Wednesday, March 2, 2011

A Healthcare Bandaid, where Major Surgery is Needed

Wherever you may fall on the political spectrum regarding the new federal health care law, we can all agree that the cost of health care in New Jersey continues to place a horrific burden on the public and private sectors.

So began New Jersey Assemblyman Gary S. Schaer (D-Passaic), chairman of the Financial Institutions and Insurance Committee, in an article late last year in the NJ Star-Ledger. In Health care costs undermine growth
, Mr. Schaer argued in favor of the "Healthcare Transparency and Disclosure Act", which will ostensibly "better assist New Jerseyans in making informed and financially prudent choices about their health care". This will "lower costs" and help "create jobs".

Mr. Schaer says we must accomplish those goals "with as little government intervention as possible" because "health care already is over-regulated". It never occurred to Mr. Schaer, or at least he chose not to mention it, that the over-regulation is the cause of the problems his bill seeks to address. It's nice that he wants to be sure that "patients must know each party’s financial responsibility for each medical transaction — no mysteries and no surprises". But mysteries and surprises are what you get under a system in which everyone is reponsible for everyone else's healthcare, but not his own. It is the government that created the third-party-payer system, in which insurance is provided by either government (Medicare) or employers, but in which the healthcare consumer does not own his own policy.

The over-regulation is widespread and deep. Until that problem is addressed rather than simply accepted as a given and then swept under the rug, bandaid solutions like the Healthcare Transparency and Disclosure Act will do nothing substantive except add another layer of regulation and enable politicians to claim to have "done something".

I've left the following comments, and then engaged in a little back-and-forth with another correspondent who took issue with what I had to say:

zemack December 01, 2010 at 7:24PM

The need for government to control healthcare costs was created by government itself. More than half of American healthcare spending is by government, through such programs as Medicare, Medicaid, SCHIP, etc. Most of the rest is through the heavily regulated, mandate-burdened, competition-protected quasi-private insurance companies. The only practical and moral way to “control costs” is to free the market from government interference – meaning that each individual participant is responsible for managing his own healthcare spending based upon his own judgement. The natural incentives inherent in a free market – consumers seeking care that they can afford from providers seeking their business – leads inexorably to falling costs and widening availability and quality of healthcare. Free markets have been proven to be practical, and they are moral because they recognize the rights of all participants – consumers, insurers, doctors, pharmaceutical companies and other providers, and patients – to contract voluntarily with each other to mutual advantage.

We can begin to move toward a free market by focussing on converting what we now erroniously call the private sector into something that at least mimics a real free market. First, remove the burden from business by ending the third-party-payer (also referred to as employer-based) system of health insurance. Instead of businesses and other third parties like unions buying insurance on behalf of their employees, they should be allowed to simply deposit whatever they are currently spending to insure their employees’ into their own self-directed, personal tax-free health savings accounts. Individuals and families can then go forth and purchase insurance directly from insurers competing for their business. This would also alleviate a host of other problems by making health insurance portable like auto, life, and homeowners insurance, which people don’t lose when leaving a job.

But for that to work, two other reforms are needed. End all insurance mandates like community rating and benefit mandates. These mandates violate the rights of consumers by forcing them to pay for coverages they may not want or be able to afford and of insurers by restricting their freedom to compete based upon market realities. Mandates are special interest group driven, and really amount to using “private” insurance companies as conduits for government-enforced wealth redistribution. The other reform needed is to stop protecting insurers from interstate competition, and state politicians’ controlling power, by removing insurance trade barriers between the states. These three simple reforms would dramatically lower insurance premiums, leaving more money in people’s HSAs for direct payment of routine, predictable medical needs, resulting in lower prices for a myriad of procedures like mammograms, prostate screening, and doctor’s visits.

Assemblyman Schaer is correct that “Health care already is over-regulated”. These limited free market reforms would begin to reduce the over-regulation by partially freeing up the private sector. More would need to be done. The encroaching crisis in healthcare grows worse the farther we move away from a free market, and we should not reward government with even more power and regulatory authority. With due respect to Assemblyman Schaer, the Healthcare Transparency and Disclosure Act is, at best, a Band-Aid. The underlying problem is that healthcare is at least the second most controlled industry in America, behind only the financial industry (another big headache, not surprisingly).

