THE LIBERTARIAN ENTERPRISE
Number 378, July 30, 2006
"The Founding Fathers made that very mistake..."
It's the System That's Sick
Special to The Libertarian Enterprise
Last week, my mother had surgery. The operation wasn't a terribly serious one and she came through it just fine. It was, however, invasive enough that she had to recover in intensive care and spend a day and a half in the hospital.
With everything else she and my father were worried about last week, it's good to know that they're not going to have to pay anything out of their own pocket for the surgery or the before and after care. The government will pick up a good part of the tab via Medicare; the balance will be covered with the supplemental insurance policy they purchased.
I say that this is good because they're living on a fixed income, and the level of that income is fixed a whole lot lower than most of us would be comfortable living on. Though they've got savings, they consider those for emergency use only, so the bulk of their income is based on their monthly Social Security checks. Those checks are not large, and a goodly chunk is spent every month on the premiums for the aforementioned supplemental insurance. But they're afraid to be without it, and so they go without other things instead.
I can't blame them for worrying about the possibility of very large medical bills. I pay a ridiculous amount every month myself for the same reason. But the size of the premium payment checks pale in comparison to the bill I got from a hospital two years ago. I had some surgery myself then. Though it turned out to be outpatient surgery, it was just major enough that there was some question as to whether or not I'd be able to go home the same day. I recovered well from the operation, and so I did go home late that day only to feel truly sick when I got the bill: $26,000 and change.
Most of my bill was covered by insurance. The balance due was luckily within my means to pay (though it was painful, I managed). Although I still complain when I have to write a sizeable check for health insurance coverage every month, that $26,000 bill is always in the back of my mind and I grudgingly never miss a premium payment as a result.
Health insurance affordability is a big deal, especially among so-called political liberals. They've made up their minds that every American should have insurance. That's far from the case today. Millions of Americans don't; millions more children remain uncovered. Although these numbers vary from month to month let alone year to year, it's fair to say that the total number of uninsured Americans at any given point in time is significant.
Most of the time, it's said that those millions of people don't have insurance because they can't afford to have insurance. In some cases, of course, that's true. But there are other reasons that people choose to forego insurance as well, and among them is the fact that they know perfectly well they'll get treatment anyway should an emergency arise.
The reason people know they'll get treatment is because hospitals will give it to them is that it's required they do so by federal law. But they comply with the law in the full knowledge that they'll make up the costs of providing the free care. One of the ways in which medical centers recoup their losses is through tax deductions. Another is the large bills they send out for those who do have insurance coverage (does $26,000 for outpatient surgery ring a bell?).
In my relatively eclectic employment past, I've worked both for the home offices of insurance companies and for the billing department of a chain of clinics. At the insurance company, people are employed full time to pick through hospital bills. Oftentimes they'll find mistakes (that's not a reflection on careless hospital accountants but rather a simple statistical probability for error when that many line items are involved with that many bills). Usually, they'll consider the rest for payment.
Medical personnel get involved. They look at the procedures performed and decide whether or not those procedures were medically necessary. They approve for payment the ones that they decide were; they deny payment on the others. Claims adjustors get back into the picture when they determine "usual and customary" charges for the region in which the medical provider is located. And then they approve for payment some previously contracted percentage of that.
Hospitals, meanwhile, are often the butt of late night jokes when they bill $3 for a single aspirin, or include multiple fees for a wide variety of blood tests to reach one simple diagnosis. But in the first place, many people don't consider that the aspirin may have only cost a nickel, but for the hospital pharmacy to store and dispense it, the doctor to approve it for a given patient and diagnosis, and the nurse to bring it costs a little more than that. Multiple tests are donethe kind that insurance company medical advisors often decide aren't medically necessarynot to pad insurance bills but out of fears malpractice suits will be filed if doctors miss even the most obscure health condition.
Insurance companies are in business to make money, and when they get very high hospital bills, they do their best to pay as little as legally possible. Hospitals are also in business to make money (or, in the case of public hospitals, to at least break even), and so they have to institute charges everywhere they can and at a sufficiently high amount so even after numerous denials and numerous non-paying patients they'll still make something.
Liberals often suggest that the answer to putting a stop to this vicious circlehigher doctor bills mean higher insurance premiums mean fewer policyholders mean lower reimbursement levels mean higher doctor billsis to put the government in charge of health care. Socialized medicine, they say, is the only equitable way to go.
In 1994, then-President Bill Clinton gave his wife, Hillary Rodham Clinton, the assignment of solving what some insisted was a "crisis" in health care in the United States. Mrs. Clinton and the fellow members of the task force given the job came up with what was derisively called "Hillarycare." Not quite socialized medicine, it came close with its requirements that all employers provide health insurance for their employees, and mandating tightly controlled (effectively nationalized) HMO's to offer care.
