A Modest Health Care Proposal

A not so Modest Health Care Proposal
I always wanted to write my health care manifesto :) first draft was a bitch.

As far as national insurance plan being cheaper it seems unlikely. The incentives for efficiency are inverted in bureaucracies. If you decrease your budget your budget is reduced next period while if you increase your spending you may show increased budgetary needs and get an increase in budget. There is also the lack of pricing mechanisms to measure efficiency requiring a rather inaccurate estimation of efficiency. The purpose of a bureaucrat is the maintenance and growth of the bureaucracy. Even the final given prices are extremely inaccurate. For instance the government when determining the cost of programs fails to take into account any and all administrative fees inherent in the collection of taxes. As surprising as it is to some people it costs money to collect money. These account account for 10% or more and therefore increase the cost to taxpayers that use these tax sources by 11% or more. The governments estimations also fail to take into account any and all supporting and supplementary resources. For instance In the District, the spending figure cited most commonly is $8,322 per child, but total spending is approximately $24,600 per child. The commonly cited figure counts only part of the local operating budget. To calculate total spending, we have to add up all sources of funding for education from kindergarten through 12th grade, excluding spending on charter schools and higher education. For the 2008 year, the local operating budget was $831 million, including relevant expenses such as the teacher retirement fund. Add another 11% and you arrive at over $27,000 per pupil. All of these expenses are necessarily taken into account by private businesses like private health insurance companies. Actual costs to taxpayers are over 225% higher then the stated cost of $8,322. Often actual stated costs are two to three times estimated costs. Taken together if the government says it will cost 1 billion dollars if it is implemented they will almost certainly state that it ended up costing 2-3 billion and it may actually cost the taxpayer 6-9 billion. These are just examples but the idea that the government is going to be able to overcome the estimated 20-30% profit, they chose the some of the highest estimates, by increases in efficiency seems rather insanely idealistic given the accuracy of their past estimates.

Now if you wanted to add social insurance for those going through difficult times or for the those unable to pay for basic health care given these greatly reduced prices you could use a health care voucher program using a similar gradual compensation model, the less you make the more you get the more you make the less you get. For instance you make less than twenty thousand you get $3,000 a year to spend on health care as you see fit. With longer term catastrophic health care insurance extremely affordable you would be able to continue to pay for the continuation of current insurance and pay for common expenses as you see fit, dental, vision, acupuncture, aromatherapy etc. This simplicity would allow for the full freedom of the market, you get to spend the money on health care in the most efficient manner you can, and reduced regulatory burdens and expenses.

Medicaid and Medicare increase the cost of health care by forcing businesses to accept lower compensation for goods and services than they would otherwise in a free market. By removing the patient completely from payment you invite overuse of medicaid and medicare. The loss of compensation is passed on the other patients in the form of higher fees often paid for by insurance companies. Those small businesses that can't afford the loss inherent in medicaid and medicare opt out and refuse to accept them. This has been and increasing problem in medicaid and medicare patients as fewer and fewer hospitals and doctors accept them. Sometimes patients have to drive hundred of miles to receive care because that is the closest hospital that accepts medicare and medicaid patients. By forcing the treatment of all who show up at emergency rooms without regard to their ability to pay you force both the doctors on duty and the hospitals they work in into a difficult situation. People overuse the emergency room if they don't have to directly pay for it, either because they have medicare or medicaid, contemporary insurance, or have no ability to pay at all. The doctor on duty must legally treat the patient in the emergency room regardless of the number of hours the doctor worked, their regular schedule previous plans etc. and the hospital must treat them regardless of whether they need emergency treatment or not. Some indigent people use the hospital emergency room as a source of free food and lodging while others use emergency rooms when there was no emergency, simply because of impatience on their part. All this increases the use of facilities, increases costs, and decreases their profitability. Many emergency rooms have shut down because the hospitals couldn't afford to keep them open. Eliminating Medicare, Medicaid, would further reduce the cost of health care and eliminate much of the waiting in the emergency rooms. This coupled with insurance reform like those mentioned above would result in further decreases in emergency room usage, again this was seen to happen with conceptually similar health insurance plans.

