Read How Capitalism Will Save Us Online
Authors: Steve Forbes
How Capitalism Will Save Us (61 page)
In other words, without anyone’s being explicit, the implied attitude is: why bother treating the sickest people?
Medicare’s paltry reimbursements have also encouraged inefficiency. John Goodman of the National Center for Policy Analysis points out that Medicare’s refusal to reimburse doctors for e-mail and telephone consultations is one reason they’re so seldom used. Medicare also refuses to reimburse doctors for educating patients on how to self-administer some care at home—for example, the treatment of diabetes. Patients are forced to go to the doctor’s office or to the hospital, experiencing greater inconvenience and adding unnecessary costs to the nation’s health-care bills.
In the end, neither Medicare nor Medicaid fully delivers on the promise of meeting the health-care needs of elderly and poor patients. Medicare coverage is today so inadequate that participants have to purchase private “Medigap” insurance policies to pay for what’s not covered. Program participants today pay a greater percentage of their incomes for health-care expenses than they did in 1965, before Medicare began.
This already incomplete coverage is fated to get worse as the population ages and more people enter Medicare. Both free-market opponents and supporters agree the current system is heading for a Fannie- and Freddie-sized meltdown. The Cato Institute’s Sue Blevins predicts that by 2030, just twenty years from now, only 2.3 workers will be available to support every Medicare patient—compared with today’s 4 workers per beneficiary. Experts call the system “unsustainable.”
41
State-run Medicaid programs, meanwhile, are straining state budgets to the breaking point. In the state of Florida, with its high population of immigrants and elderly, Medicaid rolls ballooned 40 percent over five years, and the program in 2005 was 25 percent of the entire state budget.
42
Many think that expanding government programs like Medicare and Medicaid will straighten out the health-care economy. But this would only exacerbate the mess these massive bureaucracies have caused. People
will end up paying more for health care whose quality and innovation will continue to decline. The cost will be not only in dollars, but also, in policy lingo, in worsening “health outcomes,” with greater risk to our health and our lives.
REAL WORLD LESSON
By imposing a rigidly bureaucratic system of third-party payment with inadequate and capricious price controls, Medicare and Medicaid have massively distorted the entire health-care economy
.
Q
W
HAT IS THE
R
EAL
W
ORLD MARKET SOLUTION TO HEALTH CARE?
AA
LLOWING CONSUMERS, NOT CORPORATIONS OR GOVERNMENT, TO CONTROL HEALTH-CARE DOLLARS AND MAKE THEIR OWN BUYING DECISIONS
.
T
he best way to fix health care is to allow the return of a healthier market, where consumers make the buying choices for health care and insurance. Doctors and hospitals will once again become accountable to the individual patient. Do away with the regulations that are today currently driving up the cost of coverage. Make it easier for individuals to buy the plans and care that they want.
Enabling people to buy their own insurance and care would push insurers and caregivers to become more efficient and come up with new, less expensive ways of providing health care. We see this phenomenon in every other part of a free economy, including a market sector more basic than health—food. Food is more critical to life even than health care. Yet in real terms it is costing less and less.
With the patient in the driver’s seat, you’d get better care and better service. Your insurer, doctors, and hospitals would treat you like a valued customer. New forms of health-care delivery would spring up as companies sought to serve individual buyers. More people would be able to afford medical insurance. Fewer would need a government alternative. But even if we still had Medicare and Medicaid, those programs would be easier to finance in a consumer-driven market because health-care costs would be lower.
The power of the individual consumer to bring down health-care prices is illustrated by the relatively low cost of medical services that
people buy directly and are not covered by insurance. Two prime examples: plastic surgery and laser vision surgery. Neither is normally covered by traditional health insurance unless the surgery is needed because of accident or disease.
Plastic surgery has not experienced the kind of price inflation that has afflicted the rest of the health-care industry even though, in the last fifteen years, technological advances have proliferated and demand has rocketed sixfold. Conventional laser eye surgery that reshapes the cornea so a patient no longer needs to wear glasses costs a third less in real terms than it did a decade ago.
How do we get there from here? The following reforms would begin to untangle the system:
Allow people to buy health-insurance policies across state lines
. This would enable people to buy plans in states regulated by fewer costly mandates. You should be able to buy a policy offered anywhere, from Arizona to Vermont. Allowing sales of health insurance across state lines would enlarge risk pools, making sicker people easier to cover. And it would increase competition among insurers, bringing down costs. A couple of years ago, the Health Care Choice Act, introduced by Arizona congressman John Shadegg and South Carolina senator Jim DeMint, would have allowed out-of-state insurance sales, while preserving the state’s primary responsibility for regulating health insurance. The bill never made it out of committee. Had it passed, it would have enabled more people to have access to lower-priced insurance. Competition would have blossomed.
