Monday, December 15, 2008

Health Care in America

Last weeks OTT triggered a discussion on the issue of Health Care (or more specifically Health Insurance). With that in mind, I would like to take this opportunity to lay out my ideas in regards to this issue.

Our current state with regard to health care is an untenable position - a significant portion of our society has health care coverage - either through the state (Medicare and its various flavors), their employers - even some on an individual basis, while another large swath of the population are not able to afford health insurance. The former group sees little to no cost to health care - which in turn artificially increases demand - which (especially when coupled with the issue of unrestrained litigation against the medical profession) drives the cost up for those in the latter group.

The major stumbling block in regards to workable health care reform is the intense focus on insurance. The reason this approach is flawed, is that lack of insurance is not the problem, but rather the fact that a specific commodity (in this case health care) is not reaching a large segment of the population. The health care issue is at its root a economic dilemma. Failure to recognize this critical piece of the puzzle automatically shuts out a multitude of potential solutions. Rather than considering the full scope of the problem, we immediately limit ourselves to the subset of possible solutions that focus on getting everyone insured.

With all this in mind - and keeping in mind the economic principles presented here and here - we can begin to look at potential solutions.

Here are a few of my favorites in no particular order:

1) Disband Health Insurance as we know it - As of now, the majority of consumers "purchasing" health care have no exposure to it's cost. Obviously the providers of health care (as with any good or service) do not have an interest in keeping the price down. In this situation, the only entity interested at all in keeping the price down receives no benefit from the transaction.

In order for this idea to remain at all palatable, this would have to occur gradually- with various elements of health care being phased out over time. This exposure to costs (whether for prescription drugs or routine procedures) would cause individuals to opt out of procedures they did not deem necessary. This would provide incentives for patients to discuss cheaper alternatives with their doctors.

In my view the end result would have health insurance look more like life insurance. Catastrophic policies that pay out a set amount should an individual get cancer or develop some major illness, etc. This would allow individuals to protect themselves in the event of disaster while at the same time providing the exposure to cost that is necessary to induce patients to seek savings on their own.

2) Tort Reform - Death and injury are risks in just about every occupation, however, the very nature of health care increases the likelihood that some customers will suffer injury or death while in the care of the provider.

There are many instances where such occurrences are the result of gross negligence and individuals must have access to civil courts to settle such matters. However, our society has a general tendency for litigation whenever any is hurt - regardless of fault. This tendency has exceptional impact on an industry that deals with death and injury on a daily basis.

To lessen the impact of litigation on the medical profession, hard caps should be imposed on awards for Pain and Suffering or Punitive damages. This would allow providers of malpractice insurance to accurately assess the risk they are taking on when insuring doctors.

Individuals (medical community or not) must also have a means of redress for dealing with frivolous claims. As it stands now, there is no risk to an individual filing a claim - attorneys don't charge them anything unless they win - and should the suit fail, the defendant still has his attorney fees to deal with. I would propose that individuals filing suit be responsible for the defendents legal fees should the case be dismissed.

3) Promote alternative care - I'm not talking accupuncture or holistic medicine, I'm talking about places like the Minute Clinic at CVS. $60 every couple of months for their Health Screening Package sounds like a reasonably affordable way to take preventive care into your own hands.

4) Provide incentives for Health Savings Plans - Think 401k for your health - or something along the lines of a College Savings Plan. All contributions to the plan would be tax deductible - and withdrawals for health care would be free from any capital gains or income tax.

This would encourage individuals to take responsibility for their own health care - which is where the responsibility actually belongs. It would also be prudent to permit individuals (once they reach a certain age) to begin withdrawing form the account without any penalties in excess of ordinary income taxes. This would again provide incentive to be selective when making health care choices.

The bottom line, is that we need to place health care back in the hands of providers and patients. In order for health care (or any commodity) to become readily available, the individuals making the transaction need to be the ones making the decisions - otherwise we will be stuck with shortages and high prices.

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