Proposed TLP Statement on Health Care Reform

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

Introduction

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)

  1. 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.
  2. 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.
  3. Eliminate anti-competitive regulation, especially “Certificates of Need” for health care facilities.
  4. Eliminate all regulatory barriers to formation of voluntary group plans across state lines.
  5. Eliminate regulatory barriers to lifetime health care plans to allow purchase of plans which level premiums over life expectancy.
  6. Eliminate mandated coverage of specific risks.
  7. 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.
  8. Replace Medicaid with need based subsidy of individual and family HSA’s.

Rationale

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.

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13 Responses to Proposed TLP Statement on Health Care Reform

  1. Rich Roberts says:

    There is one major problem with this bill.

    It is not a “jobs” bill.

    This will reduce the need for health care lobbyists and thus increase unimployment in DC.

    Legislators who routinely take kick-backs to keep out competion from these lobbyists will suffer a decrease in income. That is money that will not be pumped into the local economy. Local DC retails could suffer.

    Hi-end local restraunts and stip-clubs may see a decrease in business since there will be no longer and incentive for health care proivders to finance these “businees events” to seek political favors.

    No, No, No I say!

    The answers is to levy increased taxes on the rest of America. That way, the added tax revenue can be used to apply “Green Technologies” to Hosipitals and Heath Care Providers coroporate health care buildings.
    Since I used the word “Green Technologies”, that means thousands of jobs will somehow be created out of thin air! Then hospitals and insurers can reduce cost which will make health care affordable to all!

  2. Len Rothman says:

    Don, I have some reservations about the level premium idea. It works with disability and term insurance because the benefits are fixed, or you pay extra for a certain percentage of inflation to be added as the years go by.

    Health care expenses are rising at a much more unpredictable rate that is also well above inflation.

    If someone bought one of these policies 30 years ago, it would be woefully inadequate today even if the actuaries factored in a reasonable rate of inflation.

    Thus, the only way you would have coverage is to have rate increases, regardless of how long you have been paying. Or, more than likely, the class of rates would increase as you get older, with the idea of causing the you, the customer, to drop out. Kind of what the insurance companies are doing now.

    • Don Tabor says:

      Len, The beauty of a free market is that if you have doubts about a product, you don’t have to buy it. I am predicting that such policies will be made available, not suggesting they be mandated. If you want to go on buying health insurance one year at a time, no doubt someone will be willing to sell you such a policy.

      You also, should an insurance company treat you poorly, have to option of taking your business elsewhere. The majority of insured people now do not have that option as they have no say in what their employer chooses.

      But you make an error in presuming that because health care has increased in cost faster than the rate of inflation in the past that it will continue to do so. The higher rate of health care inflation is the result of its disconnection from the market forces we hope to release by making these changes. Eliminating cost shifting, mandated coverage, and anti-competitive permitting will have powerful downward forces on health care costs.

      Again, walk into any supermarket or department store and look around. You will see a wide variety of products in abundance, and every one of them will cost LESS in real dollars than a comparable product from 20 years ago. Health care should be no different.

      To provide an example I know of from my own practice, the cost for a composite resin filling has gone up probably 50% more than inflation over the years, but they last 4 times as long as they did 20 years ago, so, when compared on a per-year-of-use basis, the price has plummeted. Similarly, CT scans are expensive, but before they were available, the alternative was often exploratory surgery, which would be far more expensive. The real cost of health care can and should come down, relative to everything else, and fails to do so only because of the economic distortions that result from government.

  3. Len Rothman says:

    You may have a point. But the possibility of changing companies if you feel that the one you have is not giving proper value for service is a pipe dream unless regulations against pre-existing conditions and rescission are placed in force. As we age, we often develop medical history that no company will want or make affordable.

    So as long as insurance companies cherry pick, and they will, the idea that the market can provide wide choices is very unlikely.

    If you buy a computer and don’t like it you may be out a little cash, but try to shift coverage or get sick and the company bails on you, you may go broke or die.

    Big difference.

    In a free market, the large companies hold the cards, even with groups. Because, like I said earlier, what group wants to take on the sick if it affects their rates.

  4. Rich Roberts says:

    Large companies do not hold the card in a free market unless they hold a monolpoly.

    Large companies hold many card in our current system because they are favored by government regulations. They have the lobbying power and money to do so. Often large companies will welcome government regulations for, even though they are burdomsome cost to them, it increases start-up barriers for newcommers.

