Wednesday, November 11, 2009

Health Reform History Lesson: Lest We Forget

A Reminder of What Health Reform is All About And Why It Is Necessary
From: “Health Reform’s Moral Hazard,” by Steven Malanga, RealClearMarkets, November 11. 2009

Prelude: The italics are mine.

It has now been some 70 years since the federal government shifted the landscape in health care by bestowing on employers tax subsidies for providing workers with health insurance. And it has been 45 years since the federal government got directly into the act by creating two vast public health plans, Medicare and Medicaid. Both moves have helped to transfer health care bills from the individual to third-party payers, so that many of us are now used to not paying individual bills from doctors or hospitals.

Over time, healthcare has come to seem less like a service we purchase than like an entitlement or worse, a right bestowed on us by government or by our workplace. After all, the government designed Medicare, the public health plan for seniors, to cover hospital care for seniors but eventually under pressure expanded it to pay for virtually all non-elective doctor and hospital visits as well as drugs for every senior.

And private enterprises like the Detroit auto companies negotiated their health benefits for employees with unions because it was cheap to do so using government tax subsidies. The companies rarely asked whether the additional services and coverage they were providing were essential to their employees' health. These services were perks that were affordable in the post-World War II era, and employees came to expect them until the auto companies could no longer afford them.

Now, nearly two-thirds of Americans surveyed by a Quinnipiac poll say it is government's responsibility to ensure that everyone has "adequate health-care." But does providing $90 mammograms to an uninsured person who would rather spend $400 on Botox treatments amount to a responsibility of government?

The question is ever more important as the health reform debate rages. The New York Times reports that a battle has broken out in the White House between those who want reform legislation to have more cost-saving initiatives and those like Chief of Staff Rahm Emanuel, a master of realpolitik, who think it's not politically possible to pass a bill that Americans will see as limiting their health care choices.

What both sides in this White House debate don't understand is that they are at loggerheads because the legislation being considered in Washington will attempt to reform the system from the top down, by fiat from the government. As a result, any cost savings will be those dictated from Washington after decades when individual Americans and health providers have grown resistant to such mandates
. To take just one recent example out of dozens: some White House advisers want more savings in the legislation from hospitals, but the administration has already promised hospitals that it won't demand more of them in exchange for their support of health reform. This is the way our health system is being revamped, one political favor at a time.

This is why the only truly effective way to reform our health system, including slowing the growth of costs, is not from the top down, as mandated by Washington, but from the bottom up, by putting health care dollars and choices back into the hands of individuals. We can do that by eliminating the business deduction for health insurance and transferring tax credits to individuals who can use them to purchase their own insurance. We can establish health savings accounts where people can accumulate the money they save on health insurance to pay big bills. If we feel we need a safety net, we can establish government pools that protect people against the most catastrophic costs.

In these ways we would slow the growth of health costs not by gigantic, unpopular mandates from Washington but through millions of individual decisions by people acting with their own money and in their own best interests. Under such a system there should be no need for the White House to cut Machiavellian deals with hospitals or doctors or AARP for their support in exchange for political favors that undermine the greater goal of reform.

Dr. Richard Reece is author, blogger, speaker, and innovation and reform commentator. Dr. Reece’s latest book, Obama, Doctors, and Health Reform ( is available at,, and for $31.95 (hardcover), $21.95 (softcover), and $6.95 (electronic). For information on speaking fees and arrangements, call 860-395-1501.

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