How Free-Market Choices Can Solve Our Health Care Problems

Until the 1930s, the US health care system was customer-based, where each person decided which services to use and paid for them directly. The needy were often given discounts by the doctors and hospitals. Abuse was minimal because people knew each other and valued their reputations. This has evolved to the mix of employer, government, and insurance-controlled plans we have today.

Abuse is rampant (excess services and fraudulent billings) because most people don’t mind cheating the government. A major step occurred in the 1930s when hospitals organized Blue Cross, and doctors created Blue Shield, to guarantee themselves a steady income stream by having patients — and later, their employers — prepay for medical care on a subscription basis. Wage controls during WW2 led to employers offering ‘group’ health and life insurance as an ‘extra’ to attract scarce workers. After the war, these benefits were perceived as a ‘normal’ part of any good job. People with ‘existing conditions’ (the ‘pre’ is redundant) were absorbed into the group plans with little impact. As part of his ‘Great Society’ program, Pres. L. Johnson created Medicare (Parts A, B, and C; for seniors), and Medicaid (for the needy; paid 50 to 83% by the Federal government, but operated by the states) in 1965. Drugs were added to Medicare as Part D in 2006.

Today we are in the midst of massive federal government intervention in our health care system because Congress passed the ‘Patient Protection and Affordable Care Act’ (PPACA; ‘Obamacare’) which became law on March 23, 2010. The law claims to reform the private health insurance market by; 1. providing better coverage for those with existing conditions, 2. improving prescription drug coverage in Medicare, and 3. extending the life of the Medicare Trust fund by at least 12 years. Sounds nice! However, it’s clearly unconstitutional (no authority in the Constitution, forced purchase of insurance, etc.), and this is just a start. Instead of a ‘single payer’ system run by the government (like Canada, France, Mexico, etc.), it dumps the costs on; 1. the insurance industry, which then must boost its rates and rules to handle the increased benefits, and 2. the states with increased Medicaid users.

Choice is being replaced by coercion!

Government Plans
In any country with ‘national single-payer’ care (doctors are government employees, all citizens must belong, etc.), government budgets are a huge issue as to which services and medicines are available, and to whom (rationing). The medical specialists and equipment for expensive services such as organ transplants are limited, and people wait for years and sometimes die. In some national programs, the death rates from breast and prostate cancer are twice to three times higher than in the United States. You can’t see a specialist (ear, eye, skin, etc.) without referral by a family doctor. Old people are sometimes deemed ‘not worth it’ for expensive treatments and drugs.

It was illegal in Canada to open a private ‘for fee’ clinic, since it was deemed unfair to those who can’t afford it, but that is changing. Canadian health managers now admit that their system is financially ‘unsustainable’ (same in England, France and others), and that formerly illegal ‘private services’ (non-government doctors who charge a fee) and private insurance will be needed to avoid collapse. Some provinces already allow certain private services, and even pay private hospitals to take care of ‘public’ patients. Government doctors even suggest use of private care to avoid the delays, and to off-load patients. From my personal experience living in Canada, I found doctors to be less courteous, since to them patients are not valued clients, but just more work. At the extreme (Russia, etc.), corruption sets in, and doctors and staff demand bribes for access to services.

In countries with a long history of rule by monarchs, or socialism, I find that government is viewed as a combination of Boss and Mother, and the people are submissive to the rules and treatment. Those who don’t like it, leave. The USA was founded in a spirit of Liberty, and some people still prize it, but since the 1930s when FDR declared the government owed you ‘a good life’, the majority of people now seek benefits paid by ‘someone else’ (‘the rich’, property owners, inheritors, etc.). The growth of government spending and debt in the last seventy years (especially since 1971 when Nixon took us off the gold standard) has grown to such extremes (debt now equals the GDP!) that we face a crash in the economy and value of the dollar. Funding will drop or end for most government programs. The sudden onset will prevent seeking alternatives in time, and many people will suffer or die.

In the free-market plan below, I show how medical costs can be reduced, even while increasing quality. It is based on less government spending and control, and more personal responsibility. Private charity will blossom as the people take charge. This produces a moral and sustainable program of good health for all. It sets goals that will take time to achieve, but if we start the step-by-step transition now, the results will soon show and the goals will be achieved.

Dave’s Free-Market Plan
This plan is aimed at getting the government out of patient-doctor-hospital control and funding so that positive free-market incentives guide the patients and doctors: This will reduce cost, improve care, and preserve our civil rights and liberty. The items below all start in parallel on a planned-transition basis. Existing care will be maintained as the changes take place.

1) Repeal Obamacare, phase-out Medicare and Medicaid, and allow states to create their own plans for seniors and the needy. Care for war veterans would continue without change. As a transition, the Federal government would issue quarterly vouchers to all former Medicare and Medicaid recipients until their state system is in service. The vouchers would be useable only for paying health expenses and insurance, and be the same amount for everyone. This would let people shop for the privately provided services they need. Special vouchers would be issued to those with major ‘existing conditions’ that preclude their purchasing insurance, with payments continuing until the end of their illness, or until death. The value of any voucher would be owned by each person, and could be transferred; a) to their account in another state if they move, b) as a gift, or by a will upon death, to other qualified people. Vouchers are a form of Health Savings Account (HSA, see item 10), and give incentive to avoid unhealthy life styles (obesity, excess alcohol, etc.) and non-essential visits to, and treatments and tests by, the doctor.

2) Reduce costs by greater use of Physician Assistants (PAs) so a doctor’s time is not wasted on routine work the assistant can perform (including clinics run by PAs; see Item 9 below).

