A Prescription for Health Care in America

Just exactly what will health care look like in America in the coming years? Even better, who will pay for it? At this point in time these questions are very difficult to answer, but they are important questions that we should all be concerned and vocal about.

Congress and the Obama administration have decided to provide their answers to these questions and this past month in town halls all across this great land of ours and have shown just how tone deaf our elected officials in Washington, D.C. really are.

With unemployment at 9.3% (August 2009) and expecting to top 10% next year and a federal deficit growing so fast that revisions to the trillions of dollars of debt are blurring the reality of our actual financial condition, the White House has characterized our current situation as “grim”. Yet, amidst this “grim” outlook our Congress and executive branch are all about socializing American health care under the guise of “reform”. When will they understand that the problem with socialism, aside the loss of individual liberty, is that you will eventually run out of other people’s money?

So much has been written against these proposals, and Congressmen and Senators have received an earful at their town hall meetings during the August recess, that the real issue at hand in health care has been forgotten – out of control costs. Both sides of the debate have publicly stated that they favor lower costs, more choice, and reducing the number of uninsured.

We struggle today with a health care system that is price blind and quality silent, with inequitable tax treatment of coverage, extensive government regulation of benefits and marketing opportunities.

What is missing in the debate is a real conversation about the cost drivers in the system, e.g. over-utilization, technology, and the infusion of public dollars, but even these are symptomatic of other challenges, e.g. third-party payors, innovations in health care, and spending public money in hopes of solving an ill-defined problem.

Policy makers should be discussing cost drivers like friction in the system, waste, error, delay, and variance. These are all cost drivers that exist due to the lack of free market principles in American health care and they deserve more attention.

It is possible to reduce costs. It is possible to create more competition. It is possible to reduce the number of uninsured. All of this is possible without tax increases or running up our national debt or eroding our Liberty. This is possible if we allow Americans to own their health care coverage and make health care decisions with their doctor. This is known as consumer-directed health care.

Consumer-directed health care is simply defined as giving consumers the ability to have choice in their plan benefits, ownership of their plan, and have the information necessary to “shop” for their health care goods and services leading to better service and competition.

A movement in the direction of consumer-directed health care requires us to put aside the old “iron triangle” of the industrial age of cost, access, and quality and embrace a new “iron triangle” for a new health economy that addresses ownership, access, and privacy.

Our current health care finance model is extensively regulated with a substantial reliance on third-party payment systems that distort incentives. This distortion when coupled with the lack of transparency in prices and quality measures limit the effectiveness of competition. Add in the fact that societal attitudes towards health care are different from other goods and service sectors and you have an environment that is difficult to reform.

In other words, give consumers the tools they need to actively engage the health care market through the promotion of private property, i.e. the ownership of health insurance.

The key components of such a transformation will embrace the market and seek to improve it through ownership and transparency. Ownership is only possible when the market distortions are leveled for consumers in the marketplace. It will also require consumers to “come to grips” with the public consequences of their private actions.

Think about it, our car, life, and homeowners insurance have no connection to the workplace. They are purchased by individuals and are owned by them until the individual decides otherwise making these insurance products portable – who the individual is employed by is irrelevant in regards to our ownership and consumption of these insurance products.

If individuals can’t “take it with them” or have choices in their plan benefits, e.g. deductibles, coinsurance, co-pays, provider networks, and have some certainty that they won’t change on a yearly basis, then we can’t be consumers – we remain recipients borrowing or renting our health insurance from benevolent employers or worse, politicians seeking re-election.

If we don’t have control over the plan benefit options that best fit our family’s needs and we don’t have the ability to take our health insurance with us when we switch jobs, then we can never achieve ownership.

Why then should health insurance be any different?

Congress and the Obama administration should drop their belief that government is the only honest player and put their faith in the American people once again. The following proposals will promote ownership and competition while preserving Liberty:

Tax Equity. Give every American taxpayer the full deductibility of their health insurance premiums from their federal income taxes regardless of whether they have group insurance or an individual health insurance.

Portability. Make it possible for individuals to own their health insurance coverage and take it with them from job to job. One study indicated that up to 40% of workers who get their health insurance through their employer never advance their career by going to another company, they never start a small business, or engage in an entrepreneurial activity, because they are afraid of losing their health insurance. Congress should consider the loss of invention and innovation, because of such laws on the books today!

Transparency. Our health care system is price blind and quality silent. Individuals have a right to know the relative price and quality of health care goods and services. Without this information we can never make value decisions about our health and truly exercise our rights in property of our own health. We know the cost of every other good and service before we purchase it, why not health care?

Guaranteed Access. The current debate is infatuated with this notion of reducing the number of uninsured to reduce the amount of uncompensated care. The real issue is not the uninsured, but those who have pre-existing conditions and are considered uninsurable. Those individuals who are considered uninsurable, i.e. they can’t be medically underwritten for an individual health insurance policy, are more likely to contribute to uncompensated care. Affordable, publicly subsidized high risk pools should be promoted and funded in each state.

Interstate Commerce of Health Insurance. Remove barriers to allow individuals to purchase health insurance policies across state lines from any insurance company in any state. This would allow consumers to purchase plans that best suit their needs, instead of the interests of local politicians, by escaping expensive mandated benefits and extensive regulation, e.g. a family in New York with extensive regulations, e.g. guaranteed issue and community rating, will pay about $12,254 for a policy versus a family policy in Missouri for $5,535 which does not require guaranteed issue or community rating.

Health Banking. It is time to give consumers ownership of their health care records. Consumers already manage their own bank accounts, investments, and purchases. In this new information age consumers deserve to have the same authority over their own medical records. Consumers should have the ability to designate who may see their private information. Consumers should be able to legally own and be protected through privacy laws a copy of their complete, lifetime medical record.

These proposals will transform American health care into an even better system than we have today by reorienting our state and federal health care policy toward the objectives of the individual and away from the employer, the insurer, providers, and government through portability and fairer tax treatment among all consumers of health care goods and services.

Once individuals own their own health insurance and take control of their own health care needs, then transparency of prices and service will be demanded by consumers. As Milton Friedman so aptly pointed out, “…if you want efficiency and effectiveness, if you want knowledge to be properly utilized, you have to do it through the means of private property.” After all, “Nobody spends somebody else's money as carefully as he spends his own.”