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Government control is bad for your health

Wednesday, September 26 at 12:00 AM

By Brian T. Schwartz, Boulder

The 208 Commission is spending your tax dollars to inject poison into our health-care system — the very same poison already crippling it: government controls over your medical choices. These controls chain you to your employer’s health plans, prohibit the sale of affordable insurance policies and allow Medicaid to provide lousy health care while perpetuating poverty.

Because the tax code exempts employer-provided health insurance, but not other types, you’re essentially stuck with your employer’s high-cost nonportable choices. Hence, insurance companies can afford to be stingy and deny you care; they know that losing you as a customer requires that you change jobs.

Tax-exempt insurance coddles insurance companies by encouraging you to forgo a higher salary for more expensive coverage than you may need. This especially applies if Congress denies you a tax-free Health Savings Account because your insurance doesn’t qualify. Why save $100 each month on a more economical policy when, after taxes, you’re left with only $45 to save for when you’re older? You might as well keep the costly insurance, even though you probably won’t utilize those high premiums and you could be saving.

Our insurance-friendly tax code has resulted in our demanding prepaid medical care instead of real insurance. Since medical care appears almost free at the point of service, patients overconsume, are not cost-conscious, and providers need not compete on price. Providers do not strive to satisfy you as a customer because you aren’t a customer — your insurance company is. Yet, extensive research has shown that patients with higher-deductible policies spend much less than those with prepaid plans — with negligible difference in health outcomes.
They also seek more preventive care.

To champion fairness and affordable quality medical care, the 208 Commission should support a tax code that treats out-of-pocket medical expenses and insurance equally, regardless of who pays insurance premiums. President Bush’s tax deduction for insurance falls short, as it still favors insurance companies and penalizes out-of-pocket medical purchases.

A viable solution is universal eligibility for tax-deductible Health Savings Accounts, now available only with high-deductible insurance. Since taxes shouldn’t favor insurance over savings, anyone should be able to open an HSA. Further, to free us from our employer’s insurance, we should be able to purchase insurance with HSA deposits.

It’s bad enough that government pampers insurance companies by penalizing savings and pushing you to buy needlessly expensive insurance. Worse yet, Colorado’s mandated-benefits laws make it a crime to purchase affordable health insurance. The 208 Commission supports plans to extend these laws, even though they already increase your premium costs by between 21 percent and 54 percent.

The Colorado legislature should expand eligibility for “mandate-lite” policies and ultimately repeal mandates. It should also advance the goal of the Health Care Choice Act, which would allow you to buy insurance that meets less damaging regulations of other states.

Lastly, the 208 Commission foolishly supports Medicaid expansion. As shown in FAIR, my free-market proposal at WhoOwnsYou.org, Medicaid fails to meet its criteria of increased access, personal responsibility, financial stability, and fairness. Instead of unfairly competing with insurance companies with Soviet-style government-controlled insurance, Medicaid could at least mimic food stamps with insurance vouchers.

This would be an improvement, but it’s still unjust. For every dollar expropriated from you to fund Medicaid, private charities lose a potential donation. A tax credit for donations to medical charities would partially level the playing field. The threat of lost revenue would motivate Medicaid administrators to be effective, and taxpayers would have more freedom to fund charities they deem worthy.

Government controls cripple medical care. Effective reform requires phasing out destructive controls and programs, not creating more of them. Paraphrasing Colorado activist Robert LeFevre, government-controlled medicine is a “disease masquerading as its own cure.”

Brian T. Schwartz, Ph.D., is a resident of Boulder.

READER COMMENTS

Comments have addressed many topics. I'll provide references for two here: (1) administrative costs and (2) the effect of prepaid health care (low deductibles) on consumption of health care.

I also suggest that eliminating our insurance friendly tax system will make it more difficult for insurers to control our health care decisions.

(1). Administrative costs. Look up the report called "Medicare's Hidden Administrative Costs: A Comparison of Medicare and the Private Sector."
www.tinyurl.com/29qxaz

Here's part of the press release:

"You've heard the claims: Medicare administrative costs are about 2 percent of claims costs, while private insurance companies' administrative costs are in the 20 to 25 percent range -- or more.

That assertion is frequently followed by a policy recommendation: Switch everyone to a government-financed health care system -- or just put everyone in Medicare -- and the country will save so much in administrative costs that it can cover all of the 46 million uninsured with no additional health care spending.

