Proponents of the current health care proposals charge that those who oppose these proposals only want the status quo. No honest Democrats have stepped forward to admit the truth that opponents of these measures have been offering alternatives and decrying the status quo. The leader among dishonest Democrats today is none other than President Obama (whom I have tried to refrain from specifically criticizing) who not only will not admit the truth about opponents of his preferred reform package but who goes further by holding “town hall meetings” where no opportunity for discussion is even considered (as do many of his followers) – these are not chances to discuss and enlarge public understanding of the issue, they are opportunities to indoctrinate the masses one town hall at a time.
Nothing I have said excuses the behavior of some protesters at many town hall meetings who are equally disinterested in any actual discussion, but any real leader would have to rise above such rabble and be willing to engage and explain rather than pontificate and cajole.
Among those speaking against the current reform proposals there is a common belief that has never been addressed by backers of the proposals – that the current prescription will actually be worse than the status quo (which they agree is not an acceptable situation). Not only are they speaking against the dangerous potential of the current direction but here are a few of the ideas that are not being offered to considered by our current leaders.On June 23, 2009 Senator Jim DeMint offered the Health Care Freedom Plan. More than a month ago I offered a simple proposal to expand individual choice, lower costs, and reduce government spending. On August 11th John Mackey offered a proposal in the Wall Street Journal based on the experience of Whole Foods Markey Inc. (he’s the CEO) in lowering their health care costs while improving the coverage they offered to employees. On August 13th I found another plan outlined by Matt Piccolo. Let’s start with the shortest proposal (mine) and see what these four independent approaches have to offer.
My first proposal was to tax employer-sponsored health benefits and make individual health insurance premiums tax free. Piccolo agrees with me but DeMint and Mackey both disagree with taxing employer health benefits and Mackey supports making private health insurance premiums tax free. DeMint also proposes a $2000 individual and $5000 family voucher for those without access to employer sponsored coverage. I presume he means to replace Medicaid/Medicare with those vouchers.
My second proposal was to make government health plans (yes, that would include Medicaid and Medicare) only cover emergency and preventive care – with no copay for preventive care. Piccolo says that government plans should be phased out while Mackey generally states that Medicare needs to be reformed.
My third proposal was to reduce the requirements on private insurance plans to the level of government plans. Mackey agrees with this.
My final proposal was to make all out of pocket health care expenses tax deductible – including premiums, but excluding strictly elective procedures – essentially this would give any savings account some of the advantages of an Health Savings Account (HSA). DeMint says that HSA’s should be able to be used to pay insurance premiums, Mackey argues that there should be fewer obstacles to the creation of HSA’s, and Piccolo supports HSA’s as well as a guaranteed medical loan program.
Mackey, DeMint, and Piccolo all argue in favor of allowing people to purchase insurance across state lines. I agree that this would make the market more competitive. They also each argue for tort reform to limit the financial risk that doctors face in lawsuits. My understanding of this is that the cost of medical malpractice lawsuits is only a token amount compared to other areas of waste in the system. For me they are not a real priority but I see no reason to avoid tort reform. Finally, Mackey and DeMint each push for greater transparency to the consumer on the costs of health care procedures. I think this would naturally result from the use of high deductible and catastrophic insurance – which is what I propose government insurance to become.
DeMint’s plan also explicitly protects the right of consumers to keep their existing insurance and proposes block grants to let states figure out ways to cover those with pre-existing conditions. He proposes to pay for this by repealing TARP and requiring that TARP money already paid out be repaid within five years.
Mackey also proposes that tax forms should provide an easy way for people to make tax deductible contributions to help people without insurance who do not qualify for any government insurance programs (Medicaid, Medicare, or SCHIP).
Mackey closes with this crucial observation:
. . . every American adult is responsible for his or her own health.
Unfortunately many of our health-care problems are self-inflicted: two-thirds of Americans are now overweight and one-third are obese. Most of the diseases that kill us and account for about 70% of all health-care spending—heart disease, cancer, stroke, diabetes and obesity—are mostly preventable through proper diet, exercise, not smoking, minimal alcohol consumption and other healthy lifestyle choices.
