Healthcare Rights & Wrongs Part II:Where To From Here?
Since we know a bit about how we got here, the question arises where do we go to now. The first thing that I think should be done is to increase the supply of medical providers and medical services. This is likely to be more politically salable and will not risk motivating those politically powerful groups getting below market medical care.
The most dramatic step we can take is to end ALL laws of licensure. Yes, I mean stop licensing doctors, nurses, pharmacists, etc. I can hear it now; who will prevent the unqualified from practicing medicine? Not state licensing boards for one. They currently only ascertain that someone has graduated from an “accredited” school. They do not certify doctors as competent in a specialty. That is already being done by the market; hospitals, medical companies, HMOs, etc.… Additionally this is being done by liability insurance companies who will deny coverage for certain procedures if they are not satisfied as to competency. Insurance premiums are also now heavily weighted to actual medical performance. In any event state licensing entities are not liable if they fail to sanction an errant physician. In fact, few doctors are ever sanctioned, most who are high insurance risks have never been sanctioned at all. This is nicely laid out here. Removing licensure will also breathe life into certification agencies, who will now have to compete for the patronage of providers and patients. This also goes along with an increase use of brands to help patients seek out quality providers. Strengthening these trends by the removal of licensure will increase the supply of providers and allow for innovative models to develop; such as Physicians Assistants and Advanced Practical Registered Nurses who can perform much of the primary care duties currently reserved for MDs. These flexible lower cost providers can make a huge impact on increasing the supply and therefore reducing the cost of healthcare, all while increasing quality outcomes for patients.
Next on the to do list is eliminating certificate of need laws, which restrict the building of additional medical facilities. Letting market participants take the risk for adding capacity to the system will increase the supply and thus lower the cost, as competition works its way through the system. Existing medical providers should not be allowed to restrain additional supply from being brought to market any more than an existing grocery chain should be allowed to restrict the building of a new supermarket.
Also as a first step to abolishing the FDA a change should be made whereby drugs no longer need to be deemed “safe and effective” but only safe, which is the standard in most of the developed world. Let the consumers determine effectiveness. After a time, when people realize the sky failed to cave in, we can end the FDA altogether. The impact on drug development would be immeasurably beneficial.
While increasing the supply and therefore the cost is a great place to start, it will take the reforming of demand to complete the transition to a free market for healthcare. Only by creating an honest market driven demand that reflects economic reality can we put healthcare on a real, sustainable basis.
The biggest driver of a demand unhinged from economic reality is Medicare and Medicaid. Rather than think about a Medicare for all, which will just push us over the fiscal edge that much sooner, we should consider a Medicaid for all who need it. We should means test all entitlements (this would include Social Security). This means that only if you are impoverished do you qualify for the entitlement. If you can afford coverage then you will have to provide it for yourself. There will have to be a period to ramp up this program to allow for the development of a private insurance market for those over 65. While this is happening, those currently enrolled can continue to receive benefits. This is important because it will take time for insurance companies to scale up and appropriately price products. In the short run this will create expensive coverage but some transitional assistance can be offered to mitigate some of these costs. In short order a market will develop, I suspect much like Long Term Care insurance, in which clients will pre-pay into a policy when younger and healthier so that they can draw on benefits later when they are more likely to become ill. I am certain also, that when faced with an incentive to do so, business will rise to develop all sorts of currently unimagined products. Thank God, the future does not hinge upon my imagination!
The income levels can be set around 130% of the poverty level, which is currently $31,980 for a family of 4 according to healthcare.gov. This would provide insurance for those who are truly in need with coverage while allowing a dynamic health provider and insurance marketplace to evolve.
Let’s be clear, coverage would be for catastrophic events. To cover the routine is not insurance, insurance is about hedging the risk of the unexpected not the routine. Ordinary items need to be provided out of income not an “insurance” plan that covers everything and is clearly not fiscally sustainable.
Doing these things would help greatly to return healthcare demand back to a rational basis whereby patients evaluate their needs much more realistically and incentivize providers to develop more cost-effective solutions.
Along with these, two other ideas. First, removing the barriers to selling insurance across state lines. This would allow for more flexibility and economic scale to be brought to market and subsequently lower costs. Second, end the tax-driven job lock by giving equal tax treatment to insurance premiums. Doing this by allowing for the deduction of individual policy premiums rather than taxing employer plans is the best route. This will encourage further flexibility in the insurance market and allow for greater employment mobility for workers.
It will not be an easy transition and I am not confident that right now anyone has the courage to propose a truly free-market healthcare plan. It may not be politically possible to do this before the U.S. cracks up financially and perhaps impossible to do so afterwards. The faithful, must however keep trying, for that is our call.
If we do take these steps, I suspect that it will not take long for a more stable and rational healthcare market to develop. This will prove to be dynamic, cost-effective, and innovative. It will allow the market to do what markets always do when allowed: to produce more goods and services, of greater quality at a lower cost. Isn’t that His will being done on Earth as it is in heaven?
Praise Be to God