But what Medicare calculates as its administrative costs excludes many of the costs that are regularly included in private sector administrative cost tabulations. And there are other factors that, when considered, raise serious questions about whether Medicare's administrative costs are actually lower than the private sector."

2. Effect of health care appearing free at the point of service.

See the RAND Health Insurance Experiment:
www.tinyurl.com/26zaq3

From the page linked above:

"Key findings

* In a large-scale, multiyear experiment, participants who paid for a share of their health care used fewer health services than a comparison group given free care.
* Cost sharing reduced the use of both highly effective and less effective services in roughly equal proportions. Cost sharing did not significantly affect the quality of care received by participants.
* Cost sharing in general had no adverse effects on participant health, but there were exceptions: free care led to improvements in hypertension, dental health, vision, and selected serious symptoms. These improvements were concentrated among the sickest and poorest patients."

---
In "The history of health care costs and health insurance," (on-line, Google the title) Linda Gorman notes another important result of the RAND Health Insurance Experiment:

"Cost sharing had little effect on visits for serious problems likely to require immediate attention—
head injuries, abdominal disease, chest pain/acute heart disease, and acute eye injuries."

3. Our tax system empowers insurance companies at our expense
In a comment below, Frank complains about how insurance companies have become extremely bureaucratic and do not serve customers. Then why not support repealing policies that have placed insurance companies between patients and doctors? Namely, the employer tax-exemption for their products that makes them cheaper and eliminated the insurance company's need for competing for your business?

Posted by Brian T. Schwartz on September 26, 2007 11:42 PM

The best way to help the poor who need health care is to give them tax credits. That way even th poor can afford a HSA. We can also do as they do in the earned income tax credit with regard to chronic or disastrous diseases. It only applies if you work so the working poor will get the benefit. The market will never be allowed to work as long as the government health care "assistance " programs of Medicaid and Medicare are a blank check attached to a pile of paperwork.

The simple solution would be to assign a flat rate "health account" to every citizen. Put it on a card like the current food stamp cards. Require ID and the card for services. This way the market would be in charge. It would take a while but eventually the people would prevail because there is such creativity in our, well I would say souls but in respect for the non-religious I will say spirits, that it will not take long for it to create the market where health care is treated as a product.
Many of the people who have posted claim that no one will choose cost over life. Wrong. I made that choice two years ago. I had horrible insurance and my husband had just lost his job. It would cost almost a thousand dollars a month to use Cobra insurance. He would not be eligible for insurance until September. I had a major heart attack in late May but the hospital I went to had no ability to treat me so, two days later, my doctor told my husband I would be dead in days if I didn't get moved to another hospital. Moving to a new hospital would mean I was uninsured. We decided to go to the new hospital. The tests the first hospital had run were read and the doctor explained to me that there was no real way to fix my heart but it MIGHT help if they tried a special surgery. They knew we had no insurance but were most willing to treat me with a surgery that would have a total cost of about 100K. After a long conversation we decided to forgo the surgery. Recent tests have shown that the surgery would most likely not have helped. The doctor, a new one, agrees. I have only about 14% heart function. I can't walk more than a few feet nor can I do many things I love like cooking. We continue to make choices that are cost based. The hospital reduced their bill and we are making payments. All but one doctor charged only 50 dollars or less in return for cash which we paid with out tax refund.

Now we keep track of the costs even more closely than when we were uninsured. We do a lot of research and ask a lot of questions. Most of the time we don't think we need to spend a great deal of money for a small benefit. One thing we did apply for was a power scooter so I could get around better. Our co-pay would be too high. I'll keep trying to teach my cats to wear saddles.

I support change in the health care system to permit the individual control and benefits from their life choices. I would like a base amount in the proposed accounts to be at least 3K , but it would have to be paid in to each account yearly. Whatever the amount is it will be well used by the majority of people. Perhaps it would be practical to permit the spending of a percentage of the accounts after a certain amount of time or a total amount in the account. The beauty of the plan is that the doctors would get the equivalent of cash payments from those using the health care account cards. It would be better to spend administrative costs on fraud investigation and enforcement. No citizen would be uninsured. It might be practical to permit the sale of insurance with the payment being made with the card. No one needs to suffer from governmental thinking getting between them and their health.
I won't be here for the end of this battle but I'll keep rooting for individual rights as long as I can.

(I started this post about 9:00. Many rest breaks but it is important for people who are most "in the target sights" of reformers to speak out.)

