Tuesday, September 25, 2007

Escalating Health Costs and Health Care Vouchers

The New York Sun reports that health care costs in New York and nationally are expected to rise by 8.7 percent, or roughly $700. The national cost per person is $7,982, while in New York it is $8,719 (the difference is probably due to the cost of parking in New York City). The Sun quotes the management consulting firm of Hewitt Associates to the effect that nationally employees will pay 21% of the cost, or $2,008 and employers will pay 79% of the cost.

I have previously blogged that the sum of current Medicaid; Medicare; tax expenditures on corporate plans; and state and federal employees' insurance would pay about 69% of the cost of health insurance for every person, including the uninsured, in the US. Thus, if instead of sponsoring inefficient plans like Medicaid and Medicare, and by combining all the federal and state governments' spending on all plans, including tax expenditures, Congress could create health care vouchers which Americans could use to purchase health insurance from private companies. In fact, the percentage would be higher than 69% of cost because of the large amount of waste and corruption in Medicaid and probably in the other government plans as well. This would require ending the corporate tax deduction for health insurance and replacing it with a blanket tax credit that would apply to all Americans. Those whose taxes are less than $8,719 would receive reverse income tax to cover the cost of health care. Taking government out of health care to a greater extent (by ending Medicaid, Medicare and government employee plans) would be a step toward deregulation of health care. If this were combined with increased incentives for globalization (receiving expensive operations in foreign countries like India where they cost 90 percent less) and limits on heroic end of life care which is in the area of 1/3 of all costs but does not produce life-extending outcomes (insurance for which could be purchased privately if wanted) and unnecessary operations, current government spending would likely cover health costs for all Americans, at as good a level as they receive now and probably better than other nations'.

The problem is not one that ought to involve spending money, but rather one that ought to overcome government bureaucrats, public health officials and health providers, all of whom have juicy "stakes" in arguing for more bureaucracy, more spending and ineffective care.


A Jacksonian said...

One of the major questions should be: why are we using the worst possible method to pay for medical care?

Insurance, itself, has a large overhead and the bureaucracy that private companies need to expend to ensure that there is no insurance fraud is large. A high percentage of the money paid for 'insurance' is not towards any medical care, but to administrative costs. Worse is that doctors need to hire staff to just process paperwork, not do medically important things. That process, today, is supported and subsidized by the tax system that was put in place *temporarily* during WWII to allow for non-wage income to be compensated for by the Federal government. That has drastically altered the landscape of medical care to the point where we are today: high costs for medical treatment to cover administrative costs that are spiraling out of control. Even worse is that insurance companies get to decide on care and medications for patients and serves as a third party that is seeking its financial benefit not the betterment of your health.

Adding vouchers into that system will not only *not* improve it, but will then require additional paperwork for administration of the voucher system on three sides: the government, private insurers and doctors. By trying to make the system more 'open' it increases the expense of the overall system while actually not improving overall care very much and forcing more individuals to submit their health needs to companies. That is not only less than optimal, it turns individuals into supplicants to health insurance companies.

If you try to legislate to add 'oversight' to THAT system, you then increase overall cost of the system via another layer of bureaucracy, and now an individual would have to appeal to anonymous bureaucrats who see *your* case as overhead to their 'real work', which is filling out forms.

I have seen this at work in the INTEL Community in which trying to add the DNI not only did *not* improve interoperability, but actually made it worse via adding another layer of 'oversight' while actually decreasing accountability.

Insurance is *not* the answer and government oversight is *not* the answer. The answer is: remove the idiotic subsidies in the tax code which then removes the incentive for companies to get insurance to cover every little thing and gets individuals involved who will realize they need to *think* if insurance for everything is what they *need*. The absolute destitute need some help, and that is true. The Nation once had a system of charitable hospitals run by churches and non-profit organizations that used to handle such things, before the crush of insurance paperwork ruined their administrative structures. In adding subsidized insurance, this Nation is destroying its charitable institutions, removing the individual from making necessary medical choices for themselves and putting in an upwards spiral of costs that are forcing all involved to spend less money on keeping individuals well and more money on making sure that all paperwork is generated. This is no longer a 'health insurance' system: it is an administrative management system for records.

Remove the incentive to keep on ramping up costs and the need *to* ramp up costs, and prices will start to decline. Get rid of the overhead, have folks need to decide on what kind of insurance needs they actually have and put the responsibility for health care into the hands of individuals and their doctors. Those who need catastrophic health insurance need to decide that for themselves. Once the incentive to overcharge, over administrate and all the rest is *gone* companies will need to do this thing known as 'compete' based on service and pricing. And put the money back into the wallets of individuals who can decide if there needs to be a bit more charity in society and less bureaucracy.

Mitchell Langbert said...

Dear AJacksonian: Vouchers shouldn't increase government oversight, though. The idea is to let people use them as they will, just like money, except they have to use them for health care. People who pay enough tax could just reduce their taxes as a tax credit. No need for additional government oversight. Also, this would limit the "deduction" and could potentially include a health spending account provision that would provide an incentive to reduce health spending.