By: Daniel Horowitz | March 08, 2017
Ever wonder why heart surgery costs $106,000 in America but only $1,583 in India? Do you find the lack of an “Uber style revolution” in health care absurd?
In so many ways, health care and health insurance – and no, the two are not the same – have missed the great technological revolution. The reason? Big, bad government.
It’s time to bust apart the regulatory state that enriches the big government-big business cartel. And we can start with these 20 ideas on a state and federal level that kick government to the curb and return the power to consumers, entrepreneurs, and health care providers:
Health care reforms
- End the medical malpractice boondoggle
- Allow hospitals to turn away non-urgent illegal aliens
- Offer a tax deduction for those providing health care to indigents
- Reform FDA approval process … big time
- Make more drugs available over the counter
- Stop boxing out specialty hospitals with burdensome certifications
- Expand who can deliver care so health providers have to compete for the customer
- Promote telemedicine and other modern delivery systems
- Break the AMA monopoly on medicine and prevention of for-profit healthcare
- Repeal the HIPAA regulatory leviathan
- Encourage health care providers to post prices online
Health insurance reforms
- Tear down regulations
- Promote health status insurance to deal with pre-existing conditions
- Stop socially engineering employer-based insurance through the tax code and treat it the same as individual plans
- Allow unlimited Health Savings Account spending
- Let consumers and employers purchase health insurance plans across state lines
- Permit individuals to pool together for group insurance
- Change antitrust laws so Big Pharma’s stranglehold on competition is destroyed
- Make Medicaid work with the market, not destroy it
- Allow affluent seniors to opt out of Medicare
Health care reforms
1. End the medical malpractice boondoggle:
Medical malpractice is the 800-pound gorilla in the room when it comes to jacking up health care on the supply side, even before we get to insurance. Moving to a loser-pay system and capping non-economic damages will bring down the cost of medical malpractice insurance (which is passed down to the consumer) and the enormous gratuitous cost of defensive medicine. The extra margin of profit will decrease pressure on unsustainable hospital costs and allow doctors in out-patient clinics or offices to offer more bargains to their clients.
2. Allow hospitals to turn away non-urgent illegal aliens:
Hospitals account for 32 percent of all health care spending in America. Aside from the problems with Medicaid, one of the big problems driving up costs is the prevalence of illegal aliens and indigent people who use emergency rooms for primary care. Once again, the culprit is government. In 1986, Congress passed The Emergency Medical Treatment and Labor Act (EMTALA) which forced health care providers to offer care to anyone irrespective of their ability to pay. While we obviously want to care for anyone with an urgent need, hospitals must be given discretion to turn away those who do not have an urgent need. This provision was part of “The Patient Option Act,” (H.R. 2900) introduced by former Rep. Paul Broun (R-GA). Getting rid of this massive unfunded liability will curb skyrocketing hospital costs and improve access to emergency care.
3. Offer a tax deduction for those providing health care to indigents:
One of the ways for government to work with, not against, the market and civil society is to grant doctors the ability to write off any health care they provide to the indigent sick as a tax deduction.
4. Reform the FDA approval process … big time:
It takes years and well over a billion dollars for companies to develop a single drug due to the outdated FDA approval process. Aside from jacking up the price of drugs and preventing lifesaving cures, this process once again benefits large pharmaceuticals and serves as a bar for smaller companies to enter the field of R&D. The entire process needs to be streamlined, and the government needs to approve third-party certification organizations that would compete against each other in offering alternative certifications for medicines. They should also have an expedited process for approving drugs already in use in other developed countries. Furthermore, the FDA should create a parallel “preliminary approval” process for drugs that are not fully tested yet, but are given over to health care providers with the publicly advertised caveat that they are free to use at their own risk. See more FDA reforms in this article from The Heritage Foundation.
5. Make more drugs available over the counter:
Liberals love discussing marijuana legalization, but have supported needless regulations on basic drugs used for common ailments. Making more drugs available over the counter, such as cholesterol medication and contraception (yes, liberals, we’re looking at you), will drive down costs. Moreover, consumers would begin paying for more medicines out of pocket and be more cost conscious, which would have a further self-fulfilling deflationary effect on pricing.
