Click HERE for a PDF version of this position paper.

The New Health Care Reform Law:  Pay More, Get Less

Recently the Congress passed, and the President signed, a highly controversial Health Care Reform Law along strict party lines that will impact all of our lives in ways yet to be understood.  In fact, nearly every day we are discovering something new that the healthcare legislation mandates:  new taxes, higher costs, loss of personal choice and options, and more complicated regulations.  My own company recently discovered our Health Insurance premiums are increasing 30% due to provisions in this legislation.  We were actually on the low end of this year’s cost increases; many companies have premium increases exceeding 70%.  More unpleasant surprises are sure to follow this ill-considered law. 

The problem the President stated we wanted to solve was the increasing cost of health care in this country.  Unfortunately, that is not the problem this legislation addresses; clearly that can’t be the case when a company’s premiums increase between 30-70% in less than a year after passage of this bill.  The law that was enacted did nothing to control costs, but instead focused on increasing insurance coverage for the uninsured while simultaneously increasing regulation, mandates and increasing taxes on nearly everyone.  Bottom line, the simplest explanation of the recently passed bill:  Pay more, get less

This new law will result in the following trends developing in American Health Care**:

·         Costs will increase

·         Availability of care will decrease

·         Medical innovation will decline

·         Quality will decline

·         Care and coverage decisions will be made for you, not by you.  Otherwise known as rationing

·         Choice of coverage will decrease

·         Physicians will be second guessed by distant bureaucrats with cost containment as their highest priority

·         Over time people will in fact not be able to keep their insurance, but be forced into one size fits all policies run by the government

How does this help Americans?  85% of the American public is happy with their current health coverage and care.  Less than 5% of the population falls into the category of uninsurable.  Why transform the highest quality health care system in the world to solve a problem only about 5% of the population has?  There are better ways to solve the problems we have without creating new ones or destroying a system the vast majority of people are happy with.  We have a cost problem, not a care problem, and this bill increases costs and will reduce care.  Only the Federal Government could deliver results like this.

This 2,000+ page piece of legislation was passed with support from legislators like Congresswoman Lois Capps, who admits she doesn’t really know what was in it. Much of it was created behind closed doors, violating a central promise of openness and transparency.  Washington saw a problem, and instead of coming up with a solution, they created more problems.  This law demonstrates a total failure of our political leadership; to pass something this sweeping along partisan lines and hope to “fix” it later is totally reckless and irresponsible.  As Congresswoman Capps herself admitted – the health care bill that was passed is a “big gamble”, and the only reason they passed it was because they could. That kind of arrogant attitude with something as important as your health care is an excellent example of what is wrong with Washington insiders like Mrs. Capps.   “They” know best.

We do indeed have problems with our health care system, and those problems are to a large extent, driven by government policy – not insurance companies.  Costs are increasing for two primary reasons:  1) the quality and technical sophistication of the care has increased dramatically and 2) the way the health care is paid for encourages cost growth.  Number 1 is not really a problem, it is a good thing.  Like many products in our dynamic free market economy, the quality of health care has improved almost magically.  Treatments available today were unimaginable in the 1970’s or even the 1980’s and 90’s.  Those advancements require significant investment.  In life, you get what you pay for, and health care is no exception.  The quality of American health care is outstanding, if you get sick you want to be in this country to receive your care.  Number 2, dealing with how the care is paid for is where the discussion forward will focus. 

Currently, for the vast majority of people, someone else directly pays for the bulk of the health care costs an individual accrues.  That is known as a third-party payer.  In reality, we all pay for the care through our taxes or benefits, which reduce your direct pay from your employer, but the perception is someone else is paying the bills.  Either the government or insurance companies directly pay the vast majority of medical bills in our country.  When someone else is paying the bill, nobody cares what things cost.  Such a system is doomed to fail because there is no cost sensitivity at the point of purchase.  Incentives and costs are misaligned, leading to overutilization. We can reduce health care costs by reintroducing the normal market forces that govern the rest of our economy:  competition, cost awareness and consumer choice will make the system more efficient and competitive just like it does in every other corner of our economy.  Health care isn’t magic, it is a product that requires people who have mortgages, car loans and child care expenses; to spend their working labor delivering this product for us to utilize and then compensate them for.  Like you and I, they don’t work for free.

