It is not enough for Libertarians to simply oppose the socialist proposals to nationalize health care, as that could be seen as an endorsement of the status quo. Changes are needed, but a reduction in government involvement is the answer. Below is a proposed statement for comment and discussion at the August 15 meeting (Updates in blue)
Health Care for a Free Country
An Alternative Solution Offered by the Tidewater Libertarian Party
The miracle of free markets has served us well in most parts of the economy, bringing us ever increasing value and declining real costs for the things we want and need, yet health care becomes increasingly unaffordable. So, it is reasonable to ask what is different about health care that prevents the normal market forces from controlling the increases in costs before radically altering an industry which is, from a quality of care standpoint, the envy of the world.
The answer is that health care has become separated and insulated from market forces by well intentioned government interferences and mandates; followed by yet more interferences enacted in an attempt to mitigate the unintended consequences of previous interventions. Libertarians reject yet another layer of bureaucratic interference and offer a series of changes intended to remove, in a responsible manner, those earlier economic distortions that have caused the problems. To that end, we recommend the following:
Recommendations (Rationale to follow)
- Allow all contributions to Health Care Saving Accounts (HSA’s) the same tax treatment as employer contributions to employee health care plans now enjoy, regardless of their source.
- Eliminate all mandates imposed on hospitals to provide treatment beyond immediate life saving measures required by injury or acute illness to those who cannot provide evidence of ability to pay.
- Eliminate anti-competitive regulation, especially “Certificates of Need” for health care facilities.
- Eliminate all regulatory barriers to formation of voluntary group plans across state lines.
- Eliminate regulatory barriers to lifetime health care plans to allow purchase of plans which level premiums over life expectancy.
- Eliminate mandated coverage of specific risks.
- Phase out Medicare over time, allowing lifetime health care plans to replace the government plan without abandoning those who have not had the opportunity to purchase such coverage.
- Replace Medicaid with need based subsidy of individual and family HSA’s.
Expanded HSA’s – By far the greatest market distortion, and the source of most of our problems, is the fact that those who use health care do not pay for it and those who buy it, our employers, have differing interests from the beneficiaries. The root of this most egregious economic distortion is the tax preference afforded employer sponsored health care plans as a means of mitigating the harm done by World War II wage and price controls. Certain critical industries were permitted to provide untaxed health care benefits in order to attract able bodied workers in the face of a labor shortage as a legal means of evading the wage limits. This preferred tax treatment for employer provided health care became standard and the overwhelming tax advantage provided these plans drove other options out of the marketplace.
However, with the users of health care insulated from the cost of coverage, there is a tendency toward overutilization. Worse, the employer’s interests in purchasing health care are radically different from the best interests of the insured. Were we purchasing our own health care plan, it would make sense to buy insurance that leveled our premiums over our lifetime, paying more than necessary to cover our risks when we are young while building cash value to cover higher costs as we age. Employers, however, can’t know if we will stay with their company as we age and have no incentive to purchase insurance more than one year at a time. The result is that insurance becomes unaffordable as we age, making Medicare necessary for retirees and leaving us vulnerable, if we lose or change our jobs, to extremely high costs for insurance due to pre-existing conditions and aging.
This is not evil or greedy on our employer’s part; it is simply a distortion of normal market incentives. In order to correct that problem, the tax advantage provided employer sponsored plans must be equalized. The best way to do that would be to allow employers and individuals to contribute to individual and family Health Care Savings Accounts on the same tax free basis as employers enjoy now for contributions to their own plans. By allowing ANY individual to contribute pre-tax to any other individual’s account, we would facilitate parents or other relatives helping each other out and even encourage charitable assistance(Including ‘in-kind’ donations by providers) by individuals to those in need.
End Mandated Treatment – The proposed government health care system mandates insurance coverage, enforced through a complicated system of fees and taxes, yet simply eliminating the requirement that hospitals provide free treatment to those who have no coverage would accomplish the same end at no cost. It is false compassion to allow those who choose not to be insured to impose their costs on the responsible who, in many cases, are no better off than those who choose to place other desires ahead of health insurance.
Those who simply refuse to get coverage could still appeal to charities for assistance by means of contributions to their HSA or treatment at a charity facility without shifting the costs of their treatment to others.
Certificates of Need – are a central planning scheme intended to reduce duplication of capacity. In theory, this will save money, but it is the excess capacity of the private sector that drives competition.
Voluntary Group Plans – Health Care Insurance actually has two functions, spreading of risk of the costs of serious illness, the true ‘insurance’ function, and to act as a bargaining agent to obtain negotiated fees from providers which are lower than you could expect to enjoy as an individual. Both functions are more readily accomplished when health care plans are purchased by a group. But most small businesses are not large enough to negotiate favorable rates unless they can band together with other similar businesses to combine their buying power. Too often, State and Federal regulations prevent formation of such industry wide groups, as well as groups composed of church members, professional associations and non-profit co-operatives which could serve as purchasing groups. The barriers to formation of voluntary groups should be overridden.
Lifetime Health Plans – As we age, our health care costs tend to rise and peak in our last year of life. When health care insurance is purchased one year at a time, the cost naturally rises until it becomes unaffordable. However, it is common for disability insurance to be written with premiums, determined by our age and health at the time we initially apply, which remain level over our lifetimes, adjusted only for inflation even though the risk of disability also rises as we age. This works because the premiums charged when we are young exceed the actuary risk early in life and cash values, similar to whole life life insurance are accumulated to cover the higher risks later on in life.
Regulations impeding the offering of insurance on this model for health care should be eliminated.
Mandated Coverage – Many States mandate all insurance cover certain diseases and disabilities which are not of equal risk for all. For example, women who have had hysterectomies still must purchase insurance which covers maternity benefits in Virginia, though they clearly are at no real risk of ever needing those services and could purchase less expensive coverage which excluded that coverage. Mandated coverage is a form of cost shifting, benefitting some purchasers at the expense of others. The risks we choose to insure against should be a matter between us and the insurer, and no one else.
Medicare is necessary only because lifetime health care insurance is unavailable in the current market, and that is because of our dependence on employer sponsored plans which leave us uninsured when we retire. Ending our dependence on employer sponsored plans will, in time, eliminate the need for Medicare, but it will be necessary to phase it out over time, as those citizens nearing retirement have not had the opportunity to purchase such insurance when they were young enough to benefit from it. A gradual increase in the eligibility age, beginning no sooner than ten years out, will allow people to make that adjustment.
Medicaid – Currently, we provide medical care to certain disadvantaged people through the Medicaid system. Whether that is good policy or not is beyond the scope of this topic, but there is no reason for the system to be administered by the States instead of the private sector. With HSA’s established for all families and individuals, State and Federal assistance could simply be electronically deposited into the HSA’s monthly and the participants could then purchase their plans in the private sector just like anyone else through their church or community organizations. In that way, as those people no longer needed assistance, only the source of funding need change while their health care plans continue uninterrupted with no exposure to pre-existing condition limitations.
Tort Reform- At the State Level, tort reform which preserves the right of parties injured by actual negligence to be ‘made whole’ through the courts, without creating incentives for the misuse of punitive damages, would further help control the cost of health care.
Summary the free markets have never failed to provide us with the best values when they have been allowed to function, providing us with everything from pencils to computers in abundance and at fair prices. The road to affordable health care is a return to that free market, carefully disentangling ourselves from the snarl of bureaucracy which has created our affordability problems, while not abandoning those whose life choices have been limited by those interferences in the past.
The free market is, after all, the American way.