Friday, March 4, 2011
Governor Peter Shumlin and his super legislative majority have received their federal waiver and can be expected to begin the conversion of Vermont’s health insurance system – what’s left of it – to a government-run single-payer plan in earnest and without much resistance. After two decades of government intervention in the health insurance market which, according to the politicians themselves, has left Vermonters struggling with higher insurance and medical costs, the political class has decided the path to lower is costs is through more government intervention.
This illustration of the classic definition of insanity is by no means unique. It has played out on the national level as well, with health care being only the most conspicuous example. Government has become increasingly active in regulating and financing health care over the last 40 years—increasing health care spending from 25 percent to more than 50 percent of overall spending. Clearly the solution must be more government.
Unfortunately, the free market solutions to the health care insurance dilemma are virtually ignored in Washington and Montpelier alike. That does not make them less effective, however, only less palatable to those seeking to secure more power under the guise of compassion and fairness. It’s time at least some of those solutions had a hearing.
One of the easiest ways to reform the health insurance market would be to allow consumers to purchase policies available in other states. Only a few health insurance companies operate nationally or regionally and consumers are not allowed to cross state lines to purchase policies from smaller companies. When choices are limited and no one is competing for customers the consumer is at the mercy of those who have achieved state sanction.
Or should we say those who have had the resources and tenacity to jump through all of the state-held hoops? Many companies offer policies that are acceptable to or even preferred by individual consumers, but do not meet coverage standards dictated by the state. If we are to attract more insurance companies to Vermont, we have to repeal the onerous state coverage mandates that drove so many companies outside our borders in the first place. Standardized statewide plans have allowed only large insurance companies with deep client pools to continue swimming in Vermont. Dropping community rating standards and allowing Vermonters to select from an a la carte menu of insurance options would attract more providers to the state and lower consumer costs.
Third party payments, whether through government or private insurance, have insulated medical service consumers from the cost of these services and resulted in careless spending of “other” people’s money. One of the best ways by which we could tame medical costs would be to decrease dependency on insurance for routine medical care and once again involve the consumer. High deductible insurance policies for catastrophic illness and tax-deductible Health Savings Accounts (HAS) can accomplish this.
Whole Foods Market provides a successful blueprint for this approach. Whole Foods provides its employees who work 30 or more hours a week with a high-deductible health insurance policy plus up to $1,800 per year in additional health-care dollars through deposits into employees' Personal Wellness Accounts. Money not spent rolls over from year to year. Whole Foods employees therefore spend their own health-care dollars until the annual deductible of around $2,500 is met and the insurance plan kicks in. This creates incentives to spend the first $2,500 more carefully. Combining actively engaged consumers with greater transparency of health care costs could make a multi-billion dollar difference in our approach to these costs.
No discussion of free market remedies would be complete without raising the specter of tort reform. I once heard a radio talk show host dismiss lawsuits as making up “only” 200 billion of the 1.2 trillion dollar health care industry. Umm, do the math – that is one-sixth of the cost involved in medical care and that estimate is probably low since it is nearly impossible to assess how much of medicine as practiced today is defensive. We need to establish sensible guidelines for what constitutes medical malpractice and remove the threat that currently hangs constantly over our medical professionals’ heads.
There are many other sensible solutions, such as changes in tax law regarding the deductibility of individual health insurance purchases, Medicare reform and vouchers for government health benefit recipients. We can also take control of our health as individuals and families by learning about and implementing the many preventative measures we can take with regard to wellness. Personal responsibility can greatly impact both our individual and collective health care circumstances and should be part of the equation.
As should free market solutions. Contrary to a popular slogan, health care is not a right but a service. Like food and housing, it should be provided through voluntary and mutually beneficial interactions between consumers and providers