Comment: Solutions to Our Health Care Crisis

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Solutions to Our Health Care Crisis

Solutions to Our Health Care Crisis
by Dr. Roger Stark, MD, FACS
Health Care Policy Analyst

The fundamental problem with the health care system in this country is its ever-rising cost. We spend 17% of our gross domestic product, or nearly $2.5 trillion, on health care each year. Most policy proposals attempt to control these expenses by imposing more top-down regulations, “better” medicine, and ultimately, a government-managed system.

Costs will continue to increase as long as each of us believes someone else will pay for our health care. Whether it is a government agency or an employer, a third party is now paying over 87% of health care costs, even as individual copays and deductibles are increasing. As long as we think someone else is picking up the tab, demand and utilization will far outstrip supply. This is an immutable economic law and it must be addressed before any reform will work.

Only when people can direct their own medical spending through a free market will costs become transparent and likewise come under control. Critics say health care is too important and too complex to be left to mere individuals. Yet health services are like any other economic activity, and because of their highly complex nature, they can only be managed through the unregulated interaction of providers and patients.

Unless patients can control their own health care dollars, reform is doomed to fail, and will lead to overutilization, uncontrolled spending, and ultimately to some form of medical rationing.

At present, there are five solutions to our current health care problem:

1. Change the Tax Code

Congress should change the federal tax code and allow individuals to deduct their health expenses just as businesses and privately insured self-employed individuals do. This would give employees the freedom to purchase their own insurance and would allow employers to decrease their overhead and offer higher wages.

Individual insurance coverage, not tied to employment, would also allow people to keep their health care coverage as they move from job to job, and state to state.

Why should an employer provide health benefits in the first place? Why not simply adjust wages upward and allow employees to buy their own individual plans? Except for retirement plans, there are very few other needs in life (like food or housing) that are provided by employers.

2. Eliminate Some State Mandates

Mandates set by state policymakers now restrict patient choice in the purchase of individual health insurance. Instead of offering people a range of choices, mandates require all individual plans to provide the same benefits and increase costs for everyone. For example, why should a 25-year-old single man be forced to pay for obstetrical coverage?

Mandates are the classic example of politically powerful lobby groups inducing legislators to include their services in every insurance policy. Washington state has 58 mandates whereas Idaho has 17.

A reasonable first step would be to allow interstate commerce in health insurance. People could then purchase any approved insurance plan from any company in any state. Literally overnight, consumers would have a huge increase in personal choices and the market would become much more competitive.

3. Reform Medicare and Medicaid

The non-partisan Congressional Budget Office reports the Medicare program is not financially sustainable in its present form. Costs are rising, the number of workers to support the program is proportionately decreasing, and the number of recipients is about to increase dramatically as baby boomers reach retirement.

We now have an entire generation that has grown up with Medicare, has paid into it, and expects something in return. We also have young people who understand the bankrupt nature of the program and do not believe Medicare will exist when they reach age 65.

The solution must account for young people and the elderly, as well as for future generations. We have a moral obligation to the seniors already enrolled in the program and those approaching retirement. Simple first steps to fixing Medicare would be to raise the age of eligibility to 68 or 70 years and to require means testing for enrollment.

Future generations should be allowed to take their individual health care insurance into retirement and not be forced into a government program. No surprise, younger people as a group are healthier than older people, so as the younger generation saves, their health care insurance nest egg can build until they need it in later years.

Medicaid, the program for poor families, is in the same unsustainable financial condition as Medicare — perhaps worse. We must care for the poor, but giving them mandated, unlimited, first-dollar coverage is both financially and ethically unsound. A voucher system allowing personal choice and a financial reward for dollars saved would be an excellent start to solving Medicaid’s problems.

States should also receive Medicaid waivers and block grants from the federal government. States could budget more efficiently with a fixed yearly amount of money rather than the open-ended entitlement of the current Medicaid program. They could also design their own innovative programs without being stopped by the federal government.

States should be allowed to return to the original income requirement of 133% of the federal poverty level for their Medicaid recipients, instead of the 250 to 300% they now use.

4. Enact Tort Reform

Nearly 20% of our health care budget is spent on the legal system through attorney fees, court costs, malpractice insurance premiums, and most importantly, defensive medicine. Medical outcomes in the U.S. are no worse, and in many ways much better, than in other countries, yet our legal system burdens doctors and hospitals much more than the legal systems in other countries.

Meaningful caps on non-economic damages offer the main solution to our current legal awards lottery.

5. Make Health "Insurance" True Risk Management Insurance

We also need to fundamentally change how we view health insurance. Instead of “insurance” paying for every health-related activity, it needs to work like other forms of risk management insurance, such as car and home owner insurance.

Just as no one uses insurance to pay for gas or to mow the lawn, we need to get away from the idea of health insurance covering all minor health-related events. True indemnity insurance should be there for catastrophes and emergencies. Day-to-day health expenses should be paid out of pocket.

An effective mechanism to do this today is a health savings account (HSA). These are being used by an increasing number of Americans. HSAs require a person or family to purchase a high-deductable catastrophic policy, but allow a tax-advantaged savings account for day-to-day medical purchases. Savings can be rolled over from year to year and can be taken from one job to another.

These five solutions offer the best way out of our health care crisis. Patients, acting as health care consumers, would demand more transparency in pricing and, just as happens in other areas of life, would force competition, improve quality and service, and drive costs down.

"I'm as mad as hell, and I'm not going to take this any more!"
- Howard Beale