Health Care: A Short Story
Now before we get started, let me just acknowledge that yes, I understand that health care and health insurance are two completely different things. Care obviously refers to the actual medical services provided to a patient (consumer) by a doctor (provider). Insurance is a mutually agreed upon contract by which the insured (consumer) mitigates the risk of loss by transferring said risk to the insurer (provider). In both cases, there is a consumer and a provider (see how I did that?). That, however, is where the similarities end, something that supporters of government health care don’t seem to understand (along with basic economics, human nature and often simple common sense). But I digress…
The point is, for the sake of simplicity I’m going to lump both health care and health insurance into the generic health care bucket. Get over it.
Now that we’ve gotten that out of the way, please allow me to further simplify my point (yes, I do have one). The simple fact is that health care has been a very public issue over the last four years. I could spend time demonstrating that the issue is largely (though not entirely) a manufactured one designed by politicians to buy votes by creating a problem and then “solving” it. I could go into extensive detail about the flaws of Obamacare and why it is doomed to catastrophic failure. I could even illustrate this by highlighting the same components of Medicare/Medicaid and their long list of unintended consequences and destructive results. Luckily for both of us, I’m not going to do that.
What I am going to do is tell you a story. It’s short, simple and to the point. Moreover, it will simply demonstrate where the ultimate problems lie with health care and thus, will remove all the complexity so the solutions will be staring you in the face. Here goes…
In 2009, I left the company for which I had worked for almost 15 years and became a partner in a start-up. As such, I decided it was prudent to make sure I had health insurance in the event I was mowed down by a runaway bus or some other such catastrophic inconvenience. So I set off to procure a suitable policy now that I was no longer protected by employer-provided coverage. While employed, the company paid for approximately 2/3 of my insurance plan, leaving the remaining 1/3 to be paid by yours truly. The company is a national, multi-billion organization with some serious purchasing power. The net effect is that I paid $148 per month for my third, making the total cost of my insurance around $445 per month.
Now for the fun part.
I found a policy that provided roughly equivalent coverage, but was actually better for me in that it more closely suited my actual needs than the one-size-fits-all policy offered through my former employer. Guess how much this policy cost me (don’t forget that I was now paying for 100% of my coverage). Seriously, I want you to guess. Think of a number before reading further. Okay, now that you have a number, the cost of the new policy was… wait for it… $116 per month. That’s right. I literally reduced the cost of my health insurance by almost 75% and got a better policy out of it. Keep in mind, when I say better, I mean by my standards, not the standards of some politician or bureaucrat that thinks I’m too stupid to know what’s best for me.
Moral of the story:
The moral of the story is simply that the problem is really not a heath care problem. It’s an economic problem. The people consuming medical services (including insurance) are not directly paying the providers for those services. Third-party payers remove the consumer from the financial end of the transaction with the result that people don’t think about and in many cases, don’t even have the information necessary to evaluate the cost.
If you want to buy a new computer, you can get the most advanced technology with any possible combination of options that you can imagine. You can choose from hundreds, if not thousands of sources and you can buy it for a historically low price. This is possible not because your employer cut a good deal for you or because some politician decided you were too stupid to negotiate for yourself and made a law. The is the result of simple free market economics. You can decide what computer is best for you and providers are not restricted in what they can offer you, so they have to flexibility to provide you with whatever type of computer you want, at a price that you are willing to pay. This is the most fundamental principle of economics. A principle that as a result of all the third parties involved, our current health care system doesn’t accommodate particularly well. The scary thing is that Obamacare is going to make it worse. Much worse. Orders of magnitude worse.
The most effective way to lower health care costs and improve access is through freedom of choice and competition. Consumers will always make more effective choices for themselves than someone else will. That is just a fact. Employer provided or government mandated health insurance will by definition, reduce the choices consumer have, the result being more expensive, one-size-fits-all coverage, lower quality care and far less efficient use of resources.
The solution? Get the government out of health care and give incentives for employers to also remove themselves from the equation. Third party payers are the enemy of choice and competition. Unlike the current residents of Congress and the White House, I don’t think you’re too stupid to make your own decisions. I have every confidence that you are perfectly capable of evaluating the health care services you need, as well as a reasonable price for them.
