The root of America’s health care problem is not quality but cost. Health care procedures are too expensive, and rises in costs make proper health care inaccessible to individuals who aren’t insured.
Under the Patient Protection and Affordable Care Act, the health care system will be reformed so those who don’t have insurance coverage will.
The government insists that adding 32 million additional people into the market — along with Medicare reform — will help reduce the costs of medical treatment. Its assumption is that people who weren’t previously covered would now go in for regular check-ups, which would help prevent them from having catastrophic medical emergencies that require higher-cost emergency care.
This solution, however, only throws more money at the problem, because it does not address the underlying issue of why medical costs are out of control — the over-utilization of health insurance itself.
The actual problem lies within the existing insurance mandate from the government.
The government gives tax benefits to employers that provide employees with health insurance. If you earn wages, your employer can give you a portion of that income tax-free in the form of health insurance.
As it stands, the employer gives this benefit to its workers and both receive a tax benefit by participating.
Of course, workers are going to want to have every medical expense covered and paid for by the insurance company. This causes the over-utilization of insurance in common health care procedures that should be paid out-of-pocket.
Insurance is supposed to only cover catastrophic events such as heart attacks or cancer treatment. By already having government involvement in the distribution of insurance and insurance policies, free market forces are not allowed to function.
As competition is effectively eliminated, this leads to a rise in cost.
Individuals don’t care about the costs because, with insurance, they do not directly pay for treatment. Having someone else pay causes prices to spiral out of control because individuals only care about the service with no regard for the cost.
As a result, private practices and hospitals can raise costs, mainly to cover bad tort law policy, with little resistance.
This prices out individuals with no insurance who are forced to pay the actual cost, or it leads to lesser care for those on Medicare because of price fixing.
Ideally, individuals would be allowed to shop for noncritical health expenses and compare costs. Doctors would be forced to compete with one another to provide quality, cost-effective treatment.
A comparable structure can be seen in health practices not covered by insurance, such as elective procedures or Lasik eye surgery. People care about the price of Lasik because they pay out of pocket; when they go in for a checkup at the family clinic, they aren’t concerned with the price of a procedure or whether they really need it because it’s covered.
The easiest solution to the health care problem — aside from tort reform — would be to completely eliminate the government’s involvement with the insurance industry.
If state governments repealed regulations on what portion of costs insurance companies had to cover and the federal government allowed employers to give employees health care benefits in the form of cash, tax-free, most people would take the tax-free payment and buy a cheaper insurance policy that only covered what they needed.
Such insurance policies would most likely cover less with higher deductibles and much lower monthly payments. Under this system, going to the doctor for a routine visit would exclude insurance entirely, and people would be able to shop around for doctors who charge reasonable amounts.
By introducing competition, costs would plummet as they would in any facet of the economy where free markets are allowed to function. Also, by removing mandatory health insurance from jobs, the issue of pre-existing conditions would be eliminated, as people wouldn’t need to qualify for new insurance policies if they changed jobs.
Disconnecting insurance from government regulations accompanied by tort reform is still not a perfect fix. It is, however, a fix that actually addresses the fundamental flaw in the cost of medical care, and it could be enacted immediately.
Brandon Wynn is an engineering junior and may be reached at [email protected]
This is a well-written proposal and explanation, and IMO very accurate. However, one wrinkle not mentioned, is that people do not voluntarily buy insurance for things they do not expect. Since insurance companies are masters at deception and policy complexity, it is easy to envision a free market health insurance industry peppered with deceptive practices that end up costing people unexpected money at the worst possible times – once you find out your cheap policy doesn’t cover your illness, it’s too late.
Enacting laws to protect health insurance consumers is how we got to where we are now, entangling government with insurance. What’s worse, is that once government is paying for health care with our tax dollars, doesn’t it make sense for government to dictate lifestyles that minimize potential health risks? After all, if outlawing candy can save taxpayers billions, then…
Unfortunately, this may be the price we pay for the public’s inability to comprehend the old adage, “Buyer Beware.”
What you don’t mention is that people will not by and large pay for the routine preventative care or lesser health problems. They will tend to go without. This includes doctors such as myself. I have a chronic health condition and go to the doctor regularly as indicated and take my medication as prescribed. Without insurance I would would probably tend to cut back on this. It is a form of rationalization and denial. It is a natural human tendency to do without especially if there are competing demands on the budget, esp the needs of our children. Only when things get bad do we consider we should have to pay. Even in my private practice. People who lost health insurance, or ones whose insurance did not cover the visits, tended to drop out of treatment. Even with reduced prices, they tended to drop out especially if the money was needed for more “important things”. You need to cover all needed care even more “minor” ones.
Also people tend to resent money spent on insurance if it is just for more catastropic things, since these things rarely or never occur to many of us, they then view the money they spend as wasted. I have seen family members neglect important conditions such as hypertension, etc in order to avoid paying for the health care themselves. Or in some cases, they truly did not have the money for evaluation, follow-up, etc. Human nature is funny but we cannot deny it, We have to design programs that will work with the human nature you cannot change.
A few points that occur to me while reading Brandon’s article:
It would appear self-evident that the “free market” doesn’t lead necessarily to competitive market forces making health insurance companies more efficient or health care less expensive. Historically, it appears that it produces something close to monopoly or at least a form of “price fixing” among the really big players. The are “free” to simply decide how big their profits should be and then price the product accordingly. The American public is “free” to either pay that price or do without health care. Is this demonstrably different from the “free market” forces we have recently seen operating in the finance industry? My logic can’t distinguish between the behaviors of the big banks and big health business.
