My Turn column on Healthcare the Free Press refused to publish.
Here are some bullet points, followed by a policy brief.
The Swiss Universal Health Care System is also referred to as Consumer Driven Health Care. There is a safety net so the poor are covered, but the poor are covered in the most efficient way possible through free markets. You might think of it as food stamps for health care. We don't have a government farm, government truck company, and government store to provide food for the poor. What we do is give people who qualify for food stamps a subsidy so they can go to a privately run store to purchase their own food.
Maine family of four buying an individual insurance policy from Anthem must pay $1,395 per month. And that’s with a $1,000 deductible," Davis and Woodcock wrote. "Yet, that same family living across the border in New Hampshire only pays $586 a month for the same Anthem policy. If they live in the similarly rural state of North Dakota, then they only pay a low $346 per month."The reason for this difference is not hard to understand," the senators conclude. "It has to do with bad insurance regulation which drives up costs in Maine."(source)
While most Vermonters believe that they have access to adequate health care, they also perceive that health care and health insurance are far too expensive and that consumer choice is far too limited. Those Vermonters who pay for their own health insurance or pay out-of-pocket for health care know just how expensive health care is. Many Vermonters who receive health care benefits through their jobs may not realize that they pay a heavy price for those benefits in the form of reduced wages and salaries - if health insurance were less costly, their employers would raise their pay. A major cause of excess health care prices and limited choice is state government health care policies.
By artificially increasing price, state policies reduce affordability and access to health care, threatening the health of all citizens. State health care policies also have a hidden cost by harming the health of the economy and taking away economic opportunities for individual citizens that would otherwise be available. Tinkering with these state government policies is not enough to reduce the price of health care, to repair the damage they do to economic opportunity, and to broaden choice. Health care prices are forecast to rise ten percent or more each year for the next ten years. Vermonters cannot wait. These policies must be reversed now.
The state's health care policies concentrate power over health care decisions in bureaucratic agencies in Montpelier, which, of course, take a cut of your health care dollars for themselves. I will work to return the power to make these decisions where it rightfully should be -- in the hands of individuals and families. I want to give you the power, and the responsibility, for your own health and your own health care. No other candidate is willing is willing to treat you like a responsible adult.
Four Vermont policies bear most of the blame for high health care prices and limited choice: (i) community rating, which prohibits insurers from setting their premiums based on the risk - or lack thereof -- presented by the individual insured; (ii) state mandated coverage, which requires insurers to provide, and individuals to buy (whether they want to or not), coverage for certain kinds of treatment; (iii) expansion of Medicaid benefits to individuals well-above the poverty rate, under-compensation of health care providers who serve Medicaid patients, and lack of incentives for Medicaid enrollees to take personal responsibility for their health and to use services prudently; and (iv) prohibition of voluntary before-the-fact agreements between providers and consumers to structure medical malpractice liability.
This Policy Brief will illustrate how these policies, separately and taken together, increase price and reduce choice. As a general matter, these policies result in unnecessary administrative costs, cost shifts and hidden taxes, lack of personal responsibility, and one-size-fits-all health care. These policies are unjustified. Stripped of these counter-productive policies, health care and health insurance would be no different than any other industry. Competition would flourish and product innovation would create a myriad of choices for consumers, who would receive far greater value for their health care dollars.
This Policy Brief then describes tax policies that I will fight for when I am elected that will enable consumers to better utilize health services available in market unfettered by state interference.
Community Rating. Under the state's community rating requirement, insurers may not make distinctions between policyholders as they do in every other area of insurance. Think about your auto insurance. Your premium may depend upon many risk factors, such as your age, your driving record, and whether your car is equipped with air bags, among others. But because of state policy, your health care insurer is not permitted to take into account your age, your physical condition, or your lifestyle. Community rating has many undesirable effects. For example:
Mandatory coverage. A coverage mandate is a state law requirement that an insurance company or an insuring entity such as a self-insured employer offer specified benefits in an insurance plan. These benefits are not based on individual preferences or even on sound medical judgments, but rather on political pressure by industry groups and their patrons. State-mandated coverage increases the price of insurance (which in turn drives some consumers out of the market), forces some consumers to subsidize others, and limits the choices available to individual consumers.
