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Thursday, June 6, 2013

A Free Market solution for Health Care

We are having a great debate about health care. Do we want a government sponsored program or a free market program? Measured among our peer nations, the other advanced economies, our health care system rates near the bottom. I do not care which party repairs our system, or how it is accomplished, we need to become competitive with the rest of the world. The two extreme views offered to American voters are not the only possibilities, for there are many successful examples of other methods. We are offered only these two methods by our bicameral political system.
The Democratic Party has put a policy on the table, Obama Care is being instituted. It will be years before the results can be evaluated, and many improvements will be needed. The prototype, Massachusetts’ Romney Care enacted in 2006, has shown the need for amendments and has a good record of improvement. The law was amended in 2008, 2010 and again in 2012, there is current legislation aimed specifically at controlling cost. The voters largely approve, medical review is mostly positive, and financial review is mostly positive. Americans never completely agree on anything, and that seems to be why Romney Care does not get a 100% approval.
The Republican Party has put no grand policy on the table. They advocate a free market solution. They have bumper sticker slogans such as Tort Reform. I live in Texas, we enacted Tort Reform about 10 years back, none of the promised health system benefits has materialized, some studies indicate that Tort Reform has been damaging. Tort Reform is a small idea. We need a big idea to deal with a big problem. This is a common problem with all of the Republican proposals. They have small ideas with no examples of success.
Comparing the Texas approach with the Massachusetts approach, Massachusetts has the lowest number of uninsured citizens; Texas has the highest number of uninsured citizens; Massachusetts has seen premium increases below the national average; Texas has seen premium increases above the national average; both states have a shortage of General Practice Doctors. The Massachusetts attempt has clearly improved their system; meanwhile the Texas attempt has not shown measurable improvements. This is not an entirely fair comparison since the Massachusetts legislation was a big idea, while the Texas legislation was a small idea.
Our national debate rages with emotion, a calm fact based discussion never happens. This total lack of unbiased reporting makes any prediction about Obama Care impossible. What will be the outcome of Obama Care? Well … pick your demagogue. This artificial smoke screen has flustered me as I try to find any valid information or any valid counter proposal.
Let me purpose an idea, a free market idea driven by the profit motive. The free market is incentivized by economic reward. What we need is an economic reward for corporations that improves individual health outcomes. Under the current system the healthy young pay the medical bills for the unhealthy old. This is used by the Republican Party for another bumper sticker about generational warfare (This is a generalization, there are young people that require medical services and there are old people in very good health). This is actually an opportunity for free market reform. A different approach about the healthy youth vs. the unhealthy aged is to take a longer timeline view. When you are a healthy youth you pay for your own unhealthy age. This is an accounting issue; currently the healthy youth that uses no health care will have their premiums booked in the current year as profit, while the aged user of health care is booked as a loss. If the accounting rules were changed to amortize the health care cost over decades, the same as capital investments, the corporations would have a financial incentive to keep the individual healthy. Amortization would return the highest profit from that individual that remains healthy the longest. Corporations would seek to maximize profit by delaying diabetes, heart issues or excessive weight. This would differ from the current system where corporations seek to maximize profit by cancelling an individual’s insurance for health issues.
There would be tracking problems as individuals change insurance policies and companies. Corporations have the managerial skill to solve tracking problems, as long as there is a profit for doing so. By changing the accounting methods, the profit motive will generate new and novel health care solutions, the profit motive will lower health care cost by making healthy people profitable. In our current system the largest profit, for doctors and hospitals, comes from unhealthy people. The higher cost of health care services are passed on by the insurance companies (plus a little for their trouble), here also, changing of the accounting methodology changes the end results.
Call me crazy, for I certainly am, but at least I have purposed a real, system wide, free market solution.

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