Recent scientific and medical evidence shows that a diet consisting of foods that are plant-based, nutrient dense and low-fat will help prevent and often reverse most degenerative diseases that kill us and are expensive to treat. We should be able to live largely disease-free lives until we are well into our 90s and even past 100 years of age.
Health-care reform is very important. Whatever reforms are enacted it is essential that they be financially responsible, and that we have the freedom to choose doctors and the health-care services that best suit our own unique set of lifestyle choices. We are all responsible for our own lives and our own health. We should take that responsibility very seriously and use our freedom to make wise lifestyle choices that will protect our health.
None of this sounds to me like people who want to maintain the status quo.
Something else that needs to be addressed are vertical monopolies that shut competition out of the market. IHC controls both a significant number of health care facilities and a large insurance program. Because it costs so much to add IHC facilities to a competing health plan (if it is even made available), non-IHC customers are severely limited by their choice of facility and aren’t given as much pricing flexibility. And it is a dangerous thing when your doctor is directly on your insurer’s payroll.
I should just start this out with a disclaimer – I work for Intermountain Healthcare. I hope I can be objective in my comments, but I don’t want to pretend like I am a disinterested third party.
I agree with your statement about the danger of vertical monopolies in theory – that being said, Intermountain is recognized as a model of efficient health care service. We deliver high quality care at prices that are low relative to other health care providers in the nation. I guess my point is that a vertical monopoly is not a guarantee of a poor system. I wonder what can be done to allow for more flexibility in allowing other insurers to be served by Intermountain facilities. (I just work in Information Systems – no connection to the insurance aspects of the business so I really am fairly objective about that aspect of the company.)
I disagree with using any kind of subsidy — tax or otherwise — to encourage the purchase of health insurance; although, I do agree with creating programs that help the indigent. The logical effect of any subsidy is to encourage overconsmption and reduce the quality of whatever is being subsidized. However, I will admit that getting rid of these market-skewing tax subsidies is probably not a politically viable idea at present. (That still doesn’t make subsidies the right thing to do.)
All medical expenses used to be tax deductible. But this evolved into the single most abused feature in the income tax system. People tried to deduct anything that they felt was remotely connected to health, including air conditioning and swimming pools. Noncompliance with the law was pandemic. When Congress increased the standard deduction so that itemizing deductions was not used by most people, and simultaneously raised the floor for deductibility of medical expenses to 7.5% of adjusted gross income, the abuse largely evaporated. The lesson that we can learn from this is that trying to influence health decisions through tax policy is not a smart thing to do.
I think you dismiss tort reform too easily. While the actual aggregate medical lawsuit awards are only a pittance of total medical expenses, these do not include the vast army of legal folks that are employed by the industry in an effort to avoid and minimize the cost of such suits. What about the studies that show the costs of practicing ‘defensive medicine?’ The total costs are higher than you think. Tort reform ought to be included.
Jesse is right about monopolies. Businesses that create high barriers to competition — ostensibly thanks to public policy — need to have their politically favored wings clipped. It’s not that a monopoly can’t provide quality service. It’s that it stifles competition and the evolution of varied and improved products and services. Government’s business should be that of providing a level playing field and reducing artificial barriers to entry into markets.
While I would argue that we should not be using a subsidy to encourage the purchase of health insurance normally I view my proposals for tax-free health insurance premiums etc. as a reaction to a situation where the government taxes too much in an effort to do too much. Making those things tax free is a way to reduce the percentage of spending that is funneled through the government as much as it is to encourage the purchase of health insurance. The fact is that government should be taking a lot less in taxes and allowing people to make more financial choices without having tax implications for those choices.
I can see how this could/would/was being abused and I am certainly open to other options, but as I have said before – we should be placing all the options on the table and sorting through them rather than getting stuck on one preferred solution and trying to ram legislation through that matches that solution as closely as is politically feasible.