Of further note is the absence of the cost of regulation directly payed for by the taxpayer. Regulation requires regulators and with the incredible breadth and depth of health care regulations, from procedures and drug regulation, to health care workers and insurance regulation we pay literally billions to enjoy increased bureaucratic inefficiency.

By eliminating Blue Cross and Blue Shield, or at least removing their tax exempt advantage, we would remove what was the initial impetus for the change in the "health insurance" definition. Remove the tax exempt status of health benefits and we remove the incentive, or mandate, for businesses to offer a disproportionate portion of compensation as health benefits and gives people back their money to pay for their own health benefits efficiently, or pay for whatever they want. Remove mandatory federal and state insurance additions and restore health insurance to its traditional role. Catastrophic health care would still be covered but With higher deductibles hospitals will be forced to compete with one another on pricing for the vast majority of health care without the interference of insurance companies or the state. Common health care services would go down in price with the insurance companies removed from the equation. There are examples of hospitals that don't accept any insurance charging much less than half the cost and publishing prices on cards and on the internet for easy comparison. Sometimes these insurance less doctors charged literally pennies on the dollar. Again this isn't hypothetical there are actual examples of this cost reduction. With federal and state regulation decreased as well as the removal of most of the mandatory health insurance additions companies could offer truly affordable catastrophic health insurance that would promote health by offering incentives for preventative care. They could offer discounts for exercise, nutrition, bmi, fat percentage, cholesterol, and other healthy lifestyle choices. If health care were offered in a similar fashion as term life insurance people could pay for 10 or 20 year catastrophic health care plans at very affordable rates, and with the separation of health care from employment it could follow you around indefinitely from job to job increasing career mobility. Health insurance plans that offer catastrophic coverage with a cumulative yearly general health stipend have had fairly impressive results in decreasing health care costs and is somewhat indicative of what would happen with a more radical but conceptually similar catastrophic without health insurance tax exemption and increased discretionary compensation model.

If national health insurance is supposed to reduce costs through large scale bargaining then it should work for private insurance companies. If increased use of information technology should increase efficiency, then removing privacy limitations on private insurance companies should allow them the same benefit. If offering a simple plan, without addons, for everyone reduces costs remove mandatory addons and it should work for private insurance companies. In fact almost all the cost cutting strategies congress is debating for a national insurance plan are denied private insurance companies. If these strategies are sound they should work for private insurance companies and they should be allowed the chance to try them. It these strategies are denied private insurance companies for ethical reasons then there is little reason to assume these moral qualms should melt away when politicians are involved.

On top of the onerous federal regulations that necessitate insurance bureaucracies, which necessitate hospital bureaucracies, every state adds further requirements in the form of additions on all policies. These can, and do, include such things as personal trainers, dietitians, councilors, but also yoga instructors, aromatherapy, chiropractors, hydrotherapy, acupuncturists, and other more nontraditional, and other efficacy questionable, medical treatments. All told there exist over 1900 additions in all 50 states. Where there are more additions there are fewer policies, fewer health insurance companies. and there premiums are higher and where there are fewer additions there are more policies, more insurance companies, and their premiums are lower. If you have close to 50 additions to all insurance policies all the policies begin to look the same and the selection decreases accordingly. If you only want simple catastrophic coverage you still have to pay for the additions, the majority of which you may never use, and still be forced to pay for them. These mandatory additions are often political favors to special interest groups at the expense of the consumer.

Many states legislate that employers offer health care. This reduces discretionary compensation and places many personal health care decisions in the hands of employers who are often simply unable to make the best decisions for all of their employees. Employers must decide on a health care plan, or small selection of plans, that is appropriate for the majority of their employees and at a reasonable price. What is appropriate for one employee is often inappropriate for another so the limited selection is inherently inefficient at providing the most appropriate care for employees. Since group plans are inherently somewhat homogeneous many end up paying for much more than they would have otherwise because they receive specific coverage they would not otherwise have purchased. Those who would have on their own purchased more comprehensive coverage are often unable to have it provided by their employee without additional supplementary policies further increasing the inefficiency. They must try to be fair with the coverage provided but with the knowledge that health insurance comes at the cost of discretionary compensation, i.e. wages and salary.

