Rx For Health Care

By Dr. Richard Kelley

“Rule one: Never allow a crisis to go to waste. They are opportunities to do big things.”

That quote has been frequently attributed to President Barack Obama’s Chief of Staff, Rahm Emanuel. Accordingly, with the Democrat-controlled U.S. Congress back in session in Washington, D.C., the battle to cure the alleged crisis in the U.S. health care system is running at “flank speed” – an old nautical term used to describe a ship’s maximum speed used for short, emergency sprints.

All of the favored proposals currently circulating are leading toward a massive, government-run health care system with unknown costs, bureaucratic dictates, higher taxes, and rationing of services.

In my view, there is no crisis in our health care system and consequently, no need to rush through drastic change with hundreds of pages of unread and unanalyzed amendments added in the middle of the night as the House did recently with the disastrous “Cap and Trade” bill.

Although they acknowledge the need for improvements, many, if not most, U.S. citizens are quite satisfied with their present health care. We do not need to turn it all over to the government.
By focusing on the following concepts, we can find much better ways to solve the problems in our current health care system:

Tax Equity
Individual Choice and Free Market Competition
Personal Responsibility
Tort Reform

Tax Equity
The basic problem with our health system is rooted in the fact that it was started in the World War II era as, in effect, a “tax dodge.” Wartime wage and price controls made pay raises difficult, but the government did allow companies to give their employees a non-taxable health care benefit. Over time, these tax-exempt health care benefits grew and grew.

As a result, today we have two systems for people who are not covered by one of the government’s existing health care programs (Medicare, Medicaid, Children’s Health Insurance Program (CHIP), Federal Employees Health Benefits Program, Veterans Health Administration, etc.):

One tax-free system for people who are lucky enough to have employer-sponsored health care insurance benefits which, except for small employee co-payments, provide health care starting at dollar one.
A much more expensive, pay-with-your-after-tax-dollars system for everyone else.

The playing field should be leveled so everyone is treated equally:

Either give people who pay for their own health care a tax deduction for those expenditures
Or treat all employer-provided health care benefits as taxable income and reduce tax rates so total taxes do not increase for these individuals and families.

Individual Choice and Free Market Competition
We must allow individuals the right to choose how they want to pay for their health care needs and those of their families. Unfortunately, there are already many, many state, local, and federal laws, rules, regulations, and mandates that limit choice as to how individuals are provided health care coverage. Each state and local jurisdiction is different, and those differences can be costly.

Health care analyst Michael D. Tanner provides the following example. “New Jersey requires insurers to cover a wide range of procedures and types of care, including in-vitro fertilization, contraceptives, chiropodists, and coverage of children until they reach age 25. Those government-mandated benefits aren’t cheap. According to a 2007 analysis by the National Center for Policy Analysis, the cost of a standard health insurance policy for a healthy 25-year-old man averaged $5,580 in the state. A standard policy in Kentucky, which has far fewer mandates, would cost the same man only $960 per year.”

This should be changed so anyone in any state can purchase any type of health care insurance they believe best suits their needs.

Some people will continue to choose an insurance policy similar to one of the several excellent products offered to Outrigger employees today.

Hopefully, many would recognize that they can save money by insuring for catastrophic illness only. Such coverage is far cheaper than the plans most people have today. For routine medications, physician visits, etc., they would pay their providers directly, building once again a free market in health care and getting the third party — the insurance provider — out of the middle of most of their medical decisions.

Beyond the savings on low-cost catastrophic insurance coverage, where would people get the money to pay for routine care? From something called a Health Savings Account. This is a concept that has yet to be widely adopted – many in Congress who prefer a government-run system oppose it because it restores free-market principles to health care – but it could do a tremendous amount of good by giving health care consumers the same range of choices people enjoy when they buy most other goods and services.

Here’s how Health Savings Accounts work. First, both health care expenditures and money deposited in Health Savings Accounts have to be made tax-deductible. Employers could then add to employees’ regular wages the same amount of money now spent on providing health insurance. This extra cash would be tax-free to the employees if they deposited it in a special Health Savings Account. They could then use it to pay for routine care – office visits, immunizations, prescriptions and other routine services. Large expenses – hospitalizations, for example, which occur infrequently for most people – would be covered by their low-cost catastrophic health insurance policies. The higher the deductible on such policies, the less they cost.