The federal government has contributed greatly to the rising cost of health care by distorting the market, creating perverse incentives and shifting costs from Medicare and Medicaid to private payers.  More intrusive, expansive and restrictive regulations will only make things worse, as we are already beginning to see only months after the law took effect.  Our federal government has already run up about a $37 Trillion unfunded liability for our current Medicare system and Medicare fraud is one of organized crime’s most lucrative businesses.  With this record of failure we want to give them more responsibility?  Just to put this new law in perspective, take a look at a flowchart of how the new health care system is laid out in this bureaucratic train-wreck.

http://jec.senate.gov/republicans/public/?a=Files.Serve&File_id=5ee16e0f-6ee6-4643-980e-b4d5f1d7759a

The above link is to a PDF of a flowchart to visually depict how the law is actually written.  The following figure is an image of the flowchart.  Only in the detached wonderland that is Washington, DC could anyone take this seriously.  You couldn’t make this up if you tried.  Microprocessor design comes to mind.  Welcome to your new Health Care System:

In the real world outside of Washington, anything too complicated to explain is too complicated to work.  Does anyone actually believe this has any prayer of working as advertised?  This is a bureaucratic nightmare destined to drive up cost, reduce quality and result in rationing decisions made on financial and not medical grounds.  It doesn’t have to be like this, there is no rational reason for the federal government to involve themselves in your health care to this degree.  This is government at its worst.  Is there a better way?  Yes, to let the magic of American free enterprise do what it does best:  deliver quality goods at a fair price.

There are several clear-cut, economically driven recommendations I have to reduce the costs of healthcare that do not include increased taxes and/or increased premiums or any cost to the government – and will address problems such as denial of coverage:

·        Individual Ownership of Policies – Like your Auto or Life Insurance policies, Health Insurance should be able to be owned by the individual for life, if one so chooses, and not tied their employer.  Too many people feel stuck in their jobs just for Health Insurance reasons.  If you owned your policy you could take it with you anywhere and shop around just like you do for anything else.  It belongs to you, not your employer.

·        Portability—An individual should be able to take their health care policy across state lines.  This is one area where Congress should have interceded years ago, enforcing the Constitution and the Commerce Clause.  Nearly everyone has the same car insurance or life insurance company for extended periods as they move around the country.  Health insurance should be no different. 

·        Healthcare Tax Credit – The current tax credit that businesses enjoy purchase health insurance for their employees should be given to individuals.  People should have the ability and choice to pay for their own healthcare coverage and enjoy the same tax benefit their employers do. The current system penalizes individuals and favors corporations and results in coverage contingent upon employment.

·        Eliminate Costly Minimum Coverage Mandates – Different states require different levels of minimum coverage.  Some states require covering items like hair transplants and in-vitro fertilization.  If you don’t want coverage for those things, too bad, you have to purchase the coverage anyway.  Individuals should be able to purchase the coverage they want, not what they are required to purchase by the government.  These mandates increase costs and remove an individual’s ability to make their own decisions.  If an individual just wants to pay for Catastrophic Coverage they should be allowed to.  It is your choice, not some politician or bureaucrat.

·        No Cancellation – If you are a customer and have been paying your premiums, an insurance company should not be able to drop you if have an illness that requires coverage.  That is the point of buying insurance in the first place, to protect against unanticipated needs.  This would encourage people to buy a policy when they are younger, to keep it and remain in good standing.

·        Risk Pooling – Allow individuals and business to pool and spread risk across multiple populations who desire to participate.  For high risk individuals a pool should be created based upon market share that would help cover people with pre-existing conditions or other high risk factors that are uninsurable normally. This is an area where thoughtful regulations could be of assistance to the less fortunate among us with chronic health problems.

·        Incentivize Healthy Habits – Several companies in corporate America, like Safeway and Whole Foods Market, have clearly demonstrated that their employees will take control of their health and lose weight, stop smoking, etc. if they are financially rewarded for those changes in behavior.  Let the free market continue to innovate and create such programs where there are clear financial incentives towards health.  The private sector is significantly better at this sort of innovation than our bloated and unresponsive federal government.  

Bottom Line:  Let the health care market function as an actual market and it will respond like a market.  Medical care in fields that are not subject to the current third party payer system, like cosmetic surgery, Lasik eye surgery or Concierge type care have shown that the quality will increase and the relative cost will decrease if normal market forces are allowed to work.  The United States has the most innovative healthcare system in the world that delivers the best quality of care.  The vast majority of new drugs, medical devices and surgical innovations originate in the U.S. and American researchers dominate the medical literature.  This is evident by the tens of thousands of foreigners who travel to the United States specifically for advanced medical procedures.   Let’s keep it that way.  Let’s not destroy the best health care in the world to solve a self-created problem.   Let’s work to make our system even better.  Let’s allow people to make their own choices along with their Doctor and not some faceless government bureaucrat.  You own your body, the government doesn’t.  They shouldn’t be making your health care choices for you.

**Multiple independent organizations both inside and outside of government have arrived at these conclusions including the Congressional Budget Office, the Congressional Research Service, The Lewin Group, Galen Institute, Heritage Foundation, CATO and others.

Click HERE for a PDF version of this position paper.