Health Care - Problems and Solutions
In the past several years, tensions have arisen between the quality and
cost of health care,
access to health insurance, and patient choice of physician and treatment.
imposed by government and big business has been "managed care" through
"health maintenance organizations (HMOs)."
Doctors and consumers are not happy with HMOs,
because under managed care, critical
medical treatment decisions are often made by non-medical insurance
(with varying degrees of reluctance) by physicians and received (with
varying degrees of
frustration or dissatisfaction) by patients. Managed care has marginally
slowed the rate of increase of medical costs, but at the expense
of quality and patient choice. It has had
little impact on access to insurance.
Implicit in managed care is a top-down forced rationing of medical
services, justified, in
part, by past wastefulness. However, the violence that has been done to
the medical system in
the past few years by managed care suggests that
there must be a better way to address the
problems of cost, quality, access and choice. We believe a
better way exists.
A brief history lesson
Twentieth century American medicine, for all its technological successes,
has been a triumph
of special interest politics. Prior to World War I, organized medicine
succeeded in closing half
the medical schools in the country, thereby restricting the supply of
physicians, and increasing
the incomes of those who remained. During the Depression, Blue Cross and
created the reverse of normal insurance: covering minor conditions, yet
leaving major illness
uncovered. The Blues, through effective lobbying, also obtained sweetheart
legislation in most
states which enabled physicians to name their own prices -- in effect, to
be paid as much as they
wanted. Both these situations remained true until the start of the current
decade. (There has not
been a "free market" in medicine in this country, within living memory.)
The effect of such an irrational incentives system was extreme cost
inflation. And yet,
despite all the waste, patients retained the ability to choose their
physician and, to some extent,
their treatment. There was enough competition between doctors to keep the
reasonably patient-centered. Doctors made decisions on medical (not
economic) grounds, and
patients were reasonably satisfied. Quality and patient choice were
Cost and access were not. Politically-influential employers found employee
too expensive. Health insurance was priced beyond the reach of many
programs paid doctors less than their overhead, so access to primary care
for poor women and children. Nonetheless, emergency care was excellent,
and available to all.
Something had to be done. The solution chosen by big business and
care, has done little to cut costs, but much to harm quality and choice.
Access remains an unsolved problem.
Towards a solution
Solutions are more likely to be found when all the relevant parts of a
problem are taken into
account. In recent health reform, cost has been almost the sole focus.
Quality and choice
have been largely ignored. Successful reform must consider all three, and
also maximize access
to quality primary and specialty care.
Carrots make better incentives than sticks. Managed care creates a
which, in practice, rations care away from those least able to defend their
those most adept at working the system. The much-touted "Health Consumer's
Bill of Rights"
accepts the legitimacy of top-down rationing, and merely provides a
structure within which
those denied care are allowed to ventilate their frustration. If they live
long enough to do so.
We can do better than that.
The chief problem with managed care is that the locus of control is the
doctors and patients must settle for whatever crumbs fall from the
insurance company's table.
To bring this into line with our campaign theme, the insurance company is
currently the center of
the medical "wheel" - put there by the government. In effect, this means
that the government,
through its insurance surrogates, is able to determine what care families
We believe families - health care consumers - should be in the center of
"wheel," able to choose their doctor and have a say in their treatment
(instead of being forced to
settle for the minimum the insurance company thinks it can get away with
providing). This can
be done through high-deductible catastrophic health insurance and Medical
which have been tested extensively in various states, and proven to
preserve quality, control
cost, extend access (including welfare patients) and maintain patient
choice much more effectively than managed care.
Medical Savings Accounts have been vigorously, almost hysterically,
because they shift the locus of power (and much of the money) away from the
industry and government to the consumer.
Any solution to our medical delivery problems must take all four factors
into account. If
cost is to be controlled, it should be controlled where the bulk of
wasteful treatment occurs, in
everyday care of minor problems (not through rationing of vital major
treatment, as is common
in HMOs). If quality and choice are to be maintained,
then patients and doctors must regain
decision-making power. If access is to be general and across
economic groups, then means to broaden access must be found.
Medical Savings Accounts
The Medical Savings Account is the only solution which successfully
addresses all four goals.
Medical Savings Accounts (MSAs) are quite simple, both
in concept and in practice. They
involve the purchase of major (catastrophic) insurance, which can be had
for a fraction of the
cost of low-deductible insurance. The consumer then
deposits the difference between the
catastrophic premium and the low-deductible premium (usually two to
three thousand dollars a
year) in a medical savings account, and then draws on that account to pay
minor medical costs, up to the price of the deductible.
