Health Care: Bowing to political reality

Sen. Ron Wyden (D-OR) has introduced his version of universal healthcare. Sen. Hillary Rodham Clinton (D-NY) has introduced her modified version of universal healthcare backing up, at least initially, from her widely repudiated version proposed during the Clinton years. Both suffer from two significant defects – first, they put the government in the position of defining what healthcare is appropriate and, second, they create large governmental bureaucracies to run them. Despite Hillary’s claim that savings in the cost of healthcare would fund her plan, nothing could be farther from the truth. Simply stated, you cannot create a government-managed program – any program – that produces efficiencies greater than the competitive market place. Monopolies – even government monopolies – are inefficient by definition.

However, as long as these Democrats continue to pander to a voter expectation that they can get something – healthcare – for nothing, I feel constrained to offer an alternative. A hybrid, free market alternative.

Now don’t get me wrong. I do not support the concept of government mandated universal healthcare. In fact, the only justification for government mandated universal healthcare is a determination that healthcare is a fundamental right guaranteed by the constitution. No such right exists, although that has seldom stopped the courts from declaring its discovery among the penumbra of the constitution. (I leave aside for purposes of this column the issue of our moral obligation to provide healthcare because it is by definition a moral issue and not a legal or governmental issue. Our moral judgment as to the obligation to provide healthcare will lead us to voluntary acts – not mandated acts.)

I do not believe that the experiences of other countries support that universal healthcare is either “quality care” or “timely care.” While there are a variety of reports published that suggest that the United States lags several European countries in the quality of healthcare, they all suffer from the same fatal error. These studies use, as a primary factor in determining quality, the number of persons covered by healthcare. Thus, those countries that have succumbed to the socialist notion of government provided healthcare for all score higher without significant regard as to the actual quality of that care. When you exclude such notions from those studies, the United States routinely finishes on top. That is to be expected since the United States has the finest, most modern, and most complete healthcare capability in the world.

Be that as it may, the political dialogue, accompanied by the continuing escalation in the cost of healthcare, is likely to make the concept of universal healthcare a political reality. That being the case, let me offer an alternative plan. One that is self-administering, less costly and will drive the big government advocates nuts.

Here it is by the numbers:

1. Every legal resident of the United States is required to obtain and maintain health insurance. Those who fail or refuse to obtain health insurance will be denied health services unless they are able to pay cash for such services at the time they are incurred. Illegal aliens will be treated in the same manner as all others – they will have access to healthcare only to the extent that they have insurance or are able to pay cash for such services. (See Item 7. Below.

2. The burden is on the individual and not employers. Those employers currently providing health insurance will be required to arrange conversion of their policies to individual policies. Those employers will also be required to increase the salaries and wages of their employees by the amount of savings attained by elimination of their cost of providing such coverage. (We are not looking for windfalls here.) The principle reason for imposing the obligation on individuals rather than employers is that “futurists” tell us that this generation and future generations of people will not have a single lifetime employer but rather a series of employers over their working lives. Not all employers provide health insurance and as employees move from job to job, they will often find themselves scrambling to find health insurance – sometimes during periods in which they may be surcharged because of a health issue. If employers chose to contribute to an employee’s healthcare, they can make such payments directly to the employees health insurance provider rather than having the employee be at risk of losing the employer’s plan upon termination of employment.

3. Each person who obtains health insurance will determine the extent of the coverage they wish. This permits buyers a continuum of choices ranging from complete coverage to catastrophic coverage only. Thus those who wish to have coverage for such things as birth control, cosmetic surgery, erectile dysfunction, and mental health problems are free to choose such alternatives without the government telling them that they are included or excluded.

4. The cost of such individual healthcare will be funded by a full tax credit against any income taxes owed to the jurisdiction mandating the universal healthcare. (After all, if healthcare is a fundamental right, it, like voting and education, is one that we should not have to pay for directly, but only through a general assessment of taxes.) Thus, if the State of Oregon mandates such coverage, the tax credit will be against state income taxes owed. Or if the federal government mandates coverage, then the tax credit will be against federal income taxes owed.

5. The amount of the tax credit cannot exceed the average cost of health insurance claimed as a tax credit by all taxpayers. For those choosing to forego health insurance in favor of the “pay as you go” option, they can claim a tax credit for their actual cost of healthcare not to exceed the average cost of health insurance. This permits those who opt for more comprehensive coverage to absorb the additional costs and those who opt for more limited coverage to offset a portion of their incurred healthcare expenses in addition to their insurance.

6. Now here is the twist. In those instances where the claimed tax credit exceeds the income taxes paid, the taxpayer is entitled to a cash refund for the difference. By doing this, we eliminate the idea that low income people will be unable to afford individual health insurance since, having applied the tax credit and refund, there is no out of pocket cost to them for the insurance.

7. The federal law mandating that hospitals must provide emergency room service to everyone regardless of the ability to pay must be repealed. (An exception should be created for emergency services when timeliness of care pre-empts the ability to determine whether there is insurance or not.) While this requirement was originally enacted to ensure that low-income people had some access for catastrophic healthcare, immigration advocates have abused it. They, knowing that no one can be turned away, now counsel illegal immigrants to utilize the hospital emergency rooms as the primary healthcare provider. The extraordinary cost that over 15 million illegal immigrants impose on the healthcare system has the ancillary impact of raising the cost to everyone else. Elimination of free medical care for illegal immigrants will enhance state and federal laws now being enacted barring employers from hiring illegals. If the jobs and the benefits go away, the reason for illegal immigration will also largely go away. There is no longer a need for free access to catastrophic healthcare by low-income people because they will now all have health insurance. (See Item 6. above) And thus the need for free care at hospitals will be eliminated.

So how much will this cost taxpayers? Far less than any of the plans being proposed by those who advocate a government managed program for three simple reasons. First, it is a self- administering program. The only government involvement is to annually determine the average cost of health insurance as claimed for tax credit purposes and to provide reimbursement to low income people of the amount by which that cost exceeds their claimed tax credit. Thus the whole cost of the massive bureaucracy attendant to government administered programs is eliminated. Second, there is individual selection of competing healthcare plans – you know, competition – that will ensure that the lowest possible price for comparable products is available. And third, there is choice as to the level of coverage. Those who want less can save and those who want more will pay the excess over the average cost. Gold plated programs such as those enjoyed by public employees will not be financed by taxpayers since the burden will fall individually on the public employees.

Is this plan perfect? Far from it. There will obviously be flaws, adjustments and corrections needed but the underlying philosophy is sound, market driven and sustainable in an era in which politics, not economics, appear ready to drive a demand for universal healthcare coverage.