The Health Care Crisis: Medicine or Money

San Diego Union Tribune, Commentary Section
October 24, 1999
By Grace-Marie Arnett


Legislators in Washington once again have headed into the operating room to “fix” the U.S. health care system, and they are wielding an ax, not a scalpel. Not surprisingly, lawyers are waiting anxiously in the wings. 

Congress’ goals are admirable: Members want to give consumers who are unhappy with their health care arrangements greater authority to get the care they want and need from their health plans. 

In movies like “As Good as It Gets” and television programs like “Law and Order” and “ER,” the villain often is a managed care company that is denying care to sick patients. They dramatize the tragic real-life stories of people who are crippled or even die as a result of denial of care. These stories have become part of the culture, and the political demand for action has been irresistible. 

Washington has been preoccupied with this issue even while opinion polls show a large majority of Americans are satisfied with their health care arrangements and would object to changes that would drive up costs and increase the number of uninsured. Nonetheless, Democrats believe that they picked up seats in Congress in the 1998 elections because Republicans failed to produce a “patients’ rights” law in the last session. Both the House and the Senate have passed bills this year. 

The most hotly debated issue, and the one that poses the biggest threat, is whether or not patients should be able to sue their health plans. The House bill gives much more sweeping authority for patients to sue than does the Senate version. 

The House bill was sponsored by Republican Charlie Norwood of Georgia, a dentist, and Democrat John Dingell of Michigan, the Godfather of health care regulators in the Congress. Norwood-Dingell would allow patients almost unrestricted access to state courts and would force health plans to provide medical care on demand. This would make health insurance more expensive, and many employers say they would be forced to cease providing coverage. Studies have shown this would increase the number of uninsured (already topping 44 million) and disrupt the private health insurance market. 

At a minimum, it would make the health sector the target of billions of dollars in lawsuits by trial lawyers who even under current law are organizing a blizzard of lawsuits. The new wave of litigation could bankrupt health plans and divert billions of dollars from health care to lawsuits. 

What is wrong with this picture? Why do consumers need an act of Congress to make the market more responsive? This is America! People are used to getting what they want, when they want it, for the price they are willing to pay. 

But not in the health sector. People are rightfully unhappy with health care arrangement that throw up roadblocks to medical care that they need when they are most vulnerable. 

The solution, however, is not to create a bureaucratic maze of impossibly complex legislation that will tie up patients, health plans, and employers in court for months, if not years. Instead, we should have a system in which people can choose the health plans that suit their needs, health plans that they have purchased directly or through groups negotiating in their best interest. 

Of course, people should be able to sue their health plans, but a lawsuit should be their last resort. First, they should be able to vote with their feet and select a plan that is catering to their needs. Then, if they are denied the care, they could take their health plans to court for breach of contract just as they would under any other contract arrangements. 

Why can’t they do that now? Because they don’t own their health insurance policies and therefore have little recourse in either the marketplace or in the courts. 

Most Americans receive their health insurance as a benefit through their jobs. But that means that the employer, not the employee, owns the health insurance policy. Their employers decide which health plans employees will get and negotiate the terms. As employers have sought to rein in costs over this last decade, more and more of them have sought health plans that would “manage” the health care of their employees. But more and more employees see “management” as “denial” and “restriction,” and they are unhappy. 

Employees are disenfranchised because they are not signatories to the contracts entered into on their behalf. They are limited to the health plan, or occasionally the plans, their employer has decided to offer them. If they decide they don’t want the coverage their employer offers, they can go without (as a growing number are doing) or try to purchase health insurance in the private market. The clincher: If they buy their own health insurance, most will have to use after-tax dollars. This can make a family policy cost several thousand dollars more than the one their employer offers — if they can find one to buy. 

The culprit lies in an obscure provision in the tax code that dates to World War II and which ties health insurance to the workplace for most Americans. Workers can get health insurance as tax-free compensation only if their employer selects their health plan and pays the premiums. This tax provision drives many of the problems in the health sector and is directly responsible for the loss of control that rightly infuriates so many American workers. 

House members will meet with members of the Senate to come up with a single bill that must be passed by both houses of Congress before it can be sent to the president for his signature. If Norwood-Dingell or anything like it becomes law, it will be the third major piece of left-leaning health care legislation to pass Congress since the failure of Clinton Care in 1994. When President Clinton said he would enact his plan little by little, he wasn’t kidding. He threatens to veto any patient protection legislation that is watered down. 

Hope that he does. 