At worst, if there is a major illness, the consumer breaks even.
(This happens about 6% of the time.) Catastrophic insurance pays
all costs after the deductible is met. Other years, when
there is no major illness, the consumer keeps the money remaining
in the account, to use as needed.
To illustrate, in suburban Philadelphia, a typical family of four pays
about $ 5000 a year for
health insurance with a $100 deductible and a 10 to 20% copayment
on major medical expenses.
That same family can buy catastrophic insurance, which covers everything
over a $3000 deductible, for about $ 1800 a year.
Therefore, catastrophic insurance would be $3200 cheaper than
conventional. They can put that $3200 into a Medical Savings
Account which they can use to cover routine health expenses.
They control that money and decide how it is to be spent.
In a worst-case scenario, they encounter a major illness and
pay the first $3000 in expenses out of their
MSA. Then their catastrophic insurance pays the rest. The result: after
every medical expense
is paid, they still have $200 left in their MSA. Which is theirs to spend
as they wish. And, since
they pay no deductibles, their total savings are much greater than just the
$200. They suffer no medical debts.
Most families do not suffer a major illness. The average family
uses about $600 worth of medical care annually; therefore,
their MSA would have $2600 left at the end of the
year, which is theirs to save or spend as they see fit.
Many people seek no medical care whatsoever;
they would have the entire $3200 at the end of the year.
The money is theirs, not the insurance company's - which is why
MSAs have been fought against so desperately by insurance providers.
When MSAs are made tax-deductible, as has been the case, for some, since
situation is even more appealing.
Medical Savings Accounts return rationality to health insurance by
increasing the coverage
of major illness, and decreasing the coverage of minor illness. Universal
(catastrophic) coverage of major
illness removes the fear of medical bankruptcy. At the same time, by
responsibility for minor illness, MSAs give doctors and patients the
incentive to stop
overutilization of minor services - the single most important source of
wasted healthcare dollars.
MSAs cut the overall cost of medical care, and medical insurance, by
efficiency of utilization, and by removing the incentives for doctors to
overtreat and for patients
to demand overtreatment. They return quality to its previous high
standard, by returning
decision-making to doctors and patients, removing arbitrary rationing from
major care, and
basing decisions on medical, not economic, grounds. They return choice of
physician and of
treatment to the patient, who controls most of the money. They make access
available by reducing the cost of insurance and by giving welfare patients
the same quality
insurance coverage as everyone else - thereby making welfare patients more
physicians, at lower cost to the state.
"Where can I get more information about MSAs?"
"MSAs won't work for the poor"
Pilot studies of MSAs in California, by the RAND
Corporation, reveal that welfare patients are as able to use the medical
system intelligently as
anyone else. Welfare recipients with good-quality catastrophic
coverage and MSAs are as
attractive to physicians as anyone else; welfare patients with a
state-funded Medical Savings
Account "shop smart" if they are allowed to pocket a proportion of the
balance remaining at
year end. They do not neglect their children, nor shun necessary
preventive care, but they do
stop abusing emergency care - a major source of unnecessary public expense.
expenditure of MSA money is overseen by case workers, there has been little
abuse in the pilot studies.
Since administrative costs are lower, MSAs allow broader
welfare coverage and better
service for welfare clients at lower public expense.
- "Parents will neglect immunizations, preventive and medically-necessary
This has not proven to be the case. There was no difference in the RAND
immunization rates between MSAs and other forms of insurance, and no
evidence of child
neglect. But there was a significant reduction is wasteful use of
emergency rooms for routine care.
- "People aren't smart enough to run their own health care"
Insulting and elitist as this statement
is, it ignores the fact that people rely on physicians to
recommend treatment. The
limiting quality factor is the ability of the physician, not the
intelligence of the patient. This
objection should be seen for what it is, a figleaf to cover
reluctance to return power to the people.
- "How can you persuade workers to forsake their usual insurance for MSAs?"
Explain it to them. In large private trials of MSAs in
Virginia and Ohio, workers
overwhelmingly chose MSAs, when offered them, and renewed with enthusiasm
liked having that money left in the account at the end of the year).
- "Are MSAs strictly voluntary, or would MSAs be a negotiable benefit
MSAs have been offered as another option in the annual menu of insurance
coverage; since they involve significant savings to all concerned, the
distribution of the savings
would be a matter for negotiation between labor and management.
The National Center for Policy
Analysis in Dallas, the Evergreen Freedom Foundation in Olympia,
WA, and the Heritage
Foundation in Washington DC have all published numerous articles reviewing
real-world experience with MSAs.