Thursday, August 13, 2009

Health Care – The Conservative Capitalist Alternative By Regis Matejcik


August 13, 2009

As Americans we enjoy the benefits of the worlds finest medical technology and distributive services. We also endure the burden of a medical system, that due to a number of factors, including the economic reality that it is a limited resource with a virtually unlimited demand, is very costly. In many polls, Americans indicate that they prefer “Universal” health care. Unfortunately, it is likely that what respondents are wanting is the finest of medical technology and service, with the only change being that it be free of cost. It is imperative that we recognize that Americans overwhelmingly approve of the quality and availability of our current health care system - but object to the cost.

Democrats want the public to believe that under their proposal health care will remain unchanged, except the Government will make it universally available and free – or almost free.

Such an outcome is, however an economic impossibility. A resource cannot be made universally available at no cost without altering the supply of the resource in some form or another. The expected result of making any resource that is in high demand available at little or no cost; is that the resource will quickly be depleted and it's distribution governed by some kind of arbitrary rationing, or the quality of the resource will degrade, or a combination thereof.

Therefore, a conservative alternative “health care reform” position must focus on the cost of health care. More specifically, a conservative alternative must focus on the current regulatory and legislative framework that has artificially played a large role in inflating the cost of health care and insurance.  It is imperative that we understand the fundamentals of the economics that drive health care.  At the very core is a demand that is growing faster than the supply.  Much of the increase in demand can be traced back to Government intervention via legislation and regulation.  For example, when the Federal Government instituted a "Prescription Drug" program for the elderly - the demand for prescription drugs was proportionately increased.  When the Sovereign Government becomes a major purchaser of health care, all other potential purchasers tend to be diminsished.  The Sovereign has the ability to print money, and to take money from others by force.  Therefore, with it's almost unlimited purchasing power, it can drive the cost of any good or service dramatically higher by "outbidding" all others for that service.  It is therefore not so much that the Medical infrastructure of the United States need reform - but the regulatory and legislative controls that govern the system that need reform.

When we speak of “health care reform” we need to emphasize that what needs to be reformed are these regulatory frameworks that govern health care. The currently proposed Democrat legislation moves in exactly the wrong direction. The current crisis in health care cost is largely driven by an ever increasing demand
for service due to well intended, but poorly implemented public policy. Legislative and regulatory trends have been to place increasingly costly mandates on hospitals, doctors, and insurers, while making no provisions for funding such mandates. For example, insurance companies are mandated to include coverage of alcoholism in 45 states. That is, even if one is a devout Mormon that never expects to have a drink, a pro-rata share of the cost of alcoholism treatment will be included in ones insurance premium. Some other examples include invitro-fertilization (13 states) and contraceptives (31 states). The unintended consequences of well intended health care regulations have left us with a system that produces miraculous innovation at what are often unacceptably high cost.

The current system displays both the creative genius of capitalism and the stifling costs born of excessive governmental meddling. The Democrats seek to cure the excessive meddling with more meddling – but with the promise that this time it will be done correctly. They wish for the Federal Government to openly “compete” for private sector customers with the insurance industry.

If there is to be any respect for private enterprise, government entities cannot, should not, must not, compete with the private sector. Private and public endeavors should be complimentary – not adversarial. The concept that the sovereign taxing authority would "compete" with a private industry is at its core antithetical to the concept of private enterprise.  Imagine the absurdity.  Private insurers who must make a profit to survive and accumulate the capital needed to cover the risks that they insure; would be paying large taxes on these profits, so they might be used by the entity that is "competing" with them for business.  For generations this country as forbidden Public entry into private markets.  Should the direction of "health care reform" continue to move in the direction of "increasing" rather than "decreasing" wrong headed governmental intrusion into this market; the problems we now face will become exasperated rather than diminished. 

The proper direction of an alternative "health care reform" position is not to "soften" or "weaken" the currently proposed legislation.  The proper direction is to provide a clear concise alternative that begins to "walk back" the disastrous interventionist policies that have lead us to the current health care difficulties.  To do so, there are four major cost inflating factors that must be addressed.  It is in addressing these factors that we will begin to correct the deficiencies that burden the current system.  Since it seems no major movement or legislative initiative can survive without an acronym, we'll call this
initiative T.H.E.M.

-Tort Reform

-HSA  (health savings accounts) should be tax exempt and eligible for direct medical cost, deductibles, and insurance premiums

-Emergency  Care - definitions and limitations

-Mandate Reform

While this writer is not a health care professional, rest assured that neither is Barack Obama or Nancy Pelosi.  The following observations are based on decades of experience as a consumer and critic of the current system, as well as countless hours of research and listening to doctors, nurses, patients, insurance providers, hospital administrators and employees when addressing the deficiencies of our current system.  The above four items repeated recur as  "villains" in discussions or research regarding health care costs.  Often other commonly mentioned "villains" are merely a subset of one of the THEM.

