We Do Need To Revamp Health Care

Obama has put forth his health care plan.  Understandably, within the constraints of this blog we cannot dissect every detail.  So let’s look at the broader points.  First, it takes much of the private market for health care and puts it under government supervision and administration.  Secondly, it taxes some segments of the population early, and promises benefits later.  Third, there has been a lot of horse trading to get the bill through, so special interests were able to lobby benefits that other groups couldn’t get.  For example, comprehensive plans offered by unions to their members come away scot free from any changes.  Plans that small to mid size corporations offer are taxed heavily.  By now if you have been paying attention, you know that certain Senators and Representatives were able to eek out tremendous advantages for their own states as well.

My question is “Why do it this way?”  Why not do it the simple way, that will cover even more people at a more cost effective price?  Changes in the way health is doled out in the US have to happen.  No one really argues with that. Here is how I would do it on a macro level.  As Wendy Gramm once said in a CME Board meeting before we started on the CFMA in 2000, “The devil is always in the details.”.  But you need a framework to build on.

The goal is to cover the largest amount of American citizens at the lowest price(not cost which is different than price)

First, let’s start with doctors.  The supply of doctors is restricted by the government via Medicare/Medicaid rules.  They only admit so many doctors to med school.  This supply is further narrowed because the AMA will only allow a certain number of doctors in each specialty.  You can only have so many specialists per specialty.  So when demand spikes, supply is constrained and prices go up. End the restrictions.  Train more docs.  Let them choose to practice medicine in any specialty or place they want.  They will make economic choices that are best for them.  The choices they make will be best for the entire medical market.  Coase theorem works.

I am not advocating admitting unqualified people into medical school.   Just admit more qualified people.  If you don’t have space, start more medical schools.

Once a doctor enters a practice he needs an army of people to keep up with insurance company bullcrap. Most of a doctors’ overhead will be to employ number crunchers to extract payment from insurance companies-or to pay insurance company premiums.  One of the reasons for this is the majority of bills in America are 3rd party payed.  You don’t pay them, your insurance does.  That is probably good for major operations and medical needs.  However, most of America just needs basic commodity care.

Next time you are at your doctor, ask him how much they charge for a vaccine or shot?  They won’t be able to tell you, they will have to look it up and see how they are going to charge you.  For commodity procedures, doctors should post the price in their office. Then you can comparison shop and choose where you want to go.  There are lots of places to get this sort of thing done besides a doctors’ office.  Take Care Health Clinic’s at Walgreen’s are a perfect example.  Posting prices now injects lots of competition into the doctor market.  The amount you pay will go down, and the amount of care being given will go up. Doctors will still make a profit, but they will have to figure out how to price things to make more or less on certain procedures.  Price will not be set by a central government controlled agency.

Everyone hates insurance companies.  They have mini-monopolies state by state.  End it.  Force them to compete.  They will innovate.  New policies will emerge for different segments of the market.  The price of insurance will come down, and the amount you can get will go up.  End restrictions on people trying to buy insurance as well.  Allow people to group up in creative ways to purchase insurance.  This will force companies to innovate more, and the price you pay will come down.  Insurance companies will also innovate to cover “pre-exisiting conditions” that they don’t cover today.  Why?  Read the next paragraph.

People of the US today choose if they want insurance.  Give them that choice if they are above a certain asset level.  Otherwise they have to buy insurance.  Bill Gates probably doesn’t need insurance.  Even the worst medical condition wouldn’t break him.  But a person like me needs insurance.  Single people after the age of 18 would have to buy at least catastrophic insurance.  This increases the pool of insured people.  That spreads out risk among a far greater population, and insurance companies will cover everything.  Besides that, we have already increased competition among insurance and doctors, so costs have come down.  If people are truly indigent, then the government would issue them a voucher to purchase insurance for their family.  We would “Nudge” (Richard Thayler) them with a few simple choices to choose from.  They could comparison shop for the best priced insurance like everyone else, but they would have to spend that voucher on some policy.  Whatever was left over they could keep for themselves. 100% of the US citizen population would be covered.

Lawyers are the bane of everyone’s existence.  They are the root cause of a lot of the high prices that you pay.  We would have to have tort reform to curb crazy or unending lawsuits.  The lawsuits over asbestos, and now mesothelioma, went from lawyers truly trying to help people to gigantic unending fishing expeditions that have bankrupted companies and courtrooms. Tort reform is a key component of any health care reform.  Doctors insurance premiums would also come down with tort reform.  35-50% of their premiums are charged because of the threat of lawsuits from lawyers.