In case my position on tort reform was unclear, I am not opposed to it, it is just lower on my list of priorities – I think that other reforms have a greater potential for making a positive change in the system. That being said, I am in favor of tort reform – I am only focused on other steps before I would make a push for tort reform. Like many other positions, you are free to make a case for why I am wrong.
I agree with you and Jesse about the dangers of monopolies in general. I also agree that the place of government is to help ensure that the playing field is level. That being said, if one entity is able to acquire monopoly status without introducing artificial barriers to limit competition then there is no need to hamper that entity in serving the market. The openly thing that government should do is to watch closely to oppose that entity if they begin to create artificial barriers to competition.
Not taxing health care while (in effect) taxing other consumption is a tax subsidy, plain and simple. You cannot escape the consequences of subsidization by calling it “tax free.” All government subsidies increase government involvement in the subsidized sector rather than decreasing it. There’s simply no way around this. The solution is to get rid of the subsidies AND reduce overall tax rates.
I’m with you on allowing monopolies that exist without artificial barriers to competition. Giant players in any market that lacks such barriers invariably leave themselves open to challenge from smaller and nimbler upstarts. But we must be constantly vigilant in getting rid of those artificial barriers for this to work.
I recognize that it is a subsidy – I did not intend to argue that it wasn’t. I just don’t see anyone moving this debate right now to the point of lowering taxes and removing all subsidies – which I agree is the best way to go as far as taxes are concerned.
There are several well considered proposals in your collective comments. Politics aside, the health care issue is complex. There are many facets that need to be addressed ranging from insurance to delivery, from access to profits, costs to quality. Any serious student of this issue understands its complexity. Thus for anyone to offer a “one-size fits all” solution is foolish and to propose the government be in charge of this decision is asinine. I apologize in advance to the length of my diatribe.
I hope to refrain from politics in this matter, but it will be difficult. Further, I offer my perspective from a biased point of view as I am a CFO an alcohol and drug rehabilitation hospital. I am involved in providing high-quality healthcare to people and I have to do it profitably or we will cease to exist. I have to generate sufficient cash inflows in order to pay doctors, nurses and other staff who work hard for and care for the patients and are very invested in helping patients overcome the effects of alcohol and chemical addictions.
First, this issue is readily resolved if it is determined healthcare is a fundamental right on equal standing with such things as speech, assembly, bear arms, trial by jury, etc. If so, then the government is obligated to provide such access to health care. As I can find no underlying principle in the Constitution, then it must now be a matter to be considered through the course of law and commerce, or a combination thereof.
Second, much of the rhetoric attacking the current system demonstrates a significant lack of comprehension of the underlying dynamics of health care by the attackers. Whether this is done intentionally or ignorantly is up for people to discern. For example, it seems to me that most people do not even understand the concept of insurance. Anecdotally, it appears to me that most people believe that paying anywhere from $50 – $500 per month for insurance offered by their employer along with the ubiquitous and annoying co-pay is all that should ever be required. They do not understand that the premium is only a payment that is mixed with all the other premiums to spread the risk of catastrphic cost amoung everyone. Another example is the continual discussion of costs. As a finance person, I submit that one person’s cost is another person’s revenue. This is the basic element of any economic transaction. So any focus on costs has an equal impact on another’s revenue, and revenue should never be confused with profit. I absorb the cost for a lot of people who think that if the insurance company does not pay me for their treatment, they are not going to pay me. They want the service but they are not willing to pay for it.
Third, almost all purchasers of health care services are removed from the underlying economic transaction. As an analogy, if we all had food insurance, then we would pay an amount each month into a plan, go down to the grocery store, pick out what we need, pay the $15 co-pay and take our food. We would not be involved and would not understand the underlying transaction. We would start coming up with ideas that we were entitled to a certain type of meat, or a certain type of milk. We would quickly discover that 45 million Americans do not have access to food insurance are therefore not able to purchase food. We would start to argue that everyone had a right to quality food access because without food people die. My point being, nobody would understand the underlying economics of the transaction. We would not understand that our neighbor, through his/her hard work, raised the cattle and cows for the milk and meat and they should be compensated for such services; nobody would understand that there were people who went to college and learned how to develop food to grow in places it never grew before—and although there are a significant amount of up-front costs to develop such foods—we would not understand that there is a price to be paid; we would not understand that the food insurer takes on the risk that someday there may be a significant run on the grocery store and there side of the economic transaction/agreement is to ensure those foods are in the store when we go. And not only that the food is in the store, but that the food tastes good.