Politicians and bureaucrats will never make better decisions about your health care than you will. That is a fact. The best decisions are made by those with skin in the game and government administrators have none. They have no stake in the outcome, nor do they have a vested interest in the cost, because it’s not their money. If you don’t believe me, just read up on the collapse of the USSR or the failure of any other command economy (because they all have failed, or will).
As for employers, they will always want to be able to offer health care as part of their overall compensation packages, which makes perfect sense as it gives them another tool they can use to attract and retain talented individuals. The problem is that an employee would be disadvantaged by our stupid tax code if they were to receive a health insurance stipend from the employer in lieu of employer provided coverage (health insurance is pre-tax whereas a stipend is not). The result is that virtually all employees elect to take the company plan while virtually no employers offer an alternative.
So we need to level the playing field in the tax code so employees don’t pay a penalty. We should encourage employers to offer a generous stipend as an alternative to company provided coverage. Guaranteed, the overwhelming majority of people will elect to receive the stipend. They will go insurance shopping and select the policy that best fits their needs, which will most likely also have the benefit of saving a nice, tidy sum in the process (see previous story). Employers will also love it because it gets them out of the health insurance business. In addition to the cost of the plans themselves, it’s enormously costly for a large company to manage the plans for their employees and they will be extremely happy to not have to do it anymore, which will also free up more resources that can be better utilized elsewhere.
With that, having solved all of our health care problems, I will conclude my diatribe. While there is significantly more detail that can and should be discussed, the whole point here is to simplify the issue. If our politicians would do this and start asking the right questions, they might actually defy history and make a little progress.
The Heritage Foundation just released a white paper on this very subject. Their discussion goes into much more detail than my ramblings, but essentially comes to the same conclusions. Below are the key summary points and a link below to the full article. If you are have the slightest interest in the direction that health care is going, I highly recommend making a little time to read it.
Provided by The Heritage Foundation:
After Repeal of Obamacare: Moving to Patient-Centered, Market-Based Health Care
Obamacare moves American health care in the wrong direction by eroding the doctor–patient relationship, centralizing control, and increasing health costs. True health care reform would empower individuals, with their doctors, to make their own health care decisions free from government interference. Therefore, Obamacare should be stopped and fully repealed. Then Congress and the states should enact patient-centered, market-based reforms that better serve Americans.
Principle #1: Choose, control, and carry your own health insurance.
True health reform should promote personal ownership of health insurance. While Obamacare uses government-run insurance exchanges to limit individual choice, real reforms would focus on encouraging Americans to purchase insurance policies that they can take with them from job to job and into retirement in a competitive, free market. Policymakers should enact several key changes for this culture of personal health care ownership to take root.
Principle #2: Let free markets provide the insurance and health care services that people want.
Many individuals have already learned that, due in part to Obamacare, with its government-run health exchanges, new bureaucracies, and other forms of government control, they will not be able to retain their current health insurance. There is a better way, and it involves providing more choice through market incentives rather than undermining markets through centralized bureaucracy.
Principle #3: Encourage employers to provide a portable health insurance benefit.
Because most Americans traditionally have received health insurance from their employers, many individuals have few, if any, choices when selecting a health plan. According to the broadest survey of employer plans, nearly nine in 10 firms (87 percent) offer only one plan type, and only 2 percent offer three or more plan types. As a result, employees have only a very limited ability to choose the plan that best meets their needs.
Principle #4: Assist those who need help through civil society, the free market, and states.
While some health reforms—such as changing the tax treatment of health insurance and reforming the Medicare program—remain fully within the purview of the federal government, states also play a critical role in enacting reforms that can lower costs, improve access to care, and modernize state Medicaid programs. By serving as the “laboratories of democracy,” states can provide examples for other states—and the federal government—to follow. Because many state-based reforms do not rely on Washington’s involvement or approval, states can move ahead with innovative market-based solutions even as federal bureaucrats attempt to implement Obamacare’s government-centric approach.
Principle #5: Protect the right of conscience and unborn children.
Government should not compel individuals to undertake actions that violate their deeply held religious beliefs. Regrettably, Obamacare imposes just such a requirement on Americans, forcing many employers to offer, and individuals to purchase, health coverage that violates the core tenets of their faith regarding the protection of life.
Please read the complete white paper at Heritage.org.
Photo by WerbeFabrik (Pixabay)