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Monday, March 22, 2010

Guest Blog: The Fallacies and Failure of Health Insurance Reform

The Federal government attempts a major overhaul of our health care system every 20 years on average. Universal health care is always the lynchpin. While universal coverage was not achieved this go-around, those advocating the European way of doing things are hoping that the newly passed legislation will ultimately lead to the Holy Grail of health care-- a single payer system. But the European wannabes won’t have to wade through the 20-year cycle before “Medicare For All” is soon back on the table. The reason is that the new laws restructuring our health insurance system will fail in relatively short order. This prophecy of doom is embedded in large part in the very principles of insurance reform. For the past half-century, every major push has been based on four flawed assumptions:

1) Insurance is the exclusive currency by which patients purchase goods and services offered by health care providers
2) Health care is only affordable if covered by insurance
3) The inability to obtain health insurance translates into a failure to access health care
4) The intrinsic value of health care is unique and therefore, cannot be entrusted to the free market

Failure to devise a health care system outside of these parameters inhibits plasticity and therefore, undermines the system's viability. Governmental and corporate entities have always struggled to contain health care costs using the combined forces of public and private insurance coupled with administratively set pricing. But constraining health care costs by exerting external pressures and price controls has never worked. Yet the new law represents a dramatic expansion of this flawed approach. Accordingly, the new reformation movement will fail by design.

Unfortunately, few are willing to throw free enterprise into the fray. Not that the free market can by itself save the day. It's not designed for the indigent, the elderly or the disabled, who passively consume the lionshare of health care. These beneficiaries are forever plugged into the government bureaucracy and happily so. But the vast majority of Americans are neither poor, old, nor disabled. They are open to more innovative means of purchasing health care-- outside of the realm of insurance, if need be. They are empowered with choice and have the financial leverage to pursue those choices. But their choices are limited to insurance policies and plans. Medicine was cut off from free enterprise long ago, and we have been paying the price ever since. When innovative consumer markets compete directly for health care services with less reliance on insurance and bureaucratic pricing, the inherent prices of those services drop. The real costs then reveal themselves and provide an opportunity for insurance to actually see what it's overpaying. Free market interventions also increase the plasticity of the health care economy and help drive down costs in a more direct fashion than the external pressures of public and private insurance. What country other than the United States is better suited to mobilize free enterprise in novel ways to combat rising health care expenditures? At the moment, we seem to be moving in the opposite direction by rejecting free market paradigms. Ergo, is passage of the health care bill one more signal that American capitalism is dying? Just the opposite. Passage will exacerbate all that is wrong with health insurance and will lead us back to the free market for solutions...single-payer be damned.

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