| Relatively easy changes to our health-care system will solve everything. |
The move is on to Repeal and Replace Obamacare, and the first half will be easy. But what the heck do you replace it with? Here’s my seven-step plan, and hold on tight because there’s stuff in here that both Republicans and Democrats will love, and hate. But it’s the first plan I’ve seen that actually treats the disease itself: the fact that health care in America is so expensive someone else must always be found to pay for it. The crux of the problem is revealed with this thought experiment.
You go to the store to buy a gallon of milk, and find the price is $400. Choose the right policy response:
a) Lobby Congress for a new law that all employers must henceforth provide a “milk insurance plan” that covers free milk for all employees, paid by the employer, and a government program that provides free milk for poor people, paid by the taxpayer. (This is the Progressive approach.)
b) Lobby Congress for a change to the tax law that would allow people to create “Milk Savings Accounts” using pre-tax dollars, and also allow people to buy milk across state lines. (This is the Conservative approach.)
c) Lobby Congress for a new law that requires everyone to buy Milk Plan Coverage at extremely high prices, so that Milk Plan Coverage can be made available for free to poor people. (This is the Obamacare approach.)
d) Demand Congress open an investigation into corporate greed, with an eye towards a national program where government will set milk prices and ensure they are “fair.” (This is the Venezuela approach.)
e) Go down the street to another store where milk is priced at $4.00/gallon.
The entire health care debate for the last decade has focused on various combinations of (a) through (d). No one is even talking about (e). So, let’s talk about (e), which is the obvious free-market response. However, continuing our thought experiment, what happens if you walk down the street and find every store in the neighborhood is selling milk at $400/gallon? That’s pretty much the situation in America today, with respect to health care. It’s being priced at ridiculously-high rates. So does that mean we should retreat to (a) through (d)? No, it means we have to fix whatever is causing the price of milk to be $400/gallon. Something’s wrong, because that price doesn’t pass the straight-face test. We need to find out what the problem is.
In the same way, medical costs don’t pass the straight face test. Think about it. Why does a single Aspirin cost $30 in a hospital, when the same pill costs five cents at Walgreens?
Why should it cost almost $3,000 to sleep overnight at a hospital in Oregon when the finest ocean-view suite in Maui costs less than half that?
Why does fixing a broken leg cost over $10,000, on average, when it requires no more than an hour of time to x-ray, set, and cast? Extrapolate that to an annual salary, and society is paying the equivalent of $20,000,000 per year for someone to fix broken legs. Obviously, the health-care worker isn’t getting the twenty-mil themselves. So where’s it going? Something is seriously broken here, and it’s not just femurs.
I’ve already discussed, in an earlier blogpost, how we got into this mess, and what’s actually broken. But here’s the short version: Government policies since WWII have in aggregate conspired to remove virtually every molecule of free-market price discipline from the health care industry. And any time you do that to any industry, you get the equivalent of $30 aspirins, and $400 gallons of milk.
The solution is obvious: All those things that drained free-market competition from the health-care industry need to be immediately reversed. And that will be easy, because government policies caused them in the first place.
But before we start, let’s decide how we’ll measure success.
Success is measured not by counting up everyone who has health insurance coverage under the new plan. Success is measured by creating a world where no one needs health insurance, because medical care is no longer expensive. We measure success when a hospital stay is available for $150/night, or less. When an aspirin at a hospital costs five cents, not $30. When a broken leg can be set at a neighborhood clinic for $100, not $10,000. Etc.
The market can deliver those kinds of prices if we let it. So we have to let it. And here’s the seven point plan for doing so. But don’t worry, our new health-care system won’t be leaving the poor out in the cold. Although it will be brutal on existing, entrenched special-interests. OK, here we go.
1. Abolish the American Medical Association and remove or drastically reduce educational and licensing requirements for health-care workers. The AMA, a 21st century guild-from-hell, is a major reason health care is so expensive. Current law hands the AMA the power to effectively regulate how much education any health-care worker must receive, before they can start working. While this is nominally to protect the patients, in fact it’s to protect the guild members from lower-priced competition. Some medical specialties require extensive education, but right now, even a general practioner must obtain a four-year bachelors degree, and then a four-year medical degree, and then spend three or more years in residency. Not only is the cost of this hyper-education in the hundreds of thousands of dollars, the time spent is well over a decade. Total out-of-pocket and opportunity cost? A cool million bucks.
It shouldn’t take that long or be that expensive to train anyone for anything. Jet fighter-pilots are trained by the Air Force in six months, and that’s one of the most challenging jobs in the world. Society can ensure professionals have the requisite knowledge simply through testing. Develop standardized tests. Make sure they are as comprehensive as needed, and if someone can pass it, then who cares how they obtained the knowledge? That’s their business.
2. Reform the tort system. Scam artists like John Edwards are adept at manipulating juries into awarding millions of dollars in damages for things like…hot coffee spilled on one’s lap. Thus not only must care providers obtain high-priced malpractice insurance, they must also order expensive tests to make sure they didn’t overlook something, which might cause a future John Edwards-manipulated jury to award a plaintiff a hundred million dollars.
3. Abolish the FDA. The FDA was created in 1906 to address the problem of fast-talking salesmen selling snake-oil remedies to illiterate folk who were suckered-in. OK, how big a problem was that? I’m not sure, but I’m positive the remedy is not a zillion dollar, bloated government agency who these days is primarily responsible for making it uber-expensive to create and market new drugs. Let independent agencies, like Consumer Reports, rate the efficacy of new drugs. Let patients decide if they want to try them. Sure, there will be the occasional horror story. But the FDA itself is on track for killing millions. Snake-oil salesmen were never that dangerous.
