- March 18, 2011
If you want to see the future of U.S. health care according to Obama-Pelosi-Reid, there's no need to look to Canada or Europe. Just look at two of America's biggest losers: the U.S. Postal Service and America's public education system.
That's what we'll be getting — another government-sanctioned monopoly that loses billions and consumes greater and greater amounts of taxpayer money, only to produce increasingly disgraceful results.
The Postal Service, for instance, is expected to lose $7 billion this year, and last week, we read one more time how American students' SAT scores dropped again. Here in Florida, it's common for 70% (!!) of our students to be unable to read at grade level.
You may want to blame parents, in part, for education failure, but many of you who have put your children through public elementary, middle and high schools also know how it's all but impossible to change the education bureaucracy. What's more, you know how that system protects its underperforming teachers and administrators.
Indeed, if required to compete in the real world, the Postal Service and public education systems would be shuttered tomorrow.
And yet, down the same path is where Obama and his cohorts want to take us with health care.
It shouldn't be difficult to see that. Nor should it be difficult to see how the results will lead, at best, to a mediocre health-care system. No one today can say honestly that the Postal Service or public schools are paragons of excellence.
And yet, Obamacare supporters are oblivious to what we'll get. What proof is there in all of the history of the United States that would lead anyone to conclude that Obamacare will bring the utopia that he and his colleagues promise — affordable health insurance for all at a lower cost and higher quality than exists today?
Bells should be bonging in people's heads when they read newspaper editorials or watch TV commercials that say we must have laws guaranteeing:
• Affordable health insurance for all;
• No denial of coverage because of pre-existing conditions;
• Annual renewal of coverage no matter what;
• Equal health insurance premiums for all (see box).
You would fire him
Who will pay for all of this? As economist Thomas Sowell told Florida business leaders at a conference many years ago: There isn't enough money in the world to pay for everyone's medical care at the levels they want and now expect.
Here's the question that Obamacare advocates should answer:
Put yourself in the shoes of an owner or stockholder of an insurance company. Your own money is invested. As such, your expectation, like any investor, would be that you would earn a fair return on your money.
With that expectation, what would you say if the CEO of your insurance company informed stockholders that the company's new strategy required that it would accept and insure anyone who applied for coverage — including everyone with serious conditions that will require large payouts for medical services? And what would you say if the CEO told you the premiums you collect will not cover all of the future medical payouts your company expects to make?
In other words, what would you say if your CEO says this new strategy will lead to one of two outcomes — either bankruptcy or requirements of stockholders to invest more and more of your money to cover annual losses?
You'd say he was nuts. And fire him.
But this is exactly what Obama-Pelosi-Reid, et al, want to do.
They won't get everything they want this first time around. But as the accompanying box shows, what we're likely to get is a lot like what exists today at the state level. As Sheldon Richman, editor of Freeman magazine, described it recently:
“This is part of the corporate-state bargain in which companies get cartel rents through protection against new competition in return for complying with various regulations that they take a hand in writing. But this would be the first time that the national government would dictate what minimum health coverage would include and other company practices. For that reason, such a law would effectively create a national health-insurance cartel. Big Insurance, which has been working with the Obama administration behind the scenes, has no problem with any of this.”
Interveners disrupt relationship
That is precisely the biggest problem with American health care — the third-party payment system, which essentially is controlled by interveners. Lawmakers thrust themselves in between doctors and patients. This gives rise to all of the special interests (doctors, insurance companies, trial lawyers, chiropractors, pharmaceutical makers, etc.) each thrusting their push-peddlers into the process to protect their portion of the health-care dollar.
This has resulted in nothing close to a free market. There is no compact whatsoever between physicians and patients agreeing on price and value as there is in, say, retail clothing or groceries.
For food and clothes, retailers present their goods and price them on the basis of what consumers are willing to pay. Consumers in turn shop for what satisfies their needs at prices they can afford.
None of this goes on in health care.
And the reason for this is the tax treatment of medical expenses. Thanks to World War II policies that capped wages, medical expenses are exempt from the income tax, a huge benefit to employer-provided insurance. Employees can pay for medical expenses with pre-tax dollars. In contrast, no one can buy food or clothes with pre-tax dollars.
Result: Medical payments are controlled by third parties — government (Medicare), insurance companies, employers and regulations. As Milton Friedman often said: “Nobody spends somebody else's money as wisely or as frugally as he spends his own.” And that is the root of why America's health-care costs are so high.
