The problem with healthcare insurance is not that universal coverage isn’t available, but that it costs too much. These costs are caused by overreaching government regulations which have suffocated the free market. Healthcare insurers are prevented from using community ratings, subjected to guaranteed-issue requirements, and have become locked into a limited range of coverages which are mandated by the state.
Any-willing provider laws remove price competition among healthcare practitioners by setting their payment levels. Further, Doctors must by law purchase expensive malpractice insurance to protect themselves from medical lawsuits. These costs are passed along to customers in the form of higher premiums.
Additional regulation and transfer of healthcare management to the federal government will exacerbate existing cost and quality issues. Families who already cannot afford healthcare will be forced to purchase it or face a fine, putting a further burden on their tight budgets. In Massachusetts, where so-called universal coverage was recently implemented, citizens are fined in excess of $900 per year for shunning health insurance.
The solution to giving more families access to healthcare is to increase the range and availability of coverages from which they can choose from. Currently consumers are not allowed to select among coverages provided outside of their state. Increased competition among insurers and even regulators would drive the industry to become more efficient. Customers would be free to select the coverage they need and can afford, instead of what lawmakers decide they should have.
Do you need health insurance coverage for . . .
* Maternity care, if you’re a single male
* Infertility, if you don’t want a family
* Alcoholism, if you don’t drink
If you live in New York state then you (or your employer) must pay for all these things, by law, or go without health insurance.
It’s even worse in New Jersey, where the law only permits four basic health insurance plans, each with its own cluster of mandatory coverages. As a result, family premiums run from $2,631.41 to $6,467.58, per month. (Source: America’s Health Care Crisis Solved by J. Patrick Rooney and Dan Perrin, page 113).
People who can’t afford those premiums (and few can) must go without health insurance.
Similar situations exist in other states . . .
* In 2008 The Council for Affordable Health Insurance found 1,961 examples of state mandated coverage
These laws corrupt the very nature of insurance. Insurance is supposed to cover unlikely but expensive procedures, NOT simple blood tests, or massages, or acupuncture, or chiropractic adjustments, or anything else we could afford to pay out of pocket, if only so many of us weren’t being gouged by legally inflated insurance premiums.
Now the politicians want to redesign the entire American health care system from the top down, in one giant step, to supposedly fix a problem they created in the first place. But, instead of enacting a “grand plan” that will impact, and potentially harm, everyone, and that we may never get rid of once it’s in place, the politicians should start by taking a few simple steps to clean up the mess they’ve made.
Fortunately, not all states have mandatory coverage laws as bad as New York and New Jersey. True major medical coverage is still available in many states, but only if you happen to live in one of those places. Congress can fix this problem very easily. They should pass a law permitting you or your employer to buy insurance regulated by other states. This would . . .
* Enable you or your employer to shop for better deals across state lines
* Put pressure on state governments to liberalize their insurance regulations
Use our quick and easy Educate the Powerful System to tell your Congressional employees to pass such a law.
Mandated coverage adds over $90 billion per year to the cost of healthcare. Another $100 billion comes from liability requirements forced upon doctors to defend medical lawsuits. The total cost of regulation is $340 billion per year.
This figure takes into account regulation of health facilities, health professionals, health insurance, drugs and medical devices, and the medical tort system, including the costs of defensive medicine. Moreover, this approach allows for a calculation of some important tangible benefits of regulation. Yet even after subtracting $170.1 billion in benefits,the net burden of health services regulation is considerable, amounting to $169.1 billion annually. In other words, the costs of health services regulation outweigh benefits by two-to-one and cost the average household over $1,500 per year.
The high cost of health services regulation is responsible for more than seven million Americans lacking health insurance, or one in six of the average daily uninsured. Moreover, 4,000 more Americans die every year from costs associated with health services regulation (22,000) than from lack of health insurance (18,000). The annual net cost of health services regulation dwarfs other costs imposed by government intervention in the health care sector. This cost exceeds annual consumer expenditures on gasoline and oil in the United States and is twice the size of the annual output of the motion picture and sound recording industries.
Finding ways to reduce or eliminate this excess cost should be an urgent priority for policymakers. It would appear from this preliminary assessment that medical tort reform offers the most promising target for regulatory cost savings, followed by FDA reform, selectet access-oriented health insurance regulations (e.g., mandated health benefits), and quality-oriented health facilities regulations (e.g., accreditation and licensure).
Reagan said it best when he spoke out against socialized medicine in a 1961 campaign:
Additional regulation and public healthcare insurance as is being proposed by Democrats will add to the cost of healthcare, not reduce it. The solution is not to further expand the role of government. Instead regulators should be forced to compete with each other to become more efficient. By expanding access to coverage across state lines, consumers will be given more options. They can find a plan which fits and pool with other individual purchasers to get a competitive rate.
The current system of state licensing prevents insurers from doing this and limits the choice of individual consumers to a fixed, predetermined range of coverage. This state licensing should be eliminated or at a minimum states should recognize plans licensed in other states. Regulators will be driven to develop a more flexible and efficient framework of law. (Chapter 16 – Health Care Regulation)
With an approach known as ‘‘regulatory federalism’’ the federal or state governments would leave most health insurance regulations intact but would allow individuals and employers to purchase health insurance from other states, regulated by that second state. If a purchaser is content with her own state’s regulations, she could continue to purchase a policy regulated at home. But if her state imposes too many mandates, or prevents the insurance pool from protecting itself from irresponsible and opportunistic behavior, then the purchaser could choose an insurance plan with more consumer-friendly regulations. A recent study by economist Stephen Parente and colleagues estimated the following:
– Letting individuals and employers purchase health insurance from out of state could reduce the number of uninsured Americans by as many as 17 million, or one-third of the most-cited estimate of the number of uninsured
– When combined with tax reforms (see Chapter 14), this approach could cover as many as 24 million uninsured Americans
Regulatory federalism would increase competition in health insurance markets. Insurers would face lower barriers to introducing products into new states. As a result, consumers would have much greater choice among cost-saving features (e.g., cost sharing and care management), provider financial incentives (fee-for-service, prepayment, and combinations thereof), and delivery systems (integrated, nonintegrated, and everything in between). Insurance pools would be more stable, and consumers would have much more freedom to obtain coverage that fits their needs.
Perhaps most important, regulatory federalism would force insurance regulators to compete against one another to provide the optimal level of regulation. States that impose unwanted regulatory costs on insurance purchasers would see their residents’ business—and their premium tax revenue—go elsewhere. The desire to retain premium tax revenue would drive states to eliminate unwanted, costly regulations and retain only those regulations that consumers value. It is likely that one or a handful of states would emerge as the dominant regulators in a national marketplace. Regulatory federalism already exists for corporate chartering, where Delaware has created a niche for itself by offering a hospitable regulatory environment.