4. Eliminate corporate tax deductibility for employer-provided health care plans, and allow individuals to deduct medical expenses. My earlier post explained how employer-provided insurance is public enemy #1 in shielding the health-care market from price competition. If deductibility is removed for corporations and handed instead to individuals, every corporation in America will take the money they were spending on employee health-care, and hand it instead directly to their employees. This will be cost neutral to the company compared to the status quo, and if they fail to do it, their health care costs will almost precisely double (because of the elimination of the deduction.) So they’ll hand the money to their employees who will then be able to use it either to buy health insurance or fund health savings-accounts, or pay for medical care out of pocket, all using pre-tax dollars. Once people are in charge of their own costs, trust me, they won’t tolerate $400 milk, or $30 aspirin tablets, or $3,000/day hospital stays.
5. Change our immigration laws to move every health-care worker to the front of the line. Bring all the MD’s in first. Then Physician Assistants and Nurse Practitioners. Then Nurses. Etc. If this country is facing a health-care spending crisis (and it is) and if we have zillions of people trying to immigrate to America (and we do) then let the one address the other. Bring in all the health-care workers. This makes far more sense than screening out Muslims. Bring the Muslims to the front of the line, as long as they have health-care credentials or experience and can pass the tests. Sound crazy? This is what New Zealand is already doing. Health-care workers go to the front of the line and are fast-tracked for immigration. By contrast, U.S. immigration law seems to be focused more on bringing in lettuce-pickers. Is there a lettuce crisis I’m not aware of? But we do have a health-care crisis. So let’s change the immigration laws accordingly.
6. Eliminate most if not all regulations on health insurance. Some regulation is necessary to guarantee financial solvency of the insurer, but beyond that, let the market decide. And as for being able to buy across state lines, duh. The Interstate Commerce Clause of the Constitution should be making that possible even today.
7. Implement a Medicaid-for-Everyone plan and eliminate Medicare. Our country is rich enough to provide a level of health care for everyone, in the same way we provide roads for everyone and education for everyone. But we don’t need (and can’t afford) to provide health care at the level Bill Gates can obtain. A billionaire can buy liver-transplants all day long, but society doesn’t have enough wealth (let alone livers) to do that. Maybe in a hundred years we’ll be able to, but not today. Instead, the government can offer health care to everyone via universal Medicaid cards. But—and here’s the big catch—the reimbursement levels will need to be completely different from today. Medicaid should pay perhaps $100 to cover setting a broken leg. $150 for a hospital stay. Five cents for an Aspirin. Etc. Once all the strait-jackets mentioned above are removed from the health-care industry, the free market will have no trouble delivering services for those kinds of prices, with better care available if you can afford it. Medical tourism is already a thing, where offshore locations are competing to deliver medical care at reasonable rates. If the market can take all the computing power that existed in the world in 1960, and put it in a $400 iPhone today, it can set broken bones for $100.
The above 7-point plan will solve the problems of today’s health-care nightmare. It will ensure everyone has access to at least a minimum level of care. It will remove today’s formidable obstacles to delivering care inexpensively. Despite the expanded coverage, it will cost the government far less than what is being spent today because the reimbursement rates will be set so low. And it will dramatically lower every citizen’s cost of health care because the free market will be harnessed to deliver value—something which is utterly missing from today’s system.
But, wait. Doesn’t point 7 involve the government itself setting prices? Isn’t that what’s going on in Venezuela? Yes and no. Offering a maximum reimbursement rate for government-reimbursed health-care is the government behaving like an intelligent consumer. It’s willing to pay “x” to fix a broken leg, because taxpayers can’t afford $10,000 to fix someone’s broken leg. Some health-care providers will be happy to fix a broken leg for $100 once it’s possible to provide such services without requiring ten years of formal education. The problem in Venezuela is that the government prohibits the market from paying more than that, ever. Price controls always cause shortages, and that’s why the shelves in Venezuela are bare—of most everything.
A government maximum-reimbursement rate will ensure that the market finds a way to deliver the service for that rate. And it won’t be the gold-plated health care of the Bill Gates variety. But it won’t leave the patient out in the cold, either. Nor will it bankrupt the Treasury.
Will anyone still need health insurance beyond Medicaid? Sure, buy it if you want something better, from a far-less-regulated health-insurance industry. Or buy health care directly, for cash, if you want something better than what Medicaid will provide. But most people won’t buy anything more than perhaps catastrophic coverage, because everything less will no longer be expensive. It will be routine, like the cost of changing oil in your car, or buying milk at Safeway. We don’t need oil insurance, and we don’t need milk insurance. When sanity has been returned to the health-care market, we won’t need health insurance either—except for the most expensive stuff. And you won’t even need it for that, if you’re willing to settle for, or can’t afford more than, the basic care offered via the new Medicaid-for-All.
As we look at the spectacle of the GOP-controlled Congress trying to replace ACA with something that makes sense, keep your eye on the ball: Are they merely finding ways to force someone else to pay for outlandish costs? (Treating the symptom.) Or are they addressing the disease itself, which is the actual cost of healthcare?
The seven point plan outlined above I offer free of charge to Washington. And they don’t even need to name it JV-Care, athough that does have a nice ring to it… 🙂
Jacques Voorhees 