The Health Care Crisis

Dear Readers,

I apologize for the non-sports nature of this post, but I feel it essential to address this topic due to the incredible impact it will have upon our nation. Up front and for the sake of transparency, I wish to disclose I am a Libertarian who believes in the free market and that they government's role therein is as a referee who steps in when parties do not follow the rules or where there are market failures.

Health care is not one such complete market failure. It is merely a market failure in the sense that the nation's health care system is fractured; there is no uniform tort law, no uniform definition or standard of "proper care" and no ability to buy health insurance interstate. Each of these factors, amongst a plethora of others, have led to a market which does not flow and function efficiently.


PROBLEM #1: Setting price ceilings and mandating health care only raises costs and creates shortages.

Initially, you have a line -- people above "the line" can afford health care and people below it cannot. When the government institutes universal health care, the money has to come from somewhere. Those who can afford health care are forced to pay higher premiums to subsidize those who cannot. Let's ignore the question of "does everyone deserve health care" for a moment, as it is an economic misnomer to the question of whether or not this approach is a practical way to accomplish the goal of affordable and maintainable coverage.

Forcing those who can afford to pay for health care to subsidize those who cannot afford to pay for it raises the cost of health care for the consumer who can afford it. Thus, "the line" as illustrated creeps up and the marginal consumer who could barely afford health care before now cannot afford it. Thus, taxes or premiums must be raised again to cover this new batch of "people who cannot afford health care" and the line again creeps up. In simple terms, the price ceiling imposed by universal health care causes health care costs to rise.


PROBLEM #2: Rationing health care.

Where socialized medicine fails most is in terms of specialized treatment: oncologists, neurologists, cardiologist, etc. While socialized systems like that of Canada allow for greater public access to doctors, it simultaneously decreases access to specialists. According to an investigatory report by John Stossel for a 20/20 report a few years ago, Canadians have to wait an average of 17 weeks to see a specialist. 17 week is a long time to see a specialist, especially for those with heart conditions.

I spoke with cardiologist Robert Grodman a few years ago about heart disease. According to the standards of medical practice regarding patients who experience an acute heart attack, once an Emergency Room physicians feels that the patient is stable enough to be discharged, that person is released. HOWEVER, that patient, according to Dr. Grodman, needs to follow up and see a heart specialist within the immediate few weeks following the heart attack in order to undergo heart testing (such as a stress test) in order to further diagnose and treat potential problems.

Dr. Grodman claims that a person is most vulnerable for further complications related to a heart attack within the first few months following the most recent complication. Without proper treatment, serious complications can arise from untreated acute coronary syndrome such as a stroke, another, more severe heart attack or even death.

And this specific situation is not uncommon.

According the American Heart Association, of the 13 million living Americans who have a history of Coronary Artery Disease (CAD), 60% of them have experienced acute heart attacks. Of the 1.2 million Americans per year who experience Coronary Artery Disease related heart attacks, roughly one third of them die. Heart disease also accounts for approx. 20% of all deaths in America each year.

Simply put, 17 weeks is too long to wait for something that must be done immediately. As John Stossel concluded in his report, “government health care inevitably leads to rationing.” So socialized medicine can’t help regarding specialists. It might be cheaper to see a specialist in a socialized system, but if you die before you see one, it doesn’t do you much good.


PROPOSED SOLUTION: We just need to do four things in order to make health care affordable: we need to allow for interstate purchasing of health care plans, reform tort laws, remove state mandates and educate people about health care. The ultimate goal of these reforms is to decrease prices by increasing competition.

First and foremost, we must allow for the interstate purchasing of health care plans. Current health care structures are regulated (differently) state by state and policies cannot be bought across state lines. This, in essence, isolates each state’s health care market, which creates a problem for two reasons.

The first is market fracturing. Smaller markets are significantly less efficient and competitive than larger ones. This means that costs are higher. Secondly, different states have different tort laws. This, coped with isolated health care markets, breeds asymmetrical health care structures which attracts and repels specialists to and fro certain states. In states with stricter tort laws, specialists will leave and go to states with more favorable laws. This decreases competition within the high tort state. As a result of decreased competition, prices will naturally rise as remaining medical professionals gain monopoly power. Additionally, stricter tort laws produce higher insurance costs which raises health care prices and deters competitive medical practices from potentially opening. Why become a doctor when you can just become a lawyer and sue them for better pay? See John Edwards.