The legislation Washington is considering is not only unnecessary, it is actively harmful. A federal “patients rights” law would disrupt the more careful work being done by state governments to open up access to the state courts to citizens to sue. Further, several courts have been cracking the door to the Employee Retirement Income Security Act to allow suits against health plans by patients who were denied care in “federally qualified” plans. 

Doctors lobbied hard for the patient protection legislation and are celebrating their victory, but they are naive to think that more regulation by government, which is exactly what this legislation does, is going to solve their problem. 

Even without the new legislation, lawyers are taking action against managed care companies that they claim put profit over patient care. A group of lawyers recently filed a class action suit in Mississippi and Pennsylvania against Aetna. The suit potentially representing 18 million Americans charges misrepresentation, fraud, and extortion to “systematically limit, delay, or deny medical care to its members.” A similar suit was filed the same week in Florida against Humana. 

There is a simple dictum that explains the dilemma: Whoever controls the money controls the choices. If it is the employer, they will select the take-it-or-leave-it health plan. If it is government, it will create tens of thousands of pages of regulation to govern the spending of every penny. 

The only long-term solution is for people to select and own their own health insurance. They can choose policies that best suit them and their families at a price they are willing to pay, just as they do every day in purchasing life, home, and car insurance. Health plans and insurance companies will be forced by competition to respond to the demands of their customers for quality, affordable coverage. 

There are a number of initiatives being considered in Congress that would assist consumers in obtaining their own private health insurance by directing the tax break to individuals rather than through their employers. House Majority Leader Dick Armey, R-Texas, and Pete Stark, D-Calif., are among those who have introduced legislation that would provide tax credits to the uninsured to purchase their own private health insurance. Both believe that with 44 million Americans lacking health insurance, something must be done. Further, providing tax credits to even a targeted number of the uninsured would begin to revitalize the fragile and shrinking market for private health insurance. 

The only real cure will be a health care system in which people make their own decisions about the health coverage they want, coverage that they can take with them if they move, change jobs, retire, or start their own businesses. Providing tax credits for the purchase of private health insurance is a giant step in the right direction toward a responsive free market for health insurance * one in which health care dollars are going to medical care, not lawsuits. 



Grace-Marie Arnett is president of the Galen Institute, a public policy research organization based in Alexandria, Virginia. She is the editor of Empowering Health Care Consumers through Tax Reform, published in 1999 by the University of Michigan Press.

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San Diego Union Tribune, Commentary Section
October 24, 1999
By Grace-Marie Arnett


Legislators in Washington once again have headed into the operating room to “fix” the U.S. health care system, and they are wielding an ax, not a scalpel. Not surprisingly, lawyers are waiting anxiously in the wings. 

Congress’ goals are admirable: Members want to give consumers who are unhappy with their health care arrangements greater authority to get the care they want and need from their health plans. 

In movies like “As Good as It Gets” and television programs like “Law and Order” and “ER,” the villain often is a managed care company that is denying care to sick patients. They dramatize the tragic real-life stories of people who are crippled or even die as a result of denial of care. These stories have become part of the culture, and the political demand for action has been irresistible. 

Washington has been preoccupied with this issue even while opinion polls show a large majority of Americans are satisfied with their health care arrangements and would object to changes that would drive up costs and increase the number of uninsured. Nonetheless, Democrats believe that they picked up seats in Congress in the 1998 elections because Republicans failed to produce a “patients’ rights” law in the last session. Both the House and the Senate have passed bills this year. 

The most hotly debated issue, and the one that poses the biggest threat, is whether or not patients should be able to sue their health plans. The House bill gives much more sweeping authority for patients to sue than does the Senate version. 

The House bill was sponsored by Republican Charlie Norwood of Georgia, a dentist, and Democrat John Dingell of Michigan, the Godfather of health care regulators in the Congress. Norwood-Dingell would allow patients almost unrestricted access to state courts and would force health plans to provide medical care on demand. This would make health insurance more expensive, and many employers say they would be forced to cease providing coverage. Studies have shown this would increase the number of uninsured (already topping 44 million) and disrupt the private health insurance market. 

At a minimum, it would make the health sector the target of billions of dollars in lawsuits by trial lawyers who even under current law are organizing a blizzard of lawsuits. The new wave of litigation could bankrupt health plans and divert billions of dollars from health care to lawsuits. 

What is wrong with this picture? Why do consumers need an act of Congress to make the market more responsive? This is America! People are used to getting what they want, when they want it, for the price they are willing to pay. 

But not in the health sector. People are rightfully unhappy with health care arrangement that throw up roadblocks to medical care that they need when they are most vulnerable. 

