Health care in the United States is too expensive and difficult to access, and the recent reforms happening under Obamacare are mostly going to make things worse. The basic economics guiding the pricing of health care should really be no different than for any other product or service. Unfortunately, government interference has distorted the marketplace, leading to outrageous pricing and a system that just doesn’t work.
Here are 11 simple ideas that really will make a difference.
1. Encourage price transparency
We will know the healthcare market is really progressing when prices are posted in doctors’ offices and on hospital websites.
In our current system, when a patient seeks out medical care they typically have no way of knowing how much the doctor visit, medical treatment, emergency care, or any of the prescriptions they might need will cost. This means that there is very little real competition among healthcare providers, and a lack of competition will always result in higher prices.
If the prices of doctor visits and medical treatments were posted, we would know the market is working because individuals (particularly those with health savings accounts) would be able to compare quality and pricing. This consumer involvement always pushes those companies that offer the best value to the forefront, and the competition among providers raises the value for all consumers.
At the Surgery Center of Oklahoma in Oklahoma City, prices are transparently listed on the center’s website. Costs of surgeries at the Surgery Center are less than half the amount charged at mainstream hospitals.
By offering this price transparency, the center has grown exponentially as individuals compare prices and choose the equally safe but more cost-effective procedures offered by the Surgery Center. Similar policies should be encouraged nationwide.
2. Encourage consumers to set up a Health Savings Account
Health Savings Accounts, or HSAs, are special accounts where pre-tax money can be saved and used to pay for future medical expenses. HSAs are only available to people who have qualifying high-deductible health plans (HDHPs). Because of their high deductibles, HDHPs encourage people to price-shop when securing medical services prior to reaching their deductible. Getting the consumer so involved ensures that providers must compete more, which ultimately benefits consumers.
HSAs can be funded up to $2,650 for an individual and $5,250 for a family. If these funds aren’t needed for medical costs, the account balances may be invested in stocks and bonds and can grow tax-free. If a young person starts an HSA, by retirement the fund would presumably be extremely well-vested.
So HSAs encourage consumer involvement, encourage people to save for their future, and they reward people for staying healthy – all positive results for society.
3. Allow health insurance to be sold across state lines
Currently, health insurance is sold within states and is regulated by states. This stifles competition, resulting in higher insurance rates for everyone.
The McCarran-Ferguson Act of 1945 protects insurance firms in each state from out-of-state competition. This law is grossly outdated, and should be revoked.
However, businesses often support laws like this that protect their territory from other competitors; this includes most of the insurance companies.
Ten states have recently passed laws that allow the sale of health insurance on a regional or interstate basis, but no insurers will sell policies from a different state. The more we can remove barriers to competition, the more choices and value consumers will find.
The good news is that individuals who own federally authorized HSAs that are coupled with high-deductible health insurance policies (HDHPs) are exempt from many state regulations.
4. Allow people to purchase the coverage they want
The purpose of insurance is to reduce an individual’s personal risk by spreading the risk over a large number of individuals.
Under the Affordable Care Act (or Obamacare), insurers are mandated to cover a wide range of medical conditions and treatments that they were never required to cover before. For instance, insurers are now required to cover the cost of oftentimes unnecessary preventative care expenses, contraceptives, weight loss programs, and drug rehabilitation treatments. These mandated benefits are driving up costs for everyone.
5. Provide tax benefits for individual plans that are equal to those provided for group plans.
Currently, employees who receive health insurance benefits through their employer receive those benefits tax-free. But if individuals purchase their own health insurance, they do not get a tax deduction for it and must purchase it with post-tax dollars.
This is inherently skewed to protect the interests of companies, and sets up a system where most people do not own their own health insurance. Thus, individuals are less attuned to the cost of insurance, which results in over-testing, over-treating, and driving up prices for everyone.
6. Allow international competition for pharmaceuticals
Allowing international competition for pharmaceuticals would be another positive move that would benefit consumers. Competition is always the best way to drive down the cost of pharmaceutical products. If equally safe, significantly less expensive international alternatives are available for market, the competition will force more reasonable pharmaceutical rates.
For instance, in Canada, commonly used drugs such as Diovan for high blood pressure or Lipitor for high cholesterol sell for significantly less than they do in the states.
While there have been worries about the quality of drugs from other countries, the Food and Drug Administration (FDA) has created Current Good Manufacturing Practices (cGMPs) and set them up internationally.
