Health Care Costs: a Libertarian Solution

Too true.

Health care has been in the news lately as Republicans attack the PPACA.  This caught my attention because I have recently found work in the health care industry and have a better-than-average understanding of the law's provisions.  While I typically side with Republicans on the issue of providing health care and agree that the PPACA really doesn't do much to help, the Republicans really aren't attacking it for the right reasons.  The typical sound-byte produced during these attacks go something like this: "Barack Obama wants to mandate what health care you will receive," "Obama wants to ration your health care," or "The President is forcing you to take coverage X regardless of whether you want to or not."

My first beef with these attacks are that they're really not true.  No where in the law does it dictate what treatment you receive.  Rationing of care is a very unlikely outcome (insurance premium hikes, however, seem much more plausible). The PPACA should (in theory) even improve the selection of coverage you can choose through it's exchange programs.  So what should we really be up in arms about?

Basically, the PPACA doesn't attack any of the real problems with high health care costs.  Americans pay something like $5,000 per capita for health care services and something like $500 for administrative (read: insurance overhead).  Both numbers are roughly twice as high as the next most expensive country.  Why are we focusing on the second when we can make so much more progress on the first?

The answer to this is because there really is no good way to do it.  Medicare has attempted in the past (late 70s) to apply pricing pressure to keep costs down by forcing hospitals to use DRG codes on their claims in order to get paid.  The idea was that if every procedure was codified, they would be easier to track and analyze and they would therefore be able to set better prices.  Well, instead of this lowering costs, it ended up raising costs because hospitals simply go around the system: they generate procedures that are unnecessary and tack it on to the hospital encounter.  They also cherry-pick certain procedures or supplies that cost more than they should and charge these more often than they should (anyone ever gotten a bill for $2 cotton swabs).

What about legislation?  Couldn't the government step in and say "you cannot charge more than X for a hospital stay" or "hospital encounters need to only contain medically necessary procedures...?"  Well, in the first scenario hospitals go broke because the cost of care will always increase as the quality of care increase (that and certain procedures will always cost far more than others).  In the second, hospitals would just get around that in some other way, either by skirting around the "medically necessary" requirements or by jacking up prices on their procedures.

I believe a Libertarian solution really is best in solving the health care cost problem in our country.  We simply have way too many people requiring health care, and the high prices are a result of this high demand.  If we collectively used these services less, theory has it that the lessened demand would cause prices to fall.  But we cannot just break from our commitments: we have promised our seniors that we would provide for their medical needs. And what of those who desperately need medical care now? What about those who can't afford the care?

These problems cannot be erased over night.  No amount of sound-byteing or legislating can solve the essential problem: we, as Americans, are unhealthy.  We don't take care of each other.  We don't value health in this country, and as a result we rely on health care providers to fix us. In order to change our behavior (using health care services too much), we must change our attitudes.  It must become unacceptable to lead an unhealthy lifestyle.  In order to change our attitudes, we must change our values. We must embrace healthy lifestyles. I believe a great way to do this is to simply make it more difficult to be unhealthy.  Phase out Medicare.  Phase out Medicaid.  Set an age (35) where you are no longer eligible for the program.  Give back tax money taken from those who are younger and no longer are eligible. Create new, far smaller programs that support only those that truly need it: the disabled, and those who by no fault of their own cannot support themselves. Knowing that there is no safety net to pay for all of their medical needs, people will live much healthier lives. They will save for future medical expenses.  And knowing that the government will no longer be writing out the checks, hospitals will be forced to become more efficient and charge less: you can only expect to earn what others can afford to pay.

Now, lower taxes would certainly help individuals with that plan. But it's all probably too much to ask for (especially the lower taxes :) ).