Free Market Solutions

Free Market Solutions for Health Care

How the free market brings us the best health care system in the world
This free market mechanisms have worked well in health care as in every other good enterprise. Bright students were encouraged to pursue medical careers. Physicians and hospitals who offered the best care at the fairest prices were rewarded.
Physicians and hospitals also knew that helping patients regardless of their ability to pay was not only charity but good business. One reason was that the same person in financial need one year would perhaps have accomplished better prosperity later in life. One "rags to riches" satisfied patient could mean a significant advertising advantage, and patient loyalty for a lifetime. Occasional "give-aways" are a marketing tool used in almost all American enterprises.
Prudent businesses and families put aside savings to pay for medical costs up to the deductible. In good health the savings could accumulate and then be used for retirement needs.
People spending their own money for medical care would be active participants in their quest for health improvement. There was the financial incentive to take more care of oneself. If the doctor prescribed better diet and more exercise to prevent surgery, the patient spending his own money was more likely to work harder toward his own good health.
The insurance companies were eager to help when a catastrophic health situation occurred, that kind of service brought them long term customer loyalty and the reputation that brought them more business.
Pharmaceutical research based companies would seek out investors to finance the research and development of promising medical products. Investors took a lot of risk, but the potential gains were high.
Most pharmaceutical companies are publicly traded; anyone who wanted a share of the potential gain could also share in the risks of pharmaceutical research and development.
In the years before the Federal government said they'd "do it all", philanthropy paid for basic scientific research and for the building of health facilities. The spirit of giving and compassion is still strong in America; it would help if the tax system would continue to encourage it.
HSA’s are part of the best known way to return us to what should be a thriving free market based health delivery system, the best health care system in the world. For other aspects of the free market solution, see CAHI's 8 point plan

For North Carolina Citizens see Demonstrating Free Market Solutions

HSA's and politics from the mind of a mere citizen
Perhaps it's human nature to vacillate between our "robust-American-individual-pursuit-of- happiness-self-responsibility-trust-in-the-free-market" spirit and that "what-if-I-get-sick- lose-all-my-family-and-ability-to-fend-for-myself-perhaps-the-government-can-take- care-of-me" fear. Perhaps that's why the laws and trends in this country seem to be of two minds between total freedom and total regulation.
Freedom has brought prosperity in the United States that is unsurpassed. In 3-4 generations the free use of invention, competition and the rights of every citizen to pursue prosperity has made it possible for nearly every home to enjoy a stove, a refrigerator and all the groceries therein, electricity, telephone, cars, washing machines. In contrast countries that have less freedom have not been able to supply such "basic necessities" to their citizens.
How is it then, we somehow think that medical care for all citizens is unobtainable without major regulation and government intrusion?
The problems we are facing in medical care are in the places where we have left the foundation of free enterprise. These digressions began with good intentions: a tax advantage to businesses who purchased health insurance for their employees, a pool of funds drawn from workers paychecks to cover the costs of health care for the elderly, discounts or caps on doctor and hospital fees for this block of patients, etc.
But these all require increasing regulation and, thus, higher costs and more difficulty for everyone involved in the health care transaction.
In 1996 the Health Insurance Portability and Accountability Act ( also known as HIPAA or the Kassebaum-Kennedy health insurance reform legislation) became law. Among other things, it allowed for a four year demonstration project for MSA's. This demonstration project was written ostensibly under the fear that the healthy & wealthy would flock to the MSA's leaving the unhealthy with premiums that would become unaffordable. Thus they limited the number of people who could switch from a current plan to an MSA to 750,000. There is no cap on the number of people who go from a status of being uninsured into an MSA plan. The controversial legislation ended up with a number of details that hindered insurance companies from marketing the compatible high-deductible health care plan.
For the next 6 years MSA plans were not being actively marketed because the only ones to financially benefit are the MSA account holders: that would be you, your family, and your business. And there was hindering legislation in many states.
Then in the Fall of 2003 a bill to expand MSAs and allow them to be offered to everyone, lifting the caps, allowing contributions up to the full amount of the deductible, and other good things was carefully hidden in the huge Medicare bill. The name of the accounts was changed to Health Savings Accounts (HSAs). The politicians who still hoped for a socialized health system tried to block this part of the bill but were unsuccessful. HSAs made too much sense. The bill was passed into law effective January 2004.
The future benefits of the free market solutions to our country's health care future can be predicted by looking at how the free-market mechanisms of the past brought us the best health care system in the world.

The impact of taxes and the payroll deduction
Historically, all medical insurance was what is now called High Deductible Insurance (HDI). It worked as auto insurance does now: the risk of a population was calculated and premiums were pooled to pay for a catastrophe. Nobody expected to pay for routine doctor or dental visits, just as nobody would expect our car insurance to pay for routine auto maintenance. When the unforeseen expense occurred, the insurance company paid the extraordinary costs. Medical savings accounts and high deductible insurance have always been an option but at least the savings part had to be funded with after-tax dollars and the interest earned was further taxed. For the self-employed both the HDI & savings were purchased with after tax dollars.
Tax law created at the end of WWII allowed that employee benefits could be funded by businesses with pre-tax dollars (that is businesses could deduct these expenses from business income before computing taxes) . This popular deduction fueled the trends toward low-deductible health care packages.
These health benefit packages have became more and more expensive as health care costs rise (for the reasons shown above) and as politically popular government mandates require more and more comprehensive coverage.
Due to the payroll deduction and the unknown wage or salary amount that never reaches the employee before being used for his benefit, employees are insulated from the true costs of health care.
Without the benefits of being part of a large group (risk pool) self employed individuals and small businesses faced health insurance premiums that were too expensive. Many simply could not provide the health insurance benefit to their employees; It also meant they had to pay for health services out-of-pocket with after-tax dollars.
The Health Insurance Portability and Accountability Act of 1996 opened the door through which we can regain some of the benefits of a free market in health care. It allowed a tax deduction for not only the health insurance portion of coverage but also for a savings account that would pay for "first dollar" coverage up to the deductible. The new Health Savings Account law passed in 2003 opened this door even wider, now everyone has the opportunity to begin investing in an HSA.

Where the HMO path leads
Spurred by tax incentives employers signed up for low-deductible, comprehensive plans. To provide similar coverage for the elderly and indigent the government also became a third party payer. The health care finance system changed from the catastrophic model to the current system which is essentially prepayment for all medical care including the routine visits, medications, and all the mandated therapies and tests. When a large number of medical consumers began to feel that their medical services were "free", a number of problems developed. HMO’s and PPO’s came on the scene in an attempt to fix the troubles brought about by a third-party-payment system. Then came the current wave of legislation to protect patients from the difficulties inherent in the third-party-payment system. Regulations upon regulations (solutions to solutions), mandated benefits, burdens to doctors, insurance companies and businesses all result in higher costs and with no added value to the health care itself. There are movements in the USA calling for full nationalized health coverage, following examples of Britain and Canada. But we know from their experience that costs will only continue to rise and the quality of health care will fall. Turning back to the free-markets mechanisms is our best hope for recovery.
	In some Canadian hospitals the beds are lined up in the hallways because the government cannot afford enough nurses to manage the wards. Waiting lists of 3-12 months for tests or to see specialists cause dangerous delays in receiving appropriate care. Emergency rooms are dangerously over crowded. Doctors, nurses, ambulance drivers have been striking to try to re-establish "health care" into the government system.