Nothing a Shot Can't Cure

I am upset.  Befuddled.  Rattled.  Distraught.  I am so upset that I almost couldn't finish that third Ho-Ho.  (I remember when I was a kid, Ho-Hos came two in a pack, and each one was individually wrapped in foil so we could eat one now and save one for later.  Now they come three in a pack and you have to eat all three at one sitting or else the uneaten Ho-Hos (or is the singular "Ho"?) will get stale.  I don't know who made the decision to pack that third Ho-Ho (Ho?) in there and force us to eat it, but whoever it is should win a Nobel Prize.)

What has me so unsettled?  This plan by the President to "reform" the health care system.  Err, I mean Health Care System.  The President wants to rush through his bill right away because 47 million people supposedly don't have health insurance.  Even if that number is not something pulled out from under Joe Biden's hair plugs, is the number meaningful?  I mean, the 47 million includes countless illegal aliens - who won't be eligible for any new federal insurance program - as well as millions of people who choose not to insure themselves even though they have insurance available to them.  If half the people who are uninsured are in that condition because they are here illegally or by choice, why should we destroy everybody else's coverage to fix a problem that fewer than 10% of the population has?

It makes no sense.

Having the federal government insert itself into the solution makes no sense, either.  Why?  Because it is part of the problem.  A big part.

Because my friends and readers are smarter than the average human, they all know that for years the two segments of our economy with costs growing significantly faster than inflation have been health care and higher education.  Health care costs have steadily increased at just under 10% per year, while higher education has more than doubled in the past 10 years.  Both these numbers represent increases at about three times the rate of inflation.

The two characteristics that both health care and higher education share lie at the heart of the problem.  The first is that there is a great disconnect between the consumer of the product and the entity paying for the product.  People do not shop for health care and higher education the way they do other things.  When buying bread, a car, new shoes, or a pet chinchilla, people will usually compare costs, quality, need, etc. and then pay for those products or make short-term payment arrangements with a credit company.  They know what it will cost them and commit to pay.  If something is not of sufficient quality or costs too much, the sale is not made and the consumer looks elsewhere to find another product that suits the need and satifies the consumer.  This is perfect capitalism and is the most efficient way to exchange money for goods - the person making the purchase foots the bill and therefore has a very strong incentive to get the most for his dollar.  The sellers, on the other hand, have a very strong incentive to provide quality goods at a competitive price.  They must convince enough people to make the sale or else they go out of business.

With both health care and higher education, the distance has grown between the purchaser and the payer, leading to ever-escalating costs.  Very few people shop around for the best deal when choosing either of these two items, and even fewer still immediately pay out of their own pocket.  Instead, third parties have been introduced - insurance companies, government-backed student loans, etc - that are supposed to subsidize the cost and make the product more affordable to the average American, but in reality they drive costs upward.  Why?  Because people are less careful with other people's money than they are with their own.  Consequently, hospital bills are not scrutinized and questioned as thoroughly as other bills, and price seldom is discussed in-depth prior to services being rendered.  College tuition is rarely paid in a lump sum check, but rather has become some nebulous, theoretical figure that you will pay back some day.  But not today.  So what's the difference if it's 10% higher than it was last year, which was also 10% higher than it was the year before?  Because some third party has been introduced to shield you from the bill, that bill is allowed to spiral upward.

The second shared characteristic driving prices upward is that the federal government has intervened in a big way to make "access" more universal.  The feds' ham-handed, one-size-fits-all approach has caused massive cost-shifting, from people who cannot afford it to people who can.  For instance, Medicaid and Medicare were supposed to cure insurance problems for the poor and elderly, but have simply led to driving up everybody else's costs.  The rate of reimbursement to doctors for these two programs is far below what they normally receive from other patients and has led doctors and hospitals to pass these losses onto the rest of us.  This, in turn, gets passed onto the insurance companies, who raise rates, making insurance more expensive, which leads to fewer people being covered, and causes the federal government to step in and fix the problem.  The problem they had a huge hand in causing.  The problem they have no clue on how to fix.
Here's the Fat Kid's radical and revolutionary proposal for making health care and education affordable to everybody:
Outlaw insurance for everything other than things that are catastrophic and require hospitalization - things that can quickly add up to a lot of money.  For everything else - everything outpatient, pharmaceutical, etc. - having a third party payer would be illegal.  Force people to shop for their doctors the way  they shop for everything else in life.  This would also force doctors' offices and hospitals to squeeze out waste and inefficiencies.
Perhaps some will chafe at the thought of health insurance being illegal.  Fine.  Cap benefits at $1,000 per year.  That's what most dental insurance plans cap out at, and they've had that same cap for 30 years.  And guess what?  Dental costs go up only 3-4% a year, which is the same rate as inflation.
But, you may say, dental problems are not life threatening.  Neither are the vast majority of other things we see  the doctor for.  If the condition is not life-threatening, why shouldn't patients try to find the best value for their money?  If you force people to foot their own medical bills, they will shop for the best value for their money, and medical offices will respond by becoming more competitive.  It has happened in every other segment of the economy that does not have third party payers: restaurants, clothing, automobiles, computers, etc.  It works because both sides have a strong incentive based upon their own self-interests.  It works because capitalism works.  And capitalism works because people care about themselves and their money and will try to protect both, if they are allowed.
I know that some of the squishy types among us feel uncomfortable handing over their health care to the free market - the same free market that has given us cheap, quality TVs, food, automobiles, houses, cell phones, computers, etc.  And it has given us a variety of choices.  They would rather hand it over to  the federal government - the same federal government that has given us the postal service, the Department of Motor Vehicles, a trillion dollar deficit, etc.  And the federal government is the very antithesis of free choice.
I would rather trust myself and my money to the market than to any federal health care plan.

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This page contains a single entry by Louis Core published on July 20, 2009 9:00 PM.

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