Tuesday, December 1, 2009

The Right Medicine for Healthcare – Part I

With the Senate now beginning debate on a healthcare bill, it is time to step back and really think about where America could end up. The bills – and ideas – that are prevalent in Congress are devoid of commonsense. Under the current system of thinking, any bill, such as the current one on the Senate floor will be disastrous.

No one disagrees with the fact that American healthcare is in desperate need of reform. However, the current proposals do not offer good solutions. They attempt to patch a broken system without understanding what is not working. Like a charlatan doctor peddling a homemade cough syrup, they offer the wrong medicine.

The essential problem with America’s healthcare system is cost. Some may frame it in terms of accessibility – too many people do not have health insurance. However, accessibility is, in essence, an issue of cost. People that want, but do not have, insurance are precluded due to prohibitive prices. However, the present top-down approaches advocated by Congress do not address the fundamental cost issues. Instead, they attempt to make healthcare “more-affordable” by redistributing costs between different parties - whether taxpayers, the young, insurance companies, the poor, etc.

Not only is this a divisive and politically-charged (as we all know) approach, but it ultimately will fail to make substantial, lasting change. For instance, if insurance companies are simply forced to ignore pre-existing conditions, they will need to find ways to pay for these more expensive patients. This means either increasing premiums for everyone or lowering services across the board. In essence the current Congressional proposals create a zero-sum game, with clearly defined winners and losers.

What needs to be done is to develop a solid system of proposals that counter the inanity in Congress. America needs a reform that fixes the system and benefits all. The fundamentals of any successful reform rely on the mechanisms of the free market to create a cost efficient system. As Soviet Russia has shown us, centrally planned economies end in dismal failures. Regulatory bodies that determine maximum prices, public-options, individual mandates, and outrageous restrictions on private enterprise will not solve the problem, but exacerbate it.

Over the next few articles I will try to outline a few points that may serve as a rough skeleton for some detailed reform. In particular, (1) greater competition needs to be created between insurance companies by ending the employer based system, (2) medical costs need to be driven downward through tort reform, digitization of records, and realigning incentives, and (3) new financial instruments should be established to cover emergency room visits of the uninsured.

Ultimately, healthcare is a financial not a health-related issue. Insurance is one tool to make healthcare affordable. However, it is not the only, nor always the best way, to pay for healthcare costs. The desirability of health insurance is, and should be, an individual’s decision, based on relative risk and one’s financial situation. By failing to acknowledge and address these issues, Congress is suppressing true reform that could have a lasting impact on America’s future. The government should serve as an impartial referee, not a troublesome participant, in the realm of healthcare.

The discussion continues with Part II: A More Competitive Market.

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