Posted on 02/28/2010 11:38:31 AM PST by JBird77777
A primary cause of high health care cost is government interference with the market. Accordingly, the solution for this problem is to reduce, not increase, government interference.
The fundamental economic laws of supply and demand include these.
1. A lower price for a good or service results in consumers demanding and buying more of it. 2. Increased demand for a good or service results in a higher price for it.
The cost to the consumer of buying health care is subsidized in various ways. This reduces the price paid by the consumer, and therefore artificially increases the quantity demanded. An inevitable result of this artificially increased demand is higher health care prices and costs.
Such healthcare subsidies and distortions currently include these.
1. Tax deductibility of insurance premiums by employers. For example, if an employer pays a 35% tax rate, then taxpayers are subsidizing through the tax code 35% of the cost of such insurance premiums.
2. Medicaid and Medicare. Through these programs, taxpayers directly subsidize the purchase of health care by the beneficiaries of these programs.
3. The nature of health insurance. It's like an all-you-can-eat buffet. The consumer pays a lump sum to gain entrance to the cafeteria, and then little or nothing for each item that he puts on his plate. Many or most buffet consumers eat too much and leave uneaten food on their plate.
Accordingly, since a primary goal of health care reform is to reduce cost, it is counter-productive artificially to increase demand further by providing even more subsidized health insurance, along with lower deductibles, lower annual and lifetime caps, and more mandates.
In order to maximize competition and the benefits of free markets, the following principles should apply to health care reform.
1. Tort reform. 2. Allow insurers to compete across state lines. 3. No mandates for coverage of pre-existing conditions. Consumers concerned with this risk could buy guaranteed insurability at whatever rate the market might competitively determine. 4. No other mandates, whether for coverage of specific items or regarding deductibles or caps. To the extent that consumers desire to buy such features, the competitive market can be relied upon to price and provide them efficiently. 5. No government involvement in premiums charged. The market can be relied upon to sort this out. If a given insurer proposes premiums that are excessive, the market as usual will encourage other insurers to propose lower premiums and thereby attract this business. 6. Maximum amount and transparency of information so that consumers can make informed choices. 7. Elimination of any impediments to the formation of insurance buying groups, as initiated by consumers, insurers, and/or middlemen in a free market environment, with no need for any government involvement. 8. No tax deductibility of any insurance or direct or indirect health care cost by any person, employer, or other entity.
The elimination of tax deductibility of health care premiums and related costs would, by itself, very substantially increase tax revenues. Accordingly, broad offsetting income tax rate reductions could and should be enacted simultaneously.
There would remain many who are unable to afford the premiums, co-pays, and/or deductibles. If health care is to be provided by taxpayers to those who can't afford it, then the best way to accomplish this may be to establish health care escrows for those below a certain income level, as follows.
On a sliding scale, an amount, up to the sum of the annual deductible amount (e.g., $5000) and the premium on the "high deductible" policy, would be placed annually into a health care escrow account by the federal government on behalf of those qualified by low income and low assets. During the calendar year, this account would pay the premiums and deductibles for such consumers. At the end of the year, any money not spent would be paid in full to each such consumer. This approach would effectively encourage each consumer to shop for and buy only those health care services that the consumer determines are worth the full, unsubsidized cost.
Wow. What a concept.
What's that called? Free Market capitalism?
Didn't we have that in this country once?
We defeat them fast - we kick them out - or free market will be a thing of history
Freedom is the answer! But politicians hate freedom, so free-market solutions do not have a chance in the current political structure.
Yes and the number one kind of interference that is causing high health care costs is the limits on the number and capacity of medical schools which in turn reduces the number of doctors.
All you can eat for illegals and seniors with no accounting for how it gets paid for.
Third party payment for services vs direct pay by actual consumer means that individuals are shelling out $$$ to insurance companies so that they can cover the costs that other subscribers run up.
Lawsuits that award payments for appeals to emotions rather than cold hard facts. (See John Edwards for that)
Paying for medical care for obesity, smoking, alcoholic and drugs and other personal responsibility issues.
Litigation and preemptive testing has much to do with costs.
