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Daily Journal

Reverse the Status Quo, Liberate Health Care

Sep. 4th, 2009
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This week’s “Daily Journal” guest columnist is Dr. Roy Cordato, vice president for research and resident scholar at the John Locke Foundation.

President Obama often accuses his opponents in the health-care debate of defending the status quo. The dictionary definition of status quo is “the condition or state of affairs that currently exists.” In light of this, who is really defending the “state of affairs that currently exists” when it comes to the provision of health-care services and how those services are paid for?

Our health care system is dominated by government control and manipulation. Government, through Medicare, Medicaid, VA hospitals, and other programs, makes 50 percent of all payments for health-care services. And with government payment comes government control. Reimbursement fees are below market, which translates into shortages of services provided to the beneficiaries of these programs. Furthermore, almost all of the remaining 50 percent is paid for by a system of employer-owned insurance policies that is the result of government manipulation of insurance markets. If we were asked for a copy of our homeowners’ or auto insurance policy, we could probably produce it. But except for a few of us, we can’t do the same with a health insurance policy. Because of a series of perverse government regulations and tax rules that has penalized the personal ownership of health insurance, most of us don’t own a health insurance policy. Our employer owns it for us.

During World War II the federal government had wage controls in place, and employers offered health insurance benefits in place of cash wages to attract higher quality employees. This practice continued after the war because health insurance benefits provided through an employer were not taxed while privately purchased plans had to be bought with after-tax dollars. In other words, the government imposes a tax penalty on people simply for owning their own health insurance policies. This is the root cause of all the concerns over insurance portability.

Also there are regulations that micromanage nearly every detail of how insurance is provided. The federal government legally enforces a system of health insurance cartels by denying both employers and individuals the right to shop for policies across state lines. This restricts availability and increases premiums. At the state level, there are laws mandating what policies must cover regardless of consumer needs. For example, men must pay for plans that cover prenatal care, and women must pay for insurance that covers prostate examinations. Many states have systems of rate controls that force younger and healthier people to pay higher rates than a sensible risk assessment would justify, leading many younger people to forgo health insurance all together.

A truly egregious intervention into health-care markets is state-based certificate-of-need (CON) laws. The North Carolina CON law, which is typical, declares that its purpose is to “prohibit healthcare providers from acquiring, replacing, or adding facilities and equipment … without the prior approval of the Department of Health and Human Services.” Approval is not related to health or safety considerations but is solely meant to restrict the supply of new health-care facilities, driving up costs. These include “hospitals, psychiatric facilities, chemical dependency treatment facilities, nursing home facilities, adult care homes, kidney disease treatment centers … facilities for mentally retarded, rehabilitation facilities, home health agencies, hospices, diagnostic centers, oncology treatment centers, and ambulatory surgical facilities.”

Reform that challenges the status quo would dramatically reduce government involvement in health care and health insurance markets. People should be free to purchase their own health insurance plans without being punished by the tax code. They should be free to purchase any bundle of insurance services that they desire from whatever company is offering the best deal, no matter where it is located. They should not be forced to buy coverage that will never be used. CON laws should be abolished, eliminating the Soviet-style central planning of health-care services markets.

Other reforms should include relaxing licensing laws that prevent trained health-care professionals from rendering needed services. Another reform should target the tort system, which pushes malpractice insurance rates to levels that drive doctors out of their chosen specialties, especially obstetrics and gynecology. And ultimately, Medicare and Medicaid should be privatized, removing the government from the health insurance business altogether. Aid to seniors and the poor should be provided through a system of vouchers that empower people to own their own insurance plans, lifting them out from under the health-care bureaucracy. This would increase competition and the pool of insurance subscribers, reducing overall costs. It would also increase access by allowing health-care providers to get out from under government reimbursement caps.

The only way to challenge the status quo is to liberate health-care decisions from the stranglehold imposed by government control. It is President Obama who wants more of the same — government control, government power, less freedom.