REAL Reform – 7 Ideas for Health Insurance Reform

Here are 7 ideas for health insurance reform that are not part of the plans currently proposed in Congress. If you look at the Republican's counterproposals you will find some version of these in all of them. These reform ideas are based on the free-market and are aimed at putting the power and choice over health care decisions back in the consumers' hands.

1. Tort Reform – This is an often laughed at proposal made by conservatives. Liberals like to mock this idea saying that is the only plan Republicans have to offer. Regardless of who offers it up, shouldn't it be considered? According to an IBD Editorial, "The accounting firm PricewaterhouseCoopers says about 10% of the cost of medical service is attributable to medical malpractice lawsuits. Roughly 2% is caused by direct costs of the lawsuits; an additional 5% to 9% is due to expenses run up by defensive medicine." According to CRS Report for Congress, in "2006, National Health Expenditures (NHE) were $2.1 trillion". If we saved 10% that would be $210 billion in savings. We could cover a lot of uninsured people with that money.
   

   Considering the rate at which the lawyers are donating to the Democrats in Congress it is not likely that tort reform will ever be a part of this law. Consider that 2% of the health expenditures in 2006 would have been $41 billion. The lawyers typically get 1/3 of that or about $13.6 billion. According to a Washington Examiner Op-Ed:
   

   An Examiner analysis of the 15 firms on the National Law Journal's "2008 Plaintiff's Hot List" shows that for 2009, their employees have contributed $636,305 to federal politicians and PACs. Only $4,875 of that amount has gone to Republicans, meaning that the nation's top trial lawyers are giving more than 99 percent Democratic this year. The PAC for the American Association of Justice, the top trial lawyer lobbying group, has been marginally more balanced, giving Democrats a mere 96 percent of its $627,000 in contributions.
   

   Is it any wonder why the Democrats do not want to implement tort reform?
   

2. Reduce Mandates – One of the biggest reasons insurance premiums have continued to rise is the ever expanding mandates on coverage. The politicians think it is a great idea to force insurance companies to provide coverage because it is necessary or compassionate. The problem is that these mandates increase the cost of premiums. A recent report by the Council for Affordable Health Insurance stated that:
   

   While mandates make health insurance more comprehensive, they also make it more expensive because mandates require insurers to pay for care consumers previously funded out of their own pockets. We estimate that mandated benefits currently increase the cost of basic health coverage from a little less than 20% to more than 50%, depending on the state and its mandates. Mandating benefits is like saying to someone in the market for a new car, if you can't afford a Cadillac loaded with options, you have to walk. Having that Cadillac would be nice, as would having a health insurance policy that covers everything one might want. But drivers with less money can find many other affordable car options; whereas when the price of health insurance soars, few other options exist.
   

   Lobbyists contribute to a state politician's campaign and all of a sudden you're paying a higher premium for coverage you may not need or want. While politicians can go back to their constituents and claim that they have provided them with better health insurance coverage, all they've really done is increase the premiums that everyone pays. The proposals before Congress add more mandates to coverage and with the proposed "insurance exchange" all of your coverage will eventually be determined by the government. If you want a cheaper policy that does not cover doctor's visits or has higher deductibles you will not have that choice. The government will decide what coverage you will be forced to have. So with all of these new mandates, how can they claim they will reduce premiums?
   

3. Change Tax Code – Two of the selling points that the Democrats are using is that under their plan people will no longer have to fear losing coverage if they move or change jobs and if you like what you have you can keep it. These are false promises because if you change jobs you will only have coverage under the government option meaning that you cannot keep what you have, even if you like it. Changing the tax code and leveling the field for people buying individual insurance could actually accomplish both of the above points.
   

   Currently, your employer chooses the insurance plan and you have to live with it. If you're lucky and work for a larger company you may get to choose between several plans. Either way, your employer makes the decisions. If you want to change jobs, your insurance coverage disappears. If you purchase your own policy you do not get to deduct all of the cost from your taxes while your employer deducts 100% of the cost from his taxes. How is any of this fair to the employee? The current proposals do nothing to change this.
   

   The tax laws need to be changed so that individuals get the same tax breaks that employers get. The idea would be to encourage employers to stop providing insurance, pay the savings to the employees and let the employees purchase their own insurance plans. This would give choices to the employee while also allowing them to take their insurance with them if they changed jobs. No longer would an employee be stuck in job because they were chained to their health insurance. Employees would finally own their insurance policy.
   

   This would also put choice, power and responsibility into the hands of the consumer. The consumer would be able choose the insurance that best meets their needs. They can choose a comprehensive policy that covers doctor's visits or a cheaper catastrophic policy. If they chose a more expensive policy they would have to make up the difference like they do now except it would be their choice not the employer's. If they chose a cheaper policy they could put the extra money into a Health Savings Account (see below) and use tax-free money to pay for out of pocket expenses.
   

