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发帖数: 29846 | 1 December 17, 2011
By Matt Palumbo
There are many myths that proponents of socialized medicine commonly use to
advance their cause. One thing that is true, however, is that rising costs
are a major flaw in the current system. In due time, this problem could
well constitute a "crisis."
There are many different ways to combat rising costs: rationing and price
controls, increasing subsidies to health care (and thus further masking
costs), or market competition. Rationing has its obvious consequences, and
price controls remove the profit motive, thus stifling innovation --
something the current system tends to specialize in. Increasing subsidies
to health care cannot lower the cost of health care any more than a student
changing the D on a test to a B would change his grade. Subsidies can only
give the appearance of lower costs, but they have to be counterbalanced with
the tax increases necessary to pay for them. In addition, the government
tends to under-project its expenses when it comes to health care. As the
Joint Economic Committee noted, while the initial estimate of Medicare
expenses by 1990 was $12 billion, the actual bill totaled $110 billion.
The third option, competition, has a track record of success and thus is the
only viable option. While cost of living has declined dramatically over
the course of the last century (thanks to market competition), the cost of
health care has skyrocketed. This article will examine the causes of health
care cost increases -- masked costs, miscellaneous mandates, anti-
competitive laws, and FDA regulation -- and how to combat these problems.
First and foremost, masked costs fuel medical inflation. As previously
noted, only 12% of health care costs are paid out of pocket. Around half is
paid by government, and the rest by another third party. What is the point
in shopping for the best deal if you pay only 12% of the cost? Health
insurance certainly plays some role, but the intrusion of government into
health care plays an even larger role. Prior to the increase in government-
subsidized private insurance during the 1950s and onward, there was a period
of medical deflation. The solution to this is not to eliminate insurance,
but instead to guide the system to a more consumer-driven, market-oriented
one, where people are aware of costs and have incentives to pay less.
For proponents of consumer-driven health care, Health Savings Accounts were
the most groundbreaking invention since the shovel. Whole Foods founder and
CEO John Mackey solved his company's problems with health care by
implementing these HSAs.
The rules of these accounts are simple. For members who work over 30 hours
a week, Whole Foods pays 100% of their premiums and deposits $1,800 each
year into an employee's Personal Wellness Account. Whole Foods employees
working under this plan spend their own money in the account towards health
care until their deductible of $2,500 is met, which is when their insurance
plan takes effect. Money not spent in their account remains and compounds
over the years. Current rules allow money not spent in an HSA to be used
towards retirement after age 65, as long as the money is subject to taxation
. If someone tries to withdraw the money before age 65, a 10% tax is taken.
The HSA model has gained popularity fast -- 4.5 million Americans were
enrolled in one by 2007, and 11 million were by 2011. In practice, the HSA
plan successfully meets its goal of removing the distorted relationship
between a patient and his costs by turning the patient into a consumer. As
a result, people enrolled in HSAs tend to be much more cost-effective, using
generic drugs more often than those with traditional health plans and
having better records of using these drugs correctly. Overall, the HSA plan
is a cheaper alternative to the traditional one, coming at a cost averaging
over 30% less per month, or around $3,200 less per year by a different
analysis.
Miscellaneous mandates within insurance tack on costs which add up fast
enough to price people out of purchasing insurance. There is no question
that insurance needs to be mandated to cover certain things, but forcing
people to pay into a risk pool for coverage of things they are unlikely to
ever need is absurd. Forty-eight states have mandates for breast
reconstruction, 40 have mandates for mental health parity issues, 46 have
mandates for alcoholism, and 30 have mandates for contraceptives. Each adds
a small cost to a person's health premium -- the mandate for alcoholism
adds on 1%-3%, while general health parity adds on 5%-10%, and
contraceptives add 1%-3% in costs. There existed 2,156 total mandates in
2010, each at a small price. Luckily, the majority add less than 1% to the
cost of health insurance, but they still add up.
The negative effects of mandates can best be observed from a case between
1990-1994, when sixteen states dramatically increased their mandates and
further regulated health insurance. Most of this was an attempt to
implement the previously failed Clinton health care reform plan. The result
for these sixteen states wasn't pretty. As the Heritage Foundation tracked
while the other 34 states had their uninsured population increase by only 1.
02%.
Restrictions on insurance competition also help increase costs. Since
insurance companies are forbidden from competing across state lines, a form
of economic localism works in their favor. Imagine, for instance, that
people in New Jersey were allowed to enter Pennsylvania but not purchase
anything from the state. Next, let's say that two shops selling identical
goods are opened within 200 feet of each other, one in NJ and one in PA.
While anywhere else in the world this would prevent either store from
jacking up prices due to competition from the other store, the law gives
each store a free pass in increasing the price of its product.
A removal of this hypothetical law would certainly allow more competition
and lower prices, as would a removal of the same law prohibiting health
insurance competition. In 2010, the average family premium for an employee
enrolled in employer-based health insurance in Tennessee totaled $12,729 and
$15,032 in Florida. The average family size in Tennessee and Florida is
about identical, so a larger family size, and thus a larger group to cover,
is not the cause of Florida's increased bill. With the current regulations
removed, an insurance company operating in Florida would be forced to lower
its costs, or else lose all its customers to a cheaper state.
Contrary to Paul Krugman's claim that there are "no examples of successful
health care based on the principles of the free market," such examples are
not all too hard to find. Lasik eye and cosmetic surgery stand out well.
Indeed, Lasik has one of the highest satisfaction rates of any surgery. In
1999, the average price of Lasik per eye was 2,106, and by 2010, the average
cost had increased to $2,170. The cost of Lasik in 1999 would translate to
$2,756 in 2010 dollars, and thus the cost of Lasik dropped by over $600
when adjusted for inflation.
The market for cosmetics shows a similar trend. The inflation-adjusted
price for cosmetic surgery fell every year from 1992-2001 -- a decline so
steep that the general inflation of all goods outpaced that of cosmetic
surgery. The price of cosmetic surgery declined even after a surge in
demand. In the three years preceding 2009, cosmetic procedures increased by
456% for males and 215% for females. Before this surge, the average price
was $2,317, and by 2010, it declined to $2,232 -- a decline even without
adjusting for inflation.
Lastly, the rules and regulations which the FDA abides by come at the cost
of both money and lives. The cost of producing a new drug totaled $1.3
billion in 2006, largely due to FDA regulations on drug-testing. A company'
s patent on its drug before another company creates a generic version lasts
twenty years, though sometimes shorter because some companies will file
their patent before testing their drug.
Essentially, the company who invented the drug has twenty years to gather $1
.3 billion in revenue before breaking a profit -- but the company has a
monopoly while doing so. When Makena, a drug previously produced by non-
federally approved pharmacies, was approved by the FDA and a single
pharmaceutical company gained a government license to produce the drug, the
price of the drug jumped from about $15 per injection up to $1,500. This is
what happens under a monopoly, but the story of generics is the opposite.
According to the FDA, generics work just as well as regular drugs and cost
80%-85% less. When has competition ever not worked? A combination of
cheapening the cost of drug production and allowing competition among
companies is our best bet for cutting drug costs.
After reviewing the causes of the health care crisis, it is amazing how
Reagan's famous declaration that "government is not the solution to our
problem; government is the problem" can be applied to almost any crisis the
government has an initiative to fix. When it all boils down, there are two
forces that can attempt to cure the health care crisis: the free market, or
the entity that helped fuel the crisis. In this case, it shouldn't be hard
to pick your poison. |
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