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June 23, 2009

Controlling Rising Health Care Costs - Give the Power to the People

Right now, Democrats and Republicans in Washington, D.C. are fighting over what type of system the United States should use to control skyrocketing health care costs.  I thought I would do some digging to see which plan will actually reduce costs.

The Rising Cost of Health Care
The Plans:
    Democrats - Government-insured (especially a push for single-payer) health care
    Republicans - Private insurance and government out of the picture

Selected Types of Payment as % of Total Health Care ExpendituresI went digging and using data from the Center for Medicare and Medicaid Services, I found that the plans put forward by both the Democrats and Republicans will fail at controlling costs.  Costs have been rising even though Medicare, Medicaid, and private health insurance have been insuring a larger proportion of American's medical care since 1960, when the Great Society programs and employer- based health insurance really started to take-off.  If the given plans would save money, then the domination by government and private insurance should have already started yielding cost savings.  Instead, costs have been skyrocketing.
 
So I kept digging to see if there was any granule of data that would show me anything about why health care costs have been rising.  The devil was in the details. 

The Composition of Health Care Costs Hasn't Changed MuchWhat are both plans missing?  The power of the consumer.  Insurance, whether government or privately-run, fails to contain costs.  Food is more important than health care, yet we don't need to buy food insurance to ensure every American is fed.  Since World War II, Americans have been relying more heavily on insurance than ever before to pay for health care.  

Digging through the data, I found that as Out-of-Pocket payments for health care have decreased as people shifted to insurance (both private and public), while health care costs soared and the types of health care paid for have stayed relatively stable.Health Care Costs Rise as Out-of-Pocket Payments Become Less Popular
  
The system that we have that is based-on insurance is the problem.  In order to lower health care costs, we need to get insurance (except for catastrophic) out of the picture and have consumers pay for their own health care.  Then everyone will be able to afford their own health care, on their own.

In order to create the system, the Federal Government will need to:

  1. Tax employer-sponsored health insurance (to stop distorting the market)
  2. limit federally-financed health care to Medicare for the elderly (they deserve to be paid-back for the money they put-in).
  3. give Medicare beneficiaries accounts with pre-determined amounts of money to spend on health care that they can then use to shop around for non-catastrophic health care use (and this is what they're limited to).  Then give them catastrohpic coverage to cover the balance.
  4. Make sure direct primary care providers are not defined as insurance companies for Medicare patients
  5. Make illegal the practice of insurance companies limiting their payments to doctors within their "network", which is anti-competitive and hurts consumers.

State Governments that are serious about controlling health care costs will also make sure direct primary care providers, such as Qliance, are not defined as insurance companies.

Instituting these programs will take the incentive away for people to get insurance and will give the power of their health care decisions back to the American people.

For more info, check out:
"How to Cure Health Care" by Milton Friedman

Related Articles:
If Food Doesn't Require Insurance, Health Care Doesn't Require Insurance

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