A final necessary step in
healthcare reform is to devise and enable new forms of healthcare financing. Health insurance is not a health-related but a financial issue. Generally speaking, the quality of healthcare in America is quite good. Although there are certainly instances where it could be more efficiently provided, few Americans question the available technological level of American health services or the requisite knowledge and skill of American doctors.
Under the American model, personal financial decisions are left to the individual (or family) to manage. While some base level social-safety nets are provided by the government, the majority of an individual’s financial decisions are left to one’s own planning. Individuals are responsible for saving and spending within their means, as well as preparing for their futures.
Insurance is one model that allows people to remove the financial risk of large, unforeseen circumstances. This is why millions of Americans purchase a wide range of insurance products – from auto, to natural disaster, to life. All of these are financial decisions based on an individual’s relative probability of some event happening, the perceived cost, and ability to pay. In any rational model, insurance should only be purchased if the math indicates that it is financially cheaper.
Health insurance should be no different. It should be one tool, out of many, that Americans can choose to rely upon if financially sensible. A number of new, financial tools should be developed to facilitate an individual’s access to affordable healthcare. All of these can and should be established in the private markets.
One of the current problems with health care provision is nonpaying emergency room patrons. This has sparked calls for a legislative individual mandate, where all Americans are required to purchase healthcare. The mandate, while undoubtedly
unconstitutional, is a gross misappropriation of government power. Not only does it invade on the fundamental liberties of American citizens, but it drastically distorts the market. It forces individuals to make unwise financial decisions.
Without a mandate, proponents argue that hospitals have to unjustly bear the cost of these freeloading individuals. Ultimately, these costs get passed on to consumers via higher hospital bills and insurance premiums. This is undeniably a correct assessment of the current system; however, the mandate does little to allocate the costs of health to the appropriate recipient.
This is precisely where new financial instruments can alleviate some healthcare cost issues. Arguably, every individual (except for maybe the most indigent) should be responsible for paying for their own healthcare. This is particularly true for those who, under the current system, can afford health insurance but for personal reasons decide not to purchase any. If some do not buy private health insurance, due to poverty or personal decision, the burden of their health care should not fall on those who made the financially astute decision to invest in insurance.
However, under the current system there are few, if any, methods for those who gambled and lost to pay for expensive procedures. Providing new methods would not only benefit willing financiers (and the economy) but those who decide to opt out of the health insurance path.
First of all, private hospitals need to have greater say in how their emergency rooms treat patients. Within limits, private hospitals should be able to refuse care to individuals who cannot pay. [For instance, I don’t necessarily think hospitals should be able to refuse care if such refusal would lead to imminent death.] Hospitals should have the ability to decide whether they will open their doors to everyone and eat the costs or refuse care to the non-paying. From the hospital’s perspective there would be a tradeoff between cost savings and image. Like many environmentalists who pay a premium to ‘save the environment’, some individuals may feel comfortable paying higher prices to use the services of hospitals that cater to the common good.
Much of this tradeoff, however, could be erased with new financial mechanisms. Hospitals, for instance, should be encouraged to accept credit cards in lieu of health insurance [imagine the frequent flier miles!]. Likewise, hospitals could establish on-site financing departments that provide emergency care funding. Such funding could come in the forms of loans – like mortgage loans – that allow individuals to pay their hospital bills with interest over time.
This would enable individuals to take personal responsibility for their health care and prevent freeloaders from weighing down the rest of the system. It would allow individuals to design financially responsible systems for providing for their own health care. People would be able to choose what the most sensible way of covering potential expenditures, given their health and ability to pay. For instance, young, healthy individuals who want to save or invest extra disposable income could purchase minimalist health insurance policies given the low probability of needing coverage. They would be able to supplement this risky decision with on-site funding in the rare case of disaster.
Naturally, such credit related solutions could have significant impacts on individual’s debt situations. Bankruptcy laws would need to be reworked in order to make financing opportunities appealable to lenders. Alternatively, payment systems can be designed that move away from the fee-for-service model. For instance, rather than purchasing health insurance individuals could buy access to unlimited care at specific full-service facilities. Monthly membership dues – like a gym membership – would give individuals access to healthcare whether they use every specialist or just an internist.
While such proposals will not be a complete panacea, they will help to alleviate some of the issues. More importantly they may encourage people to be more proactive in planning and managing their health and finances. Ultimately, the goal is for each American to be able to pay for and afford healthcare, not necessarily health insurance.
