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 of health care, 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 emergency care necessary to preserve life at risk due to injury or acute disease, 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 costs 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.
- Tort reform is properly a function of the several states, and thus beyond the scope of this alternative, but should provide for parties injured due to negligence by health care providers to be made whole, while not creating incentives for misuse of punitive damages.
Allow all contributions to Expanded Health Care Saving Accounts (HSA’s) the same tax treatment as employer contributions to employee health care plans now enjoy, regardless of their source. – 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 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 costs 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 for our long term needs. 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 disconnection from 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 their own or any other individual’s account, and bequeath the remainder when we die to a designated heirs’ HSA, we would facilitate relatives helping each other out and even encourage charitable assistance by individuals to those in need. Non-profit organizations should be allowed to open group HSA’s to which charitable donations and bequests could be made pre-tax, and transfers between individual and group HSA’s should be allowed without tax consequences, in order to facilitate individuals in good health, and groups, to assist those with greater needs by transferring funds to their HSA’s.
Finally, health care providers should be able to make pre-tax, in-kind contributions at their Usual Customary and Reasonable fees to the HSA’s of needy patients when providing ‘pro-bono’ care.
These measures will assure all health care arrangements receive the same tax treatment, eliminating the market distortion which currently keeps us bound to employer provided plans. Because HSA’s are owned by the individual and not the employer, or the government, and thus cannot be diverted, even if funded in whole or in part by the employer or public assistance, the problem of loss of coverage and excessive rating due to health changes and pre-existing conditions would be eliminated.
Eliminate all mandates imposed on hospitals to provide treatment, beyond emergency care necessary to preserve life at risk due to injury or acute disease, to those who cannot provide evidence of ability to pay– 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. While, as a compassionate society, we will not choose to deny emergency, life saving measures to those injured or acutely ill, hospitals should not be required to provide ongoing treatment to those who cannot provide evidence of ability to pay.
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 involuntarily to others.
Eliminate anti-competitive regulation, especially “Certificates of Need” which require Authorization from Government to open new health care facilities. These 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.
Eliminate all regulatory barriers to formation of voluntary group plans across state lines. – 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 large 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 within and across State lines should be overridden.
Eliminate regulatory barriers to lifetime health care plans to allow purchase of plans which level costs over life expectancy.- 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 by employers, 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.
Alternatively, or in addition, limits to contributions to HSA’s should be raised, or better, eliminated, in order to allow accumulation of funds during our peak earning years which we will need later to cover higher costs as we age.
Eliminate mandated coverage of specific risks. – 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 and are often more the result of effective political organization than realistic evaluation of risk. The risks we choose to insure against should be a matter between us and the insurer, and no one else.
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. Medicare is necessary only because lifetime health care plans are 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, or at least greatly reduce, the need for Medicare as lifetime arrangements become standard, 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, or build equity in HSA’s, when they were young enough to benefit from it. A gradual increase in the eligibility age until equal to average life expectancy, beginning no sooner than ten years out, will allow people to make that adjustment.
Replace Medicaid with need based subsidy of individual and family HSA’s. – 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 beneficiary’s 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.
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.
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