Free Market Healthcare Reform – A Bad Idea

Republicans want a free market solution to health care?

What exactly is that?

Why does that idea resonate at all?

Does a free market solution means no direct government involvement in health care?

The United States completely abandoned that position when it adopted Medicare and Medicaid.  Those programs recognize that free market health care doesn’t work if you don’t have money.

Does a free market solution to health care mean that individuals have free choice of doctors?

Where does that exist?  It exists in Medicare – a government plan.  Among those with employer sponsored health insurance, 80% are enrolled in either HMOs or PPOs.  That means that if you don’t get your health care from network providers, you pay a penalty.  Is that freedom of choice?

So are Republicans proposing that the health care system do away with HMOs and PPOs?  If so, I missed it.

And what market are we talking about?

Is it a marketplace for doctors and hospitals? No middlemen such as insurance companies.  Conservatives often argue that insurance does not allow the free market to work, because patients are isolated from the true cost of health care.

How does that work?

It certainly can’t work between patients and doctor/hospitals.  The reasons are too numerous to mention, but I will give it a try.

Any serious illness or injury quickly becomes too expensive for most Americans.  To the individual patient, does it really matter whether a specific procedure costs $20,000 or $80,000.  Both are out of reach if you have to pay cash.

Patients are often making decisions under duress.  “Sir, you need this surgery right now or you will die or go blind.”  (I heard of both these accounts in the past week)

Patients may be unconscious.

Patients don’t have enough information on price, quality, and effectiveness to make good and timely decisions.

And competition among insurance companies?

The Republican candidate in the last election touted and idea that insurance companies should compete across state lines.  Tim Foley demonstrated that states with more health insurance mandates had health care premium rates that increased more slowly that states with fewer mandates.

But this goofball idea has a more fundamental flaw.  Insurance companies are local and they contract with local providers.  If someone buys a an insurance policy from an out of state insurance company, chances are there will be few if any network providers in the purchaser’s state.  So the purchaser will be paying out of network co-payments.  Where is the savings?

How do insurance companies compete anyway?  Competing insurance companies are a bit like competing shopping centers.  Both are multi-dimensional, but consumer choice is usually based on a single feature/store.  Unlike shopping centers, if you find your self in an insurance company that doesn’t have what you need, you can’t just drive across town to get it from another insurance company.

Pillage Medicare?

The goofiest ideas yet is put forward by the Republican Study Committee and highlighted by James Ridgeway in his blog, The Unsilent Generation.   Allow seniors to opt out of the Medicare program.  Actually, if that is all it was, I might be convinced to support the idea.  I would exact one condition; those opted out seniors who would be forced to declare bankruptcy because of medical bills, would be compelled to serve out the remainder of their lives in debtors prison.

But no,  the idea goes further.  It would give seniors a voucher to purchase their own insurance.  What misalignment of brain cells allows an idea like this to have any credibility at all?  Let’s break it down.

Scenario I       Medicare takes money from people who have it and gives it to doctors, hospitals and drug companies  for treating sick old people who mostly don’t have it.

Scenario II      Medicare takes money from people who have it.  They give it to people who don’t have it, so they can add something to it to buy insurance.  The insurance company keeps some of the money, and gives some of it to doctors, hospitals and drug companies for treating its customers.

How does this make any sense?

But dumb keeps getting dumber.  There is another screwball idea in the mix.  Now, if a senior does not elect Medicare when he or she first becomes eligible, there is a 10% penalty per year for every year he delays.  This is a basic principle of insurance that Medicare surely learned from the private sector – you don’t let people wait to buy insurance until they need it.  But the Republican Study Group suggests doing away with this penalty.

Apparently an idea is OK if the private sector does it, but it is unfair when the government does it?

There is no free market solution to health care

The industry has had a century to prove otherwise and it has failed.  Ironically, it’s most effective scare technique is not that we will be losing private health insurance with health care reform , but that seniors might lose their public health insurance.

The “free” market is not free.  Study after study shows that “free” market strategies in Medicare consistently cost more per recipient than traditional Medicare.

Employers are shedding health care as if it were the swine flu.

In the United States, when you include employee health care benefits for government employees (local, state, and federal), our tax dollars pay for almost 65% of health care.  If we left out the private sector funding all together we would still have the most expensive health care in the world.

Government needs to play a much stronger role in any final health care reform.

It is a reflection on the sad state of debate on this subject, that we even need to discuss this.

Instead of leaving the government out of health care, we should be talking about leaving the private sector out.

The only discussion should be around how the government can best organize the financing and delivery of health care.