Sadly, none of the debate in Washington even hints at creating a market and eliminating the disastrous third-party payment system. It's all about expanding government power even more.
To fix the U.S. health-care system, the first place to start is to dispel myths:
Myth 1: Medical care is a right.
It is not. It's a limited and scarce resource. Just as no one is entitled to unlimited, free food or clothing, no one has a right to or is entitled to unlimited health insurance or free medical care.
Myth 2: “Affordable” medical insurance is a right.
It is not; it's a choice. Why do so many Americans have cell phones (at $150 a month), premium cable TV (at $150 or more a month) and new-model automobiles (at $400 a month), yet they say they cannot afford health insurance?
When Obama and others throw out the big numbers of the uninsured, we're expected to take this on its face that health insurance is unaffordable. In truth, it's a matter of priorities.
Unfotunately, wiping out the above myths will take the melting of a political glacier. But if Americans are indeed serious about “reforming” our health care system correctly, here are some essentials to move it toward a real competitive market so it consumes less of our income and is indeed more affordable:
• Tax equity: Eliminate the tax-exemption for employer-provided health insurance. Get corporations out of insuring employees. Companies don't insure employees' homes or autos. Why should they insure their health?
The elimination of this benefit would make consumers responsible for their own health costs and have a huge beneficial effect on the amount spent on health care. The simple reason is employees — not third parties — would be responsible for every dollar spent.
If this were done, however, one requirement of Congress would be to lower income-tax rates to offset the lost tax benefit.
In addition, eliminating the tax break would solve the portability issue. If every individual purchased his own insurance, it would go with him regardless of whether he switched employers.
• Deregulate health insurance. Eliminate the government mandates of what services must be covered by health insurance. These mandates have bureaucratized medical care and increased costs. It's ridiculous that we now rely on insurance companies to pay for every little medical visit and that patients and doctors' offices must battle over what insurers will pay for. Who hasn't heard his doctor complain about the amounts of paperwork, costs and hassles they have with insurance companies?
If deregulated, insurers would offer more and more affordable choices. Consumers could pick what coverages they want — a Cadillac plan or a simple catastrophic plan with a high deductible. As it is now, special-interest medical providers have persuaded legislators to mandate every type of service in insurance plans (see box). This shuts out consumers. They should be able to pick and choose, just as they do in the grocery.
• Reform legal liability laws. If consumers paid directly for their medical costs, doctors likely wouldn't order as many tests as they do today. Consumers would weigh the benefits before saying “yes” to every MRI. But another reason physicians order so many tests is that it's protection against lawsuits and extraordinary malpractice awards. This could be remedied if the United States adopted the English style of litigation: The loser pays all legal fees.
The above steps don't address pre-existing conditions or Medicare and Medicaid. The former should not be treated as an automatic entitlement to insurance. If left to Adam Smith's free hand, private-sector insurers would no doubt craft insurance plans that could provide some relief.
As for Medicare and Medicaid, the best reform would be to eliminate both of these welfare programs for new entrants. At the least, turn Medicaid into a voucher system that places the responsibility of how the money is spent on the recipient. Medicare for those should be converted to health savings accounts. Let consumers save for future health needs with pre-tax savings, much as they save fore retirement with IRAs and 401(k)s.
Altogether, though, with the exception of the first fix (tax equity), none of the other fixes is politically feasible today.
That doesn't mean they should be abandoned. To the contrary, they can be yardsticks in the current debate. Any legislation that moves in the opposite direction of these steps should be rejected. Thankfully, it appears the majority of Americans see and know that where Obamacare would take us is, unequivocally, the wrong way.
According to the HB 3200, an insurance company's health plan would have to offer, these features and benefits, among others:
• Covered pre-existing conditions without limit
• Accepted all applicants
• Guaranteed renewal
• Charged everyone, regardless of health status, the same premium within an area, with the exception of age and family variations defined either by the legislation or by state law
• Imposed no annual or lifetime limit on coverage
• Was “equivalent ... to the average prevailing employer-sponsored coverage.”
• Outpatient and emergency services
• Professional services
• Incidental services, supplies and equipment
• Prescription drugs
• Rehabilitative and habilitative services
• Mental-health and substance-use disorder services
• Preventive services, such as physical exams, mammography and colonoscopy
• Maternity care
• Well-baby and well-child care
In addition, the bill would create a Health Benefits Advisory Committee, a public-private panel of experts who would recommend covered benefits and essential, enhanced features.
Bottom line: This is similar to what state governments require, only more mandates. All of which equals higher costs. And that money must come from somewhere. — MW