The solution, however, is not to create a bureaucratic maze of impossibly complex legislation that will tie up patients, health plans, and employers in court for months, if not years. Instead, we should have a system in which people can choose the health plans that suit their needs, health plans that they have purchased directly or through groups negotiating in their best interest. 

Of course, people should be able to sue their health plans, but a lawsuit should be their last resort. First, they should be able to vote with their feet and select a plan that is catering to their needs. Then, if they are denied the care, they could take their health plans to court for breach of contract just as they would under any other contract arrangements. 

Why can’t they do that now? Because they don’t own their health insurance policies and therefore have little recourse in either the marketplace or in the courts. 

Most Americans receive their health insurance as a benefit through their jobs. But that means that the employer, not the employee, owns the health insurance policy. Their employers decide which health plans employees will get and negotiate the terms. As employers have sought to rein in costs over this last decade, more and more of them have sought health plans that would “manage” the health care of their employees. But more and more employees see “management” as “denial” and “restriction,” and they are unhappy. 

Employees are disenfranchised because they are not signatories to the contracts entered into on their behalf. They are limited to the health plan, or occasionally the plans, their employer has decided to offer them. If they decide they don’t want the coverage their employer offers, they can go without (as a growing number are doing) or try to purchase health insurance in the private market. The clincher: If they buy their own health insurance, most will have to use after-tax dollars. This can make a family policy cost several thousand dollars more than the one their employer offers — if they can find one to buy. 

The culprit lies in an obscure provision in the tax code that dates to World War II and which ties health insurance to the workplace for most Americans. Workers can get health insurance as tax-free compensation only if their employer selects their health plan and pays the premiums. This tax provision drives many of the problems in the health sector and is directly responsible for the loss of control that rightly infuriates so many American workers. 

House members will meet with members of the Senate to come up with a single bill that must be passed by both houses of Congress before it can be sent to the president for his signature. If Norwood-Dingell or anything like it becomes law, it will be the third major piece of left-leaning health care legislation to pass Congress since the failure of Clinton Care in 1994. When President Clinton said he would enact his plan little by little, he wasn’t kidding. He threatens to veto any patient protection legislation that is watered down. 

Hope that he does. 

The legislation Washington is considering is not only unnecessary, it is actively harmful. A federal “patients rights” law would disrupt the more careful work being done by state governments to open up access to the state courts to citizens to sue. Further, several courts have been cracking the door to the Employee Retirement Income Security Act to allow suits against health plans by patients who were denied care in “federally qualified” plans. 

Doctors lobbied hard for the patient protection legislation and are celebrating their victory, but they are naive to think that more regulation by government, which is exactly what this legislation does, is going to solve their problem. 

Even without the new legislation, lawyers are taking action against managed care companies that they claim put profit over patient care. A group of lawyers recently filed a class action suit in Mississippi and Pennsylvania against Aetna. The suit potentially representing 18 million Americans charges misrepresentation, fraud, and extortion to “systematically limit, delay, or deny medical care to its members.” A similar suit was filed the same week in Florida against Humana. 

There is a simple dictum that explains the dilemma: Whoever controls the money controls the choices. If it is the employer, they will select the take-it-or-leave-it health plan. If it is government, it will create tens of thousands of pages of regulation to govern the spending of every penny. 

The only long-term solution is for people to select and own their own health insurance. They can choose policies that best suit them and their families at a price they are willing to pay, just as they do every day in purchasing life, home, and car insurance. Health plans and insurance companies will be forced by competition to respond to the demands of their customers for quality, affordable coverage. 

There are a number of initiatives being considered in Congress that would assist consumers in obtaining their own private health insurance by directing the tax break to individuals rather than through their employers. House Majority Leader Dick Armey, R-Texas, and Pete Stark, D-Calif., are among those who have introduced legislation that would provide tax credits to the uninsured to purchase their own private health insurance. Both believe that with 44 million Americans lacking health insurance, something must be done. Further, providing tax credits to even a targeted number of the uninsured would begin to revitalize the fragile and shrinking market for private health insurance. 

The only real cure will be a health care system in which people make their own decisions about the health coverage they want, coverage that they can take with them if they move, change jobs, retire, or start their own businesses. Providing tax credits for the purchase of private health insurance is a giant step in the right direction toward a responsive free market for health insurance * one in which health care dollars are going to medical care, not lawsuits. 



Grace-Marie Arnett is president of the Galen Institute, a public policy research organization based in Alexandria, Virginia. She is the editor of Empowering Health Care Consumers through Tax Reform, published in 1999 by the University of Michigan Press.

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About the author