Health-care reform:
too late for common sense?

Copyright 1994-1996 by Liberty Issues and Michael J. Hihn All rights reserved.

What would happen if car insurance was a tax-free benefit, paid by employers? Would workers demand free car washes?

Nobody buys insurance for routine expenses. Not with their own money. But add a tax gimmick, have somebody else pay, and those free car washes would become a "Basic Right of all Americans."

We'd get car washes every day, maybe two on weekends. Demand would force prices up. Car insurance rates would skyrocket. The uninsured would be forced to drive dirty cars. Politicians, who created this farce, would proclaim a Car Wash Crisis, "The free market has failed."

That's silly. But it does explain what happened to American health care. The free market hasn't failed; we don't have one. Free health care has failed; we can't afford it.

Economists say free health care rewards waste. But if it's free, who cares? You should. If somebody else pays your premiums, you lose the right to pocket your own savings. For example, if you select HMO coverage from your employer, somebody else pockets $1,500 per year, on average. Today, employers pocket your savings. Tomorrow, the government wants your savings -- a huge invisible tax.

It's even worse if you sign a Living Will (death with dignity). This alone could slash your lifetime medical costs by half. Should these savings be pocketed by your employer, by a government health scheme -- or by your own heirs?

If we all made these choices, American health care would be the cheapest in the world, with the same high quality. But it's an election year. So politicians are peddling something for nothing: the illusion of free health care. Democrats want to expand it. Republicans are afraid to take it away.

It's an illusion, because workers still wind up paying the bloated costs, through lower wages. But no current "reform" lets those same workers pocket the promised savings. ...

Who can best control the costs and quality of medical care? A Congress dominated by special interests? ... Or 150 million consumers spending their own hard-earned dollars? ....

• Give you the cash now being spent on your behalf.
• Let you control how that money is spent.
• Permit the market to offer you more and better choices.

... Employer-based health care is obsolete. We change jobs too often. That's what causes the problem of pre-existing conditions. Do we solve that by slapping new regulations on an obsolete system? Or do we fix it right, and create portable health insurance?

Treat employer-paid insurance as taxable income. But increase the Personal Exemption on federal tax returns by the average cost of these benefits; plus an equivalent change in FICA taxes. That's a tax cut for the uninsured, paid for by taxing excessive benefits, all revenue-neutral to the federal treasury. Neat, eh?

Insurance premiums would become a payroll deduction. Take-home pay and taxable income would remain the same, if you have average benefits. You'd own the insurance. You could stay with an employer-based plan, or select from dozens of new choices not permitted in today's over-regulated market. Any savings would be pocketed by you, in after-tax dollars. And we'd repeal the current discrimination caused by employer-based insurance.

Employer-basing discriminates against the majority of workers in small-medium businesses. Large employers sponsor a wide variety of choices. And most federal employees select from a dozen or more different plans. But the total number of market choices is useless to small business (which can sponsor only a single plan). ... Buy your own insurance, and all Americans will have equal access to dozens of competitive choices.

It's difficult to predict what choices would appear in a freed market. But several better choices are certain, based on what insurers do in other lines, plus what we know about health care.

We know 60-75% of American healthcare costs are spent during the last months of life. That's the biggest factor in our high health costs, as a percentage of GDP. Government plans avoid these costs by letting people die. Republicans ignore the issue. And the Clintons urge us to sign Living Wills. Note the common theme: kill yourself to pay for universal coverage.

Eventually, many of us will face a deathbed choice: Should I spend $50,000 for another six months of life, or leave that money for my heirs? If you have the money, that decision can only be made by you -- never by government. In a free market, private insurance can provide every American, rich or poor, the cash to make this decision.

For the growing number of people who sign Living Wills, health insurance could be sold at a big discount -- the same principle as cheaper life insurance for non-smokers. This alone could reduce lifetime premiums up to 50%, depending on your age. But the most likely policies would combine with Term Life insurance. Then young couples could sign Living Wills, pay lower premiums for most of their lives, but still change their mind near the end. If you do change your mind, your life insurance would go toward that care instead of to your heirs. Your money; your decision.

A modified version can even be applied to Medicare, potentially slashing runaway costs in this bankrupt program. Nobody would pay more for life-extending medical care. You already pay for that. But if you'd rather give that money to your kids, who has any right to stop you?

Likewise, other choices would be based on legitimate underwriting standards and medical factors, instead of where you work. Doctors tell us health-care costs are largely a function of lifestyle choices. In a free market, we'd likely see discounts for non-smokers, young males with vasectomies, plus dozens of other controllable medical-cost factors.

By comparison, the Clinton and single-payer plans mandate the same premiums for everyone. That's not an insurance decision. It's a political decision, with perverse consequences. Low- income young workers would be forced to subsidize cheaper rates for higher-paid older workers. (Guess which group has more political clout.)

Consider abortion. Liberals want pro-lifers to pay for abortions. Conservatives want all pro-choicers to give birth. That's power politics. In the marketplace we vote with dollars, and both sides get what they want. We already see policies that pay for abortions, and policies that don't. In a free market, you could select either.

Our health care system is drowning in costly paperwork. But only bureaucrats would consider "streamlining" it. Get rid of it!

HMOs eliminate third-party reimbursements, thus providing the lowest costs for the comprehensive coverage we've grown used to. But liberals hate HMOs for delivering more care, cheaper, than any government program on earth. And conservatives hate HMOs, because they're confused about a doctor's right to self-employment.

Doctors do have a right to be self-employed, and should not be forced into prepaid plans. But they have no right to demand we pay $1500 a year extra to see them (compared with an HMO) -- with taxpayers subsidizing the difference. Instead, doctors can offer fee-for-services medicine, and still compete on total costs with HMOs -- if government graciously permits Medical Savings Accounts.

Individuals should have the same right now restricted to employers: self-insurance. Instead of paying $3,000 to an HMO, you might buy catastrophic (high-deductible) insurance for $1,500. The other $1,500 goes into a Medical Savings Account to pay routine expenses. plus larger expenses up to your deductible. Any cash remaining at death would go to your heirs.

Doctors would face market pressure to reduce newly-visible fees. More important, they could afford to cut prices. Instead of claims processing costs and aggravation, most doctors would have . .. cash. Nobody reimburses your doctor faster or cheaper than your debit card. (And your debit card can be paid from your Medical Savings Account.)

That's two free-market choices, HMO and Medical Savings. Both eliminate all or most of today's costly paperwork. Each is 1/3 cheaper than today's comprehensive insurance plans. Between the two, every American would have dozens of new and better healthcare choices, while eliminating divisive battles like abortion. The Clinton plan can't do that. Neither can the single-payer plan. Nor can any other government-run plan.

Only a free market guarantees maximum choice for both patients and doctors. Will we be stampeded into something less? Or do we still have time for common sense?