    Government regulation intervention is the root problem, not the answer. The more they stick their hands in the pot, the worse it gets. Therefor I find it illogical to think increasing this behavior will cause things to head in the right direction.

    I find it interesting Len that you are worried about a free market because then large companies would “hold all the cards”. Why are you not then frightened about the government “holding all the cards” which is what is at stake this very momment.

    I don’t see any evidence to support that government is any more benevolent than any company. With companies and a free market, the companies have other companies and freedom of choice to keep them honest.
    What is there to keep the government honest.

    Voting out elected officials? We have a two party duopoly which replaces an ousted official with a carbon copy. We have no choice.

    I understand some people do not want to make important life decisions. The would prefer government to run their lives and make it easy on them. Those people should be free to do so and they should have to live with the consequences of their indifference. I simply want the opportunity to make my own choices and manage my own life. I am willing to accept the conseqences of my actions. What I am tired of is paying for other people’s mistakes and lack of judgement. Again, this is what is at stake here.

    We, for a long time, have looked to government to solve our problems. Each time we do so, we sacrifice a bit of our freedom. It has been adding up over the last century, we need it to stop and we need it to stop now before we don’t have anything left.

    Before the government holds “all the cards” in every aspect of our lives.

  5. Britt Howard says:

    When you think about giving government “all the cards”, think about what happens when all the “politically correct”, “morally correct”, and environmentally correct” thought police get in office. Whether it is your free speech and religious liberties being denied by the Left or your religious liberties and ability to engage in oral sex denied from the Right, what you are allowed to do as an alleged adult depends on what day of the week it is.

    We see what happens. When the Dems hold power – Republicans get audited by the IRS. When Repubs hold power, the Democrats have to worry. When Bush was in office, he wire tapped relentlessly eventhough it is just SOOO freakin’ easy to have a judge available at night for emergency warrants. When the Clintons were in office, the Clintons somehow got FBI files on all the Republican congressmen. Were GOP closet gays that prey on their own, outted by surveillance before things went public? Maybe, they deserve what they get karma wise, but IF were to happen, that would still be illegal and morally wrong.

    Oh sure, Democrats try to smuggle top secret documents in their pants and Republicans come up with a monstrosity called the Patriot Act that they claim will only affect terrorists only to have it exposed as being used later in drug cases as an evidence gathering tool. Absolute power corrupts absolutely.

    At least when companies play a role in health care, there is some form of competiton. You can go elsewhere for the best treatment. When the government holds all the cards, there is NO CHOICE. If you can’t trust the government when the wrong power is in office, can you trust you won’t get shoddy or deadly health care when your political opponents run things?

    When you get denied treatment………don’t look so surprised, ok?

  6. Britt Howard says:

    Umm…my previous rant aside….

    I do believe in regulation and the government acting in its proper role.

    The purpose of government is to protect the individual from force and from fraud.

    The government just has no role in telling you what to do or imposing anything if you are not infringing on the rights of others.

    I shouldn’t really go off on a rant like that. I just really see the socialized health care offerings by the Democrats as inherently unhealthy for America. That and the “Might makes right” thing pushes my buttons. My apologies for interupting a good discussion on health care reform.

  7. Len Rothman says:

    Britt and Rich,

    I realize that I am in your pub, but I am still willing to buy a round when the time comes.

    My questions regarding the free market approach are more to make folks aware that huge companies are not necessarily any better than a single payer system.

    They are going to make decisions based on economics, as would be expected. But right now they can unilaterally cancel policies that they deem too costly, usually at the time a patient needs them the most. And this is after the patient has paid premiums for years.

    Shame on them. But it is legal and in the best interest of the shareholders.

    Good business or bad ethics? Pick one…better yet, pick both.

    What the free market does well, it still does it under regulatory controls. Anti-trust legislation is but one example. It is necessary to avoid monopolies, which are the natural outcome of any free wheeling system of unrestrained markets. And once monopolies, or near monopolies take hold, without force or fraud, mind you, they will dominate the market and prevent competition by all perfectly legal means. Often literally legal, by lawsuit after lawsuit against any possible competitor until they go broke.

    So, I am not necessarily harping for single payer, but I do not trust corporations. They have done some pretty despicable actions throughout history (Chiquita Banana, anyone?) and, by their very nature, will continue to do so. They are amoral economic machines, and are dependent upon leadership to steer both the right economic and moral course. Problem is, the executive decision makers are so distant from the effects of those decisions that the ethics part becomes lost.