Posted by momma y on September 26, 2007 10:51 PM

Frank,
Your explanation for administrative costs is nonsense. Vision correction surgery is market driven, and its price has been dropping.

2) The vast amount of health care does not involve an immediate life-threatening situation. And in cases where it is, people may not be able to shop around, but so what? Even if they end up with the highest priced treatment, at least they got the treatment.
If someone cannot make the absolute optimal decisions about their health care, again so what? Someone who's stuck somewhere in the bowels of government who, being no different than anybody else and thus are no more able to make those decisions for themselves either, certainly could not make those decisions for the rest of us. Better to leave those decisions to our doctors and ourselves who know our own bodies more than anyone else. Leave the government out of it.

4) If the treatments were free, the demand would outstrip the supply. That would mean that people who really do need them would have to wait in a longer line than they would now.

5) These people who came here needed treatments to save their lives. If their own countries had better health care systems than we do here, why wouldn't they remain in their own countries to get these treatments? Why would they choose to travel to a foreign country with, alleged inferior, health care, when their own lives were at stake? Answer: the treatments they needed from their "superior" health care systems were unavailable.

Posted by Dave on September 26, 2007 10:22 PM

It must be comforting to those an uninsured person who must forego a life-saving operation because of no insurance (or insurance that refuses to pay) that he "owns himself" Hank. He can say goodbye to his children explaining that Hank says it's the American way that those who drive us around in cabs and hand us our rental shoes at bowling alleys are sovereign individuals who, although they must die because we do not value their contribution to society, never had a government bureaucrat admit them to a hospital to receive life-saving surgery.

Dave, the reason administrative costs are lower in government-run health programs is that private insurance companies have MORE bureaucracy. That's right. Profit-driven health insurance corporations have out-governmented the government. The profit motive forces these corporations to create large departments dedicated to finding ways to not pay claims. It costs a lot to fund these private corporate bureaucracy departments.

2) You are correct. Let me be more precise about why consumers can't make rational decisions in the health care arena. Unless your alternate option is being a vegetable, choosing to die because of the price of health care is not a rational decision. Furthermore, many health care decisions are made on an emergent basis, where shopping around is not possible. Try to get the best deal next time you are unconscious and need an ambulance trip, hospital admission, and brain surgery to relieve pressure. I think you'll take what you get.

4) Would a greater demand for preventative care be a bad thing. Greater demand for colonoscopies would lead to less demand for expensive and drastic treatments like chemotherapy and surgery. This would lead to lower overall cost to the system, not to mention more lives saved.

5) What is clear is that they came here because the system here values those with wealth more than those without. We have the lines here too. The difference is you can buy your way to the front. Wealthy foreigners get a better shake here than hard-working, tax-paying Americans. American workers subsidized those doctors' educations as well as the infrastucture within which those doctors operate. Wealthy foreigners get the welcome mat, American workers get a kick in the rear on the way out the sliding doors. Is that the best we can do?

Posted by Frank on September 26, 2007 07:02 PM

Those who claim that some lack the assets to afford a Health Savings Account should keep in mind that these only exist to offset the existing tax exemption for employer-provided insurance. There's no reason the tax code should favor insurance over out-of-pocket medical expenses. HSAs are a way to level this tax bias.

Also, if you claim that HSAs "benefit the rich," then the tax exemption for employer-provided insurance also does. You should then advocate eliminating this tax-exemption (which favors insurance companies and punishes savings), the lowering taxes commensurately to keep tax revenue the same.

It's deceptive to call something that's tax-deductible a gift to the rich, i.e., those in higher income tax brackets. Our bracketed income tax system treats people differently under the law according to their income. Does that not violate the notion of "equality under the law"? Say you're OK with such a "progressive" income tax system - then of course something that's tax deductible saves people in higher income tax brackets more than those in lower -- that's what your "progressive" system is all about!

Further, to refer to money saved from a tax deduction as a gift from the government is like a mugger saying that, by not mugging you, he gave you the "gift" of the money in your wallet.

Also, the United Health Group has reported on the use of HSAs for those lower incomes here:
www.tinyurl.com/3an2ed

They do not specify what qualifies as "lower income," but here's the relevant part:

"Lower income consumers show just as much interest in opening and funding their HSA:

* 80 percent of eligible low-income individuals (earning less than $25,000/year) opened an HSA;
* 56 percent of low-income account holders made their own contributions to the account;
* 80 percent of these individuals carried a balance into 2006, with an average balance of $761;
* The motivation and ability of these consumers to open and fund their accounts is directly related to the employer's decision to fund the account."

