Two weeks ago in this space, we presented counter-arguments to the politicians and others who say Florida should take billions of borrowed federal tax dollars to expand the state's Medicaid health system to uninsured Floridians.
This week, we're focusing on an alternative.
Before you get to the details, though, no matter what alternatives anyone presents — even if they make common sense, are affordable and compassionate — they are an exercise in futility. Their adoption is unlikely because of two overriding reasons: The members of Congress do not have the political will or courage to do what must be done, and the vested interests in the status quo (namely the bureaucracies built up around this system) would undermine its reform.
Nonetheless, it's still worth offering an alternative, if for no other reason than to mute people like Sen. Harry Reid, who often says no one offers alternatives to the Affordable Care Act.
So let's start with two questions in Florida's debate about expanding Medicaid:
• What is the problem to be solved?
• What is the job to be done?
To an extent, these questions are one in the same. The job to be done and problem to be solved with the Affordable Care Act was to reduce dramatically the number of Americans who do not have health insurance. The job to be done was to figure out how to get more Americans to buy health insurance — for the primary purpose of their avoiding a financial catastrophe in the event of illness.
In the land of Obama, Pelosi and Reid, the answer was simple: They would make laws to force all Americans to buy health insurance. And this would be insurance the federal government would manage and oversee, decide the prices, as well as the medical services that would be covered in this centrally controlled insurance system.
Thus, one of the methods to this achievement would be to require states to open up their Medicaid health care systems beyond their historical scope of providing for the financially needy and poor. Loosen the standards so more uninsured Americans could qualify for taxpayer-subsidized and financed health insurance. That was their answer.
In Florida, about 3.3 million residents are on Medicaid; Floridians contribute $21 billion a year to their health care. If Florida expanded Medicaid under ACA, the rolls would expand by an estimated 1.6 million.
When we think of this desired expansion of government-controlled health insurance and health care, it reminds us of the way the late economist Milton Friedman described the nation's health care system in 1992. Friedman said Medicaid (and Medicare) represented “the theory of bureaucratic displacement,” which was coined by a British physician, Dr. Max Gammon, who studied Britain's socialized medical system. Quoting Gammon, Friedman wrote:
“In a bureaucratic system, the increase in expenditure will be matched by a fall in production. Such systems will act rather like 'black holes,' in the economic universe, simultaneously sucking in resources, and shrinking in terms of 'emitted' production.”
This is Gammon's Law.
When Friedman studied and analyzed 60 years of the American health system, he wanted to determine if Gammon's Law applied. Guess what. “It is hard to avoid the conclusion that Gammon's Law is at work,” Friedman wrote. “There is no question that medicine in all its aspects has become subject to an ever more complex bureaucratic structure. No question that input has exploded. No evidence that output has come anywhere close to keeping pace. 'Black holes' indeed.”
That was then. It still is today. And this will continue to be the undisputed direction of American and Florida health care under the Affordable Care Act — more and more money into a black hole, with lower outcomes and more centralized control. Clearly the wrong direction.
What would be better?
Before we offer specifics, consider this: education of our children versus health insurance. For two-and-a-half centuries, education — the funding and provision of it — has the been responsibility and domain of the 50 states. Indeed, parents fight bitterly against federal intrusion. The last we heard, every state manages to provide education to all of its children — 100% coverage. (Of course, the quality is questionable.)
With health insurance, the monolith of Washington is in control. It stands to reason why there are so many uninsured. So ...
Back to catastrophic insurance
Point No. 1: Medicaid should be like education. Let the states address the truly needy as they see fit.
What's more, follow Milton Friedman's plan for health insurance. As he recommended in 1992: End Medicaid and Medicare. Friedman urged these entitlements be replaced “with a requirement that every U.S. family unit have a major medical insurance policy with a high deductible, say $20,000 a year or 30% of the family's income during the prior two years, whichever is lower.
“... Preferably, the major medical insurance policy should be paid for by the individual family unit, which should receive a reduction in taxes reflecting the reduction in cost to the government.
“There would be an exception for lower-income families and for families unable to qualify for coverage at an affordable fee,” Friedman recommended. “The government would help them finance the policy
though not administer it. That would be done by private competitive insurance companies chosen by each individual or family.”
The high deductible would convert health insurance back to what insurance is supposed to be: protection against a catastrophic event. Insurance isn't supposed to cover the sniffles.
Point No. 2: Either end the tax exemption of employer-provided medical care or provide the tax exemption to everyone. Employees who receive health insurance from their employers either receive free, un-taxed insurance or pay for a portion of their insurance with pre-tax income. Individuals not in employer-insurance plans must buy health insurance with income that has been taxed, and it's typically more costly. Totally unfair.
That should be, and easily could be, abolished in Congress. The effects would be monumental.
For one, employers would no longer need to be involved in managing their employees' health insurance. Employers don't pay for employees' car insurance or homeowner's insurance. Why health insurance?
What's more, if employers were not paying for health insurance, employees could negotiate for higher wages, thus giving them more of the means to pay for their own catastrophic insurance.
The elimination of third-party managed employer plans and the purchase of health insurance by individuals also would help restore the doctor-patient relationship and make consumers much more aware of their health costs. Under the third-party payer system, there are few incentives for consumers to pay attention to cost. No one is more cost conscious than the person who is spending his own money on himself.
Likewise, if health insurance were for catastrophic events, this would eliminate the practice of using health insurance — and all of the processing involved — to cover routine visits to the doctor. When we buy groceries, we pay the supermarket directly. When we purchase auto insurance, it doesn't require a copayment or third party to approve and process the replacement of a blown tire. All of this adds unnecessary cost.
Point No. 3: A corollary to the above, deregulate the services mandated to be covered in health policies. Give insurers the ability to offer more flexible coverages, which would allow for major medical insurance to come in at all ranges of prices. Case in point: We hear repeatedly how 60-year-old women purchasing Obamacare are required to pay for birth control. This just adds to the price.
If indeed the objective is to make catastrophic health insurance more affordable so more of the uninsured would buy it, there are two indisputable requisites: The incentives must make economic sense, and the government should not be in control. The Affordable Care Act has both wrong. How else would you explain a law that will add $1.4 trillion to the national debt over 10 years?
This is indeed Gammon's “black hole.” If only our elected representatives had the political courage and will ...
Facts about Medicaid
Florida taxpayers contribute $21 billion a year to Medicaid, 26% of the state's $77.1 billion annual budget.
Florida taxpayers contribute $39.1 billion a year to overall health care services in the state, 41% of the budget.
Education consumes $22.6 billion, or 29% of the state's annual budget.
About 3.3 million Floridians receive services from Medicaid — more than half of those are children to young adults.
Over the past two decades, Florida's population increased 50%, while the Medicaid caseload increased 300% and expenditures increased 450%.
The Florida Medical Association identified low reimbursement rates as one of several factors contributing to the shortage of physicians willing to treat Medicaid enrollees. On average, Florida fee-for-service Medicaid pays physicians only about 57% of what Medicare pays for the same service. For primary care, Medicaid pays about 49% as much as Medicare. Florida's Medicaid program pays 46% of what a private insurer would pay.
Only about 41% of Florida physicians will accept new Medicaid patients.
About 60% of family practitioners will not accept new Medicaid patients.
72% of OB/GYN specialists will not accept new Medicaid patients.
WHO RECEIVES MEDICAID IN FLORIDA
(In order of who receives the most to least support)
SSI (developmentally disabled)
Temporary assistance to needy families
Children in homes below poverty level
Medically needy individuals
Pregnant women below poverty level
Low-income elderly and disabled
Pregnant women above poverty income
Children in homes above poverty level