America, the hypochondriac

Getting free riders off the backs of taxpayers is indeed a heck of a start for health-care reform.

Darren Bernard

Massachusetts Gov. Mitt Romney is boldly going where no Republican has gone before: Universal health care. A bill passed by the Massachusetts Legislature last week requires every man, woman and child in the state to get some form of health insurance by July 2007. “We insist that everybody who drives a car has insurance,” Romney said with the bill’s passage. “And cars are a lot less expensive than people.”

If the idea smacks of government-funded health care, think again. The Romney plan isn’t socialized medicine because it doesn’t demand employers provide health insurance coverage to their employees. It’s not Hillary Care. And it’s not a publicly-funded, single-payer system, so it falls short of the Canadian model. What the plan does do – to the same effect as socialized systems – is make health insurance compulsory. Massachusetts now will use direct subsidies to ensure insurance companies provide basic care to the poorest residents and tax incentives to guarantee everyone signs up. Health insurance packages will be simplified and pre-negotiated for employers. Businesses and individuals who refuse to comply will be penalized.

Besides the obvious moral motivation, the plan was designed to reduce the costs of uninsured adults and children who use hospital services but can’t pay for them. If previously uninsured people now are covered, they will be less likely to swamp emergency rooms and more likely to use preventative care. With more healthy young people in the health-care pool, it should be easier to stem – or even better, reverse – the rise of insurance premiums. Right?

No one is quite sure how the new plan will turn out, which has left other states ogling the idea but unwilling to replicate it. By Romney’s own admission, the arrangement will at best pay for itself. And aside from how Massachusetts lawmakers will deal with costly enforcement problems and subsidy complications, the lingering question is whether the plan actually will fix anything.

Getting free riders off the backs of taxpayers is indeed a heck of a start for health-care reform. But the plan works within an already-broken system, and it fails to address the biggest reasons medical care costs so much. For some perspective: Every year U.S. taxpayers pick up a larger tab for the treatment of obesity and obesity-related diseases than for uninsured patients’ use of medical services. There are a million other reasons medical costs have spiraled out of control. One is that the U.S. government respects patent rights and doesn’t cap prescription drug prices. Another is American hospitals use cutting-edge technology, and patients have to front the bill for future innovations. The health-care market is absurdly overregulated, and companies, hospitals and doctors need to follow mandates from Bible-sized books of state and federal directives.

Litigation is a big problem as well. The American Medical Association has screamed for years about the costs of malpractice insurance and defensive medicine, but to little effect. About every study done on the topic shows tort reform could immediately and substantially reduce health care costs. The Congressional Budget Office concluded in 1998 that capping awards for noneconomic damages has been found “extremely effective in reducing the amount of claims paid and medical liability premiums.”

And something else no politician will ever say aloud: Americans overuse health care treatments, and we do it because we can. Employer- and government-provided insurance plans remove most of the incentive for patients to “shop around” for medical care and, therefore, incentive for the medical community to cut costs. Americans directly pay 14 cents for every dollar they spend on health care. To help you grasp the problem: Imagine what your clothes closet would look like if someone else paid for 85 percent of what’s in it. Suddenly Gucci looks like Target.

This gross distortion of market forces is the real crux of the health care crisis. Over the past few decades, the prices for hospital stays and physician visits (two things typically covered under insurance policies) have gone up significantly faster and higher than, say, dental work or vision care (two things typically not covered under insurance policies). One study done in the late 1970s by Rand Corp. showed that families with no co-payment requirements used 53 percent more hospital services and made 63 percent more physician visits than a group of families with virtually no third-party help. The conclusion is obvious: By removing basic market forces from health care, the federal government actually has encouraged the rise in medical costs. Real health-care reform should aim to encourage patients to begin acting like economy-minded consumers again and to stop acting like hypochondriacs.

Which brings us back to Massachusetts. The Romney plan doesn’t take on the real health-care market problems; in fact, by insuring everyone, the Massachusetts plan might only aggravate the crisis. But no one should come down too hard on the poor governor, because at least he’s trying. And that’s more than can be said of the U.S. Congress.

Darren Bernard welcomes comments at [email protected]