With the state mandating coverage, your health insurance policy must cover certain services, such as pregnancy, drug and alcohol abuse, chiropractic care, and mental health. Whether or not you want these services, and whether or not you will use these services, you pay for them through your insurance premium. An analogy to the auto insurance market is again helpful to understanding how unusual mandatory coverage is in the world of insurance. Consumers of auto insurance who have little in personal assets might select a relatively low liability coverage level because they do not need and do not want to pay for a high premium for coverage they will never need. Wealthier individuals have more to lose and consequently might be willing to pay a higher premium to protect their wealth against large personal injury claims. If the state were to mandate that all drivers have $1,000,000 in liability coverage, those drivers who do not need such coverage would, by government fiat, pay higher premiums for coverage they neither need nor want. Those drivers who would have selected $1,000,000 in coverage regardless of the mandatory coverage benefit because less wealthy drivers are now subsidizing them. The inequity and inefficiency are obvious.
The governor's commission led by Cornelius Hogan refused to study how much mandated coverage adds to the price of health insurance in Vermont. However, an actuarial study of the twelve most common state-mandated benefits found that these mandates added as much as thirty (30) percent to the price of health care insurance. You or your employer (who passes the extra cost on to you through lower wages or salary) pay more for health insurance because of mandates.
The state's mandatory coverage law raises additional issues. First, by raising the price of health insurance, state-mandated coverage increases the number of Vermonters who elect to go without health insurance or can no longer afford it. Second, as the consumer, you, not the state, should dictate to insurers the kind of coverage you want. Given the flexibility that state-mandated coverage inhibits, insurers will develop products and services that Vermonters demand. For example, some Vermonters may demand chiropractic coverage but not mental health; others may want mental health coverage but not pregnancy; still others may want coverage for naturopaths or for in-home birth midwives, but not for traditional doctors. State-mandated coverage makes this kind of flexibility impossible.
As governor, I will lead the charge to eliminate mandatory coverage and to put you back in charge of your health care.
Medicaid and Vermont Health Access Plan ("VHAP.") Like community rating and state-mandated coverage , the state's Medicaid and VHAP programs artificially increase the price individuals and businesses pay for health insurance and fee-for-service health care. With the health care and health insurance price reductions that will result from the changes to Vermont health care law that are described in this Policy Brief, VHAP, which pays the health expenses for individuals and families for Medicaid with incomes up to over $50,000, will no longer be necessary and can be allowed to sunset without delay. At the very least, Medicaid should be transformed to give enrollees more incentives, and personal responsibility, to consume health care wisely. These measures would be appropriate during a transition period to sunset of Medicaid. A transition period will allow enrollees time to adjust to being responsible for their own health care private philanthropy time to develop private solutions for the truly needy.
Medicaid and VHAP themselves contribute to the excessive price of health care and health insurance in Vermont as a result of what is known as a "cost shift." While the state claims to be paying for enrollees' health care, the dirty little secret is that the state (and its partner, the federal government) pay providers only a small fraction of what providers charge private insurance companies and fee-for-service patients for the same services. Providers must then recover the difference between the full cost of providing these services and the sub-standard state payment from some source, and that source is private insurers and fee-for-service patients.
Of course, private insurers pass on the higher fees by raising their premiums. So, fee-for-service patients and individuals with private health insurance end up paying a large part of the tab for these state programs. Recall that individuals who receive health insurance benefits through their employers pay the higher price of health insurance through lower wages and salaries. Medicaid and VHAP are thus funded largely by a "hidden tax" that does not show up in the state's budget but nonetheless reduces the real income of working Vermonters.
If all or any part of these programs are to be maintained, the state should pay standard fees for services provided to Medicaid and eliminate this hidden tax. By making the cost of these state programs transparent, taxpayers would be more aware of the true cost of these programs and could better determine whether they want to continue them.
