In her column, Cody points out that there really isn't a problem with health care per se, most people are happy with the actual care they receive. (Since I just spent two and half days in the hospital with my wife having a new baby, I agree wholeheartedly. The staff and facility at St. Luke's birthing center in Cedar Rapids were first rate.) Cody says the real problem is with the cost and complexity of the insurance system that has grown up around health care.
Among the flaws of the current insurance regime, Cody points out:
- "Insurance policies are expensive because competition is restricted -- individuals must buy policies in their own state."
- "Each state has long lists of mandated coverages for things consumers often don't want or need, which makes insurance so expensive that many must go without coverage entirely."
- "Tax policy encourages reliance on employer-provided insurance, leading employees to stay in bad job situations merely to keep their insurance."
Since these three main forces driving up health care costs are created by the government itself, is it likely that the government will be able to reduce health care prices? I cannot, for the life of me, understand the faith that many people have that the government can do so, when every other program administered by the federal government is either a wasteful disgrace or teetering on insolvency or both.
Cody lists some of the other side-effects of government health plans, including waiting lists, doctor shortages, lower survival rates, and discrimination against elderly, minority and rural patients. She recommends reading the Cato Institute's policy analysis "Health Care in a Free Society" for more examples. (I would also recommend a shorter Cato article "Obama Doesn't Have the Only Prescription for Healthcare Reform.")
So what can be done to reform the health insurance industry? Cody recommends four mostly market-based reforms:
- "Allow people to purchase insurance from any state -- this will lead to more competition and much lower rates."
- "Repeal corporate deductibility of premiums and replace it with individual tax credits. This will sever the unhealthy relationship between employment and insurance, empower individuals and lead to more individual plan competition and lower rates."
- "Allow insurers to charge less to policyholders who practice healthy habits -- this is mostly illegal now, incredibly."
- "Reform medical malpractice laws, which will make health care itself less expensive."
These all certainly make sense and would be helpful in making health insurance less expensive, but it would be nice to see some reforms that lessen or eliminate the need for health insurance altogether.
Food is as much a necessity as health care, yet we don't have some elaborate, overly-complicated, often senseless system to pay for it. Imagine having to pay a $25 co-payment every time you made a trip to the grocery store, whether buying ramen noodles or veal chops. Broccoli might be "covered" while cauliflower is not. It would be utter nonsense, yet we think it makes sense for health care? So long as health care consumers rely on a third party to pay the bill, prices will continue to be out of whack with reality.
If, like food shoppers, health care consumers knew exactly what price they were paying and had to pay out of their own pockets, competition would soon drive health care prices down to the lowest sustainable level. Tax exempt "health savings accounts" are one small step in that direction. Abolishing the income tax, which has so perverted market incentives in health care (as well as everywhere else) would be even better. Well, I can dream.
Barring "radical" reform like that, Beth Cody is certainly right, a market-based health insurance industry would be infinitely better than any government-run program. Unfortunatly, that doesn't appear to be the way the political winds are blowing.
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I have two problems with the health care/grocery store analogy.
ReplyDelete1. The average consumer can pretty easily look at their budget and decide whether dinner will be steak, hamburger, or beans. It's a little more difficult to know if a crippling headache is a harmless muscle spasm, or the first signs of something more serious. If you are paying for each medical procedure out of pocket, the temptation is to forgo preventative care, or to ignore a condition until it has developed into something more serious, and more difficult and expensive to treat. The consequences of making a bad choice are a little more serious than in the grocery store. (And actually, most of us make some pretty bad choices at the grocery store, too. Ice cream often wins out over broccoli, at least at my house.)
2. The U.S. consumer has no idea of the actual cost of the food they are buying. Food costs in the U.S. are heavily subsidized, unless you are able to get it directly from a local farmer. Most products in the grocery store are byproducts of corn and soybeans (think corn-fed beef, high fructose corn syrup, and soy lecithin, etc.) These crops have been subsidized by the government for decades, making the prices artificially low. True to your idea of the government messing everything up, this leads farmers to grow corn and soybeans exclusively and livestock producers to feed cattle corn when their digestive systems were actually made to process grasses. While the price tag in the store may be clear, the environmental and public health costs are not.
Thanks for your kind review of my op-ed in your blog.
ReplyDeleteI fully agree with you that we should not need to rely so much on health insurance to pay for health care (the two are not the same, contrary to what some say repeatedly).
Only having 700 words to recommend a fix for the entire health care system, I had to cut out my earlier editions concerning this, but I do believe that my recommendations were consistent with this: that if people were allowed to buy any type of insurance from any state, that they would naturally and without government prompting (through HSAs, etc.) come to see the merits of High-Deductible Health Plans (HDHPs).
My family has had an HSA HDHP for several years now (albeit after the births of our 2 children), and we pay about $4K a year, vs. the $12K we would be paying for traditional insurance. Even if we were to meet the total year deductible of $5K (which we have not come anywhere close to for nearly 4 years in a row), we still would come out ahead (we have access to small business loans for emergencies, should one happen.
I believe that for any high-ticket risks (house, auto, health) we do need insurance (pooling risks is one of the great financial innovations of the modern age). But most health "insurance" isn't just insurance --but rather employer-prepaid health plans.
How much would auto insurance cost if it included oil changes and other routine maintenance expenses? We shop around for maintenance work, as we should for health maintenance expenses, because we should pay them out of pocket.
The key is more freedom and less government (and fewer employers) involved in health care. Patients unite!