6. Stop boxing out specialty hospitals with burdensome certifications:
Any health care provider who wants to innovate with specialty ideas or establish new hospitals are automatically confronted with the near-insurmountable “certificate of need” (CON), which requires them to undergo a cumbersome process of licensing. CON requirements exist on top of the regular licensing requirements and FDA regulations. Like most regulations and barriers to innovation in health care, they were created by the existing health care establishment and serve as a way to box out competition and new ideas.
7. Expand who can deliver care so health providers have to compete for the customer:
With the growth of health care extenders, such as physician assistants, nurse practitioners, pharmacists, and optometrists, there is the potential for a revolutionary second tier of access to health care that will lower costs across the board while still providing quality care for many basic health care needs. At the behest of the big medical lobbies, states have imposed gratuitous restrictions on the scope of practice for extenders, thereby denying consumers more choice, competition, and cheaper options, especially for the poor. Health care professionals must have the opportunity to practice in the field up to the scope of their training and education without limitations engendered by lobbyist-driven greed.
8. Promote telemedicine and other modern delivery systems:
Much like e-commerce and online schooling, there is no reason more aspects of healthcare can’t be delivered electronically. This can lower labor costs and foster more competition and innovative ideas. But once again, burdensome licensing requirements and other regulations, imposed by lobbyists to protect the status quo, serve as an impediment to creating such competition. Even states like Texas bar doctors from issuing prescriptions without in-person visits, which are often gratuitous and needlessly over-utilize service while inflating costs.
9. Break the AMA monopoly on medicine and prevention of for-profit health care:
One of the biggest problems driving up costs in health care is the shortage of doctors, which is expected to grow in the coming years. One of the reasons for this shortage is that the federal and state governments have given the American Medical Association a complete monopoly over medical school accreditation and physician licensing the same way they allowed the American Bar Association to control (and destroy) the legal profession. As my colleague, Logan Albright has written, “[T]hese boards effectively function like government regulatory agencies, with the important difference that they lack the opportunity for public comments, and thus are immune from any political pressure from citizens.” They are also largely responsible for the “certificate of need” regime, restrictions on scope of practice, and barriers to telemedicine.
One of the worst incumbency protection rackets promoted in most states by the AMA is the restriction on “Corporate Practice of Medicine.” This doctrine has essentially prohibited private corporations from practicing medicine or employing health care providers. In some states, it has prevented hospitals from employing physicians to provide out-patient services.
This has created a non-profit monopoly over healthcare and is probably one of the single most impactful factors in preventing the Uber-ization and Walmart-ization of health care. As Professor John Cochrane explains, “About 70% of hospitals and 85% of health-care employment is in non-profits, whose legal and regulatory treatment protects much inefficiency from competition. If United [Airlines] didn’t have to pay taxes, Southwest’s job would have been that much harder.” Imagine if liberal lobbyists got states to box out FedEx and require the use of the U.S. Postal Service. These regulations need to be loosened.
10. Repeal the HIPAA regulatory leviathan:
The entire accountability side of the 1996 HIPAA law was rooted in the provisions of Hillarycare. Under the guise of combating medical fraud and protecting privacy, this unconstitutional federal power grab has essentially criminalized basic medicine in so many ways and has created a labyrinth of regulations and paper work that drive up the cost of health care at every level of the supply side. Its overzealous privacy regulations are a big culprit in preventing innovation in healthcare mobile communications. Given the existence of the already onerous state regulations, it’s time for Congress to repeal many of these provisions at the federal level.
11. Encourage health care providers to post prices online:
One of the biggest impediments to health care working like a competitive free market is the lack of price transparency. This has been fostered by the existing socialist system, which obliterated any desire to peg the costs to services actually rendered. By implementing a number of the aforementioned health insurance reforms and fostering more choice, competition, and individualized cost-conscious consumers, the natural outcome would be that consumers would gradually force health care providers to advertise their prices.
Health insurance reforms
12. Tear down regulations:
Between Obamacare’s coverage mandates and the pre-ACA state and federal regulatory apparatus, the insurance market is not only regulated but severely limited in what in can offer. It’s time to tear down those walls and encourage states to do the same. Any insurer should be able to offer any type of plan under any circumstance to any individual or group.
