WASHINGTON, November 30, 2013 – With the failure of Obamacare looming, it appears that some ideas for a true reform of the American health care system are again on the national agenda.
There are at least three aspects of the issue on which most people can agree:
Each of these factors will be dealt with in three separate articles, beginning with some ways to reduce the costs of health care.
Consumer driven health care
A look at cost reduction quickly shows that one of the key considerations in reducing the costs of health care is competition for the consumer’s dollar, not only between insurance companies, but also between health care providers In his careful study of health care reform literature, Heritage Foundation’s Kevin Dayaratna uses the term, “consumer driven health care”, to describe a system where the costs of health care are shared directly by the consumer (“Competitive Markets in Health Care: The Next Revolution”, Heritage Foundation”, August 19, 2013).
As prime examples of this system, Dayaratna cites Medicare Part D, which has shown significant reductions in the cost of prescription drugs, and the Federal Employees Health Benefits Program, initiated by Congress in 1959 for federal employees. It appears that consumers become more cost-conscious when spending their own money.
As Dayaratna points out, competition also incentivizes health care providers to create and offer many innovations in prevention and treatment products.
To adopt this system of patient-centered pricing of health care, costs would have to be transferred from employer-provided coverage to an individual-based coverage. The choices of providers, insurance and co-payments are then left to the individual.
This reform allows many natural groups to get into the health insurance coverage business – churches, cities, clubs, non-profits, banks, credit unions, and many others. It also treats each citizen as an individual and not as a piece of an employer.
In addition, this reform not only takes the burden of paying for and administering health insurance away from companies – a significant decrease in overhead costs to the employer — but contributes to reductions in the costs of the insurance for everyone – the carriers, the insured, and the regulators.
This reform requires legislation to shift the tax exemption for health insurance from companies to individuals.
Nationalizing insurance companies charters
There are many restrictions in the current system which require insurers to limit the pools of insured over which they can spread the risks of various types of ailments. Underlying these restrictions is the fact that insurance companies, since 1945, have been regulated by the States.
These State laws not only limit the eligibility of pools according to a multitude of conflicting local requirements, but also sharply increase the costs of doing business for a national company, which must then provide fifty separate infrastructures to support its business.
In reality, many companies either cannot or choose not to compete in many of these jurisdictions, leaving a number of States and specific populations, such as inner city and rural areas, at the mercy of a virtual monopoly, or with no coverage available at all.
A notable model for this reform is the Federal Employees Health Benefits Program which covers the federal workforce. The entire federal workforce, which spans all the states in the Union, presents itself as a single pool – or “market” in business terms – and invites all qualified insurance companies to bid for its members’ business.
The pool sets up certain requirements which must be met by all bidders, assuring that the entire population receives a high minimum standard of care, including elimination of a number of unfair burdens imposed upon the insured by the present system. Employees are free to choose from available insurance plans. There is never a shortage of bidders.
How can this cost factor be reduced?
The answer is federal legislation to allow federalizing the charters of certain insurance carriers (like federally and state chartered banks) , and allowing any group of citizens which cares to do so, to organize into a large pool.
Another factor increasing costs is liability insurance. The specter of lawsuits hangs over the American health care like George Orwell’s’ 1984 Big Brother. It affects every aspect of the process. To start with, a typical physician has to pay at least $200,000 per year for liability insurance before he can even open the door to his practice.
Then, he – and all other health care professionals – must practice “defensive medicine”, meaning that they must perform every possible therapeutic act in anticipation of defending themselves in a lawsuit. This drives up costs in the form of unneeded tests, dangerous delays, and unnecessary referrals.
This combination of factors has driven American physicians out of the practice of medicine, to the extent that we are facing a serious shortage of physicians and surgeons and other medical professionals.
This has to stop.
It is true that there cannot be unlimited trust in any group of people, whether doctors, teachers, clergy, coaches, or hospitals. But neither can they be expected to risk unlimited liability in order to do their jobs. They will – and have – voted with their feet, and done irreparable harm to the rest of us by doing so. There have been many proposals over the years to remedy this situation. All have been defeated by the trial lawyers who have made billions of dollars from this litigation. Only they have benefited; the rest of us have suffered greatly. The basic answer seems pretty clear:
The law should punish medical professionals and institutions only for malicious intent, culpable negligence or incompetence. Then the penalties should be set by law. No more windfalls.
In summary, there are at least three federal laws that will help reduce the cost of health care in America:
Legislation to shift the tax exemption for health insurance from companies to individuals.
Legislation to allow federal charters for insurance carriers.
Legislation to punish medical professionals and institutions only for malicious intent, culpable negligence or incompetence. Then the penalties should be set by law. No more windfalls.
Next: It is clear that the American system at its best is indeed the best on earth. But it is not always at its best. Certain common sense deficiencies stand out…
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