3) Use the FDA only to determine and disclose possible side-effects and viability of drugs, but not restrict use of them (or their potency) until there are virtually no side-effects: Let doctor judgment and CONSUMER CHOICE rule! At present, the FDA people withhold use of drugs too long, so they won’t be criticized, while people die.

4) Bring the lower price and higher quality benefits of competition, and consumer choice into health care by busting the medical pricing cartel and allowing doctors to advertise their rates (web sites, newspaper ads, etc.), training and results records. The American Medical Association (AMA), and professional societies, now ‘discourage’ or prevent this. Allow doctors to practice as members of private, non-government sanctioned groups, rather than just the monopoly AMA (same for Osteopaths) and state licensing boards, with all required to disclose their training and record of results on request (the best ones will promote their good results on their web site, etc.). Pricing is now primarily set by doctors and dentists exchanging rates so they are all similar, then they agree on annual increases. This is called ‘collusion in restraint of trade’ and is illegal, but the AMA has paid-off the politicians well.

5) Eliminate dependency on insurance provided by employers. This is a holdover from WW2 when labor was scarce, wages were limited by law, and employers used benefits to attract workers. There is no reason employers should be expected, much less required by law, to provide health insurance any more than they should provide food or clothing to employees.

6) Reform our tort laws to reduce excess payments for malpractice lawsuits that doctors must add to their fees. Perhaps a special court system for such claims is needed (similar to bankruptcy).

7) Repeal laws that, a. force (mandate) insurance companies to offer a long list of covered issues (let people choose the combinations of coverage they want), ‘community rating’ and ‘guaranteed issue’, regardless of existing conditions, age, etc., and b. limit operations to a single state. Mandating benefits is like saying to someone in the market for a new car, ‘If you can’t afford a Cadillac loaded with options, you have to walk.’ The huge price increases for insurance in MA and NY show the counterproductive results of mandates.

8) Make employer and personal payments for health insurance, or HSA deposits (but not co-pays or non-insured items, or use of vouchers), fully tax deductible.

9) Make government medical licenses optional, so we can have a wide range of private practices and clinics, staffed by ‘alternate medicine’ folks, Physician Assistants, retired or part-time MDs, etc., to see patients for minor problems, including issuing prescriptions for medicine. This approach will give us hospitals, clinics and private practice offices offering; ‘Type A’ (full service, lots of equipment and specialists), Type B (moderate skills and equipment), and Type C (low cost, run by PAs and volunteer MDs, etc.; they refer cases to Type A and B as needed). Prices will drop as the AMA cartel gets some much-needed competition. If you prefer a government-licensed doctor to handle minor problems, fine, go to one and pay more. I now hear rumors that the AMA lobby is pushing to require that PAs have a Ph.D. in nursing in order to offer the above services; more restrictions to protect the incumbent ‘Cadillac’ system and MDs. The above ‘A-B-C’ plan will also help rural areas and small towns attract a ‘care person’ where they now have only one person or none.

10) Promote creation of private plans, such as: a) Health Savings Accounts (HSAs), funded by the person or employer (or friends and charity), which would pay for routine care and self-chosen insurance for major illness. Deposits would be tax-deductible, and interest on them tax free. Each person would own their account so there would be no loss if they change jobs or retire, and b) Fixed payment plans (a monthly fee, no gov’t subsidies, payable with HSA funds) run by private clinics, under their own rules, that will take care of all ‘basic’ illnesses. Both approaches; a) have positive financial incentives for all parties (stingy spending, shop for rates, healthy life style, etc.) and ‘abuse’ due to overspending would go to zero since people would be using their own HSA ‘medical fund’ and wasting it by poor shopping or self-inflicted health problems would be seen as ‘foolish’ (or stupid!), b) take the government and insurance companies out of 90% of the sessions with a doctor, and c) wise subscribers would buy high deductible ($10,000 to $50,000) private insurance for major illnesses. Some States might choose to provide this insurance.

11) Make all State and Federal elected officials and employees (in any agency or department) subject to the same health care choices as the citizens. No special plans for health or pensions!

Limited Government and Employer Role
While I prefer the above 11-point private plan, to the extent that government stays involved in health care; a) Each state would design, fund and operate their own plan, with zero Federal control and funding, b) The programs should not pay doctors and control prices, but should fund HSAs.

Having the programs funded and controlled at the state level has two benefits: a) It cannot be funded by fake money created out of thin air by the Federal Reserve, thus forcing fiscal sanity on any tax-funded program, and b) Having control distributed over fifty states reduces the size of the administrative bureaucracy each citizen must deal with, and makes states compete as to soundness (including sustainable funding) of their program.

To the extent that employers stay involved they can fund HSAs. History at firms such as Whole Foods shows that employees are stingy with their account (save for future needs) and tend to care for themselves better (diet, smoking, exercise, etc.) to avoid medical expenses.

Private charity (including free services by doctors and hospitals; like the old days!) will be an important part of care for the poor. This will work because with taxes and fees reduced by the above reforms there will be: a. More donations to charities, and b. Fewer people (about a 90% reduction) who can’t afford health care.

Conclusion
Note that none of the above suggestions depends on government rules or control of medical fees or practices. It is an ethical plan because all funding is voluntary and does not use mandatory fees, forced purchases of insurance, or coercive taxing (gang-theft-by-vote). Thus it is a fair, moral, responsible, and sustainable plan.

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Dave Redick is a Wisconsin businessman, author, and President of Forward-USA