Because the consumer is so distanced from the payment of health care most don't have a clue as to how much their paying for their health care until they receive a bill from an insurance company or hospital. And most are forced to go to certain doctors covered by their insurance. The cost of health care is largely determined by the insurance company and the hospitals and doctors willing to accept them. Without this essential cost information there is no free market to speak of, its barely a market at all. This is why hospitals recommend more tests and prescribe more medication when insurance is paying. There is no pricing feedback model in place. Price is divested from the discretion of the consumer.

Before blue cross and blue shield health insurance helped relieve the burden of catastrophic injury or medical crises. Essentially it had a large deductible but with a large maximum payout with few limits. Blue cross and Blue shield, which were created by the medical community to ensure demand and prices for their services, gained special tax exempt status by guaranteeing some basic procedural expense coverage while guaranteeing a set price for all individuals. During WWII when wages where limited by the government businesses instead increased benefits. Later health care benefits became tax exempt. The tax exempt status of benefits makes an increase in benefits more cost effective from the employers perspective and increases the power of insurance companies. As a side note when all benefits are included compensation via wages and salaries of the middle class have not stagnated but have continued to increase at a slow rate. Blue cross and Blue shield put traditional medical insurance at a terrible disadvantage. To compete with blue cross and blue shield insurance companies where forced to add basic procedure costs to their plans and when health insurance became tax exempt and when health benefits increased the metamorphosis of traditional health insurance into current "health insurance" became complete. Since so much of our current compensation is in the form of health benefits this reducing job mobility. By placing so much of health care in the domain of insurance companies you almost completely eliminate pricing information from the market and severely limit liquidity.

After health insurance became a major component of health care it increasingly became regulated by the government. Insurance companies providing health insurance where forbidden to provide it on a national and international scale. This limited there diversification, size, and power and thus thier ability to negotiate better deals for their customers. The insurance companies where forbidden to deny anyone care regardless of preexisting of current conditions limiting their ability to avoid extreme costs but also their ability to use pricing incentives to encourage healthy behavior. The limit on discrimination based on preexisting or current medical conditions doesn't discriminate between hereditary, genetics, and act of God medical conditions and malnourished, obese, sedentary, lifestyle choice discrimination. Without the ability to discriminate no incentives are in place for cost effective preventative care? Why should insurance companies pay for preventative care, extra checkups, dietitians, nutritionists, trainers, counseling, or other methods of prevention when the benefits to the insurers are so limited? Why should the insured act responsibly when they know they can not be turned down and when their premiums are set regardless of a healthy lifestyle choices? When the twenty year old health nut pays the same as the 80 year old alcoholic octogenarian smoker there is little incentive for healthy behavior from the insurance companies or their consumers.

Drugs shouldn't be forced to go through such an unnecessarily grueling FDA approval process when there are better more statistically advanced techniques that require smaller sample sizes that can avoid the years and hundred of millions of dollars for a drug to be either approved or rejected. Even after approval the efficacy of a drug isn't truly known until sometimes years after its release and during the approval process the people it could be helping don't have access to what could be a life saving drugs. Upon the approval of new heart drug, I can't remember its name, by the FDA the drug company stated that the drug would probably save 10,000 people a year. The drug took 5 years to approve. If the drug companies claims where true that means some 50,000 people died waiting for that drug. If a hundredth of that number of people died from side effects the drug would be recalled and the drug company would be held liable for their deaths in a major lawsuit. If it was reduce to one year 40,000 people would have been saved. Drug companies would still be held liable for deaths and medical conditions associated with their new drugs just as they are now. This liability, if enforced as it should be via current laws, would be a sufficient deterrent against the premature release of new drugs. The reduction of, if not elimination, of the FDA approval process would result in lower expenses for drug companies and lower costs for consumers. The number of new drugs released every year would increase and there efficacy would be more quickly determined. This reduction in expenses would also remove much of the incentive drug companies have in avoiding the five year limit on patent protection before generic competition. If this five year limit was enforced as it should be generic competition could reduce costs further. As a side note if doctors where forced to divulge whether they are getting paid to recommend certain drugs by drug companies people would know about any possible conflicts of interest, basically the same way people who recommend investments often let people know if they currently own the stock or would benefit from its purchase. This same disclosure of possible bonuses for certain procedures would allow the revelation of just how common of conflicts of interest are and currently unaware of this patients are. If doctors and patients where a little more aware of conflicts of interest, and their possible liability, the incentives would shift towards less prescription and more generic prescriptions. The idea that in law a conflict of interest is deemed a liability but in health care it is somehow appropriate is at least perplexing and at most truly abhorrent. If you know about all the possible generics available for brand name drugs we could further reduce costs. Reduced FDA regulation would also result in smaller more efficient drug companies by avoiding the size necessary to accommodate the regulatory bureaucracy. MD salaries without procedural or drug company bonuses would be nice but that is more of a business organizational recommendation than political.