    The exploding Pinto, the S&L crisis, health insurance rescissions, VIOXX are all examples of immoral decisions that would probably never have been made had the executives been more tuned to the human cost. That is, the members of the Ford corner office would certainly have not been so cavalier if they knew their children or family would buy that car. The memos showed that it was cheaper to pay off death claims than a redesign. Economically it made sense to do so, but an ethical decision to change course would have been the right thing to do.

    So I stand by my point that if we are to stay private, then we need to promulgate some rules to protect the consumer. Corporations won’t do that by themselves.

    And if you think you can shop around for better deals, you better not have any significant medical history. And if a group or a company knows that, they have you over a barrel. They certainly are not going to compete to see who can enroll the sickest patients.

    They hold the cards.

    And I doubt we will have any significant change because the health care industry owns congress and they will just give enough to keep most Americans on the brink of disaster, but not cross the threshold of “they won’t take it anymore”.

  8. Rich Roberts says:

    Len, we definately like having you around. Things get bland when there is no opposing veiw and you do it with reason and civility.

    I can not dispute the examples of corporate greed, but because of these example I do not conclude that large corporations are amoral economic machines.

    I can only really speak from my own perspective, which is no where near the health care inductry. I am a major account salesman for one of the largest corporations in America. My company may be large, all my business is relatively small in comparison. Sales and customer interaction is all done face to face on a personal level. My reputation is more important than anything. If I screw someone, I am done. My portfolio will evaporate in the blink of an eye because everyone in the area will know about it. I need to go that extra mile and provied that exceptional service because If I don’t, my competators will. And honestly, I find small business owners more likely to screw you than a corporate buyer. (just a side note).

    This is all in an industry with very little government regulation. Government does not necissarily need to be the regulator. Standards and certifications can be done by impartial trade organizations and groups. Again, going back to what I know, heating and air conditioning, Groups like ASHRAE provide books of standards and guideline, ASTM test for material strength and durability, Costumers will not by your product unless it is UL listed, ETL rated, your factory is ISO certified, your requipment has been certified by ARI, ect, ect. These are all voluntary, so you may say ineffective, but again, it is what the customers require. We developed a new ultra high efficiency geothermal heat pump and I was eager to push it. I would give engineers all our perfomance data from our labs, run clacs to show how great it is, I would always be asked, “is it ARI certified? I would have to answer it is in trials and gave the date trials would be completed. That was not good enough. It had to be certified for them to touch it.
    I’m starting to ramble, but my point is basically, there are market forces out there that work if they are allowed to. Regulation does not have to come from government. It probably works better when it doesn’t.

    Len, you do make one excellent point which I do not have a good answer to. You talked about shoping around and how you better not have a significant medical history. I envision if health insurance did not go through your employer, you could buy up coverage which spanned years, or until your death, unlike now. But then if you did have a poor medical history, shopping around if you be dissatified with your current coverage may not be possible since the quotes for coverage would undoutably be high. I don’t know what kind of terms you could negotiate here. Maybe some one else can help me out whith this one?

  9. Len Rothman says:

    Rich,

    I should have explained my “amoral economic machines”.

    A corporation can be neither moral nor immoral, any more than an automobile can be moral or immoral. Neither is human and as such, we cannot ascribe human values for behavior. As such, it is amoral.

    However, as with the car, the people who drive the corporation do make decisions about the direction it will go. Shareholder value should be the main goal, but how that is achieved can either be done ethically or not.

    Your company is run with customer satisfaction in mind, and even that can be done with or without ethics.
    And I trust you are comfortable with the way your employer operates his business and that he does so with more than just profit for the next quarter in mind. He is probably in it for the long term.

    I am not anti-corporate, but I do put the onus of moral or immoral outcomes from corporations upon those who own and run it. “Following orders” or “we did it to maximize shareholder profit” hold little water if the decisions resulted in needless injury, suffering or environmental destruction.

    So as long as private corporations will run the health insurance industry, and they will for the foreseeable future, we have to remember that their profits come from two sources: investments or denial of claims, and if one of those suffers, the other has to make up the difference. What we cannot allow is the human patients to bear the brunt of suffering should profits fall.

    Right now, that is what is happening in way too many instances. And, in my mind, no amount of free market competition will change the economic facts of life for profit in the health insurance industry.

    But we regulate all industry to one degree or another, such as the inability to dump raw effluent into rivers and lakes. Those companies have to look at that as the cost of doing business, much as labor or raw materials, and adjust their pricing accordingly.

