Real Healthcare Reform

Maybe I am stupid but I just don’t understand why no one is talking about truly reforming our healthcare system by shrinking the insurance footprint not enlarging it. In my mind it is excessive health insurance and not insufficient health insurance that is driving costs. Let me try to explain what I mean.

Over the years we have created a “cost recovery” culture where everyone wants to get back at least as much as they put in to their health insurance. This is, of course is impossible, but it also encourages abuse. People are making high cost visits to the doctor even for the simplest cold, because they have paid for it. We also believe we can do anything to our body and when it breaks, the doctors can fix it with a knife or a pill and the cost will be covered by insurance … after all, we have already paid for it. Excessive insurance has caused us to abandon personal responsibility.

But insurance and personal accountability are not mutually exclusive, we have good and affordable coverage for our cars and homes without any loss of personal responsibility. You would never hear someone say “I want to wreck my car so I can have the insurance company pay to fix it … because I have already paid for it”. People readily accept the fact that they pay several hundred dollars each year to insure their homes and most will never collect a single cent; it is insurance, not a prepaid credit card.

We buy new tires and re-carpet our homes and would never think that these routine items should be covered by insurance. But when it comes to health insurance, for some reason we think it should cover colds and scrapes, Viagra and the Pill. Why? How did we get from the concept of insurance against disaster to universal and unlimited coverage?

Excess insurance has stifled competition and driven up prices. We have come to believe that doctors and pills can fix anything with the insurance company picking up the tab; we have become unwise consumers. We don’t take care of ourselves and we don’t shop wisely for the services we do need.

If the market was willing to pay for a policy that covered oil changes and new tires, some company would surely be willing to sell it, but several things would happen. First the cost of insurance would skyrocket, second the cost of an oil change would be $190 instead of $19. Jiffy Lube would have to pay people to file all the paperwork and argue with the insurance company about every filter and belt. In addition, because the consumer is not paying the bill they would not shop wisely and so prices would rise.

Don’t blame insurance companies, they are simply providing what consumers demand, and don’t blame doctors, they are simply trying to cover their costs and make a profit so they can continue to provide services to their clients. Furthermore, there is absolutely nothing wrong with the doctors and insurance companies making a profit. The problem lies not with the providers, but with the consumers. As Pogo famously said, “I have met the enemy and it is us”.

So how do we stop the madness?

1. Stop covering routine medical services with insurance. Specifically, encourage insurance companies to offer affordable coverage that excludes routine medical services and individuals to abandon this insane concept that insurance should cover everything. We have a start at this with the high deductable policies, but that needs to be made universal.
   
   
2. The easiest way to change consumer behavior is to change the tax laws. Stop allowing companies to provide tax-free employee health insurance. This would drive this (major) component of the insurance marketplace to start (for the first time) shopping wisely. Higher priced excess-coverage policies would become less attractive if the employee were paying for them out of after tax dollars.
   
   There is also a tax equality component. Self employed and unemployed individuals don’t get a tax break on their insurance, and no one gets tax-free auto or homeowners insurance. What makes corporate employees so unique that they should get their coverage tax free?
   
   Sure those who lose this unjustified tax break would be unhappy, but they would get over it. Remember when credit card interest was no longer deductible. People got over it very quickly.
   
   
3. Encourage insurance competition by allowing insurance companies to write policies anywhere.
   
4. Drive down the cost of routine medical services by increasing competition and lowering the cost of providing these services.
   
   One way to do this is to change the laws to encourage the free market to develop more walk-in clinics staffed by Nurse Practitioners. A huge percentage of doctor visits are for things that a qualified nurse could easily handle.
   
   This would free up millions of doctor hours and decrease or even eliminate the “doctor shortage” we have.
   
5. Get serious about electronic medical records. Paper management and the errors are driving up costs.
   
   
6. Enact tort reform to stop the abuse of the system and to protect the walk-in clinics from inappropriate suites and excessive settlements. Move the responsibility for health decisions back to the patient where it belongs.
   
7. Prohibit exclusion based on preexisting conditions. It may be necessary at least temporarily to move the most severe cases over to Medicare to prevent this from driving up costs.
   
8. Create laws to curb the abuse of emergency room services. Lowering the cost of routine services would help this in any case.
   
9. Consider enacting a government safety net but only for the most severe of the severe situations. For example it might only kick in if an individual’s healthcare costs exceeded $3 million.
   
   
10. Make our elected officials live with the same rules the citizens live by.
    

What I am proposing is a 3-tiered system. The first tier would be the individual and he or she must cover out of pocket healthcare costs up to some amount, $3,000/year per individual or $5,000/year for a family for example. Second allow private health insurance to cover catastrophic events up to say $3 million in a lifetime. Finally, the government should provide a policy that covers those individuals who exceed the private insurance cap. I don’t know what the cap value should be, but it should be set so that only a very small percentage ever reaches the threshold.

There would be very little cost to the government and whatever cost there is could be easily covered by savings on government employee insurance and the elimination of the unjustified tax break given for company paid health plans.