The proposal was fought by both medical providers and insurance companies for obvious reasons: Neither would make any money under the plan. Many Americans not affiliated with either industry fought the plan, however, as well. They didn't like it because it would eliminate much of their freedom of choice in choosing their doctors and other health care providers.
Some on the left have not yet given up on the idea of socialized medicine. They conveniently ignore the shambles of the socialized system in Canada; disregard the crippling tax rate in some countries in Europe necessary to cover the costs of socialization there; and they pooh-pooh the effect of the free market on research and innovation. Though socialized medicine is obviously (demonstrably so) a bad idea, it's difficult for some Americans not to look at it a little wistfully as insurance premiums and health care costs alike continue to spiral upward.
What's the solution? There isn't one single answer to the problem. The healthcare dilemma is much like a series of dominos laid delicately in complex patterns. If one falls, much of the system collapses, and nobody in their right mind is willing to instigate that (which is why only some of the most leftward Democrats ever really consider it). But there are some actions that the government could take without toppling the system, and they include:
Getting our borders under control
Illegal aliens contribute vast sums to cost overruns at hospitals. They're frequently uninsured, yet they receive treatment anyway (hospitals are there to help first, and make money secondno one with any compassion at all would suggest the injured or ill be turned away at the door). But none of those costs are reimbursed, which means hospitals have got to get payment for those charity cases elsewhere.
Additionally, more and more doctors are becoming more and more concerned as they see diseases among illegal aliens effectively wiped out in the US. The treatment costs, of course, but even more costly is the spread of such disease. While we can't blame those suffering from a disease for the disease, we can certainly minimize its spread within our borders if we do what we can to keep the disease outside the country.
Getting the government more involved in health care won't solve this problem. Getting the government to do one of the few jobs it's actually supposed to be doingkeeping our borders securewill.
Getting the FDA under control
One undeniably expensive component of health care in America involves the cost of prescription drugs. Pills that cost fractions of a cent to make are sold at exorbitant mark-ups. Like hospitals, though, pharmaceutical companies have to pay for their research somehow, and that's how they do it (Canada's socialized medical care system pays less than it ought to for such drugs, and so Americans have to make up for that, too). Although the mark-up seems overkill, the fact of the matter is that one significant part of the cost of new drugs is getting them approved.
The FDA insists on safety standards that most of us would probably consider over the top. (Remember the FDA warnings about saccharine? Turns out saccharine only causes cancer if you drink the equivalent of hundreds of cans of diet soda a day. But the FDA apparently doesn't think you can be too careful!) Being a gigantic bureaucracy slows its review of those standards to a crawl. The average wait for the approval of a new drug can be as much as 14 years. The investment in time alone by pharmaceutical companies is huge! Why not publish the results of the studies done and let Americans decide for themselves what level of risk to take? Depending on their own quality of life, such decisions might vary, and should certainly be in the realm of the suffering individual rather than the government to make.
Instead of reforming the FDA and the way it does "business," Congress would prefer to consider kicking the drug companies while they're down by giving them even less time to recoup their investments via a "reform" of patent laws. Meanwhile, one of the best preventative measures we can take involves adequate nutrition for which vitamin and other supplements can be invaluable. But those could also be priced out of range in the near future if the FDA gets its way and regulates those as wellor rather as poorly as it does everything else.
If the government really wants to reduce the cost of prescription drugsand it claims that it doesit should cease playing the overprotective "Big Mother" figure, offer information as it comes to light, and then let Americans take the responsibility for their own medical decisions.
Getting out of the insurance business
Medicare and Medicaid are losing propositions. Doctors lose because the reimbursements are ridiculously low; patients lose because the limitations are myriad. And now, with a much touted prescription drug plan funded by federal tax dollars allegedly both under-budgeted and over-hyped, the taxpayers are losing even more.
These programs can't be stopped on a dime, of course; too many people are currently too dependent on them. But other possibilities exist, including private non-profit insurers. If those ineligible for Medicare and Medicaid didn't receive it (don't make me talk abut the expense to American taxpayers of illegal aliens again!), and if it was phased out in favor of private enterprise, the entire system would be better off.
I don't pretend that doing these things will solve our problems overnight. They won't. The one thing everybody can agree on is that healthcare costs in America are a complex issue at best. But these ideas will, at least, be a step in the right direction. They also have the virtue of some consistency: Each and everything I've said involves less government intervention, not more. I'm pretty sure there's a lesson in that. Now if only the socialist-prone left (and frankly the regulation-prone right) would learn it.