    So regulating insurance to protect patients from cancellation, delayed payments, rescissions, pre-existing conditions, etc., should be part of the cost of doing business.

    Patient care is not the same as free markets for cell phones. If you have a bad cell phone or get lousy service from your provider, you switch at little cost or inconvenience.

    Bad service in health care can affect you in much more severe ways such as injury, bankruptcy or death.

    • Don Tabor says:

      So as long as private corporations will run the health insurance industry, and they will for the foreseeable future, we have to remember that their profits come from two sources: investments or denial of claims, and if one of those suffers, the other has to make up the difference.

      Len,

      That is equally true of Auto and Homeowners insurance, yet we do not have problems there. The reason is that an auto insurance company that tried to deny claims or gave poor service would promptly go out of business as consumers took their business elsewhere.

      But, if we bought auto insurance the way we buy health insurance, through our employers, we would not have the option of taking our business elsewhere, and our employers would choose our policy on price alone or what ever was in the employer’s best interests(or according to which insurer sent the hottest hookers to the CEO’s hotel room at convention time) and the quality of the service, so long as it was not so bad you would change jobs over it, would not matter.

      That is why the Libertarian approach is to fix the damage done to the marketplace by prior interventions and then let it do its magic, just as it does with everything else.

      Remember, Allstate does not treat you well because of government regulators, but because of Geico.

  10. Len Rothman says:

    Don,

    we do have problems with auto insurance to the extent that for most, if not all, insurers, if you file one or more claims, no matter how faultless you may be, the rates will rise, or your insurance canceled. Then, good luck in getting insurance from anywhere but the state high risk pools. Even Allstate advertises that it will allow you one error, then you are on your own if any claim comes after that, no matter the cause.

    But, again, the auto and home policies are fixed costs (the value of the car, home or liability cap) where as health care is much less predictable.

    Even more to my point, however, is that once you have medical history, shifting companies in even the freest market will be beset with limitations or premium penalties.

    Second, we are talking your health and life, not replaceable cars or homes. There are often no second chances with serious illness once timely medical care is held up by non-approval or delay of payment.

    Health insurance can be as competitive as you want, only they all have to play by the rules, the same rules, and that should level the playing field. If you pay premiums to a problematic insurance company, but do not use them for anything serious for decades, you need to have the weight of law behind you if they renege when you need them most.

    Just like a company that pollutes a river needs to face jail time for its executives, not just some payments for the folks downriver.

    FYI, Taiwan has universal health care. I don’t know if it is single payer or not, but they have done something that should be incorporated here, even if our entire insurance industry stays private. Every citizen has a magnetic card that will bring up their medical records to any doctor they choose to see.

    All the medications, treatments, illnesses, etc. are easily available to the health provider once the patient gives him the card.

    After treatment, the doctor adds to the file via computer, and payment is transferred to his account from the insurance company.

    Obviously, you can insert some protections from fraudulent claims and add some verifications, but the gist is that the approximately 210 Billion Dollars per year spent on that, record keeping, mixed up data, duplicated treatments and staff to keep up with every insurance companies’ pet systems could be substantially trimmed.

    You can carry your card from Optima, I’ll carry my card from Blue Cross, Rich will keep his from Aetna. They will all access the same records after verification by your PIN or fingerprint or whatever security system they choose, and payments will be direct and timely to the providers account from their respective insurers.

    We are not a high tech country so long as physicians have to contend with different forms, policies, payment systems and culture from a myriad of corporations and records scattered all over the place.

    That is third world record keeping. The only thing missing is the high desk with green eyeshades.

  11. Britt Howard says:

    Len, I like having you here as well. I echo much of what Rich said in that regard.

    You have valid points as to the amoralness of corporations. Sometimes they see the light, but often it is in response to tighter labor markets and it becomes in their interest to treat their employees well by selecting the best insurance possible.

    As an aside, I sometimes think that I should be paid more for what I do, but I don’t complain about the medical insurance. My company makes use of the current tax benefits of paying in a tax efficient manner by loading us on a good medical insurance plan. If that were to be taxed……I’m not sure what the outcome would be. I can’t help but be nervous on that front as well.

    I’m all for independent third party certifications. We have Quality and Environmental ISO certifications where I am. Some sort of rating could be attached to health care provided. I also favor government regulation as well. After all, some of the problems you mention amount to fraud in my opinion. There’s your “Force & Fraud” thing. So, we agree there.

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