IN THIS ISSUE:
HSAs Will Aggravate Misery
Mandatory Health Insurance Now!
Absolutely the Next Big Thing
Unprecedented Buying Activism
A Fundamental Reorientation is Underway
"HSAs Will Aggravate Misery"
We have quite a backlog of items to review this week. Certainly the most peculiar is an essay posted on www.LewRockwell.com, which bills itself as "the premier anti-state/pro-market site on the net." The author, Thomas Dorman, MD, concludes that the HSA "is a bad law based on bad premises… [and] will aggravate the misery of many individuals, hamper the American economy, and indirectly the world economy, through waste, aggravation, and increased bureaucracy."
He claims to base this conclusion on an understanding of Austrian economics, but he is wrong on most of the particulars he cites. For instance, he discusses "the McCerran-Ferguson [sic] act which exempted employer paid contributions to health insurance from taxation." McCarran-Ferguson, of course had nothing to do with the taxation of benefits, only with state regulation of insurance. He supposes HSA money cannot be cashed-out to use for other purposes, and makes a number of other factual errors. But his big complaint is that the tax advantage of an HSA is confined to Section 213 expenses which do not include vitamins, chelation therapy, prolotherapy and "adjustments of natural hormones such as in menopause." That may be (I don't really know), but it is hard to see how it will result in "aggravating misery" or "hamper the world economy."
"Mandatory Health Insurance Now!"
A more thoughtful libertarian commentary comes from Ronald Bailey, the respected science correspondent of "Reason Magazine." He gets all his facts right, but comes to the conclusion that it is time for "Mandatory Health Insurance Now!" He thinks that mandatory coverage is a safeguard against a single-payer system and argues that such a mandate will "keep medicine private and consumer-driven." He is critical of employer-based, first-dollar coverage and the resultant high costs and questionable quality, and he cites some public opinion surveys that show health care is a major issue for the public, even to the point of supporting a government guarantee of coverage. He endorses a proposal by the New America Foundation that would require every American to purchase at least a high-deductible health plan.
The problem is that once you have enacted the policies that make mandatory coverage possible, you have also made it unnecessary. That is, providing the subsidies and access guarantees so that everyone is able to comply with the mandate means that very few people will not voluntarily gain coverage – so why bother with a mandate? Sure there may continue to be a few hard cases who absolutely refuse to have health insurance coverage, but that is hardly a grave national crisis. Even today, Mr. Bailey acknowledges, uncompensated care amounts to a mere $34.5 billion out of a total health care economy of $1.7 trillion – at 2% of the total it is a trivial portion by any measure. The amount would be much smaller if the proper subsidies were installed, and the downside of a mandate would be enormous (think "enforcement").
"Absolutely the Next Big Thing"
One of the most insightful reports in the mainstream press about what is going on was written by Ricardo Alonso-Zaldivar in the "LA Times." He says the Bush administration wants to "move the nation away from the system of employer-provided health insurance… [and toward] a system in which workers… would take personal responsibility for protecting themselves and their families." The article quotes Newt Gingrich as saying, "My view is that this is absolutely the next big thing. You are going to see a continued move to trying to get people involved in the process by owning their own health accounts." HSAs are certainly the centerpiece of the effort, but many other issues come into play, such as portability and cost containment. Not everyone is sanguine about the direction, of course. Congressman Pete Stark (D-CA) says "Healthcare isn't like buying a Chevrolet" and he objects to the lack of consumer-friendly information. And the Commonwealth Fund is cited for a report claiming that people with high deductibles are "more likely to have trouble paying medical bills than those in traditional insurance plans." (What, by the way, is a "traditional" insurance plan anymore?) But Galen's Grace-Marie Turner is quoted as reassuring the hysterics – "We are not trying to do one big change for the whole country, all at once… We want to let people choose this if it meets their needs, and not rip out the underpinnings of the current system." But supporters tend to agree with Mr. Stark that an information revolution is needed. The article notes that Senate Majority Leader Bill Frist (R-TN) is pushing for exactly such a transformation.
SOURCE: http://pqasb.pqarchiver.com/latimes/786458781.html?did=786458781&FMT=ABS&FMTS=FT&date=Jan+31%2C+2005&author=Ricardo+Alonso-Zaldivar&desc=Healthcare+Overhaul+Is+Quietly+Underway (there is a fee for accessing this article)
"Unprecedented Buying Activism"
Most of the health care industry has already moved beyond these policy questions. Writing in "HealthLeaders," consultant Christopher Press says he was involved with a KPMG study of consumerism in health care in 1998. "The evidence then was unequivocal and heretical: consumers were showing an unprecedented – and unpredicted – healthcare 'buying' activism." The legislative vehicle for consumerism at the time (MSAs) was inadequate, leading many people to dismiss the idea. But, he says, IRAs were also dismissed when they were introduced in 1974 and there were a mere 431 mutual funds in existence (compared to 8,100 today). But he cautions readers (mostly hospital executives) that they "must prepare our organizations to truly serve, satisfy, and respond to customer needs." He calls for a transorganizational and behavioral embrace of "a market orientation" that focuses on customer needs, competitor activities, and coordination among functions. Those who "ignore the changes" will end up in boiling water.
"A Fundamental Reorientation is Underway"
Even more thorough is the January issue of "The McKinsey Quarterly." Writers Paul Mango and Vivian Riefberg say, "A remedy [to double digit premium increases] might be emerging in the form of consumer-driven health plans… Early results suggest that these plans could slow the rise in costs by lowering demand and prompt hospitals and other medical professionals to improve the quality of care." They caution that success will depend on how well the plans address chronic diseases. The article says that neither payers nor providers "has explicitly realized how drastic the effect on [their] business systems will probably be." Providers, for instance, "will have to learn how to compete on the basis of value in a more transparent marketplace requiring a greater focus on clinical quality, service, responsiveness, and productivity." Most interesting is what the article cites as the reason for rising health care costs. It doesn't mention the usual suspects – an aging population and new technology – but says it is "a result of three basic problems: third-party payers that insulate consumers from the financial implications of their health care choices, a lack of transparency in the quality of care and in the prices providers charge, and a reimbursement system that rewards activity over outcomes." The article goes on to suggest detailed strategic approaches for both providers and payers for surviving and prospering in this new environment. It concludes, "Whatever the take-up of consumer-driven health plans, a fundamental reorientation of the health care business toward the consumer is already under way."
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