February 26, 2010
Let free enterprise take over health careBy Tom Jahn
The challenge with health care is that the fix doesn't lend itself to a political solution. Medicare is a good example. Most people think it is a good program now, but when the baby boomers begin entering the system next year, Medicare goes broke. Long-term success depends upon protecting Medicare revenue collected over a person's working years, something government is very poor at doing.
In California, housing prices more than doubled between 2000 and 2006, bringing government incredible windfall profits from the accompanying rise in property taxes. Where is that money now? Spent, just like past Medicare revenue, and California is broke.
Bernie Madoff is in jail for doing exactly what the government has done with Medicare: fund payouts to seniors with revenue collected from new people coming into the system. The Congressional health care proposals fund Medicare recipients by mandating young people buy health insurance at between two and three times the actuarial cost.
Our government has always known Medicare was going broke once the baby boomers reached 65. If Congress had taken the money collected for Medicare and issued zero-coupon bonds that matured at the same time citizens needed the money, we eventually would have had that 'lock box' Congress used to talk about, and Medicare would be solvent. In the long term any health care fix has to be pay-as-you-go. Congress hasn't learned anything from Medicare. In order to claim revenue neutrality in the current health care bills legislators in both houses of Congress tax ten years to provide six years in benefits.
The way Congress has mishandled health care has made rationing a certainty. There simply will not be enough money. Either we will get politically based rationing in the case of the government, or profit-based rationing in the case of the insurance companies. Neither is palatable.
Health insurance has its place, but payment for day-to-day normal treatments is not one of them. We buy car insurance to protect us from a catastrophic event. We don't buy insurance that pays for oil changes or new tires. Right now, there is a sign at my doctor's office that offers a 30 percent discount if the patient pays cash and saves the doctor from having to deal with an insurance company.
The current Senate bill is a boon for insurance companies, which now have a mandated market insuring millions of young healthy people, raking in huge profits and at the same time cost-shifting from senior citizens onto the young to cover up Congress' theft of Medicare funds. Stocks in insurance companies hit 52-week highs as soon as the Senate bill took its final form. This is crony capitalism at its best.
Without a third-party payer, health care consumers would order fewer tests. They would explore less-expensive alternative treatments and medications, resulting in self-rationing. Self-rationing is important because a major problem in adding millions of new people onto the health insurance rolls is availability of physicians. Following implementation of Massachusetts' universal health insurance program the average wait to see a physician has increased to more than two months.
There is no question that instituting a plan whereby individuals pay directly to their doctors will work for those who now have employer-based health insurance. One proven method that has controlled health care costs is health savings accounts. Employers place a certain amount of employees' pre-tax earnings into accounts that employees control and spend on health care, and the employer buys a high-deductible catastrophic insurance policy to pay for amounts in excess of the employee contribution. Unused portions each year can be accrued for future use by employees.
Critics maintain that this type of approach will not work for the population at large, but this is wrong-headed. Market based solutions are the only way to halt or reverse the trends of ever-increasing health care costs and steadily declining coverage by employers. The challenge is to extend health insurance to those who cannot pay based upon risk assessment and manageable resources, not entitlement. Congress recoils at the thought of confronting entitlement excesses because elected officials see it as a political loser. It need not be that way.
For instance, advocates of universal health insurance coverage who insist a great nation like the United States should provide everyone with a health insurance entitlement are the very ones who have advocated more government spending and higher current deficits that lead to huge debt loads being placed on future generations.
Likewise, proponents of a single payer system who claim tens of thousands of people die annually because they have no health insurance are the very ones who have condemned perhaps hundreds of thousands from future generations to go without health insurance because of the lower standard of living they have guaranteed with their legacy of $50 trillion in unfunded mandates.
Those who constantly lobby for unrestricted entitlements have no claim to any moral high ground and should be aggressively challenged. Newly elected New Jersey governor Chris Christie is winning the argument against entitlements by pointing out that 30-year state employees who retire at 49.5 years of age and contribute $124,000 towards their retirement reap a $3.3 million return on investment plus $500,000 in health benefits.
But in Washington Congress is too cowardly to take on entitlement reform, too fiscally irresponsible to make health care pay-as-you-go, too arrogant to allow health care consumers freedom of choice, too impotent to take on the insurance companies, too bought-and-paid-for to take on unions and trial lawyers, and too dishonest to level with the American people about the true cost of this abomination Congress proposes to enact.
Legislators should abandon the crony capitalism model now being used and allow free enterprise and truly competitive markets to operate. However, our entrenched incumbents in Congress will pick winners and losers based solely upon those who can best help them get re-elected or line their pockets - a statist political solution incapable of fixing health care.
Tom Jahn is a landlord and former UCLA swimming coach.