Remove restrictions on health savings accounts
. HSAs allow employers to offer health insurance with high deductibles. Companies—and workers, as well—put pretax money into health savings accounts. The account covers the lion’s share of care—mainly routine expenses—that you would normally pay for before your insurance kicks in. That care is paid through the HSA. The money belongs to you. Like a savings or checking account, what you don’t spend remains yours for future use. The HSA earns tax-free interest; funds can be invested, much like an IRA. This is the antithesis of flexible spending accounts, in which the worker loses whatever money in the account hasn’t been spent by year’s end.
HSAs allow people to use insurance for what it was supposed to be for—catastrophic expenses. Thus, they help lower the cost of premiums. Meanwhile, they let the patient directly buy routine medical care—creating a consumer-driven market.
For years,
Forbes
has provided employees what are, in effect, health savings accounts. The insurance itself is a bargain (relatively) because the policy deductible is high. What makes the plan so attractive, though, is that
Forbes
gives everyone who works at the company $2,500 each year, which covers most of the deductible. Money that isn’t used is rolled over. If medical bills exceed both that $2,500 and the employee portion of the deductible, traditional health insurance kicks in. When companies initially put such a plan in place, they often see a decline in premiums. Over time,
Forbes
’s premiums have increased less than those of its peers.
Insurers are permitted to offer HSAs as a result of the Medicare Prescription Drug Improvement and Modernization Act, signed into law in 2003. So far, only about eight million people nationwide have signed up for them. One reason is because they’re new. But also, people and insurers don’t fully understand them. For people accustomed to prepaid coverage, shopping for health care can take getting used to.
Another problem is that the government restricts what deductibles are and how much money you can put in your account. If such restrictions were loosened, more people would sign up for HSAs. They would become a greater factor in the marketplace. The health-care system would have to respond to these new consumer-oriented pressures. A remarkable phenomenon would unfold: Growing amounts of money would accumulate in these accounts. The accounts would grow to become a significant asset for many people, thanks to the miracle of compounding interest.
If health savings accounts became a major factor in the marketplace for insurance, pricing of medical services would become saner and more affordable. We would finally see the return of genuine insurance—coverage for major risks, instead of the dollar-for-dollar kind of coverage we have now.
Institute Medicare and Medicaid health savings accounts
. Medicaid and Medicare participants would get their own HSAs, much like
people covered by private insurance; government would provide a certain amount of money to cover basic expenses, along with a catastrophic policy. Medicaid participants would get food stamp–like vouchers or health debit cards. Medicaid and Medicare recipients would thus be encouraged to shop for health care like everyone else. To get people accustomed to the concept, the program could be phased in; it would be optional.
Health savings accounts would begin to bring the runaway costs of both Medicare and Medicaid under control. Participants would have a positive incentive to hold the line on spending—the prospect of building up their HSAs. HSAs would make government insurance consumer-centric instead of government-centric. It would create a consumer-driven market for health care; the need to please consumers would propel health-care providers to improve productivity and develop cheaper and better ways of providing health care.
Make it easier for small employers to pool together to buy health insurance for their employees
. This would enable them to spread the risk and pay lower premiums. Allowing small business pools would help to make health insurance affordable for the small employers that currently cannot afford to offer it to employees—and it would give formerly uninsured people access to coverage.
Allow individuals as well as employers to buy health insurance with pretax dollars
. Why shouldn’t you be able to pay for health insurance in pretax dollars? Here’s how it would work: Americans who wanted to buy their own insurance would be able to notify the government of their decision. They would then receive a refundable tax credit—which means either a tax credit or dollars—of, say, $2,500 for individuals, $5,000 or more for families. Equal tax treatment would encourage Americans who preferred to buy their own plans to do so without adverse tax repercussions. The market for individual plans would grow. Insurers would be under additional pressure to be accountable to individual patients. They would deliver more reliable coverage. You’d see a market developing for individual policies, instead of one-size-fits-all corporate policies. By encouraging free choice by individuals, equal tax treatment would allow individuals
and insurers to free themselves from the burden of expensive mandates. There’d be more competition in the market for insurance. You’d see downward pressure on the price of coverage.