In their fervor for promoting and protecting free markets, advocates of a totally private sector approach to the “health care industry” overlook one possibility. Could it be that it is a proper role for government to regulate and control a market for the protection of its citizens against such predatory capitalist practices as we have witnessed with such things as credit defaut swaps and attempts this year by big health to institute 30-40% increases in premiums?
Put me down as agreeing with Abraham Lincoln on the subject of government’s proper role. Honest Abe said that the proper role of government was “to do for the people what they cannot do or cannot do so well for themselves.” I think it again self-evident that I (being one of the people) cannot control the predatory, immoral and possibly illegal practices of Goldman Sachs, Bank of America, United Health Care or any other really big organization. I pay my taxes primarily for the “big” befefits the government should and must provide me such as public highways, bridges, airports, defense against military threats from foreign enemies and such. Does my government have the power to defend me against the Taliban but not against threats to my life from domestic corporations who would rob me of the ability to adequately support my family and leave me threatened by having greatly diminished access to affordable health care?
I suggest to my fellow citizens who protest so loudly that they want the federal government “off their backs,” that our government is not “on” their backs — it is trying to “cover their backs” by protecting them from threats domestic as well as foreign. By what authority, you ask? Well, lets start with the closing paragraphs of the Declaration of Independence (1776) which declares that “as Free and Independent States, they have full Power to levy War, conclude Peace, contract Alliances, establish Commerce, and to do all other Acts and Things which Independent States may of right do.” Then we can move to the Constitution of 1787, Article 1 Section 8 in which “we the people of the United States” grant to Congress the power “To regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes;” and further “To make all Laws which shall be necessary and proper for carrying into Execution the foregoing Powers, and all other Powers vested by this Constitution in the Government of the United States, or in any Department or Officer thereof.”
Those are petty broad and flexible powers of protection for me. I think that under the authority of the power to regulate commerce among the states and the power to make all necessary and proper laws to promote the general welfare of the American people, Congress and the President certainly can protect me from both predatory capitalism and totalitarian communism. Perhaps we should focus less on extremist rants about “government takeover” of health care and more on finding the way to a balanced solution that lets my government protect me from threats to my ability to engage in the “pursuit of happiness” and enjoy the “life and liberty” to which the founding fathers thought I had an absolute right.
OldProfessor,
Some in the government may be trying to protect our backs. I am not so cynical as to think that all of them are out to get me. But the problem is that as they try (naively, I believe) to watch our backs, they often cause catastrophic results. The government gets to try one idea out, uniformly across the country (if it’s the federal government). The market gets to try 100’s of ideas.
Notice that the insurance companies who raised their premiums by 30-40% did it the week after Obama claimed he would propose laws that restrict premium increases. This is an immediate reaction to that populist proposal. If they can’t increase them later, they better do it now while they can. Perhaps Obama should have foreseen this reaction, or maybe he did and knew that it would add fuel to his campaign.
No one was complaining about the big banks three years ago. When things were going well, their profits were not an issue. In general, people will do fine to not use their services if they don’t agree with the profits. It’s the bailouts that people complain about, and those are not a free market principle. Bailouts encourage reckless risk taking for the next time around. Back to the original point, health insurance company profits account for a very small part of the health care expenses.
It’s true that markets don’t have to work, but why would you think they wouldn’t work in the health care/insurance world? What would inherently cause a lack of competition or a natural monopoly, assuming that the government removed a lot of the road blocks that they’ve put in place?
I think your constitutional reference to regulating interstate commerce has been taken too far and will yet be taken much further. Give us back our freedom and the headaches that come with it.
-TheNewProfessor
Alicewan, you underestimate the free market. Let me offer one possible solution that the free market could provide. Insurance companies who are aware that their clients are not doing regular check-ups, resulting in higher costs down the road, might offer the following incentive. If you have regular check-ups then your premiums are reduced. That would give people a reason to take care of themselves but still give people are reason to shop around and take care of their health in the best way possible. It would also allow insurance companies to try to find that best (cost-effective) balance of preventative care, rather than having a government committee make the decision.
In the end, we have to allow people the opportunity to make their own decisions in a free country. If someone insists on not taking care of themselves to save some money, then they need to be allowed to make that choice. Just like we shouldn’t force people to save for college, retirement, or vacation. The good news is that as the health care industry innovates (assuming the government ever gets out of its hair), people will be able to afford the treatments and therapies without referring to their insurance.
They are attacking this medical thing from the wrong direction.
1) Make it so that people will want insurance
a) make MSA permient owned by the one who has the MSA. A person then build up a large account which is not needed would be come retierment income. A penilty for any who dose not get insurance receive only basic care that they or their insurance dose not pay for.
2) Make insurance coops possible one that any group of people could form. One where this group makes the rules of what they will cover and what they won’t. These groups should be allow to opperate accross state lines. This way a person could join a group that fit their needs and would share cost with like persons.
3) When these groups are formed then underwriters could bid to cover the insurance and the best one could get the contract.
This way those who abortions should be covered then join that group those who thinks that people who use drugs, or gay or any other risky behavior they could join that group and pay the premium that goes with the risk. Why should the rest of us who don’t do thoes things have to pay for thoes who do.
There is many more things that could be done to lower the cost of health insurance. Another one is a change the way malpractice is determined.
“Insurance is supposed to only cover catastrophic events such as heart attacks or cancer treatment. By already having government involvement in the distribution of insurance and insurance policies, free market forces are not allowed to function.”
Those surly workers, expecting coverage for preventive care and other non-emergency treatment.
Sorry, while your ideas are solid, the train has left the station. Priority one was political and priority two was add patients (see priority one). And it is coming to appear all the grand predictions of cost contaiemt were bogus as well ( big surprise).
Oh well, we get to vote again in November.
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