The catch-22 is that at least on the provider side of the health care equation, there are few if any markets that act in a classic supply and demand fashion that would allow for elasticity in price. Entry into the field is restricted by ability to obtain education, licensure, and a myriad of state and federal regulations. Many of these restrictions are in fact championed by providers under the guise of patient care safety and quality but really do nothing more than constrain competition. A truly free market would drive down prices, but how many would trust their health and lives to a hospital or doctor promoting a $19.95 Earl Sheib coronary artery bypass?
First, I am entitled to all the health care I can purchase - either by direct payment or through a contract with an insurer who agrees to pay for specified services in exchange for a specified premium. Beyond that, everything is charity. I am always free to contribute to the health care costs of friends or neighbors. Such charity is neither owed nor can be demanded, but may only be graciously and thankfully accepted.
The only way insurance premiums can be affordable is if insurers offer policies that have caps to limit risks. The choice of how to spend up to that cap should be based upon the decision of the patient with input from their doctor. Because all involved in the medical business have financial interests, ultimately the patient must diligently question cost-benefit decisions and responsibly spend the health care dollars they have either from out of pocket payments or insurance contracts.
Whether we like it or not our lifestyle choices influence our health. Smoking, obesity, consuming trans-fats, not exercising, and engaging in high risk sexual practices increase our medical costs. Our freedom to make our own lifestyle choices comes with the responsibility to pay for the medical implications of such choices. The minute that one expects an insurer or the government to assist with these costs, that expectation comes with the cost of giving the payer a say in the lifestyle choice. In other words, expecting someone else to assist with one's medical costs (beyond a contract for specific insurance for a specific premium) limits one's freedom.
A tax deduction != a subsidy. That’s inside-the-beltway conventional wisdom at its worst.
You bring up the elephant in the room, but fail to adequately address it. Medicare/Medicaid aren’t just subsidized by the taxpayer. They’re subsidized by everyone who pays for health insurance or directly for health care. Due to the .gov imposing such low repayment to doctors for services, costs are made up by charging individuals and insurance companies more. Until this is addressed, there will be no cutting of costs. Unfortunately, addressing it will also force us to address the fact that Medicare/Medicaid which are already bankrupt, will need to figure out how pay more for services and figure out how to get solvent or get out of the way.
I don’t agree with your call for raising taxes, which is what eliminating the deduction for health benefits actually is. This is something McCain was advocating for and even he wasn’t able to explain why. IMHO, the reason for that is because it’s a lousy idea with no reason for being but to please leftists who think that government revenue is a zero sum game. It would be far better to expand the deduction to individuals, so they can go out and get their own coverage. Taking it away makes no sense. Nor will it help bring in any ‘revenue’. That’s DC conventional ‘wisdom’, meaning it’s complete BS.
Then, we have the slight little problem of half of Mexico coming over our open border for free health care and the hospitals getting stuck with the bill. That all has to be paid somewhere and it’s another part of the skyrocketing health insurance and health care costs.
If we’re truly going to fix this problem, we have to think outside the box. The ‘state lines’ and the ‘tort reform’ are only a small part of what needs to be done. Big things need to be addressed here and it won’t be easy. One thing is for sure: it can be done if we are willing.
I have actually drawn up a whole plan, which I won’t bore you with here, but I also think that we can do something for people who have pre-existing conditions as well, without creating a huge government bureaucracy. I’m not a big government guy, nor am I big on sob stories, but I understand that people fear being told ‘well, you’re screwed’ if they have a pre-existing condition. Through a tax incentive system, to both doctors and insurance companies, we can help people with pre-existing conditions get coverage AND lower the cost to .gov for Medicare/Medicaid, all without expanding government power and compromising our freedom.
“All I WANT IS A SMALL CUP OF COFFEE”
HEALTH INSURANCE INDUSTRY
Image, if you will, walking into Burger King and saying “a cup small cup of coffee, please”.
The person behind the counter replies “we only sell large cups of coffee“.
I say, “OK. How much is a large cup of coffee.”
Counter Person “That will be $20.00.”
“$20.00. Are you insane?”
CP “ You don’t understand. A long with that large cup of coffee you get a order of fries, a fish sandwich, two double cheeseburger, two house salads (mandated by local government) and bake potato (mandated by to State Government). It’s a package deal”.
“But all I want is a small cup of coffee.”
CP “You see, if all the people just wanted a small cup of coffee, we wouldn’t make any money. We were not selling enough fish sandwiches and double cheeseburgers. We were selling way to many small coffees. So our CEO got together with our competing CEO’s, along with our local government and change a few things. Now, you have to buy the large coffee package. Did I mention, we are not subject to anti trust laws.”