A slow-motion government takeover of American healthcare has been advancing for decades, turning an industry that should be a growth driver into a growth inhibitor. Real reform, and cost control, means reversing that trend. Most Americans don’t want full socialized medicine, and never have. Yet, that is where we are headed. But, the trend can be reversed, and decontrol looks to be the next big healthcare trend. Far-sighted, courageous politicians can get in front of the trend by advocating now for more freedom for all American citizens in healthcare.

jimmaiul December 02, 2010 at 9:40PM

zemack, I'm sure you know the story behind employer based insurance, starting in WWII as employee compensation above wage and price controls. Employer compensation offers a big advantage as bulk purchasers holding down costs to individuals as compared to you as an individual buying insurance in the market, It's just the way markets work, so people have to get together and use the market to their advantage. it would be understatement to say you would be taken to the cleaners if you bought insurance as an individual.
Why not extend this practice to the entire country, and while you're at it eliminate the profits from insuring people which don't go to health care anyway. That's how other countries spend 1/2 per capita what we do while none of their citizens goes without access to routine medical care.

zemack December 03, 2010 at 2:39PM

Employer-based insurance was imposed back then through the tax code. The individual market was long ago made dysfunctional by this and other government policies, some of which are listed in my comments above. My proposal is simple: Shift all tax benefits to the individual, and put him in charge, which is his unalienable right. Those of us who choose can still pool our money under group plans. But, it would be our choice.

Profits are a driver of lower costs, and accrue to producers - including insurers - who successfully compete through lower prices and quality service (but only in a market free from government force ... a free market … which we need to establish). Government, not having the need to consider the bottom line, simply doesn't have any incentive or need to control costs. That is the main reason healthcare costs have skyrocketed in the US, quadrupling as a percentage of GDP since the mid sixties. To the extent that other countries actually do have lower costs (for a variety of reasons, including faulty accounting), they do it by denying care.

At some point, probably starting with ObamaCare, our government will do the same under such guises as "cost control" and "comparative effectiveness". Then we will be at the mercy of government bureaucrats and politicians backed by government’s power of legalized physical force. I’d rather be “taken to the cleaners” by truly private insurers whose only “power” is their desire to attract and hold my business with products that benefit me and that I voluntarily agree to purchase. Profits (and CEO salaries) earned through free market, mutually beneficial trades are a moral and human right for those who earn them, and a boon to our standard of living.

Jimmaiul, you’re willing to throw away our freedom in the healthcare area based upon faulty premises. You should check them.

jimmaiul December 03, 2010 at 9:13PM

Government, not having the need to consider the bottom line, simply doesn't have any incentive or need to control costs

zemack, this is precisely what governement in other counries do, they control costs through rationalization, what esto denigrates as rationing resulting in dead canadians who fail to make it to our health care paradise. The provinces have a fixed budget so politicans either spend it smartly or they're out on their ass. Here government encourages just the opposite in delusional devotion to free markets, medical policy is outsourced. Instead of the "efficiencoes of the market:, we get a revolving door, insurance co. to Congress , money in legistlation out, LIz Fowler from Wellpoint insurance seated behind Senator Max Bacuus handing him papers during testimony.

Government coercion is a bit of a stretch, don't you think? more like corporate coercion when private entities become too big to fail .

zemack December 06, 2010 at 7:36PM

"Rationalization" is a buzz word for rationing - stripping us of our freedom to pursue healthcare in voluntary association with providers. It means, quite simply, death squads.

"Too big to fail" is a government creation, which feeds growth of businesses racing to enter the exclusive bailout club, known as "too big to fail". Stop the bailouts, and many business behemoths would fall to smaller, better competitors, who are currently at a disadvantage thanks to government protection of the big guys under "too big to fail" policies.

Government coercion is no "stretch". It is a fact. A government, by its nature, has a legal monopoly on the use of physical force (coercion). No private business in a free market can legally force anyone. It is only in a mixed, regulated economy - where business and politics blends - that private businesses appear to have coercive powers. You said so yourself: "Instead of the "efficiencoes of the market:, we get a revolving door, insurance co. to Congress , money in legistlation out, LIz Fowler from Wellpoint insurance seated behind Senator Max Bacuus handing him papers during testimony." If we had capitalism - the separation of economics and state - the government would use its monopoly on legalized coercion to protect us from criminals, foreign enemies, fraud, libel, breach of contract, and the like. Business would have only voluntary pursuasion to buy its products. Fowler would have no need to sit behind Baucus, because Baucus would not have the power to legislate government control of health insurance. He would be on his own, trying to devise policies that we like and can afford.

No comments: