By Pat Hughes
As we pointed out in our last post, ObamaCare has been tried and it is not working. This is what happens when bureaucrats shun market solutions to complex economic problems.
Throughout our country’s history, every sector of our economy has experienced growth through innovation created by marketplace competition. The result has historically been the delivery of products that are routinely better and cheaper than versions that preceded them. Forty years ago, a computer cost $100,000 and would fill a lecture hall. Today, you can buy a smart phone for a few hundred dollars that fits in your pocket and does everything that forty-year-old computer can do…and much, much more.
The health care sector has seen improvements in quality of care during that time frame, but the types of market-based innovations that drove down the price and improved the delivery of technology products and services, for example, has largely missed the health care sector. As a result, heath care costs have soared.
Why is this? Because the health care industry is sorely lacking in areas other sectors are not—competition and choice—the backbone of the American economy since its inception. ObamaCare is repressing competition and choice. Hence, it is shaping up to be a monumental failure.
Throwing more people into the already-failing Medicaid program, requiring that people select from government-approved plans on exchanges, making business owners offer insurance to employees, adding minimum coverage mandates to already existing insurance plans…each of these limit the options available to consumers, hampering access and increasing prices.
Embracing competition among health care providers has to be the crux of any health care reform package if it is to meet the goals of lowering costs and providing better quality of care to more people. Fortunately, there are real, tangible solutions that exist already which, taken together, can help meet these criteria:
- Congressional Republicans have called for awarding tax deductions (on $7,500 of income for individuals and $20,000 for families) for those who have health insurance. If you find a plan for $4,000 that works for your needs, great, the remaining deductions apply to other income. If you want your family to have $25,000 worth of insurance, that’s fine, but you have to pay taxes on the annual $5,000 difference. The most important aspect of this proposal is that these tax deductions apply to nearly any health insurance plan. The amount of options available would be exponentially greater than under ObamaCare.
- Currently, it is very difficult or impossible to purchase health insurance across state lines. This is a problem because insurance plans in some states cost consumers more than others due to a more burdensome regulatory environment and higher costs of doing business. Lobbyists have made it that way, giving insurers located in various states near-monopolistic power over price and choice for health insurance. Allowing insurers to sell their products across state lines will open the market, increase competition, and lead to better, cheaper, and more available insurance. This reform would have the added benefit of incentivizing states, such as Illinois, to limit the scope of their own health care regulations, which will help lower overall costs.
- A particularly problematic aspect of ObamaCare is that the legislation is wrought with onerous coverage mandates for those buying individual or small group plans. These “essential health benefits” include mental health, prescription drugs, maternity and newborn care, and pediatric services. These are benefits that a healthy 28-year-old single male is required to pay for, and which he will likely never use. Much of the same can be said for a 63-year-old grandmother. Health care needs are unique to each individual. Government regulations looping everyone together and forcing them to pay for the same benefits makes plans more expensive for individuals to afford—and more expensive for insurance companies to offer. The fewer coverage mandates that come with health care, the more people will be able to find a plan that meets both their health care needs and their budget.
- Here in Illinois, our Medicaid program has become a fiasco. Recipients are thrown into a one-size-fits-all program where everyone receives the same coverage—no options are available to select a plan that best suits an individual’s needs. Medicaid recipients are then forced to wait longer to see doctors and receive less-than-standard quality of care. That is if they are able to see a doctor at all; one in three doctors are refusing to see Medicaid patients because the state is so poor at making timely and adequate payments. On the other hand, Florida has seen great early success in providing its Medicaid recipients with over 30 plans to choose from (chosen by the state through competitive bidding), including plans that cater to those with complex health needs. This program could easily be implemented, or expanded upon, in Illinois. Offering 30 plans is not the same as open competition, but it certainly does more to meet patients’ needs and control costs than having no options whatsoever.
- Since they were introduced in 2004, health savings accounts (HSAs) have proven to be an effective means of controlling costs and having more personal ownership (i.e., choice) of health care. HSAs allow you to transfer pre-tax income into an account, which individuals can use for health-related expenses, and they have been very popular—over 15 million people have saved over $12 billion in their HSAs. Under current law, however, it is often difficult to pay insurance premiums from HSAs. Simple over-the-counter medicine also requires a doctor’s prescription to use HSA funds. Changing these policies would likely mean that millions more of Americans would enroll in HSAs, taking greater control of their families’ health care and potentially saving hundreds of dollars a year by being able to buy basic health care items tax-free. Perhaps the greatest benefit of HSAs, however, is that the high-deductible plans typically paired with HSAs are more affordable and create more conscience consumers that are likely to shop around for better prices or for health care more specifically suited to their needs—it injects more competition into the marketplace. Unfortunately, the minimum coverage mandates in ObamaCare are making HSAs more and more obsolete in many markets.
- Doctors in the United States of America today pay exorbitant amounts for their malpractice insurance to protect against the threat of litigation. That alone is a substantial factor in driving up the cost for a patient to see a doctor, but doctors also often practice defensive medicine—ordering excessive amounts of expensive tests—to avoid being accused of malpractice and getting sued. According to Gallup, defensive medicine accounts for one-fourth of money spent on health care, roughly $650 billion each year. By passing responsible tort reform and capping the amount of money one can receive for non-economic damages (such as pain and suffering) in a health care related lawsuit, the cost of insurance would subside and doctors would be less concerned about ordering unnecessary tests.
Health care reform is not easy, but that does not mean we should settle for mediocrity. Our country has continually improved our quality of life by embracing free markets, capitalism, and competition. Once the barriers to competition are removed and consumers have easily-accessible insurance options, companies will be forced to really compete to meet consumer demands. Once that happens, innovation will occur, prices will fall, and health care delivery and accessibility will be greatly improved.