Summarizing them Briefly:

Tort Reform 

-Perhaps the easiest to understand.  Medical practitioners routinely practice "defensive" medicine by ordering tests and investigating things that they no are extremely unlikely to yield any results - but don't want to be accused of negligence for not doing so.  The financial impact of such practices is difficult to over-estimate.  Tort reform has been relatively successful in Texas.  The Texas tort reform was predominantly based on limiting jury awards for "pain and suffering."  While this is a step in the right direction, it may be even more beneficial to more clearly define and limit "negligence."  In medicine, as well as in much of our litigious society, drawing an incorrect inference based on sound medical reasoning is treated as being negligent.  The medical industry has been tasked with perfection as a norm, and anything less than perfection is regarded as fertile ground for potentially massive damages.  In any event, limitations on the excesses of the "jackpot justice" system that has grown out of the current medical/insurance industry is an absolute necessity if effective cost containment is to be achieved.

(Health Savings Accounts) 

-This idea has been around for a while.  It's a good idea, but rather ineffective unless the other three parts of the initiative are implemented.  That is because it's only effective if people are actually going to be paying directly for their own health care expenses, and no one is going to do that unless the cost expectations become reasonable.  For example, let's say that an average family can sock away $200.00 a month for an HSA.  That would be fine if they could find a decent major medical plan for the family for $150.00 a month, and they could use their HSA savings to pay either premiums, deductibles, co-payments or direct medical payments.  Under the current system, however, there is no such option; subsequently there is no widespread clamor for HSA's.  Obviously, if only a mandate laden insurance plan is available at $400 + a month, and a simple unexpected two - three day hospital stay costs about $30,000.00 - who the hell cares if they can save $2,400.00 tax free for a year?

Emergency Care - Define and Limit

-As identified in Drill Down blog (at "Our current public system is based around the EMTALA act of 1986.  In short, "The Emergency Medical Treatment and Active Labor Act (42 U.S.C. § 1395dd, EMTALA) is a United States Act of Congress passed in 1986 as part of the Consolidated Omnibus Budget Reconciliation Act. It requires hospitals and ambulance services to provide care to anyone needing emergency treatment regardless of citizenship, legal status or ability to pay. There are no reimbursement provisions."  Because "emergency care" was never defined in the bill, it has become almost universally interpreted to include anyone, with any ailment, who sits their butt down in an emergency room.  This has become the default health care resource for the indigent and lower middle class uninsured.  Typical "emergency" treatments range from massive trauma to sore throats.  All are treated, some are insured, some pay, many don't.  The costs are arbitrarily munged by the hospital to whatever paying entity they believe they can convince to absorb the costs.  Unless the Congress is going to repeal this act, it is imperative that it be treated similar to a "defined benefit plan" for people lucky enough to reside in the U.S.  That is, Congress must go through a list of defined procedures, either include or exclude them, and stipulate the amount of money the Federal Government will reimburse Hospitals for these procedures.  Additionally, it would be helpful if "emergency care" then became the distinct domain of the Federal Government - with no private coverage competing for payment of "emergency care."  The effect would be to dramatically reduce the premiums of individual hospitalization policies.  This would also largely deal with the "illegal alien" health care problem.  If minor infirmities are not treated in the emergency room as "emergencies" at no cost to the  infirmed, illegals will magically find their way to minor medical centers and magically dig up $50 or $75 for some antibiotics. (On a purely political note - this could be trumpeted by the left as "universal" and a political victory.)

-Mandate Reform

This issue was alluded to previously.  It might be considered the "deregulation" of health care insurance.  More appropriately, it should be considered the "return to market driven" health insurance.  Medical care mandates have become so onerous that there is almost no consumer choice involved in hospitalization insurance.  Both special interests and well meaning legislators have placed so many requirements on insurers that it is a virtual impossibility to create or market a competitive medical insurance product.  If, a healthy 20 or 30 something could purchase private medical coverage that excluded emergency care (that's covered above), excluded auto accidents (covered under auto) with a $5,000 deductible (covered in a couple of years of HSA contributions) it would probably cost them less than $50 a month, and it would probably be profitable for the insurer. 

Would a healthy 20 - 30 something actually do that ?  Sure, if they had the choice to opt out of their employee plan and take home an additional $300 a month.  The employer would probably also save $100 a month.

Of course the currently proposed legislation tilts in exactly the opposite direction.  The Democrat solution is to further mandate that insurers must cover those that are already sick.  Excuse me, that's not insurance.  Insurance is the act of assuming a small certain loss, while eliminating the risk of a large but unlikely loss.  The insurer assumes the risk of the unlikely loss by aggregating the value of a large number of people that agree to pay the small but certain loss.  The Democrat proposal isn't insurance, its either welfare or charity.  To mandate that insurance providers become welfare agencies or charity organizations will only guarantee one thing.  There will be fewer and fewer insurance companies. Evntually only one - the U.S.

The Republican response to the "Yang" so far has been "mini Yang"  That won't do it.  The Democrat assault on personal liberty, freedom, and private property needs to be countered with more than a "not so much" statement.  It is a "Yin" that must be countered with a "Yang".  This is the "Yang" position.  The solution is not a takeover of Health Care by the U.S. - the solution is T.H.E.M.

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