By putting health care decisions back in the hands of the consumer, the Health Savings Account concept would quickly reintroduce price competition to the health care market.

Think about it. In the June 20, 2009, issue of Saturday Briefing, I described a recent, personal encounter with that U.S. health care system. I was treated quickly and efficiently. Within five days, I had two consultations with the physician of my choice, plus an ultrasound scan and a CT scan. All sorts of life-threatening illnesses were ruled out. Once the diagnosis was made, treatment began, and I recovered quickly.

Everything was great except for one thing –I was not personally involved with any of the costs. I think I know what the physician will bill for two office visits, but I have no idea if the costs of my ultrasound and CT scans were $500 or $5,000. I was not given the option of selecting the most cost-effective means of getting the scans and really did not care because, with my excellent Outrigger insurance benefits, the tests appeared to be “free” for me except for a small deductible (co-pay), which I have yet to be billed for.

If the tax playing field for health care is leveled and if individuals have free choice of health care plans and health services as described above, everyone would quickly find out that they save money by shopping around for the best deals for every type of health care service. The free market will definitely bring down costs and stop their current upward spiral.

For proof, just look at what has happened to the prices of health care services not covered by insurance such as Lasik eye surgery and cosmetic surgery. There is true free-market competition in these areas, and prices have fallen steeply over the years. Check out the Internet for examples of the many special deals available.

Personal Responsibility
Everyone should be expected to take responsibility for improving their own well-being and making healthy lifestyle choices. Obesity, lack of physical exercise, smoking, and the use of dangerous drugs and alcohol, for example, all place stress on the human body and over both the short and long term will increase health care costs.
People who put themselves at risk should have to bear the higher long-term costs of their medical care and not shift it to others, as is presently the case where health care insurers don’t charge a premium for smokers, heavy drinkers, drug users, or the obese, even though such people are likely to require much more medical care. At present, people who live healthily subsidize the health care insurance premiums of those who don’t.

Tort Reform
Medical malpractice lawsuits add a tremendous cost to the U.S. health care bill. However, bowing to heavy pressure (that is, campaign contributions) by America’s trial lawyers, Congress and state legislatures have repeatedly failed to pass meaningful limits on medical malpractice claims and awards. This has led to a sharp increase in the price of insurance to protect doctors from the cost of such awards, which, in jury trials, averaged an astonishing $3.83 million (in 2005) according to the Insurance Information Institute. Nationwide, medical malpractice tort costs totaled more than $30 billion (in 2006), and the trend continues upward. To find the true cost of runaway malpractice suits, it’s necessary to add to these astronomical sums the costs of all the extra procedures, diagnostic tests, etc., ordered as physicians and hospitals are forced to practice “defensive medicine.”

These high costs are all built into what individuals and their employers pay for health care and health care insurance. If we are going to reduce the costs of health care, the issue of runaway medical litigation must be addressed.

So, rather than stampeding into government-run health care “reform” that will bring us lower-quality, higher-cost medical care – and, inevitably, rationing – let us look at implementing real reforms of the kind I’ve presented above. If we’re going to have change, let’s make it change for the better! ! If you agree, let your representatives in Congress – Senate and House – know how you feel.

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References on Health care Issues:

General Information

CATO Institute Health Care Website: http://healthcare.cato.org/

Articles by Michael D. Tanner

The Grass Is Not Always Greener: A Look at National Health Care Systems Around the World: http://www.cato.org/pub_display.php?pub_id=9272
How Not to Reform Health Care: http://www.cato.org/pub_display.php?pub_id=10279
Obama Doesn’t Have the Only Prescription for Healthcare Reform: http://www.cato.org/pub_display.php?pub_id=10328

Articles by Richard R. Kelley and/or Chuck Kelley

Books on Health Care Reform

Healthy Competition, Second Edition: What’s Holding Back Health Care and How to Free It, By Michael F. Cannon
The Cure: How Capitalism Can Save American Health Care, By Dr. David Gratzer

Saturday Briefing

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