Life, Liberty, and the Pursuit of Mandates, Part 2

Even if one believes that the private health care system is flawed for the majority, the proper course of action is to decrease distortions of the market then weave a safety net underneath. In any market that private enterprise can participate in, private enterprise is the more efficient route. Government's idea of cost-cutting is to pay less and demand the same results. In some cases this works (defense contracts have quite a bit of padding on them). In cases like health care, the options are to wring fraud out of the system (which governments are spectacularly inept at doing) or pay below-market rates.

The health care industry has responded to past unfunded mandates by simply refusing to provide the service, for example all of the Emergency Room closures in California. The income prospects (net of liability insurance) in some specialties have led to dwindling numbers of doctors entering them, which will lead to de facto rationing if the government lowers its payments any further. If the government starts dictating specialties to new doctors, it will end up getting lower quality doctors and picking up the tab for liability insurance. Then all those medical malpractice judgments will be paid by taxpayers. The jurors in those cases are taxpayers. This would not be a welcome turn of events for the trial lawyers currently supporting the health reform initiative.

A government-run health plan that muscles out private insurance (the stated goal of many health reform advocates) would operate under incredible constraints, with obligations added or subtracted by the courts pretty much at random. Many backing the current reform effort are Pro-Choice and would be annoyed to discover that a government-run health plan would be banned from covering elective abortions. The idea of collecting a separate premium for this coverage will not work: either the premium is paid to the government (which makes it government funds) or it is paid through an employer who now knows if the person has elected to enroll in this particular coverage or not (a very serious loss of privacy).

A 60-vote majority in the Senate is a rare opportunity for a party to put a stamp on how government operates. A number of Democratic leaders have made statements to the effect that they want some kind, any kind, of government plan in place, and that they will fix the details later. Economic interests adapt to government mandates very quickly (note how credit card companies hiked everyone's rate before the new anti-rate-hiking rules took effect), and even common-sense reforms become difficult.

There are a few smaller reforms that would enjoy broad public and bipartisan support and accomplish the goals of increasing access and decreasing costs:

1. There is no compelling reason to tie health insurance to one's job. Untying these (by expanding the current employer health insurance tax break to include individual policies, or giving everyone a blanket tax exemption for health care costs) would relieve a lot of the consumer-is-not-the-customer problems plaguing health care. It would make the labor market more efficient, since people would not be staying in bad jobs just for fear of losing health insurance.

2. Allowing people to buy health insurance across state lines would introduce a lot more competition than adding a single government insurance plan. Such policies would fall squarely under the federal jurisdiction for interstate commerce, which is important since regulators would need to prevent the massive consolidation that otherwise would occur among insurance companies. Congress can tack on any coverage requirements that it wants, and individuals can “opt out” by buying an in-state plan.

3. Identify the uninsured and target solutions to them rather than trying a one-size-fits-all reform that will end up fitting no one. A number of states have already piloted high-risk pools for those with pre-existing conditions. Allow someone to have this kind of high-risk insurance and a regular health plan until the exclusion period on the regular plan ends. Cost-cutting may bring some healthy or low-income people into the market. For those who still do not buy insurance, allow cheap catastrophic coverage that will prevent an unexpected illness from bankrupting the patient and/or sticking taxpayers with the bill.

Other reforms might meet significant resistance from one political camp or another, but should a special interest really be allowed to keep everyone else from enjoying a better system?

4. Everyone claims that wellness programs reduce medical costs. Whether this really pans out or not, the Medicare Advantage plans that include wellness are doing well enough to stay in business. Create a parallel Medicaid Advantage program and see if this really works.

5. Take some steps toward reigning in medical malpractice costs. The fear of gigantic judgments leads to defensive medicine and drives up costs. The specter of high malpractice insurance costs deters entrants to certain medical fields, too. Specialized medical courts would at least put some rationality into the system; we do this for traffic, foreign intelligence activities, taxes, patents, etc., so why not medicine? The existence of a predictable court system might even end the practice of getting patients to sign away their rights on those agree-to-arbitrate forms. It also seems to be a lot fairer than artificial caps on judgments.

6. Get hospital reimbursements in line with actual hospital expenditures. If the law requires hospitals to treat anyone who staggers into the Emergency Room, the law should provide a way to pay for it. The current practice is massive cost-shifting (such as high Medicare fees to make up for unreimbursed Emergency Room care). Some hospitals are better at managing cost shifts than others, and the ones that aren’t so good at it end up closing their Emergency Rooms to the detriment of the surrounding community. Also, better ties between service and payment will make fraud easier to spot.