VHAP (and its related programs, e.g. Dr. Dynasaur) will become unnecessary once the state's community rating and mandatory coverage policies are reversed and the medical malpractice system transformed. These policies are responsible for pricing individuals enrolled in VHAP programs out of the insurance and fee-for-service markets. Families with incomes as high as over $50,000, a large proportion of all Vermonters, are now eligible for essentially free health care. Placing them back into a market which is less fettered with state interference is the answer to their health care issues.
As for Medicaid, prior to its advent, individuals did not go without health care. Charitable and religious institutions operated free or low-cost clinics and hospitals, and doctors and other health professionals donated their time. All of us may have a moral obligation to help the truly needy, but that moral obligation should not be imposed as a matter of law. Each person owns himself, including the fruits his labor. No one should be coerced to surrender those fruits. Americans in general, and Vermonters in particular, are a generous people. The poor in Vermont did not go without health care before Medicaid, and when Medicaid is ended, they again will not go without.
With the realization that government funded health care and other programs have undermined individual responsibility for some citizens, a phase out over a few years would be appropriate. During the transition period, enrollees would be able to adjust to a new system in which they would be responsible for their own health care, and private philanthropies would have the ability to ramp up their services.
To help enrollees adjust during the phase-out period, Medicaid should be transformed into a health saving account ("HSA") model. Under this model, Medicaid enrollees would be given an account that can be used for health care or health insurance expenditures, with the state purchasing catastrophic coverage from the market on their behalf. With the dollars in that account, they could select the mix of health insurance, managed care, and fee-for-service care they desire. Many may select policies that do not cover the first dollar of every claim or that cover only large claims. The current first-dollar or managed care Medicaid coverage discourages enrollees from taking responsibility for their own wellness and for consuming health services wisely. Under the HSA model, enrollees would be able to accumulate or use unused dollars left in the account for investments in the family's earning power, wellness, and independence. HSAs will empower Medicaid enrollees and begin to set them free of government dependence.
Transforming medical liability. Another state policy that causes excessive health care and health insurance prices is the current legal regime governing alleged medical malpractice. Under the current regime, a before the fact agreement between a health care provider and a patient governing how an injury caused by alleged medical malpractice should be resolved is unenforceable because the injury is considered under personal injury law rather than contract law. Personal injury law was developed to address injuries caused by strangers, where there is no opportunity for the plaintiff and the defendant to agree before the fact on how to resolve claims. This makes little sense for malpractice claims because the parties do have such an opportunity. Providers and patients should be permitted to enter into such agreements. Allowing them to do so will reduce prices and enhance consumer choice.
The personal injury model for medical malpractice claims raises prices. Regardless of previous performance, insurance for malpractice claims is expensive and increasing. There is only one way for providers to recover the cost of this insurance - raising fees charged to individuals and health insurers. The administrative cost of resolving claims also must be recovered, and these costs are a drain on the system. To avoid malpractice claims, providers often practice "defensive" medicine, ordering unnecessary tests and visits. Again, the price of care rises.
No one can predict what kinds of provider-consumer patient agreements would evolve when I am elected and work to make these agreements enforceable. Different patients have different preferences, and a provider's proposed liability agreement may be one criterion by which the patient will select that provider. Different providers in the market may propose different agreements to satisfy those preferences. Alternatively, one kind of agreement may become predominant because it best meets the needs of consumers and providers.
I understand that providers are concerned about several issues, such as the time and expense of litigation (and how binding arbitration may be more economical), non-economic damages like pain and suffering, and reducing damages payable when the plaintiff has recovered those damages from another source ("collateral source" rule). However, I do not support legislative mandates on how these issues should be resolved. Consumers and providers can come to mutually beneficial resolutions of these matters once before-the-fact agreements are made enforceable. Because current law does not enforce these agreements, and does not allow the lower prices that may result, it is impossible to predict whether these provider concerns will be met by consumers and therefore reflected in consumer-provider agreements. We should not be concerned how these issues are resolved between individual consumers and their providers so much as that these consensual agreements are allowed to be enforced by both parties.