In a debate on another blog I was challenged for my solution to the country's current health woes. While I don't pretend to have all the answers I think that the following would be a good start:
1. End the business tax deduction for medical and dental insurance. This is an artifact of World War II in which businesses began offering this as an inducement to workers because they were prohibited from raising wages as a means of combating inflation. The problems with this are legion:
This is because insurance removes the incentive to shop around for the best deal since something else is paying for it. Insurance also brings with it, by its very nature, lots of paperwork and bureaucracy as measures to insure the insurance company isn't being ripped off. Dental insurance is a particularly egregious example of the bad effects of insurance. By its nature dental care is mostly about maintenance and prevention. Why is insurance needed for an eminently predictable expense?
This is not to say that insurance doesn't have its place. Everyone should buy insurance to guard against catastrophic developments such as cancer. But in general we should move towards a fee for service model in which you shop around for your doctor and pay him for services rendered. Yes, this would bring a new expense but it would also free up companies to pay their employees more.
Most importantly having millions of consumers out shopping around would help increase competition and drive down prices. It would also produce an increase in choice for insurance options more tailor made rather than the current approach in which insurance companies offer a handful of options for an entire group of employees.
Doctors could spend more time with patients and less time filling out forms.
2. Allow insurance companies to sell their products in any state. Currently there isn't a national marketplace in health insurance, with states regulating health care differently and often times imposing regulations such as mandates about procedures insurance must cover. By creating a national marketplace you would expand choice and drive down costs through greater competition.
The Constitution explicitly gives Congress the power to regulate interstate commerce and this would be a great way to wield this authority.
3. Review licensing requirements. It is my understanding that nurses, for example, have to get licensed in each state they wish to practice in and that this is not always an easy undertaking. Such requirements serve as a barrier to market entry in econo-speak, reducing the supply of nurses and increasing costs.
On a similar note I have read that regulations mean that a number of routine procedures must be performed by a doctor when a nurse could take care of this. Doctor's time is expensive and this unnecessarily pushes up costs. You don't need a $300/hour tax attorney to fill out your 1040EZ.
4. Review medical malpractice laws. While I am not sure of the magnitude it seems that medical malpractice suits impose considerable costs on doctors and drive up the price of health care. We need a better system here that balances the ability of patients to sue their doctors for damages with costs that deter medical professionals from practicing their craft. I don't have the solutions here but it warrants a closer examination.
Now, would these measures provide all the answers? I doubt it. You have the problem of taking care of the poor and those with pre-existing conditions. But while it doesn't solve everything I feel pretty confident that such actions would be a big step in the right direction.
1. End the business tax deduction for medical and dental insurance. This is an artifact of World War II in which businesses began offering this as an inducement to workers because they were prohibited from raising wages as a means of combating inflation. The problems with this are legion:
- It makes workers more costly and companies less likely to hire them
- It makes workers less likely to leave their job for a new one
- It promotes use of the insurance model to pay for health care
This is because insurance removes the incentive to shop around for the best deal since something else is paying for it. Insurance also brings with it, by its very nature, lots of paperwork and bureaucracy as measures to insure the insurance company isn't being ripped off. Dental insurance is a particularly egregious example of the bad effects of insurance. By its nature dental care is mostly about maintenance and prevention. Why is insurance needed for an eminently predictable expense?
This is not to say that insurance doesn't have its place. Everyone should buy insurance to guard against catastrophic developments such as cancer. But in general we should move towards a fee for service model in which you shop around for your doctor and pay him for services rendered. Yes, this would bring a new expense but it would also free up companies to pay their employees more.
Most importantly having millions of consumers out shopping around would help increase competition and drive down prices. It would also produce an increase in choice for insurance options more tailor made rather than the current approach in which insurance companies offer a handful of options for an entire group of employees.
Doctors could spend more time with patients and less time filling out forms.
2. Allow insurance companies to sell their products in any state. Currently there isn't a national marketplace in health insurance, with states regulating health care differently and often times imposing regulations such as mandates about procedures insurance must cover. By creating a national marketplace you would expand choice and drive down costs through greater competition.
The Constitution explicitly gives Congress the power to regulate interstate commerce and this would be a great way to wield this authority.
3. Review licensing requirements. It is my understanding that nurses, for example, have to get licensed in each state they wish to practice in and that this is not always an easy undertaking. Such requirements serve as a barrier to market entry in econo-speak, reducing the supply of nurses and increasing costs.
On a similar note I have read that regulations mean that a number of routine procedures must be performed by a doctor when a nurse could take care of this. Doctor's time is expensive and this unnecessarily pushes up costs. You don't need a $300/hour tax attorney to fill out your 1040EZ.
4. Review medical malpractice laws. While I am not sure of the magnitude it seems that medical malpractice suits impose considerable costs on doctors and drive up the price of health care. We need a better system here that balances the ability of patients to sue their doctors for damages with costs that deter medical professionals from practicing their craft. I don't have the solutions here but it warrants a closer examination.
Now, would these measures provide all the answers? I doubt it. You have the problem of taking care of the poor and those with pre-existing conditions. But while it doesn't solve everything I feel pretty confident that such actions would be a big step in the right direction.
1 comment:
I know this goes against your free market principles but I would add an individual mandate to your list.
Just as we require drivers to have car insurance all American's that can afford it (anyone making over $40,000 if some smart simple changes were made to the existing system) should be required by law to have health insurance.
I'll leave the implementation to smarter people but I would think a simple solution would be that you must include proof of insurance with their tax return or pay a fine in a reasonable amount that would go into a fund that reimburses hospital costs for the uninsured.
For those making under $40,000, the gov't should fund it out of general tax revenue. Eliminating the tax deduction of employer health insurance should more than offset this cost. Ideally, the $40,000 cap would also include some sort of asset test and the cap could not be raised without a 2/3 vote in Congress to prevent the usual expansion of programs for the poor to middle class entitlements.
Our society will never sanction turning poor or uninsured patients away from the emergency room doors. As a result, some government intrusion is necessary.
An individual mandate accomplishes this in the least intrusive manner.
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