Fourth, there is a dearth of understanding as to the “quality”, and “affordable” healthcare. In business and other places I have learned that there is a three-pronged element to every transaction: speed, quality and cost. You can only have two of the three. If you want speed and quality, it will cost more than if you don’t need something for a while and don’t care of the quality. If you need to travel to your job you can do it in a car that can travel 250 mph, has plush leather upholstery, and is made of the best new composite materials or you can take a bicycle or the bus. One will cost more than the other but both will get you there. Perception is also an issue here: quality to one person may not be considered quality to another. I am a relatively healthy person, so to me, I measure quality and am will to pay for it by getting in and out of the doctor office quickly. I don’t really care if I see the doctor or not, I don’t care if the doctor is from Harvard medical or Granada medical, just give my the antibiotic prescription and let me leave. However, I might have a completely different attitude if diagnosed with cancer. Politicians (on both sides of the aisle) throw these words around without any real concept of the meanings. Everyone can have quality and affordable healthcare, but it will come at an enormous cost. We need better understandings of what quality and affordable health care really means. My concern with the current proposal is that everyone will be entitled to the 250 mph car, but only have to pay the price of a bus token.
We need to really determine if this is “crisis” of unparalleled proportion. Or, is this just political expediency? Is this a situation that is imperiling the opportunity for the United States to come out of the global recession, or is it something that is a serious matter that needs creative thought, discussion and action?
I think your discussion raise some very good points. Do we use fiscal policy to increase/decrease demand, access, subsidy, etc? Very good ideas to be debated. How effective are HSAs in accessing and paying for healthcare? My experience at a company offered me an insight into this. Most people liked the idea of putting tax-deferred dollars into a plan, but what became the most problematic issue was educating people on making healthcare economic transactions. People were very upset when they had to use those funds to make the payments to doctors and for medications directly. It was a significant learning curve for people to be put into the middle of the underlying economic transaction. After a while, the plan was scrapped because the people really did not want to be bothered with the “details”. In other words, let me pay my premium, deductible, office visit charge and co-pay and don’t bother me with the details of how much it actually costs to be treated.
Finally, I think one way to solve this supposed “crisis” is to break it down in to simpler components and then we can identify what the real problems are. Let’s even assume for a moment (and this does not suppose this is a correct solution) that Medicare does work and there really are hundreds of billions of dollars of waste and fraud. Let’s separate that issue from universal access and attack and determine if that is truly the case. Don’t mix trying to provide healthcare at an enormous cost to the taxpayers with an untested hypothesis that the way to pay for it is by reducing waste and fraud. Let’s look at the impact of governmental mandates to insurance companies to provide for annual mammograms or physicals or other requirements on the overall cost to the insurance company and the impact on premiums. Let’s really determine if insurance companies are pillaging the masses for profit, or are they prudently being profitable so as to have adequate reserve for catastrophe? Let’s determine if it is morally wrong for business to make a profit. Let’s educate people on what it really does cost and why it costs that much for drugs that are now available that were not even conceived of 15 years ago. Let’s evaluate through various testing procedures the impact of drug advertising and its need, let’s look at the impact of FDA regulations on developing drugs to determine if that is appropriate or whether more or less scrutiny is required and how that impacts the cost. Let’s really determine whether 45 million Americans are truly left without access to healthcare, or is it really 45 million Americans have access to healthcare, or if they just don’t have access to all of the same healthcare providers that others have access to.
Thanks for sharing your professional perspective on this (obviously I am not going to try responding point-by-point). People need to recognize what’s really happening and how unrealistic most of our expectations are.