Reform of the health care system in the United States is absolutely necessary. Our nation spends roughly twice the percentage of GDP on health care than many countries in the world, without noticeably different health care outcomes. Businesses and their employees are getting socked hard with health care insurance premiums, which are rising 3 to 4 times the rate of inflation. Those without health insurance flood the emergency rooms, increasing costs for all of us. Our President is right when he says that something has to be done, but more government money and control will only make things worse.
I’m not naïve; I know that I can’t spell out in detail how to fix health care, but I can set up an outline for reform in this blog. Other blogs will be necessary to fill in the blanks, but the basic premise is that our health care “crisis” has been caused by too much government, not the absence of government. Before identifying the four “Horsemen of the Health Care Apocalypse” that are forcing up health care costs, let me dispel three myths that are floating around regarding health care.
Health Care Myths
Myth 1: We need to keep the US Government out of health care. Too late; the government is already in the health care business. It’s called Medicare and it is pretty darned popular with seniors. Seniors on Medicare have a wide choice of physicians and the quality is generally good. Unfortunately, Medicare makes Social Security look like a legitimate enterprise! Medicare’s unfunded liabilities are seven times that of the Social Security system, running in excess of 90 TRILLION dollars. Every cent produced and earned in the United States for seven years would have to be paid to the federal government to pay off a $90 trillion liability. Maybe the government can run a health care system, but it’s current experiment running Medicare is about to bankrupt the republic.
Myth 2: The “Public” option will result in health care “Rationing”. Health care has always been rationed and like all scarce resources, it will always be rationed. In our current system, those with health insurance go to the doctor and those without insurance show up and wait in line at the emergency room. Public option or not, health care will always be rationed, one way or the other.
Myth 3: Health care is a human right. Nowhere in the constitution are goods and services considered “rights.” The constitution gives Americans rights to “actions” (free speech, assembly, worship, etc) but not rights to “objects” (health care, food, housing, clothing). When Government gives citizens the right to an “object”, another citizen must be forced to supply that “object.” When that line is crossed, the Government takes upon itself the role of “chief thug,” stealing from some people (via taxation) to give to others. Societal division results as producers lose incentives to create value, while recipients lose incentive to work.
John Mackey, CEO of Whole Foods Market, wrote an insightful article about health care reform that appeared recently in the Wall Street Journal. You can access that article in its entirety by clicking here:
The Four “Horsemen of the Health Care Apocalypse”
There are four “Horsemen of the Health Care Apocalypse” that are responsible for our staggering health care costs. All of them have been allowed to do so because they received “monopoly power” from Government. The “Horsemen” are (1) lawyers, (2) drug companies, (3) medical insurance companies, and (4) physicians. The only way to really cut costs in health care (and it can be done) is to subject each of these actors to more competition. This will drive costs down and make health care not just a little more affordable, but very affordable.
1) Lawyers. Tort reform is needed in health care, but the Lawyer lobby has already convinced lawyer Obama and Congress (more than half of whom are lawyers) that tort reform is off the table. Lawyers directly drive up health care costs by spiking jury awards for medical malpractice. More important, lawyers indirectly drive up medical costs by forcing medical practitioners to conduct unnecessary procedures and tests, for fear of being sued. Caps on medical malpractice awards, along with a provision that the loses in court case must pay 100% of all legal and attorney fees, would greatly reduce health care costs.
2) Drug Companies. Once patents expire on new drugs, there should be no extension of patent protection for any reason. The FDA should relax the incredibly long procedure for drug approval, lowering development costs for the drug companies. The increased risk of a “bad drug” would be far outweighed by the health benefits of millions who benefit from new drugs. Finally, hospitals, clinics, and physicians in the United States should be allowed to import prescription drugs from any country, without exception. Bans on cheap and effective imported drugs cause American consumers hundreds of billions of dollars of unnecessary expenditures each year.
3) Medical Insurance Companies. Laws that restrict interstate competition for medical insurance providers should be struck down, allowing medical insurance companies to sell their policies in any state. Excessive regulations that discourage smaller companies from entering the health insurance field should be scrapped, encouraging competition. Health savings accounts should be encouraged. Insurance coverage should be “portable”, which would make labor markets much more efficient.
4) Physicians. The American Medical Association has long encouraged monopoly power for physicians, primarily through occupational licensing. The increased scope of responsibility for nurses, physician assistants, and nurse practitioners is a good thing, but it needs to go further. Legal barriers to the establishment of walk-in clinics should be eliminated. Nurse practitioners and physicians should be able to prescribe medicines at their own discretion without the presence of a doctor. License requirements should be streamlined, allowing thousands of new nurses, physicians assistants, chiropractors, acupuncturists, massage therapists, and other health providers to compete for the consumer health care dollar. These practitioners should offer “cash” prices for services whenever possible. Medical insurance companies not making these “lesser” practitioners eligible for coverage would lose business in a competitive insurance environment.
It is my opinion that if the Congress had the will to subject the “four horsemen” to competitive pressures, as stated above, we would experience a huge increase in the variety of health care services, along with dramatic cost reductions. Furthermore, without government involvement and excessive regulations, even poor, working folks could go to their neighborhood pharmacy and receive good preventative medical care from a licensed professional on a cash basis. Private foundations and charitable organizations could heavily subsidize or grant free health care to pay for major surgical procedures, which would also be much more affordable.
The problem is that the “Horsemen of the Health Care Apocalypse” have a lot of economic, and hence, political power. They’re not easily going to let go of the economic advantages that government has given them. For that reason, I’m not hopeful that we will have any meaningful, efficient health care reform.
I’ll weigh in on this health care debate in the future with more detail. Today’s blog is only an outline of the problem and some possible solutions. For now let it suffice to say that when health care decisions are put in the hands of consumers, who are spending their own money, economic and medical common sense will prevail. The Amish in southeastern Minnesota don’t have health insurance. They have a long-standing tradition of cutting their own cash deals in advance with health care providers. When an Amish farmer needs a triple heart bypass, he goes to the Mayo Clinic and gets excellent care at a pre-negotiated cash price. I don’t know what kind of cash deal the Amish have cut with the Mayo Clinic, but I’ll wager that the Amish aren’t paying $15 for an aspirin tablet and $25 for a band aid.