Let insurance companies experiment with new ideas that solve issues like pre-existing conditions. The insurance regulatory regime should be focused solely on enforcing the contracts insurers make with consumers.
Keeping regulations to a minimum will lower costs, remove the bar to entry for start-up insurance companies, break the Big Government/Big Pharma monopoly on health care, and foster even more competition, choice, and cost transparency.
13. Promote health status insurance to deal with pre-existing conditions:
One specific area of insurance that the federal government should leave completely free of regulation is any idea to solve the problem of pre-existing conditions through the marketplace. One proposed solution is health status insurance, broadly popularized by University of Chicago Professor John Cochrane.
These plans would work much like life insurance: Consumers purchase an insurance plan to cover potential changes in their “health status” that would otherwise jack up premiums or make it hard to purchase new coverage. Parents could take out plans for children before they join the workforce — or even unborn babies — at dirt cheap rates. Let’s say Tom and his family have health status insurance. Tom’s daughter develops asthma and his wife is diagnosed with high blood pressure. Their health insurance rates go up. But, health status insurance kicks in to pay the higher premiums. Alternatively, Tom would receive a lump sum payout to be managed in a trust-style account to directly pay the health care costs. He could purchase specific options or riders for varying health anomalies (diabetes, heart disease, cancer). The options are endless.
Health status insurance will encourage insurance companies to offer tailor-made health plans or multi-year contracts that will protect those who later develop chronic conditions. Health insurance will become portable and untethered to employment decisions, a change in health status, relocation, or young adults moving off their parent’s plan.
14. Stop socially engineering employer-based insurance through the tax code and treat it the same as individual plans:
The original sin of government intervention in health care was the creation of the employer tax exclusion for health insurance. It is truly the pre-existing condition to most market inefficiencies in health care.
Born out of WWII-era wage controls, the federal government essentially codified insurance as part of salaries with a tax exemption for employer-provided health insurance officially created by a 1954 IRS reform bill. The distortion to both the labor market and the insurance market has been cataclysmic. Every year, roughly $275 billion is pumped into over-utilizing and distorting the product of health insurance rather than increasing wages.
Those who purchase insurance privately are at a disadvantage, and people are reliant on their employment situations for insurance. This kills entrepreneurship and discourages job mobility, especially for someone who develops health problems while grandfathered into an employer-provided plan.
Other forms of insurance let customers establish long-term relationships with the insurer and customers are eligible for discounts. Employer-based health insurance removes the personal element that tailors plans to the individual and could potentially encourage a healthy lifestyle.
Ideally, we would repeal this market distortion and remit the $275 billion in new revenue back in the form of an across-the-board business tax cut. This would create jobs, raise wages, decouple insurance from employment, massively reduce inflationary pressure on insurance, and flood the individual market with choice and competition. Politically speaking, however, people are so accustomed to getting their insurance “taken care of” by the employer that they might not appreciate the net benefit in earnings.
The next-best option is to grant individuals who purchase insurance in the private market the same tax deduction afforded to employer-sponsored insurance. This will 1) incentivize savings, 2) cut overutilization, 3) grow wages and jobs, 4) create downward pressure on prices and relieve those in the individual market, and 5) further lower prices by encouraging more people to purchase insurance. With lower prices and numerous options in the individual market, coupled with a tax deduction and expanded HSAs, many individuals will take their full salary from their employer and cost-consciously purchase their own private, portable plan.
15. Allow unlimited Health Savings Account (HSA) spending:
HSAs have been one of the few health care success stories in recent years. Customers are allowed to put up to $6,500 in tax-free income into an account that is then used to cover health care costs. Unfortunately, that limit is way too small, and HSAs cannot be used to cover premiums under current law. Allowing them to cover anything up to $12,000 for a family would go a long way towards forcing individuals to make cost conscious decisions, and would further decrease prices. This would represent a massive $9 trillion tax cut, and would reallocate money from inefficient, over-utilized fourth-party payers of insurance to cost-conscious consumers.
16. Let consumers and employers purchase health insurance plans across state lines:
If insurance is enough of an interstate commerce issue to regulate people into oblivion at a federal level, then the federal government should be able to invoke the Commerce Clause to tear down the barriers to purchasing insurance across state lines. Indeed the Supreme Court has said as much [United States v. South-Eastern Underwriters Association, 1944]. This will foster massive competition, make insurance portable, and together with individualizing insurance through equal tax treatment and expanded HSAs, will save many individuals who get sick later in life after moving to different states from the problem of pre-existing conditions.
