Five Health Care Reforms You Won’t Hear the President Propose

Tuesday

Sep082009

Tuesday, September 8, 2009 at 05:54PM

The President and his Democratic Congress, unimpeded by a jaw-dropping 37% approval rating—the lowest in 20 years1 —have been nonplussed by a uniquely cultural rebuke to their health care proposal which they may never understand: Americans are viscerally opposed to bigger government.

The majority of the country understands this about the otherwise abstruse proposals: extending government influence over 18% of our economy and our personal welfare will damage a health care system that is considered to be among the best in world, because it will disassemble the very aspects that have made it so advanced without addressing the deficiencies that cease further progress.

Health care needs improvement, there is no debate. What should be debated is how the reform is effected, because the “how” will either extend fundamental principles that have served our economy for two centuries, or it will supplant them with an irreversible forfeiture of our individual freedoms. There are ways to address the system’s shortcomings that are consistent with free market principles without disturbing what works or unleashing an unnecessary expansion of government. Here, then, are five reforms you won’t hear the President propose, but can foster meaningful debate and give the country real choice if consolidated into a counterposing plan.

1- To lower medical costs, increase supply. We have one doctor for every 416 persons as compared to 1 to 300 for France, Germany, Sweden, and Australia2. We need to encourage the licensing of more doctors, and allow portability of their license from state to state. If I can be licensed to drive in New York and get a traffic ticket in Oregon, why can’t a doctor licensed in Oregon practice in New York if that is where the demand is? Testing and licensing alternative forms of medicine that are widely accepted in other parts of the world will also help increase supply in the United States.

2- To lower insurance costs, make policies personal, portable, and open. There is no justification for individuals and families to buy health insurance through their employers. This anachronistic system penalizes smaller businesses, according to a Kauffman-RAND study3. Entrepreneurs, the driving engine of our economy, and their employees can accrue neither the tax benefits available to larger companies nor premium advantages of big groups. It is also uneconomic to restrict policy acquisition by state. Make the market for insurance more competitive by allowing individuals to buy insurance in an open, nationwide market, and offer the tax advantages directly to them rather than to the employer.

3- Allow derivative insurance products and financial incentives for maintaining good health. Start by allowing insurance coverage of licensed providers anywhere in the country—even in the world, as some companies are now exploring4. The artificial provider networks insurance companies created injure competition. Reinstating individual responsibility for one’s care and supporting the doctor-patient relationship, by making the patient responsible to pay his provider directly with the insurance proceeds, empowers the patient to manage both his health and costs. From there we might consider an annual build-up of cash value for unused policy benefits that can be applied to future premiums, to future medical expenditures, or even to long term care as we get older. The health savings account should be made as flexible, manageable, and survivable as an IRA.

4- Limit liability in medical malpractice to all but the most egregious negligence. Direct expenditures on malpractice amount to 1% of health care costs, but the indirect costs are difficult to quantify5. There can be almost no doubt that we spend nearly twice per capita on health care as most industrialized countries6 partly because of the endless battle we tolerate between doctors and lawyers. The ultimate payer of defensive medicine is the patient—in the form of increased premiums for both doctor and patient, increased medical fees, and redundant treatments. This extraneous demand for services drives costs up.

5- To help the poor and uninsured, encourage self-reliance and participation in the private system available to others. Economist Arthur Laffer recently took a page from Milton Friedman’s book and suggested we offer vouchers to the poor with which they may purchase medical insurance on the open market7. One wonders if, when faced with such alternatives to the “public option”, liberals will adhere more to the objective of helping the poor than to the unspoken pursuit of expanding government.

When an industry seems to have broken down or run out of control, we tend to think of all free markets as venal. Defenders of capitalism should not lose heart. Economic sectors fail their constituents to the extent they deviate from market forces, either by overregulation or self-accumulation of power. The counterargument to centralizing control over the economy is to recalibrate industry toward market and competitive forces. The antidote to bigger government is freer and greater choice for the consumer.