I wasn't advocating the elimination of a free market only indicating that what we have now in no way resembles one. I am actually in favor of free market solutions.

We could eliminate the "Medical Industrial Complex". By taking away any and all special privileges that doctors, physicians assistants, nurses and any and all health care providers posses via law as opposed to there specialized training we could increase the supply of the health care community and the number of viable health care solutions. Medical schools artificially limit the number of health care providers, many programs must decide between applicants with perfect GPAs and differentiate based on extra curricular activities, charity work, the strength of letters of recommendation, creating an artificial shortage and increasing medical costs while the limited number of slots ensures the costs of health care providers educations stay high. Allow people to decide for themselves if they want to go to an MD, PA, RN ect. after all it has been estimated that a RN is capable of correctly diagnosing and offering treatment options over 90% of common ailments, and that a PA is capable of diagnosing and treating over even more, and you would still have access to general practitioners and specialists, but allow people to decide for themselves the appropriate level of care and expense they wish to receive without having the government mandate it universally on a federal level without regard to the specifics of individual peoples medical situations. If they deregulated much of this there would be more health care practitioners and a more fluid use of them. Eliminate the FDAs ability to determine what is and is not appropriate for an individual adult to take into their body and the MDs current positions as drug dealers. Many doctors readily admit to getting their information about new drugs by reading drug company created literature very similar to what is available to the public. It makes very little sense for a person who is close to 99% sure about a recurring illness, or any illness or medical condition for that matter, to be forced to consult with a doctor to be prescribed set of drugs or perform simple procedures, or be forced to go to a "qualified professional" when a shoot is required or intravenous drugs. The people who draw blood from you probably have a GED or high school diploma and a few hours of training, diabetics administer their insulin on their own, you can read the same information on medication available to your doctor on the internet, its use for treatments, side effects, and drug interactions. This deregulation would increase the supply of qualified health care practitioners while increasing the efficiency of their use and decreasing their demand. You could again have the local MD and nurses before such arduous regulatory burdens changed historical averages of 90% of medical establishments where small and 10% where large now it is inverted where 90% are large and 10% are small. The regulatory burdens create health care efficiency of scale that aren't inherently health care related only bureaucratically related. Again this is about choice if you still want to go to an MD for every little scrape and bump then you would have that freedom to do so but you would also have the freedom to go to an PA or RN or treat yourself as you see fit. As a side note many of the countries that supply national health care limit access to MDs because MDs are rare and to control costs patients instead go to nurses for simple ailments or conditions.

Politics has distorted words like "insurance" and "free trade"to the point of requiring a PC dictionary to facilitate basic communication. If health insurance worked like insurance should, according the actual definition of insurance found in dictionaries, costs would become apparent and the free market could work. But without any feedback on prices there can be no free market. Accurate and timely information as well as liquidity are necessary criteria for a free market to work. The current path of greater obfuscations and greater interference remove both of these components. So whether you are for or against a free market solution for health care don't mistake this mishmash of regulation and legislation we currently have for a free market. We have two basic opposite health care reform options. Add or subtract. Do we try to eliminate information and access interference, often caused by health insurance, and restore a free market or do we eliminate the need for a free market by nationalizing it?