Posted by Brian T. Schwartz on September 26, 2007 04:08 PM

CS & Dick Tricle,
The vast number poor people in this country have their own home, their own car, a TV... The idea that they cannot afford their own HSA too is nonsense. And for those few who have absolutely no money to place into one, denying HSAs to everyone else won't make those poor any better off.

Posted by Dave on September 26, 2007 03:43 PM

People in low wage jobs can't afford a medical savings account, high deductibles or copays. The free market doesn't answer this need but lets these people stay uninsured because there is no profit in it. The US economy can't function without cheap labor so the least this society could do is see to it that these people have insurance. A rich fat conservative can go prattle about the magic of the marketplace all day long and it won't be anything but hot air to a $7 dollar an hour worker.

Posted by CS on September 26, 2007 03:15 PM

Frank,
Considering the bureaucracy one has to deal with when it comes to getting something from government, I have a hard time believing that a government run health care system has lower administrative costs than what would be under a market driven system.

2) Choosing not to have a life saving procedure can be rational. Lots of people have what's called a Living Will that stipulates that no life saving measures are to be taken, if they are in a vegetative state.

4) The point was that if something is offered for free, there will be a greater demand for it than if people had to pay for it out of their own pocket.

5) Perhaps they are rich, but so what? It is clear that in spite of their riches, they were unable to get the health care they needed in their own countries whose health care systems we're told are superior to that here. It is obvious that in spite of the problems we have here, their health care systems are worse.

Posted by Dave on September 26, 2007 01:03 PM

Monopolies are generally outlawed business arrangements that are hostile to consumers. The reason is that they tend to produce higher prices that are accompanied by low quality; thereby abusing the consumer who has no choice. Such one-sided commercial arrangements are generally outlawed in commodity transactions like oil, natural gas, lumber, livestock, precious metal and grain transactions just as surely as they are also outlawed in transactions involving non-commodities like televisions, homes, finance, technology, clothing, autos and food. To assume that people are simply too stupid to act in behalf of their own best interest and make the best choices for themselves is to assume that someone other than the customer/consumer has a monopoly on intelligence and wisdom. And that, in itself, is a conspicuouly ignorant proposition.

Then there is the question of freedom, accountability and responsibility. Who is more accountable and more responsible, and deserving of more freedom than is the consumer--the customer?

Healthcare is not a shared responsibility, it is the responsibility of each and every individual to make rational choices in his/her own best interest. And only he is the expert on that subject. The moment your healthcare is reduced to a shared responsibility by law, then that becomes the very moment that you no longer own you. A totalitarian dictatorship owns you, owns how you live and owns your choices. Abe Lincoln settled that one some 150 years ago. You would have to enjoy a monopoly on stupidity to assume that anything less is compatable with American freedom as is guaranteed in our Consttution and is discussed in our Declaration of Independence.

Posted by Hank on September 26, 2007 12:32 PM

If you're too poor to pay taxes, a tax free HSA is no use.

If you're in the top bracket it's 1/3 off treatment you can already adfford.

HSAs are more gifts for the rich.

Posted by Dick Tricle on September 26, 2007 11:16 AM

I did not say our system is free-market. I said it is more market-driven than anywhere else in the developed world. The result: the highest administrative cost in the developed world. Administrative costs=health care money being spent to do things other than provide health care=inefficiency.

2) No one can rationally choose not to obtain life-saving health care. Dying is not a rational choice.

4) Would you gobble up free colonoscopies. Every day? Every week?

5) Administrative costs=health care money being spent to do things other than provide health care=inefficiency. Those people came here because they are wealthy, not because our system is a model of efficiency. Most people are not wealthy. The fact that the rich can purchase life-saving care does not prove efficiency.

