Real Health Care Reform

In the health care reform debate, we keep hearing that we must control costs. And then no one offers a method for actually getting and keeping costs down.

In all the states and foreign nations that have achieved universal coverage, not one has been able to keep health care costs under control, and most systems are operating under deficit spending or are rapidly approaching that point.

I have already written about some of the sources of rising health care costs, but I'd like to look at a couple here.

Defensive Medicine
Many doctors order more tests than they need to cover their butts in case of lawsuits. We cannot reform our health care system without addressing tort reform. Texas instituted tort reforms a few years ago that have been largely successful. Other states have had similar successes. I was encouraged that the President mentioned this in his address to Congress, but then he put a long time trial lawyer lobbyist in charge of "examining" the situation. The tort lottery has to change if we want to get health care costs under control.

Free Health Care is Expensive
The second major issue in medical costs is that it's free.

No, it's not free for the doctor or hospital. It's not free for the insurance provider. But it is largely free for the user -- the patient. We neither know nor care what it really costs; we just know we paid our copay and got whatever we wanted.

If I pay my $25 copay, I don't ever have to know whether the actual cost of the visit/procedure was $200, $2000, or $20,000. Why does that matter?

Free Oil Changes
Do you know how much it costs to get your regular oil change? I do. And if my bill isn't what I expect, I want to know why. If the closest garage charges too much, I go down the street.

But would I if my car insurance paid for the oil change? Probably not. I'd never even see the bill.

Consider two questions:
How much would your car insurance cost if it paid for your oil changes?

How much would an oil change cost if you didn't pay for it out of your own pocket?

Competition as Cost Control
The biggest problem with health care costs is the patient's apathy toward the cost of procedures. I recently had an ultrasound scan. I just went where my doctor told me.

If I was responsible for more of the cost, I would have gotten on the phone. If a hospital five miles away did the same procedure for $200 less, I would have insisted on going there.

And if I was interested in how much the procedure cost, both of those hospitals would be as well. Hospitals, whether for-profit or non-profit, have to have customers to stay open. If their customers become cost-conscious, so will they.

Creating Cost-Conscious Consumers
We could all decide to become cost conscious in our health care, but frankly that's not going to happen as long as someone else pays for it.

We need to change our approach to insurance. Our health insurance should work more like our car insurance. It should be catastrophic coverage -- cancer, heart attacks, car accidents -- rather than covering every conceivable procedure.

If I had to pay for every visit to the pediatrician out of my pocket, he would have an incentive to keep his costs low. Yes, we might not visit quite as often, but we're still going to take care of our kids.

Catastrophic Coverage
The key here is catastrophic insurance. Most health insurance covers a wide variety of procedures. Many states require insurance to cover all kinds of things, including therapeutic massage, fertility treatments, and birth control.

Instead, we should have insurance that only covers real emergencies. All of those other things drive up the cost of insurance. If we decrease what we expect health insurance to do, we will decrease how much we pay for it.

And all of the money that we don't spend on insurance can now go into our paychecks or, better, into a pre-tax health savings account (HSA) that would be used to pay for non-catastrophic health care.

Reform Now
Some will say this is too drastic. It's drastic, but it's not as damaging as pumping trillions of dollars into an ever expanding health care sink hole.

Some will say this would take a long time. They're right.

We can start tomorrow, though, with two very important things:

1) Universal coverage with catastrophic insurance. We can create this quickly and easily within the existing system, and we can get everybody taken care of so that no one will ever go bankrupt because of an illness again. Those who can't afford even this insurance can get help from the government or from somewhere else.

2) Tort reform, as Texas has shown, can turn things around quickly. Start there, and you will at least slow the rise of health care costs and stop the practice of defensive medicine.

After that, we can move toward a different approach to health insurance using HSAs.

Just This Once
There are those who think the only solution to our social problems, including this one, is government. Well, we tried Social Security; it's going broke. We tried Medicare; it's going broke, and what really works -- the drug benefit -- is one of the few things that the government has ever done that came in under cost estimates because of free market principles. We tried welfare; after decades and trillions of dollars, we tried some conservative solutions and finally made a dent in the problem.

Just this once, can we try the small-government solution to a social problem first? The big-government approach will always be there. But given the results in every other country that has taken that road, I think we owe it to ourselves and the next generation to think out of the box and give real cost containment a shot.

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Related: Healthcare Reform: Meeting in the Middle

Recommended reading: How American Health Care Killed My Father