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5 Easy Steps to Health Care Reform

August 20, 2009

stethoscope_1The most ironic and frustrating aspect of health care reform is the controversy surrounding it. On the face of it, health care reform should be easy. Every American believes in health care reform. Each of us could benefit from it. All of us want it. Yet the proposals put forth by this government have set off the most heated debate since the worst point of the Iraqi War.

It is remarkable that attempting to resolve a problem that Americans want resolved should produce such rancor. And yet it has, and it is because Americans know instinctively that the solutions proposed do not treat the problem, which we agree should be treated, and know should be easily treatable, but rather create worse problems. The majority of us, despite our desire for healthcare reform, see what is coming out of Washington as something that should be facing a death panel.

One does not have to be an expert on health insurance, economics, or government to realize this. One does not need a medical degree to know that when a patient goes to see a doctor with a bloody nose, and the doctor proposes leg amputation, something is wrong. And this is where we find ourselves now. Government is like the doctor in the example used by our president, who described how patients with sore throats are getting tonsillectomies because the doctor has an ulterior motive. Instead of treating the sore throat, we find ourselves being prepped for surgery which may bankrupt us and may not treat our problem. Instead of treating the problems of our current health care system, which are availability and affordability, we are finding ourselves being offered a mandatory, government-run health insurance system.

We know such a draconian solution is not necessary. We know, for example, that despite the screaming of the liberal politicians, the health care system is not “broken.” Most of us are insured and relatively happy with our insurance. Furthermore, we know our health care is the best, or among the best, in the world. We have the best doctors, we have the best hospitals, we have the best drugs and the best medical equipment, and, as a result, as the CDC just reported, our life expectancy continues to climb to all-time highs.

So, then, our health care system does not require surgery. It does not have to be decimated, but rather tweaked. Below are five very simple solutions, all of which are already on the table, which could easily increase availability and affordability, which is all we really want.

1. Allow national portability in buying health insurance: If I needed a mortgage, and I was limited to New Jersey banks, the best offer I may be able to find is a rate of 10%. If I was as restricted in obtaining a mortgage as I am in buying health insurance, I would have to take the 10% rate. Instead I can go on the Internet and find a much better rate. Perhaps there is a bank in Wyoming that would be willing to offer me a rate of 5%. Not only would that save me money, it would eventually force the banks of my state to offer a more competitive rate.  Yet our Congress, even those who say that we need a government-option because, despite there being over 1,300 health insurance providers in this country, there is not enough competition in the health insurance market because some in certain areas may only have access to one or two, finding themselves limited to an uncompetitive rate, do not want to make national portability available to us.

2. Institute tort reform: Critics of tort reform argue that medical malpractice damage awards are only one or two percent of what Americans spend on healthcare, but given that Americans spend $2.5 trillion a year on health costs, one or two percent is a significant number. Furthermore, in order to protect themselves from those medical malpractice damage awards, doctors must buy very expensive medical malpractice insurance. This restricts the number of doctors available (especially considering how many doctors relocate from high insurance rate states and avoid specialties like obstetrics that have a higher malpractice insurance premium), restricts the number of services doctors offer, and results in many expensive tests performed on us for no other reason than to protect the doctor from malpractice liability. Also, some economists estimate that the high cost of malpractice insurance – as much as $200,000 a year in premiums, depending on the doctor’s specialty and location – gets passed on to the patient. Diana Furchtgott-Roth, an economist and senior fellow at the Hudson Institute, estimates that “an average of ten cents out of every dollar you pay goes to the malpractice insurance doctors must have to protect themselves in case a patient sues them.” Again, considering that we spend $2.5 trillion of annually on healthcare, “ten cents out of every dollar,” is a very significant amount of money.

3. Fight medical fraud: The National Health Care Anti-Fraud Association estimates that the cost of fraudulent and overpriced claims may be as much as $240 billion in 2008 alone. Other reports say the cost of medical fraud ranges anywhere from $60 billion a year to $600 billion a year. Unfortunately, much of the FBI taskforce created to fight medical fraud has been taken off that mission to engage in anti-terrorism activity. We clearly need more resources dedicated to fighting fraud, yet year after year something gets proposed – this year for example President Obama proposed a Department of Justice/Health and Human Services taskforce to fight fraud – and year after year, nothing gets done.

4. Require all Americans to have some form of health insurance: According to the Congressional Budget Office, “Most of the uninsured are young and in good health … roughly 60% are under the age of 35, and fully 86% report that they are in good or excellent health.”  According to a study by Mark Pauly of the University of Pennsylvania and Kate Bundorf of Stanford, “nearly three-quarters of the uninsured could afford coverage but chose not to purchase it.”

These people, who are either too cheap, or feeling too invulnerable because of their youth, are hurting us in two ways.  One is because the larger the pool of insured an insurance company has, the lower their risks will be and the lower they can charge for premiums.  Secondly, when one of these people do get sick or get into an accident, they must seek emergency room treatment, which transfers an enormous cost to us the taxpayer. According to the California Health Care Association, “Providing uncompensated care to the 7 million uninsured Californians only adds to the relentless and increasing financial pressures on hospitals. In 2003 alone, California hospitals provided more than $5 billion in uncompensated care (adjusted for cost) to low-income and uninsured patients.”  This cost gets passed on to the rest of us in the form of higher insurance premiums, as well as giving us access to fewer emergency rooms (as many who are unable to continue to shoulder these costs simply close) and more crowded emergency rooms which results in us having longer waits for and a lower quality of emergency room medical treatment.

