By proposing legislation to repeal and replace ObamaCare with actual health-care reform, the Republicans in Congress have an opportunity to address the unsustainable health-care costs threatening the financial viability of individuals, families, small and large businesses, and the fiscal soundness of state and Federal governments; and to regain a portion of this nation’s citizens’ trust by demonstrating the ability to solve a critical problem facing our country.
Viable and coherent reform that lowers health-care costs would have far ranging benefits including lowering Federal and state deficit and unfunded liability, increasing the numbers of individuals with insurance, and lowering the number of citizens dependent on government. True reform that results in small and large business would liberate significant resources to reinvest in the businesses, making them more competitive, increasing employment, and hugely stimulating the economy.
The 3rd party payer system is the prime driver of health-care cost growth. In this payment scheme, a person transfers a significant portion of their earned wealth as deferred compensation and as taxes to a 3rd party who then pays the majority of that individual’s health-care expenditure. Disconnecting the consumer of health-care services from the cost of those services encourages both providers and patients to over utilize and inappropriately utilize services. Further, the 3rd party payer system discourages transparency and accountability regarding costs, indications, and outcomes for services.
Harmful government regulation decreases competition and increases costs. Health-care coverage can only be purchased within state borders, and each state has its own mandated services which increase premium costs between 20 and 50%. In any given state, only a few insurers have the capacity to operate in the varied state regulatory environments. Fewer insurers results in higher costs and lower customer service. Federal “guaranteed issue” and “community rating” mandates were estimated in a WellPoint study to increase the premium cost by 150% for a healthy 25 year-old. Current regulation also precludes individual from joining together to form “group associations” to negotiate for better policies and policy rates.
Federal tax policy that preferentially treats employer provided health-care over individually purchased (owned) insurance has resulted in most individuals obtaining health-care insurance through their employer with 2 clear detrimental consequences: 1. Employees, understanding they have deferred significant compensation for that benefit, feel obligated to maximally use that benefit thus further driving inappropriate utilization and cost expenditure. 2. Loss of employment results in loss of health-care coverage. The CDC had found that 24% of the uninsured, that lack of coverage resulted from recent change in employment status.
Medical malpractice litigation drives up the cost of health-care insurance; and drives up medical malpractice premiums, decreasing access to high risk specialists such as obstetricians. While direct medical malpractice expenses make up only 2% of the annual health-care expenditure, the cost of practicing defensive medicine has been estimated to be between $190 to 239 billion. The CBO estimated tort reform including a cap on non-economic damages would decrease Federal health-care outlays by $54 billion over 10 years. Similar savings from reform would be expected in the private sector as well.
The components of viable reform include shifting from a 3rd party payment system to a more patient-centered payment system, increasing insurance company competition, equalizing Federal tax treatment of individually owned health-care benefits with that of employer provided health-care benefits, medical malpractice reform, and a Federal voucher system for the chronically uninsured who qualify to purchase their own insurance.
Restructuring the 3rd party payer system would give greater financial control and responsibility to the individual by utilizing effective higher wages (by not deferring income for the employer to purchase an individual’s health-care insurance), and a combination of tax credits and tax deductions to fund high deductible policies and associated health savings accounts (HSAs). Such control would discourage over utilization of health-care services and bring significant competitive forces to bear on providers, leading to increased transparency with regard to indications, cost, quality, and patient satisfaction for health-care services.
Insurance reform allowing sales across state lines, allowing formation of group associations, and decreasing regulation including the number of mandates would encourage insurance company competition, lowering premium costs, and elevating customer service. Allowing insurance companies to price risk of utilization of health-care services into premium cost will give young individuals and families access to affordable insurance, and encourage individuals to reconsider life style choices that result in higher premium cost. Fair pricing with regard to medical risk would bring more transparency, more competition, and lower costs to premium cost structure for those individuals with higher risk and pre-existing conditions. Focused government subsidy of state or federally based high risk pools would assist those who couldn’t afford the premium cost.
Medical malpractice reform including reasonable caps on non-economic damages would decrease government health-care expenditure, lower medical insurance premium cost, and lower medical malpractice insurance cost.
The above reforms would greatly decrease the numbers of the uninsured. Instituting a voucher system for those who qualify to purchase their own insurance would address the relatively small group of persons who remain chronically uninsured, and would be far superior to the current Medicaid system.
The US national debt exceeds $14 trillion dollars. Unfunded state and Federal liabilities are more than $120 trillion, with Medicare, Medicaid, and Social Security accounting for most of the liability. Nearly 50 million people (almost 1 in 6 Americans) live below the Federal poverty level and more than 60 million persons are on Medicaid. Unemployment remains above 9.5% and Federal civilian employees, who also depend on tax payers for subsistence and retirement, now number nearly 2 million persons. Although unsustainable health-care cost growth demands reform, the solution cannot possibly be more Federal bureaucracy, more deficit spending, more entitlement, and more dependency. The Republicans must rather argue that only reform utilizing traditional American economic principles, freedoms, and values, can result in fiscally sustainable, accessible, and high quality health-care.