Category Archives: Health Reform Goals
WE DON’T NEED AN INDIVIDUAL MANDATE TO BUY HEALTH INSURANCE: PART 2 – WHAT THE SENATE AND HOUSE BILLS MISS
People will game any economic system for their own benefit—whether medical care or anything else. It is this characteristic human behavior that makes markets thrive while assuring that no alternative, centrally-controlled mechanism will ever match markets’ ability to optimize the creation and distribution of economic goods. The necessary rules and top-down decisions that govern centralized systems can never be sufficiently detailed or flexible to match markets’ indescribably complex and dynamic interactions among millions of consumers, producers, and intermediaries—each gaming the system for his own advantage. No one really understands why this emergent property of human behavior works, but it does.
Thus, we should always seek minimally regulated market solutions for creating and distributing economic goods, even—or especially—in the presence of market failure. Accordingly, enacting health reform to correct the health insurance market failure requires setting up a new regulatory and safety-net framework that reforms the system to allow everyone to purchase (or not) affordable individual insurance while preventing people from killing the market with free-riding adverse selection.
A key requirement of the House and Senate health reform bills is that all Americans without employer or government coverage must purchase health coverage through a new insurance exchange. The reason is to avoid the ravages of “adverse selection” by “free-riders” who wait until they get sick to buy insurance and thereby bankrupt the system. This free-rider problem is at the heart of the market failure I’ve written about that prevents universal access to necessary, affordable health insurance.
In effect, insurance mandates are a required license to breathe. The often heard argument-by-analogy is that it’s no big deal, because we already require drivers to buy auto liability insurance. But driving is a privilege subject to reasonable public safety regulation and comes with the right to abstain—as 100,000,000 non-driving Americans do. Everyone breathes. Also, mandatory auto insurance is to protect the victims of drivers’ mistakes, not the drivers themselves. Car insurance mandates aren’t just irrelevant but also ineffective—14.6% of drivers still don’t buy it (similar to the 15.3% who lack health insurance).
The raging health reform debate on the public option has sucked all the air out of the room on the central question that we should be addressing: How can we fix the insurance market failure that prevents everyone from buying affordable health insurance that covers all medically necessary, otherwise unaffordable care?
The current House and Senate health reform bills try to accomplish something like this by creating an insurance exchange that allows the uninsured to buy coverage (and by expanding Medicaid). But they do nothing to correct the overwhelmingly dominant employer- and government-based programs that constitute the real looming train wreck.
In theory, an exchange or similar mechanism that allows universal insurance access is not just a good idea, but an essential one. But it must be open to everyone, regardless of employment status or eligibility for government coverage. Properly structured, it can be the critical component for achieving an effective, sustainable health insurance and medical care delivery system. Neither of the shortsighted, overreaching congressional bills will yield this result.
The new breast cancer screening guidelines released last week, along with the supporting study, are among the most disputatious medical recommendations in recent memory. Critics on the right charge government rationing, while those on the left suspect an insurance company conspiracy to cut essential coverage. Adding gasoline to the fire is the even more heated health reform debate that has led its combatants to hijack the mammography issue to bolster their own particular views, pro and con.
To get past the politics, I read the study. It is hardly a page turner, but it’s a credible scientific analysis of the available data on breast cancer screening. A key question it addresses is how effective mammography is for women under age 50—an issue that has ping-ponged back and forth across the medical policy community for four decades. In this latest volley, the U.S. Preventive Services Task Force (USPSTF), citing the study, recommends “…against routine screening mammography in women aged 40 to 49 years.” But then it equivocates with, “The decision to start regular, biennial screening mammography before the age of 50 years should be an individual one and take patient context into account, including the patient’s values regarding specific benefits and harms.”
THE PROPER ROLE OF GOVERNMENT IN HEALTH CARE REFORM – PART 3: HOW REGULATED CONSUMER MARKETS WILL SUCCEED
In Part 1, I describe the market failure that has caused all the major problems in our dysfunctional health care system. Part 2 recommends straightforward government regulatory reforms that will correct this failure. Now, Part 3 describes how these market reforms will allow all Americans—finally and sustainably—to get their necessary health insurance and high-quality medical care at less than half of today’s cost. This is not deregulation of health care, but enlightened re-regulation to correct a fundamental market failure that the government and economists have ignored for decades.