Not only will this reform create a more competitive national market, but it will induce states with a costly regulatory burden to get with the program and relax their regulations to compete with the more pro-consumer states. It will also create momentum for states to ease regulations on tele-medicine from out-of-state providers.
17. Permit all individuals to pool together for group insurance:
One way to lure people away from the non-portable employer-based model is to allow individual neighbors and friends to create associations and negotiate directly with insurance companies just like employers do. Breaking down any such regulatory barrier will, in conjunction with the advent of a tax deduction for personal insurance, encourage many people to claim their full salary (without withholdings for employee-contribution to employer-provided insurance) and opt to buy their own private insurance, albeit with the improved negotiating power of pooled resources.
18. Change antitrust laws so Big Pharma’s stranglehold on competition is destroyed:
Leave it to government to regulate insurance to death but exempt the industry from the one regulation that is actually needed to foster a true free market. The McCarran-Ferguson Act of 1945 exempted the insurance industry from antitrust laws and made it almost impossible for insurance start-ups to open new businesses and compete. In conjunction with onerous regulations crafted by the few insurance companies and their lobbyists, the bar to entry is insurmountable and creates a pro-incumbency bias towards existing pharma lobbyists. Repealing the antitrust exemption while eliminating most other regulations is the perfect mix to foster maximum competition, cut lobbyists and government out of price controls, and allow consumers to control the market.
19. Make Medicaid work with the market, not destroy it:
Imagine what would happen to the price of home or auto insurance if the federal and state governments were responsible for 50 percent of the payments. Prices would skyrocket for those who want to pay for the policies on their own. That is exactly what has happened in health care —state and federal governments are responsible for over half of all insurance payments. While it’s hard to reform all of these programs in the span of one presidency, we must at least begin with Medicaid.
The combined federal-state expenditure for Medicaid is approaching $600 billion, and is responsible for 17 percent of health care spending. It is also responsible for inflating the cost of hospital care, which by itself is the single biggest cost to our health care system. The cost of covering an individual in the subpar Medicaid program was $3,247 per individual in 2011 before Obamacare was enacted. In 2015, according to data from the Department of Health and Human Services, the cost of enrolling an individual in Medicaid doubled to $6,366 per individual. And that is only for the second year of implementation. The cycle of regulations, public funding, overutilization, and an inability to peg the cost to the service has created a circuitous death spiral of unaffordable costs and unsustainable subsidies. It’s nothing but a handout to hospitals and insurers promoted by their lobbyists.
Converting Medicaid into a voucher program that allows low-income individuals to purchase the plan of their choice and rewards them for making cost-conscious choices will go a long way in curing the death spiral of costs. Then, giving Medicaid funds to states in a “block grant” — one lump sum with no conditions attached — will allow individual states to further innovate in cutting costs because they would no longer have the enticement of unlimited matching funds commensurate with their spending binge, but would be unshackled from the federal regulations.
20. Allow affluent seniors to opt out of Medicare:
This is one simple Medicare reform that is a political slam-dunk. Under current law, every senior must enroll in Medicare Part A (hospitalization) or forfeit their right to Social Security. It simply makes no sense to force wealthier seniors off private insurance if they are willing to forfeit a benefit and cut the federal budget while not contributing to the overutilization of health care.
Once government and the lobbyists they support are out of the way, there is no limit to the innovation that can take place. There are obviously some elements of health care that will never work exactly like Netflix or iPhones, but opening the market up to private sector innovative ideas and competition will create growing momentum for choice, competition, and efficiency. As with so many other aspects of the economy, consumers will be the ultimate winners.
There is no middle ground with this problem.
We either double down on the counterintuitive pursuit of universal coverage or we focus on lowering costs and restoring the concept of insurance to health insurance. Either we believe we can tax, regulate, mandate, and subsidize our way into solvency and prosperity or we marshal efficient modern market forces to innovate and grow wealth. After 70 years of trying the other side’s ideas, isn’t it time for a change?