Political Reform

Health Care Reform

Page 2

The root cause of our health care woes is that the entire industry is able to act as a monopoly.  When a health insurance company decides they want to make more profit do they look for ways to find more customers or shave costs?  No.  They just raise premiums, because they can.  Their customers have no choice but to continue paying.  When a hospital wants more money they do the same.  I've heard from nurses that their hospital signed a contract to purchase screwdrivers from a certain company for $50 dollars each, even though Sears will sell you a screwdriver with a lifetime warranty for $10.  This is evidence that the hospital doesn't care about what their costs are, and the reason for that indifference can be only one thing.  Whenever they need more money they can just raise prices.

So how do we get the health care market to once more behave as a free market?
On to the solution.  We will do this in 10 steps

          1 Our first step is to modify the lowest level of the market so that it behaves according to free market principles.  The lowest level is the purchaser, or in other words, you and me.  Health care needs customers that will shop around based on price, quality, and overall value.  The system also needs customers who care more about price than quality or service.  These types of customers will drive down costs the most.  The way to do this is through two steps.  First we require all health care providers to publish their prices online in a standardized format.  Web pages are cheap, and the US government can even host the server for it.  A large website like this likely would only cost a few hundred dollars a month and could easily host all the medical prices for an entire state.  This information, once available makes it possible for you and I to shop around by price, quality, safety record, customer satisfaction, and any number of other metrics.  Once it is possible to shop for better value, we must provide the motivation to do so.  Health savings accounts would provide this, and are the second step in this process.  In a health savings account the money is yours, and if you don't spend it you get to keep it.

          2 Our second step would be to introduce more free market behavior into our payment methods for health care, meaning the insurance industry.  Medical billing is very expensive and inefficient.  One estimate is that 1% of GDP or 6.25% of Health costs is in administration costs, or just paperwork.  Health insurance companies don't bother to find more efficient ways to administer their customers, because they don't feel any pressure to do so.  In order to make this more competitive and encourage health insurance companies to become efficient, I would institute an Opt out rule for all health insurance.  What this rule would do is make it possible for anyone that currently get health insurance from their employer to opt out, and have the employer contribute the amount they are paying into the health insurance plan of the employees choice, or into a health savings account.  If the plan or savings account contribution amount is lower for the employees chosen health plan than for the employers plan, then the balance would go back into the employees pay check.  This allows and even motivates employees to shop for cheaper, more efficient health insurance, and at the same time forces health insurance companies to compete with health savings accounts.  I would also require that health care providers give their lowest prices to customers who pay in cash or equivalent at the time of service.  Since medical billing is so expensive, a customer who pays by cash, cashiers check or debit card will cost the hospital significantly less than a customer who pays through an expensive and lengthy claims process.  Since prices have to be listed online, the online listed price will be for those who pay in cash.  The hospital can then charge a percent surcharge for other types of payment.  Many large insurance companies negotiate lower prices for themselves.  This is fine, as long as the price for a regular person paying in cash or debit card is at least 2% lower than any form of payment that costs the hospital money.  Thus anyone can get those cheap prices just by paying cash.  This is not unfair to insurance companies, since they can move to a debit card payment system instead of the current medical billing nightmare.  An insurance company could then assure themselves of the lowest prices available by arranging some form of debit card payment for all transactions.