Sunday, November 8, 2009

Free Market Health Care Reform

In the spirit of reaching out to the left, I thought I would explain how free markets and minimal government intervention can achieve the same results as the overly complex and costly health care legislation passed by the House.

From his own web site, the President's stated goals for health care reform can be summarized as follows.
  • Reduce the cost of health care.
  • Increase the number of insured.
  • Ensure those with pre-existing conditions are covered.
  • Protect Medicare.
  • Create a more competition through and insurance exchange and "public option."
  • Do not increase the deficit.
With respect to reducing the costs of health care, I hope we can all agree that such reduction is only desirable if the value of the health care delivered is not increasing. There are actually two costs that get conflated in this argument. One is the cost of care, the other the cost of insurance. To reduce the cost of insurance, we need more competition, less regulation. The Congress, acting under the interstate commerce clause, could pass legislation that allows any insurance company licensed by any state to be allowed to sell insurance in all the fifty states.

Reducing costs of care is more problematic, but again, information and competition are key. In Pennsylvania, the government publishes statistics about hospital outcomes and has found that the most effective hospitals are the least expensive, because the cost of re-admission skew total costs of care. Is this government intervention? Yes, but the least obtrusive kind, providing needed information. I foresee a time when such fact finding could be done privately for insurance companies under a consortium.

Increasing the number of insured is also amenable to free market reform. The health insurance industry is subject to heavy regulation as to what should be covered, what co-pays are allowable and what caps are in place. As with any regulation, this has stymied the innovation that is the cornerstone of increasing efficiency and reducing cost. Further, the current system doesn't give consumers enough incentive to shop around for best value in health care providers. Lifting regulations on what must be covered would be a boon to many. A single male shouldn't have to pay for pregnancy coverage for example. A young married woman shouldn't have to pay for viagra coverage, we hope. Further, high co-pays, with catastrophic caps to prevent disaster for the insured, would go a long way to reducing the cost of insurance. I'm not saying that no regulation is required. Certainly, a legal framework that requires insurers to honor their commitments is needed, even libertarians agree in the basic issue of contract enforcement. But the current amount of regulation hurts the ability of insurers to provide lower cost products.

Pre-existing conditions that prevent some people from getting insurance certainly tug at our heart strings. Our heart goes out to someone who loses their insurance and because of an existing and potentially debilitating illness, would go bankrupt getting treatment. However, this can be solved in a two pronged approach. First, we need to make insurance even more portable than it already is. Individuals should have the right to purchase a level term guarantee, just like they can with life insurance, so that they can take their coverage with them if they lose employment. Secondly, we should change the tax code so that we start to encourage employers to get out of the health insurance business, and have individuals purchase their own plans. If the plan is my own, it doesn't matter who my employer is, I can keep my plan for life.

As far as protecting medicare, I am not sure it can be saved, but certainly cutting payments to Doctors accepting medicare will only hasten it's demise. Doing nothing will do more for medicare than anything produced by this administration.

Increasing competition? See previous paragraphs on reducing regulation and allowing health insurance to be sold nationally.

This is easy under free market reform, no new programs = no new spending.

There, we have the start of a free market plan, time for the Republicans to put it forward.

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