   According to this CRS Report for Congress:
   

   Within the private category, private heath[sic] insurance payments accounted for a growing share of spending (34.4% in 2006, compared with 22.2% in 1966), while consumer out-of-pocket payments accounted for a shrinking share (12.2% in 2006, compared with 39.8% in 1966).
   

   This is an indication that over the past 40 years more and more of the payments being made are coming from the insurance companies and not from the consumers. This is a disturbing trend because people are removed from the real cost of the services they are receiving. How many people know exactly what their last doctor's visit cost? They know what they're co-pay was but most have no idea what their doctor charged the insurance company. If consumers paid more of their health care costs out of their pocket they would be more aware of the actual costs and demand that costs were brought down. Consumers would be more willing to shop around if they were paying the bill. As it stands now, most people think they are getting "free" health insurance from their employer and look to the politicians to implement "reform" (i.e., more mandates) in order to get better coverage. What they do not understand is that their employer pays the insurance premiums on their behalf and reduces their wages proportionately. Putting the power in the employees' hands will give them more choices, more security and more "skin in the game".
   

4. Allow Purchasing of Insurance Across State Lines – The current laws are such that you have to purchase insurance only from providers that sell insurance within your state. If you hear of a cheaper insurance policy that is available in the state next door, you cannot purchase it. Removing the barriers of state lines would truly increase competition; more than any government option would allow. The current proposal in the House includes something called an "insurance exchange". The concept is that all insurance will eventually be purchased through this exchange. On page 17, the bill discusses the "GRACE PERIOD FOR CURRENT EMPLOYMENT BASED HEALTH PLANS" and page 19 of the bill states:
   

   Individual health insurance coverage that is not grandfathered health insurance coverage under subsection (a) may only be offered on or after the first day of Y1 as an Exchange-participating health benefits plan.
   

   In essence, this will allow individuals and companies to purchase insurance across state lines. Unfortunately, this exchange is a huge encroachment by the government into the insurance industry. The exchange will mandate more coverage meaning higher premiums and dictate the profits that insurance companies are allowed to make. When are we going to start limiting the profits of Bill Gates and Microsoft? How about the actors making over $20 million per film? This exchange will not increase competition it will only involve the government more than they need to be.
   

5. Expand Health Savings Accounts (HSA) – Health Savings Accounts are similar to 401Ks and IRAs in that tax-free money is put into a savings account. This money is then used to pay for out-of-pocket health care expenses. HSAs have the benefit of being a tax-free investment vehicle. When the individual retires the money can be withdrawn, like form an IRA, without penalty for non-health care related expenses. An HSA could be used in conjunction with a cheaper catastrophic insurance policy and would pay for the associated out-of-pocket expenses (e.g., doctor's visits, deductibles, etc.).
   
6. Vouchers for Working Poor – There is a segment of our population that is truly in need of help with accessing health care. This is the small group of people that do not have employer-provided insurance and make too much money to qualify for government programs like Medicaid but not enough to reasonably afford health insurance on their own (estimates put this group at 8-12 million people). This group should be given vouchers that would allow them to purchase their own insurance (tax credits are a similar option). These vouchers would give the worker the choice of which insurance plan works best for them. Again, the idea is to give the consumer choices. The major initiative of the proposed bills in Congress is to cover these people with a "government option". This is simply another version of Medicaid and does not give people a choice. It will be another government entitlement program full of fraud, corruption and bureaucrats paid for by the taxpayers. This is not the answer. Give people a choice and with it some dignity. Here is a great quote:
   

   Self-respect arises only out of people who play an active role in solving their own crises and who are not helpless, passive, puppet-like recipients of private or public services. To give people help, while denying them a significant part in the action, contributes nothing to the development of the individual. In the deepest sense it is not giving but taking – taking their dignity.
   

   Vouchers would help them and allow them to "play an active role in solving their own crises". Giving them the government option will do nothing for them. By the way, this quote is from one of liberals' greatest heroes Saul Alinsky in his book Rules for Radicals.
   

7. Pre-Existing Conditions – This is a tough topic because everyone wants to be compassionate and provide coverage to all people. However, encouraging people to forgo insurance and only get it once they need it is not a good answer. This would be like getting car insurance after you've had an accident. At one point the insurance companies had agreed to drop the pre-existing conditions clauses as long as everyone was required to have insurance. Another option is to set it up so that as long as you are in the insurance system (i.e., insured) you cannot be denied coverage because you are changing insurance policies for some reason. There would need to be a grace period of some kind so that people currently not able to get insurance because of pre-existing conditions would be able to get into the system.
   

All of the above reforms require government oversight of the insurance industry – similar to what is already in place at the state level. These reform ideas give choices and freedom to the consumer and limit the role of government, which should be the goal of any legislation that is considered. Obviously, Obamacare does not seek to give the consumer choices and limit government involvement because Obama and his liberal cronies are not interested in reforming health insurance to make it more affordable and expanding it to more people. They are simply interested in more government control, control we do not need or want.