Through universal tort reform and interstate deregulation, health care markets will equalize and become significantly more competitive. By placing each state is on an even playing field in terms of tort law and by allowing Americans to purchase health care plans from nearby and far away states, something that technology allows us to do cheap and effectively, we force health care providers to become more competitive, more efficient and offer more competitive rates to its policy holders. With 300+ million people in the market, health care companies will have to offer competitive rates to attract customers.

Another way that the government can make health care affordable for its citizens is by removing state mandates. Each state has a different health care mandate which further drives asymmetrical market structures and raises costs for the consumer. When states intervene in the market and create price and/or quality floors, they disrupt the natural movement of the market. Unnatural changes in the market creates shortages which causes scarcity which in turn raises prices. Additionally, people need flexibility in their options. One plan does not fit all. Choice is an important component to competition.

Finally, we need to educate the people about healthy lifestyles. Many contributing factors to high health care costs are diseases like Diabetes that can be controlled through healthy lifestyles. By increasing health education in schools, we can decrease problems like obesity, heart disease, hypertension and diabetes in the long run. Healthy people get sick less frequently.

Additionally, by educating people about basic heath care, we can decrease the number of avoidable visits to health care professionals. After all, the less we use health care, the cheaper it is. Thus, if we teach consumers about basic health care, they won’t need to visit the doctors office for common ailments such as a cold.

The next question of course is who pays for health care. The answer should be the people for economic reasons. If the government purchases health care for the public, they are going to wheel and deal out 300+ million policies to a single health care company to save administrative costs. This vests undesirable monopoly power in a single company, which will gain great amounts of leverage over the people and its governments in time. Government regulation of monopolies is also a difficult and expensive task and it surely won’t make the costs to the taxpayer any cheaper than if they bought their own policy.

Also, who do you think will provide the health care? It’s going to be a large corporate political contributor, adding an element of big business clout that Americans are simple weary of.

Let’s return to a concept I introduced in a previous speech that I’ve dubbed line theory. You have a line -- people above the line can afford health care and people below it cannot. When the government institutes universal health care, those who can afford it are forced to pay higher costs to help pay for those who cannot. This raises the cost of health care to the consumer who can afford it. Thus, the line moves up and people who could barely afford health care before now cannot afford it. Thus, taxes must be raised again and the line again creeps up. In simple terms, the price ceiling imposed by universal health care causes health care costs to rise unnecessarily.

A more effective solution would be the following. Returning to the idea of the line, if the government issued tax rebates in the form of health savings accounts, money that can only be spent on health care, the cost of health care to the consumer would fall. People who barely could to afford health care before now can afford it. More people buying health care plans means that providers must offer more competitive rates to attract these new customers, causing prices to also fall. As a result, health care becomes more UNIVERSAL and AFFORDABLE than before. You might say that the best form of socialism is capitalism.

You spend your money better towards your own utility than does the government spending it for you. Let's throw a food metaphor in here; let's call health care a hamburger. The government spends as though a hamburger is a hamburger. It is fiscally impossible to administer programs which tailor consumer-by-consumer and they just want the best solution en masse. But what kind of hamburger fits you best? Let's say the government is giving out McDonald's hamburgers. Maybe you don't like McDonalds. You're a Burger King girl. Or a Applebee's guy. Maybe you're a vegetarian. Should you have to pay for the McDonald's hamburger you do not want and then have to shell out extra money for the hamburger you do want? Given the decreased pool of insured under private programs that would result from a public option, the costs thereof would inevitably decrease (premiums are inversely related to diversification).

Simply put, to make health care affordable, the government should be giving consumers the money the government would be spending on health care back to them. Let consumers price hunt for the best coverage - this forces providers to offer competitive rates and lower prices versus the government contracting health care out to a single uncompetitive company that donates a lot of campaign contributions every year.

And what of the field of "basic health care?" That of treating things which require a more base medical knowledge and less training than a decade of medical school. For example, a patient with strep throat. You might say that any doctor or nurse could treat it and prescribe the necessary medication, provided they have adequate basic medical training. Private companies, such as Walgreens, have taken notice of this opportunity and are opening low cost, flat rate "Take Care" clinics which provide basic health care without the premium cost of education factored into the pricing. An expansion of these alternative options to doctor treatment for basic health concerns seems to be the more practical approach to providing people with greater access to basic health care than socialization.

What's your take on this, TBO?