Meanwhile, the person in the next isle orders 5 large coffees and is only charge $75.00.
“Hay, CP. Why did that guy only pay $15.00 per the large coffee package?
CP “They are a belong to a large discount group.”
“Let me guess, Local government?”
CP Why yes. They get the best discount. Large employer. you know.” Do you work for a large group?
“No. I’m a sole proprietor .”
CP “ You are SOL. It’s against our rules for you to join with other sole proprietor to form a group”
By the way, you can’t go to the next town to get your Small Cup of Coffee. Even if they sell it, they, like us, can only sell to residents in the town.”
“Let me guess. Part of the being exempt from anti trust laws?”
CP “Right, You catch on fast.”
This is the “State” of our health insurance industry as it stands.
WHERE IS THE COMPETITION? LET ME BUY MY “SMALL CUP OF COFFEE”
WE DEMAND A FREE MARKLET SOLUTION TO BRING DOWN THE COST OF HEALTH INSURANCE.
LET THE COMPETITION BEGAIN
Great points, but please remember: 1) to have hospitals be able to not treat illegals and to report them for deportation (artificial increase in demand of services), 2) to allow other designations beyond state sanctioned “medical doctor” to prescribe/refill a prescription, order a test, or other perfunctory jobs (artificial constraint on supply of doctors or other methods of treatment), 3) require statement of the efficacy of the treatment being delivered (for example, if certain cancer treatments are no more than doing nothing, let the patient see that).
With the limited number of physicians and considerable control by hospitals, we effectively have an oligopoly in health care.
Bingo! All the other suggested remedies in the article matter precious little when the supply of physicians is severely restricted.
Excellent IBD article posted 2/18/10:
http://www.freerepublic.com/focus/f-news/2454514/posts
http://www.investors.com/NewsAndAnalysis/Article.aspx?id=521533
“...one kind of interference that is causing high health care costs is the limits on the number and capacity of medical schools which in turn reduces the number of doctors.”
I have heard this before but can’t find good research although I suspect it is true as well as the fact that medical professional organizations (AMA) actively restrict number of doctors to restrict competition through government regulations re: internships.
Also restricting number of medical professionals is cost of training. Certainly that tax incentives could be used to ease this burden on professioal education.
Moreover I have read a couple of times that the rate of health costs has actually decreased but again not much literature only remarked sometimes. Apparently due to the fact that in the US expensive medical equipment was purchased as soon as available as well as new drugs.
If we want a true discussion about reforming our health care all of these topics would be researched but there’re not.
A lot of the other factors that seemingly increase the cost of healthcare can be traced directly to the doctor shortage. For example, yes, hospitals spend a lot of money on equipment that is arguably not needed. But what’s being missed in that reasoning is the fact that if you have the dire shortage of doctors that we have, then you can’t have doctors wandering the corridors looking for equipment when it is needed, or twiddling their thumbs while orderlies do so. It’s got to be there when they need it, and it’s got to be working. It’s got to have all the convenience features that are available, and it’s got to work quickly. So they spend money on duplicate equipment, and they buy the Cadillac model, not the Chevy.
Hospitals would not buy the equipment unless it pays for itself. No one is forcing them to do so. The fact that they do tells you that it’s not the problem, but only a symptom of the problem.
Not suggesting they should not have purchased the equipment. As reported in UK a lot of times it just is not available because they can’t afford it.
What I am trying to suggest is that one of the reasons we had a large increase in healthcare costs was the purchase of new equipment as soon as it was developed and that now that it’s paid off the rate of increase In healthcare is leveling off or decreasing.
In other words one of reasons we saw such an increase in healthcare was the purchase of new technologies. The real point I’m trying to get references for is that healthcare costs have not been increasing (adjusting for inflation and that kind of thing).
But that has not been explored in depth in discussions of healthcare costs. They are talking as though the rate of rise will continue to increase.
I am in total agreement with you regarding the doctor shortage and the fact that this has not been part of the discussion about healthcare reform.
"8. No tax deductibility of any insurance or direct or indirect health care cost by any person, employer, or other entity"
Why not? We shouldn't be paying any federal taxes anyway. If you want to incent people to buy insurance, make the premiums tax deductable.
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