are picked by company management based on price rather than on benefits and service quality. Employees then have to pick only from the plans their employers offer, which may often be only one plan and is rarely more than three. This eliminates the force of free market competition. If individuals picked and paid for their own insurance, the better plans would get more customers and the insurers with poor service and benefits would either improve or go out of business. Prices would also be lowered as insurers worked to attract more customers, because insurers could no longer count on guaranteed large pools of customers from group plans. Businesses which no longer had to pay for health insurance would increase salaries so that employees could pay for themselves. This would also help with the problem of the uninsured, because many of those currently uninsured are self-employed and cannot find competitive plans, because most insurance is currently marketed to groups rather than individuals. Give individuals a tax credit only if they purchase insurance themselves. Encourage people to self-insure and eliminate regulations like HIPAA which give special protections to group plans. Insurance companies will rise to the challenge by providing better and cheaper coverage and more variety of plans.
  • Eliminate coverage mandates. Currently there are over 1900 regulations requiring health insurance companies to cover specific ailments, most of them ones which are more common among older patients and many of them quite rare. The insurance companies lay off the cost of this coverage on the general customer base which massively raises the price for the young and healthy who make up about 40% of the uninsured. Eliminating these mandates would lower the price of health insurance sufficiently for that group such that they could afford to be insured. Instead of mandating what conditions insurers have to cover, let customers pick plans based on the level of coverage which they feel meets their needs. There will be a market for full-coverage insurance and competition to keep the price of premium plans low. No private or public system of insurance will ever exist without some rationing of care, but in a free market, consumers will be able to decide in advance what areas they are willing to sacrifice and where they want to focus their coverage, rather than having those decisions made by their employer or the government. Consumers could still be protected from abusive practices by a private certification system which would analyze plans and certify the quality of coverage offered, and the market could be made more accessible and competitive through nationwide internet-based insurance shopping.
  • Privatize Medicaid and Medicare. One of the largest factors in the inflation of health care prices is that so much of the money in the industry comes from Medicaid and Medicare and prices are set at the rate which the government is willing to pay rather than by competition in a free market. Private insurers are then expected to pay for services from doctors and hospitals at the same inflated rate. Medicare and Medicaid costs have increased at about twice the rate of general inflation since the programs were started in 1965. The result is that the price of these programs has doubled every 7 years until today they are 50 times as expensive as they were at their inception. For comparison, the cost of most other goods and services has increased by an average of only 8.5 times in that same 44 year period. We have people being billed $25 for an aspirin because the price of that aspirin is not based on the current market price, but on a schedule of Medicare/Medicaid prices which factors in that enormous level of artificial inflation. Hospitals and insurance companies then follow those pricing trends. Elimination of Medicare and Medicaid as they now exist would force hospitals and doctors to price competitively because insurers would refuse to pay for overpriced products and services. Instead, Medicare and Medicaid should exist only as government payment plans which would subsidize the purchase of private health insurance or health services for the poor and the elderly.
  • Free the health insurance marketplace. State and federal laws currently place a huge number of restrictions on the kinds of health insurance available to consumers. One result of this is that regulations make insurance much more expensive in some states than in others. If consumers could shop for insurance in an unrestricted nationwide market then they could spend their money in Wyoming where a good plan costs $1500 instead of New Jersey where an equivalent plan costs $5000, or more likely, expensive plans would go down in price so that people everywhere could afford them. Similarly, eliminating many of the current legal restrictions on insurance companies would encourage the creation of alternatives to traditional insurance, like health care cooperatives and hospital-based medical plans where customers could subscribe to health care services from a specific source instead of having to go through an insurance company at all. Eliminating the regulations which prevent health care providers from marketing their services directly to consumers would lead to substantial reductions in costs from increased competition.
  • Open up free trade in prescription drugs. One of the factors which keeps the price of health care high is the inflated cost of many prescription medicines in the United States. Government regulations protect pharmaceutical companies from having to compete in a free market by prohibiting private or commercial importation of drugs. This lets pharmaceutical companies charge more for their products in the United States to offset the lower costs they charge in other countries. The result is that on average drugs cost 30-40% less outside of the US and the price differences are much larger for the newest and most effective drugs. If consumers could buy their drugs outside of the US or if pharmacies could import their drugs from other countries — many of which have even higher quality standards than we do here — prices would go down substantially for American consumers who are currently paying far too much and subsidizing the low cost of drugs in other countries.

These five steps won't solve every problem in our health care system instantly, but they will eliminate most of the really serious problems, almost all of which originate in over-regulation. Our current system is designed to keep insurers and health providers from having to compete in the free market, a practice which limits consumer choices and keeps prices artificially high. Make them compete and the qualify of their product will become better, at a lower price.

There are a few things which these proposals cannot address directly. Free market changes do not guarantee a solution to the large number of uninsured, most of whom are uninsured by choice. Many of them will take advantage of lower-priced plans aimed at their part of the market, but there will continue to be a problem with those who are difficult to insure because of preexisting conditions and those who just don't want to pay for insurance. Those who cannot qualify for private insurance at a reasonable price would have to be made eligible for some sort of public subsidy under an expansion of Medicaid. The cost of doing this would still be enormously less than the proposed cost of Obamacare. Those who choose not to be insured could be dealt with under a gap insurance system where if they went to an emergency room their treatment would be covered, but they would be required to repay Medicaid for that treatment on an extended payment plan.

Right now no one is considering this sort of real, fundamental reform of the health care and insurance system as a comprehensive plan. However, there are a number of bills, which include many of these ideas, being proposed to essentially reform the health care reform plan before it even passes . Among these is a bill from Senator Ron Wyden (D-OR) called the Healthy Americans Act which would take the idea of Health Exchanges in the current proposal and use them as a way of transitioning from group plans to individual insurance. Another idea is the Pharmaceutical Market Access and Drug Safety Act, which would open up imports of pharmaceuticals to create a competitive market. It was proposed by Senator Byron Dorgan (D-ND) and has 29 bipartisan co-sponsors, but is stuck in committee. There's even a bill to privatize Medicare with a voucher system proposed by Representative Marsha Blackburn (R-TN). These are all good ideas, but they are being left by the wayside as congress looks at the proposed 1000 page plan which meets President Obama's requirements, but offers little real reform and just expands and makes even more expensive and less efficient the current system.

The plan currently being considered is not health care reform. It is more of the same on a larger and more expensive scale. Real reform means going back and starting over and figuring out what we've been doing wrong and then doing it right. That means reintroducing free markets to the health care and insurance industries and putting choice and control back in the hands of the people. Real changes like the five proposed here will reduce consumer costs and improve the quality of care without massively expanding government or increasing taxes. Ideas like these ought to be part of the debate and not shoved aside in the headlong rush to impose more of the same failed ideas on an ever larger and more expensive scale.

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