I would also require insurance companies to accept those of us with preexisting conditions.  Of course this will be a tremendous short-term burden for insurance companies, but it is short-term, and it will be offset by the benefit of having millions of people being forced to buy insurance. Furthermore, if the government is going to mandate XYZ Insurance Company to provide insurance to someone with, say, terminal cancer, then XYZ should be compensated in the form of a tax credit to do so.

5. Encourage the creation of Health Savings Accounts for those who have been means tested and found to be unable to afford health insurance: Let’s say we take the 47 million we are told we are leaving uninsured, and subtract from that the number who are either not citizens or could afford health insurance – that leaves us with 20 million people (out of a nation of 300 million) who cannot afford health insurance. Let’s estimate that the average cost of health insurance is about $4,000 a year, which is high as an estimate, but let’s go with this. Therefore, creating these health saving accounts will cost the taxpayer about $80 billion dollars a year. Or, as I’ve pointed out, about a third of what the National Health Care Anti-Fraud Association says we spend on medical fraud. If you take into account savings we will create with the national portability, tort reform, medical fraud reform, and the millions of people added to the insurance pool, the cost should be far less than $4,000 annually for health insurance premiums. So let’s say $2,500 per individual put into HSAs for the poorest among us – that would be a cost $50 billion.  And the owners of these accounts will be free to choose any insurance company they like.

And…voilá! Just using five simple measures – all of which are already on the table, some of which have been on the table for decades now, some already put forth as legislation in Congress by Republicans and Democrats – we have healthcare reform. Health insurance would be dramatically less expensive and more available, and it would be done at worst in a deficit-neutral way and perhaps could even decrease the deficit. And it didn’t take a 1,300 page bill for a bureaucracy that would intrude into our personal lives, or bankrupt the nation.


3 Comments leave one →
  1. TooMuchTime permalink
    September 15, 2009 9:34 PM

    Sorry, but number 4 is wrong. Forcing health care on people that don’t want it, would be like, using your own analogy, forcing everyone to buy a house. Some people don’t want to buy a house or can’t afford a house. They rent according to their means.

    Same for healthcare. They are young, single, and feel they don’t need it. For most, that is true. When I was that age, I felt the same way. I was working for a large company and when I had a chance to get health care, I went for the cheapest possible. I got married, had children, and then my health care needs changed. So did my living needs. I rented before, then I bought a house.

    If you REALLY want to fix health care, you would do it this way. First off, I have no idea what percentage an employer pays for the employees health care. With that in mind, say it’s 50%. Because I really don’t know.

    Keep the employers OUT of the business of choosing health care. The employee makes the entire decision. The employer can still offer various plans but the employee can choose whatever they want. Even something the employer does not offer. And the employee must pay the percentage that the employer does not pay. So, in the example, both pay 50%. This will force the employee to be more discerning about their choice.

    Let’s say a small business has 100 employees. If the employer offers the lowest, cheapest, plan from Acme Health, no one is required to take it. Say 95 of the employees go get the most expensive plan from Acme Health. They like Acme, they like their doctors, they just want better coverage and are willing to pay for it. Now the employer has a choice. He can ignore 95 of his 100 employees or he can offer the best Acme plan at a reduced rate and get some savings. This is pretty much a no brainer.

    The other 5 employess choose a Zephyr Health plan. The employer will have to pay a percentage of those as well. Since his membership is low (only 5) he won’t get any benefit from having it as a competing plan. Or maybe he can join up with some other small businesses in the area and get a group rate.

    This allows the employee to keep their health care. It is completely portable. It cannot be used as a reason for employment or for termination. Everyone gets the health care they want, at the price they can afford. And since they have to pay for a pretty good chunk of it, they are more likely to be better informed about it.

    My two cents…

  2. Mark Epstein permalink
    September 20, 2009 12:00 PM

    Before we can even address health care reform (and I agree with Whole Food’s John Mackey), we have to address “motive.”

    Just what is the under girding “driver” for reform? As I noted this morning, it is not the pretentious “concern” for the 10% of Americans without health insurance that Obama and his cohorts assert it is.

  3. josephwesley permalink
    March 2, 2010 5:14 AM

    Here’s a short little story for you all. I grew up without health insurance. The interesting thing is that I didn’t go to the doctor whenever I had a sniffle. If I had a sniffle, I slept it off. I also seemed to deal with sicknesses in about the same amount of time as people who went to the doctor. Once in a while something bad enough would send me to the doctor, and my parents would foot the bill. Fortunately, nothing catastrophic happened, and we didn’t end up owing a hospital a whole lot of money. Ok, fast forward to now when I do have health insurance. The oddest thing to me, is that I don’t consider how much a procedure costs. I just flash my insurance card. If I’m unsure about a health condition, I go to the doctor. If he says I need a test, I go to take the test. BUT WHEN I GO TO TAKE THE TEST, I HAVE NO CLUE HOW MUCH IT’S GOING TO COST. I DON’T ASK AND THE OFFICE DOESN’T TELL. IT ISN’T UNTIL THE BILL IS IN THE MAIL THAT I FIND OUT HOW MUCH THE PROCEDURE WAS. DOES THIS SEEM WEIRD TO ANYONE ELSE? IN WHAT OTHER PURCHASING DECISION DOES A CONSUMER NOT CARE HOW MUCH THE COST IS? IT SEEMS LIKE IT WOULD BE VERY DIFFICULT TO CONTROL COSTS WHEN CONSUMERS DON’T FEEL THE COSTS DIRECTLY. What do you all think about this?

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