Obama an Unwitting Catalyst for Free Market Health Care Reform?

August 6, 2009

Liberals say Republicans have no health care solutions. So their answer is to give us more of what caused most of the problems we have today: government intervention and control.

Perhaps it is true that Republicans haven’t been aggressive enough in pursuing free market solutions because they are so intimidated by Democratic demagoguery at every step and so conditioned to believing that liberal lite (such as a new prescription drug entitlement) is the only product that will fly in the Beltway.

But President Barack Obama’s radical socialist prescriptions might be the best catalyst for the resurrection of conservative ideas since Ronald Reagan.

Before we have a prayer at achieving sweeping market reforms, however, we must do a better job of making the case that government meddling in the health care industry to date — e.g., mandates, laws and regulations — has been the major source of our problems with both overall medical costs and insurance coverage.

Liberals believe evil profiteers cause price hikes, but their own do-gooder laws and regulations are the culprits. Yes, medical costs are higher because we demand (and receive) the best cutting-edge drugs, technology and treatment. But the only way to reduce these costs is to settle for lesser quality, as has every nation that has socialized health care, or to outlaw drug company profits, which would virtually end the willingness of risk-taking investors to finance groundbreaking medical research.

But we can do something about the spiraling medical inflation caused by overreaching, ill-advised tax laws and overreaching mandates.

Sixty percent of Americans have employer-provided health insurance, largely because of tax laws incentivizing employers to provide that benefit. Such laws have insulated us from the true costs of our medical care. These laws mask the fact that we are really paying for that benefit in lesser compensation and also create the illusion that we are getting free health care. As a result, the demand for health care has artificially skyrocketed, with people consuming more than they would as prudent consumers who believed they were paying for it themselves.

Just as significantly, onerous government-mandated coverage requirements have caused an explosion in insurance rates because they have drastically reduced the ability of the market to craft and make available less expensive plans that meet the particular needs of medical consumers.

“Compassionate” state legislators have deluged us with unintended but foreseeable consequences in this area by enacting laws requiring health plans to offer or pay for specified treatments, such as those for alcoholism.

In her “Top Ten Myths of American Health Care,” Sally Pipes documents that in 1979, there were only 252 mandate laws in force, but by 2007, there were 1,901. Many of these mandates, she notes — such as those pertaining to massage therapy, breast reduction and hair prosthesis — “are hardly critical components of a good health insurance policy.” But they exist, she says, because special interest groups have successfully lobbied state lawmakers to require all policies to cover them.

She provides a sampling of excessive state-mandated treatments that are covered, including: acupuncture, alcoholism treatment, athletic trainers, breast reduction, contraceptives, dieticians, drug abuse treatment, hair prosthesis, home health care, hormone replacement therapy, in vitro fertilization, marriage therapy, massage therapy, nature treatments, pastoral counseling, Port-stain elimination, professional counseling, smoking cessation, speech therapy and varicose vein removal.

When you force every insurance company to cover these things, you’re bound to drive up insurance costs. People who wouldn’t consider paying for these treatments themselves get them because they’re covered, thus increasing demand and prices.

Further unintended consequences of these “compassionate” mandates are that premiums are increased, reducing the ability of young people to procure low-premium catastrophe-only policies and causing other citizens to forgo all coverage. The higher premiums, mostly borne by employers, cause a downward pressure on wages and employment.

In response to an anticipated objection, I might add that a RAND Corp. study showed that people enrolled in catastrophic-only plans spent about two-thirds as much as those on full coverage, with health outcomes virtually identical.

President Obama can, through Draconian price controls, superficially cap medical costs, but not without rationing, black markets and reductions in quality care and not without shifting costs elsewhere.

But Pipes offers a number of free market solutions that would reduce costs while increasing choice and access without compromising the quality of care: changing the tax code by giving individuals the same tax break as employers on health expenses; drastically reducing government mandates, including those that smother competition by prohibiting consumers from crossing state lines to buy insurance; expanding health savings accounts; supporting retail health clinics; implementing tort reform; and providing vouchers for the working poor and chronically uninsured.

Liberals will scream bloody murder at the very idea of losing their control over our lives, but this is nevertheless what we need to do — yesterday.