The key action is to place America’s consumers firmly in charge with the money and the authority to make their own purchase decisions from insurers and medical providers that will be forced to actively compete with better value—higher quality, better customer service, and lower cost. This also makes consumers responsible for living healthy lives or else paying higher premiums if they don’t.
I wrote in Part 1 that medical care is an economic good. More specifically, it is a consumer good delivered directly to patients, primarily in the form of services. Experience has taught us that the most effective, efficient, and fair way to create and distribute consumer goods and services is through open consumer markets that allow each customer to determine a product’s value before deciding whether to purchase it with her limited available funds. Such value assessments require consumers to consider the answers to two fundamental questions:
- Which sellers’ are offering me products and services that will provide the best quality for my needs?
- Of those best sellers, which offers the lowest price?
In (slightly) technical terms, value equals quality divided by price, meaning that the higher the quality and/or the lower the price, the higher the resulting value. The challenge in getting higher quality, lower priced health care, therefore, lies in creating a consumer market for it. Actually, it means creating two markets, one for health insurance and one for medical services. But if we do the insurance market right, the second will naturally follow.
As a proponent of market-based health care reform, I’m often accused of believing that free markets will cure what ails our broken health care system and that we just need to get government out of the way to make it all better. I believe no such thing. And I almost never use the term “free markets.” It too often connotes that markets can operate in the absence of government regulation. That’s not how it works.
I understand why so many people believe in “free” markets, because markets themselves are a natural phenomenon arising from fundamental human behavior. Certainly no government ever invented them. Markets just happened, because people want things they lack, and they have found they can get them in return for their own labor and produce. No one really understands why markets work, because they are such indescribably complex, nonlinear, adaptive systems. But somehow they do. They’re messy as hell, but they perform well enough to allow a paraphrase of Churchill’s famous comment on democracy: Market capitalism is the worst form of economic organization—except for all the others that have been tried.
There’s a common delusion making the rounds of Congress and The New York Times that says we must force employers to pay more of their employees’ health insurance costs in order to reduce the workers’ financial burdens. The problem is that employer insurance payments are simply one component of total employee compensation. Arbitrarily increasing this part will necessarily cut the funds available for wages and salaries. Mandating such behavior would constitute nothing less than an enforced reduction in worker pay for a government-favored use, i.e., to support a wasteful, inflationary, mediocre-quality medical system. Any way you cut it, the employer mandate burden would be borne squarely by America’s workers under the disingenuous guise of employer responsibility. Every reputable economist knows this. So do our cynical, dissembling members of Congress.
They would have us believe that the modern philosopher’s stone called legislation will magically make one plus one equal three. That’s the essence of the two Senate health reform bills and the House’s own 2000-page orgy of excess (HR-3962) that would exact penalties from employers that don’t provide enough health insurance.
The raging health reform debate has completely obscured recent disclosures by some medical providers of shocking information that has long been held among their most closely guarded secrets: their prices. These innovators are responding to the rapid four-year growth of high-deductible health plans that incentivize consumers to demand cost-effective solutions for their medical problems. Stated simply, a lot more patients want to know the prices of medical services before they buy them.
I recently discovered one striking example of this trend that promises an entirely different and brighter future for American health care than the one currently fermenting its way through the legislative bowels of our nation’s capital. It is the website for The Surgery Center of Oklahoma in Oklahoma City. Click on the link and see something extraordinary: a leading-edge medical facility that actually tells you its prices up front—but only for patients who pay them in full and in advance. Otherwise, if you want the Center to bill your insurance company and fight through its bureaucratic layers for uncertain payment at some distant time, the price will be higher.
Thursday’s (10/08/09) much heralded CBO report telling us that the Senate Finance Committee health care reform bill will cut the federal deficit by $81 billion over the next ten years is a diversion at best and accounting fiction at worst. Any way you slice it, this health reform bill is going to cost you more.
First of all, any second year accounting student could drive a homecoming float through the loopholes in the CBO’s numbers. Just one example: the analysis includes ten years of increased government taxes and fees, but only six years of health reform expenses. It also assumes that Medicare will cut Medicare doctor fees by a whopping 25% in 2011 and then make below-inflation-rate adjustments after that. The reality is that the Congress has scheduled cuts every year since 2003 but has cancelled them all at the last minute in the face of massive physician lobbying. But what if this time is different and these cuts actually do go through? If past is prologue, then doctors will simply intensify what many have already done in the face of Medicare’s increasingly punitive reimbursement rates: