Markets, Not Mandates: What Would Real Health Care Reform Look Like?
Bailey, Ronald, Reason
WHILE CONGRESSIONAL reform efforts screech and shudder along, let's take a moment to dream about real health care reform. Imagine a system that is genuinely transparent, competitive, and driven by consumers.
Right now, thanks to incentives built into the tax code, patients are locked into the health plans their employers choose. Conscquently, most of us don't have a clue what our health insurance and health care cost. We have no way to reduce those costs and no incentive to do so even if we could. Worse yet, it's precisely when you need the system the most that it fails you. In the words of the Princeton economist Uwe Reinhardt, "when you're down on your luck, you're unemployed, you lose your insurance.... Only the devil could ever have invented such a system."
So the first step toward real reform is to give consumers responsibility for procuring their own insurance. The laws undergirding the third-party payment system must be dismanded, allowing the money employers spend for insurance to be converted into additional income for the employee. This would immediately inject cost consciousness into insurance decisions.
What would the results look like? It's impossible to predict all the specifics, but here's one partial vision of what markets might bring us.
The typical American might purchase high-deductible insurance policies that cover expensive treatments for chronic diseases such as heart disease, cancer, AIDS, diabetes, and multiple sclerosis, as well as the catastrophic consequences of accidents. Coverage would also include expensive treatments such as heart surgery, organ transplants, dialysis, and radiation therapy. In addition, we'd be able to buy health status insurance that would guarantee that we could purchase insurance at reasonable prices in the future.
Such policies are available already. The online clearinghouse eHealthInsurance pulls a quote of $131 per month from Anthem Blue Cross Blue Shield for a single 55-year-old male with a $3,000 annual deductible, no co-payment after the deductible, reasonable pharmaceutical benefits, and lifetime maximum benefits of $7 million, with an option for health savings accounts. (With such accounts, consumers make annual tax-deductible contributions, then take tax-free withdrawals to pay for uninsured medical costs.) That was the cheapest plan, but more than 80 other insurance policies were available. As deductibles went down, of course, the prices went up.
A lot of routine care could be handled through retail health clinics located in shopping malls, drugstore chains, and megastores. Such centers would be staffed not with physicians but with nurse practitioners or other qualified personnel. Consumers generally would pay for routine, everyday transactions directly out of their health savings accounts.
Competition would also reveal more medical information. Even in our stunted marketplace, Angie's List allows consumers to submit reports about theft experiences with physicians. In a real health care market, sources of information for comparison shopping would proliferate, just as there are now dozens of publications devoted to comparing the features and prices of cars, computers, guns, and vacations. A corps of savvy shoppers in the health care market will mean better price and quality comparisons for everyone.
For a hint of what free market medical shopping might be like, check out the California government's admittedly clunky website for comparing the costs of common surgeries. Browsing there reveals that the price of a heart valve replacement varies from $72,000 to $368,000, while angioplasty runs from $9,000 to $204,000. Other sites, such as newchoicehealth.com, enable consumers to shop for relatively routine procedures such as colonoscopies, laparoscopic hernia repair, and MRI scans. …