To Fix Health Care System, Put Consumers in Charge

Democrats were riding high in the polls in 2006 and 2008, and one of their big issues was health care. Then, after passing the president's health care law, the politics shifted, and the issue helped sweep the GOP to victory in the 2010 midterm elections. A few months later, Republicans had a 14-point advantage in terms of voter trust on the health care issue.

Then, Wisconsin Rep. Paul Ryan introduced his health care plan, and the lead disappeared. Neither party has an advantage on the issue now.

President Obama's plan is unpopular, and most want to see it repealed. Ryan's plan is unpopular, and few want to see it enacted. Both plans are unpopular because neither one puts consumers in charge of their own health care decisions. More than anything else, that lack of consumer control is the root cause of the health care problems facing our nation today.

Americans now pay a smaller share of their disposable income on out-of-pocket medical care than they did in 1960. Nearly nine out of every 10 dollars spent on medical care coverage is paid by either an insurance company or the government. Since someone else is paying the bills, someone else ends up making the big decisions about things that affect every individual's health care.

That is precisely what most Americans want to change. No one wants their health care choices being made by government officials, insurance companies or their employer. People want to make those important decisions themselves.

Putting consumers in charge would require pretty radical change, but it's the type of change voters could support. For example, consider a fairly typical situation where a company provides health insurance coverage for its workers. Rather than letting the company choose the plan, 82 percent believe that each worker should be allowed to use that money to pick his or her own insurance plan. If that plan ends up costing less than the official company plan, most believe the worker should be allowed to keep the change.

But giving consumers control of the money doesn't mean much unless they have a variety of competing insurance plans to consider. Three out of four voters think it's time to end the antitrust exemption granted to health insurance companies. Why? By a three-to-one margin, voters believe that increased competition among insurance companies would do more to reduce costs than increased government regulation.

Voters also want to reign in the government bureaucrats. Rather than letting the government define a one-size-fits-all insurance plan, 77 percent think individuals should have the right to choose between plans with a mix of higher deductibles and lower premiums or the reverse. Seventy-eight percent believe everyone should have the choice between more expensive plans that cover every medical procedure and lower cost plans that cover only major medical procedures.

To insure adequate choices, voters overwhelmingly believe that everyone should be allowed to buy insurance policies across state lines and that everyone should be able to purchase the same insurance coverage provided for members of Congress. Recognizing the importance of consumer incentives, most also believe insurance companies should be allowed to offer discounts to those who take care of themselves by exercising, eating well and not smoking.

Putting consumers in charge threatens the status quo in Washington, but it will give Americans a more responsive, less expensive system of medical care.

This is a good start.

Better yet, give individuals back the money that is being deducted from their paychecks or being spent on our behalf by the government or employers. Go back to the days when insurance was just that - insurance for rare but catstrophic events that few individuals could afford on their own (e.g., cancer treatments). Have consumers pay directly for routine medical expenses.

If I go to the doctor’s office as a paying customer (and not just a product that needs processing in order to collect payment from the insurance company that is the real customer), I doubt that I will have to wait 45 minutes, fill out mounds of paperwork, or endure a series of unneccessary tests.

From Wiki, for what it’s worth:

Employer-sponsored health insurance plans dramatically expanded as a direct result of wage controls imposed by the federal government during World War II.[16] The labor market was tight because of the increased demand for goods and decreased supply of workers during the war. Federally imposed wage and price controls prohibited manufacturers and other employers from raising wages enough to attract workers. When the War Labor Board declared that fringe benefits, such as sick leave and health insurance, did not count as wages for the purpose of wage controls, employers responded with significantly increased offers of fringe benefits, especially health care coverage, to attract workers.[16]

President Harry S. Truman proposed a system of public health insurance in his November 19, 1945 address. He envisioned a national system that would be open to all Americans, but would remain optional. Participants would pay monthly fees into the plan, which would cover the cost of any and all medical expenses that arose in a time of need. The government would pay for the cost of services rendered by any doctor who chose to join the program. In addition, the insurance plan would give a cash balance to the policy holder to replace wages lost due to illness or injury. The proposal was quite popular with the public, but it was fiercely opposed by the Chamber of Commerce, the American Hospital Association, and the AMA, which denounced it as “socialism.”[20]

Foreseeing a long and costly political battle, many labor unions chose to campaign for employer-sponsored coverage, which they saw as a less desirable but more achievable goal, and as coverage expanded the national insurance system lost political momentum and ultimately failed to pass. Between 1940 and 1950, the total number of people enrolled in health insurance plans grew seven-fold, from 20,662,000 to 142,334,000,[21] and by 1958, 75% of Americans had some form of health coverage.[22]

And from that evolution of “free medical care” came a whole host of problems. Probably the biggest problem is that the American public has now been conditioned to think of medical care as “free” or “insured.” And it’s not financially sensible or economically sustainable.

The comparison I like to make: ask someone if they drive a car, they will say yes. Ask them if they have auto insurance, they will probably also say yes. Ask them if they take care of their car with routine maintenance like oil changes, most will again say yes. Then ask them, when they go get an oil change, do they they expect their auto insurance carrier to pay for the oil change.

At that point, they usually start to get uncomfortable. But that is the mentality that has to be broken in the American public. Health care is not free, it costs, just like anything else. Go pay for it. And, if you have to pay for it out of your pocket, two things are going to happen: 1) the costs will be competitive and come down, and 2) people will start taking better care of themselves.

I would also suggest that if doctors spend a certain amount of time each year practicing medicine, then anything which allows a person to visit a doctor who otherwise would have been "too expensive" will require that someone else--who would likely have been willing to pay more for that doctor visit--will be unable to do so. Injecting money into the system may cause more doctors to spend more time practicing, but it will likely cause the combined amount paid by the patient and the subsidy to exceed the value of the care given.

As an analogy, imagine that just before an auction, some "benevolent benefactor" announces that he'll provide 9:1 matching funds, so if someone places a winning bid of $1,000 on an item, the benefactor will pay $900 and the winning bidder only $100. How would that affect the amount of money bidders would have to pay for things? [answer: it wouldn't affect it significantly, since everyone will simply bid ten times as much as they otherwise would]

Suppose the benefactor kept his policy in place long-term--what would happen then? [answer: more goods would be brought to the auction, though many of the goods that were sold at auction would in fact be worth more to the people selling them than to the purchasers; indeed, it's entirely possible that someone who bought an item at one week's auction for $100, and could have gotten $100 worth of value if he'd used it himself, might bring it back the next week and sell it for $900 (or $90) to someone who only valued it for $90, or perhaps to someone who didn't value it at all but expected to resell it the following week for a huge profit. The net effect of the "benevolent benefactor" would be to totally destroy the ability of the marketplace to allocate resources to people who would actually receive value from them.

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