Lastly, if the government were truly concerned with providing health care to all American citizens they wouldn’t tax it.  Incentivize citizens to get health care by allowing Americans to open a tax free account (like and HSA or MSA) and let the account grow tax free.  If you don’t need a lot of medical care, you won’t have to spend the money on it.  You can spend it on yourself.  This also makes it pay for Americans to take care of themselves.

That’s a pretty broad outline.  Democrats certainly have not proposed anything that resembles this.  Republican’s have proposed bits and pieces, but their proposal isn’t really bold.  It seems that both parties really want some government involvement so they can keep control.  What we really need is to own it and control it ourselves.  All the bits and pieces of legalese and restrictions and mandates that come out of the beltway just keep us further away from doing what’s best for us.

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    Momus

    2010/01/21 at 1:19pm | In reply to Paul.
    Jeff’s never has to make a payroll, either. (Read “About.”) To say “A politician has never had to make a payroll out of his own pocket,” is ridiculous.

    Momus

    2010/01/21 at 1:15pm | In reply to pittrader1988.
    Interesting for who the DA was, but basically a non-sequitir in this discussion.

    Al

    2010/01/20 at 1:04pm
    First, you must understand a large number of physicians enter this country already qualified to practice medicine, being trained and degreed in other countries. Medicare changed how it paid providers in the 1990’s from speciality based usual and customary for a given area to a relative value system which looks at work, practice and malpractice expenses for a geographical location. They have no control over the number of physicians in a given area or control over what specialty they practice. In fact, since they now pay on a RBRVS (regional based relative value system) they don’t care what specialty you are, thinking if you can do the procedure, you should get paid the same for it as any other specialty. Medicaid requires you to participate if you want to get paid for treating Medicaid patients, but in private settings, physicians have the right to chose not to treat these patients and, therefore, Medicaid has no authority over them. I could lecture (and have) on the waste within both Medicare and Medicaid for an hour with regard to enrollment processes and filing requirements, but this isn’t something the public at large would even care to understand.

    I do agree with resolving tort reform to open up competition. Malpractice limits need to be universally established before this can be done as well as universally having each states own legislature become uniform across the board with insurance coverage requirements. (An example of how states are hurting this process would be the following; Illinois just past this year another insurance mandate requiring all insurance companies to pay for hearing checks on all newborns. This mandate isn’t in every other state and makes insurance pricing and coverage almost impossible. Another example would be some states that require coverage for infertility treatments, but at different levels. Illinois has over 20 different coverage mandates.)

    The biggest problem of the healthcare system was the complete removal of the patient from the difficult but important decision making process directly with the physician with the true cost of healthcare being part of the discussion. With patients only paying a flat deductible or out of pocket expense for healthcare, they demand every test possible without regard to the cost verses the outcome. Physicians fearful of malpractice claims oblige. Without the patients becoming part of the cost containment (because it costs them more) there will remain an “all you can eat buffet mentality”. Fixing tort reform and setting reasonable limits on malpractice sounds relatively easy compared to telling the American public they also are part of this problem.

    Jack
    2010/01/19 at 10:18am
    How about we revamp the government, their track record is lousy at best. If you want to see how they are doing check out the website usdebtclock.org
    Just what we need is another program destined to fail, and the burden put on the taxpayer. How about we limit our politicians to two terms and do away with the “professional politician”, and get back to the basics where you run for an office to actually be a servant to the people.

    Paul

    2010/01/15 at 2:48pm
    Jeff:

    Here’s the problem – you offer common-sense ideas to solve the problem. I believe that is because you are a BUSINESSMAN.

    Unfortunately, a politician has NEVER HAD TO MAKE A PAYROLL OUT OF HIS OWN POCKET. Everything they do is with ’someone else’s money.’ There is a BIG DIFFERENCE between those two.

    Until we elect leaders who have had their own ’skin-in-the-game’, we will continue to get awful ideas that waste a lot of money and are more importance is placed on power than on solving problems.

    You should be our President!

    2010/01/15 at 7:43am
    http://www.theheart.org/article/277603.do

    Denying a heart transplant so a criminal case can go forward. This is bureaucratic health care at its best. Forget about what Sarah Palin calls “death panels”-these types of decisions are more insidious and the kind that will be more frequent under centrally planned health care.

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    Contrary to what Momus says above, I have had to make a payroll. It’s not been very large. Nature of my business. But. as Joe Gibbons said in the movie “Floored”, “I am trading my own hedge fund with my own money. My wife and kids trust me to not screw up.”

    Very different than getting a salary.

  • That sounds interesting. Does it have anything to do with the so called money accounts?