Given that these standards are already in place, it would take very little additional effort to expand the FDA’s operation and open the market so that competition could benefit the consumer. By opening the market more, individuals will benefit from the executive power of voting with their hard-earned dollars, and the free market that this country was built on will be stronger for having a completely open, competitive market.
7. Eliminate lifetime health benefits for Congress
Members of Congress have the option to purchase private health insurance through the Federal Employees Health Benefits (FEHB) Program managed by the U.S. Office of Personnel Management. It is the same program that is available to all federal workers, and similar to plans offered by many large businesses.
Starting in 2014, all members of Congress must begin purchasing metal level plans like everyone else. (Metal level plans are where plans cover 60, 70, 80 or 90 percent of the costs of medical expenses.) However, unlike everyone else, congressional members can continue their insurance benefits (at no cost to themselves) if they leave their position after five years of service.
As these representatives go back to being ordinary citizens, they should be treated as such. To continue to have taxpayers cover their health insurance for the rest of their lives is absolutely preposterous.
Additionally, if these congressional members are to be treated as ordinary citizens, they should more carefully consider the laws that they impose upon the American public instead of being focused on sideline benefits they are likely receiving from special interest groups.
8. Eliminate regulations that increase the cost of health care
There are certificate of need (CON) laws in 36 states plus the District of Columbia. The original purpose of the CON laws was to ensure that citizens had equal access to quality health care. Proponents of CON laws believed the government could promote appropriate competition while maintaining lower costs for treatment services.
However, as is often the case when big government steps in, things never work out the way they were planned. Currently CON approval in most states is not based on objective analysis and community need, but rather it is subjective and heavily influenced by deep-pocketed lobbyists and clout.
I believe that all CON laws should be scrapped and that hospitals, ambulatory surgical centers, and outpatient treatment facilities should be built based upon need and marketplace realities. I also believe that when construction is restricted, price competition is reduced and health care costs get higher.
9. Institute medical liability reform
A recent report found that over 60 percent of doctors 55 years of age or older had been sued at least once, and many had been sued more than once. The risk of being sued and the high cost of liability insurance (in some states liability insurance costs close to $200,000 per year) have forced many doctors to practice defensive medicine. By doing so, this leads to higher medical costs because doctors feel pressured to over-test and over-treat patients.
Currently the American Medical Association (AMA) is lobbying Congress to pass laws that will limit non-economic damages to $250,000. We agree with the AMA and feel that the cost of health care will be reduced, and the quality of medical care will improve if medical litigation damages are capped.
10. Give insured individuals the right to purchase insurance in the future
By owning their own insurance, individuals will not feel forced to stay in a job, or even a state of residence, out of obligation to health coverage.
By having the option to own their own policy – one that receives the same tax breaks as large corporations – individuals will have the freedom in the workplace to build, develop and strive for a goal without worrying about an executive decision being pushed upon them from an outside source.
Additionally, by offering the continuation of insurance – meaning, once someone has coverage they always have the right to purchase coverage – individuals will have a confidence in the healthcare system that currently does not exist, and will be protected from losing access to health care.
11. Have state-sponsored safety nets for the uninsured
A study conducted by the Annals of Internal Medicine estimated that 47 million people in the United States are uninsured, which equates to over 15 percent of the population. Of these uninsured people, over 16 million have been diagnosed with a chronic condition, and too often need medical care at the expense of taxpayers. [Source]
The best thing about the Affordable Care Act is that people who have been unable to obtain health insurance because of pre-existing conditions can now get coverage. But there are better ways to accomplish this.
State-sponsored safety nets have a successful record in helping people who are otherwise uninsurable obtain coverage – without driving up the coverage costs of people “pooled” into a policy with them, and without being a burden to taxpayers.
The Affordable Care Act is a large, unwieldy, expensive program that is simply not going to accomplish its objectives – that being to cover all Americans with health insurance. Unfortunately, the program is going to drive costs higher, and make health insurance less affordable for millions.
This is a complicated problem for which there are no simple answers. But we do know that there is nothing in the law that will reduce the rising costs of health care. Policies that encourage consumer involvement and free-market competition are really the only long-term solutions.
Wiley Long is President of HSA for America, and a passionate advocate for consumer-based solutions that will improve price transparency and lower health insurance and medical costs for people purchasing individual and family health insurance plans.