Posted by Frank on September 26, 2007 10:18 AM

Frank,
The health care system cannot be considered market driven, when your own doctor is forbidden by law to do something that could save your life without the government's permission.
The only exceptions to that are vision correction surgery and plastic surgery. And because they are somewhat market driven, their quality has improved and prices have fallen.
As to your summations:
1) Nobody ever claimed that the market is infallible in all situations. It's just considerably better than government run.
2)If you cannot make rational choices for your needs, that's no reflection on the ability of others to make that same choice for themselves.
3)I don't know where you get the idea that there is not enough health care. It's expensive, but there is plenty of it.
4)You cannot be serious. When people think they will get something for free, they gobble it up.
5)Again, you cannot be serious. Recently, a member of Canada's Parliament needed treatment for breast cancer. She didn't get it in Canada, but in California. Last year, the Prime Minister of Italy needed heart surgery. He didn't get it in France, or Britain, or Canada or even in his own county of Italy. He got it in the U.S. If health care that is more government run is more efficient than here, why would they do that? And if such care is unavailable even to them, how much worse is it for people who aren't as high in their governments.
6)Too bad Medicare is scheduled to go bankrupt in about 20 years.

Posted by Dave on September 26, 2007 10:03 AM

Dr. Brian Schwartz is completely on-target with his remarks. The biggest problem in much of the health care debate is the unchallenged (and wrong) assumption that health care should be a "right' guaranteed by the government. Any efforts to guarantee such a positive "right" (really just an entitlement) is morally wrong and will be economically unsustainable. We only have to look at Canada, UK, and all the other countries with their long waiting lists, rationing, and poor quality to see what would be in store for us if we went that route.

Note that the current system is not a free market by any stretch of the imagination, and there is still considerable room for market-based reforms that would both improve quality and decrease costs.

Posted by Paul Hsieh, MD on September 26, 2007 10:02 AM

So what is new about this?
This supposed government of ours has been injecting poison into our foods, the environment, and the air we breath for the past 80 years.
This should come as no surprise to anyone who is familiar with our crooked federal government, and this will continue until we have a total change in government.
A good start would be by getting rid of everyone of the crooks that are currently holding jobs in Washington, and especially the white house and the congress.
Then we need to get rid of the crooked lobbyists.

Posted by J W on September 26, 2007 09:28 AM

Free markets and the choice they afford consumers are generally the most efficient means to provide commodities. However, the fact that they work well most of the time for most commodities should not shield us from using our power of reason to distinguish arenas where the free market does not provide the most efficient results.

Free markets operate under the assumption that the consumer can make a rational choice not to purchase a commodity if the cost is unreasonable. Unlike DVD players, however, a consumer cannot make a rational choice to not receive essential medical treatment because the providers in the market are charging too much for their services.

The argument that insurance-covered health care is over used is baffling. The health-care crisis is the fact that many people do not have access to health care. We are not using enough health care, which results in further inefficiency by causing emergency rooms to be used as primary-care centers. Furthermore, I need not describe why free automobiles would be overconsumed while free colonoscopies would not.

The most damming evidence that the market does not create efficiency in the health-care market is the current U.S. system. As the most market-based system in the developed world, our administrative costs are the highest. This is because the profit motive creates incentives to create whole departments dedicated to denying care. In our very own system here, the choose-your-own-doctor Medicare program is the most efficient provider of health care; many times more efficient than private insurance.

So in sum:

1) We should be rational about market forces, instead of assuming they are infallible in all situations,

2) I cannot make a rational choice to not purchase essential health care,

3) There is not enough health care in the U.S., not too much. This is why it is called a "crisis",

4) Consumers are not likely to seek out excessive colon exams, root canals, surgeries, etc, just because they are free,

5) Market-based health care is the most inefficient model in the developed world, and

6) Our own Medicare has, by far, much lower administrative costs than the private insurance companies that dominate health care in America.

Posted by Frank on September 26, 2007 08:55 AM

I do not understand why Mr .Schwartz was not on the "Blue Ribbon Commission"?
He is a voice of reason and reality in a sea of hyperbole.
Of course his views are contradictory to the goal of government run health care so I guess I answer my own question.

Posted by Jack Bauer on September 26, 2007 07:55 AM

Monopolies are hostile to the consumer, even government healthcare monopolies. Monopolies always lead to higher prices and less service. In contrast, we need competition, more choices and the ability of every healthcare customer to shop the system and make decision in his/her own best interest. And the customer's money needs to be at stake, not the money of someone else. This will guarantee the best service at the lowest possible price.

The alternative is for healthcare customers to be forced to rely on the very same folks for our healthcare who also maintain our bridges, run the post office and the public schools and run medicare and our social security system. Case closed.

This is not rocket science. Try reading Adam Smith's "The Wealth of Nations" for some more clues.

Posted by Hank on September 26, 2007 07:34 AM