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Dr. Tracy Miller
Dr. Tracy Miller

For more affordable healthcare, it needs to be left to the free market


Wednesday, December 4th, 2013
Issue 49, Volume 17.
Dr. Tracy Miller


EDITOR'S NOTE: Due to the length of this submission, it is not running in the hard copy edition of the Village News, but does appear on this website.

The problems with the healthcare.gov website offer a glimpse of the way the Affordable Care Act (ACA) is likely to fail at accomplishing its most important goals: providing affordable, high-quality health care to all Americans, without increasing the deficit.

The ACA is the latest of a series of attempts by the federal government to use subsidies and regulations to make healthcare affordable for all Americans regardless of their health status. The ACA, like the regulations and subsidies that came before, only increase the problems resulting from the incentives created by our healthcare system.

If Congress repealed the ACA, along with other regulations and subsidies that distort the market for healthcare, healthcare could become more affordable and provide better quality than it ever will under the rules and subsidies of the ACA.

A major problem with our healthcare system is that it costs much more to insure people with major health problems than it does to insure the majority who are in reasonably good health.

If health insurance premiums were determined by the market, they would be affordable for most who are in good health, but unaffordable for many who have serious health problems.

Over the years, governments have used a variety of regulations and subsidies to make it easier for sicker members of the population to afford health insurance.

One way that the cost of health insurance is kept down for sicker people is through employer-sponsored health insurance plans. Although these plans arose in response to wage controls during World War II, they have grown in importance because of tax deductions and a variety of regulations. If the tax deduction was not limited to group health insurance plans offered by employers, many of the healthiest workers would buy their own low-cost health insurance in exchange for a higher wage from their employers, who would save the cost of premiums on those workers.

Employer-sponsored insurance (ESI) works well for those working for large corporations. One drawback is that it discourages workers from changing jobs, particularly if they develop a health condition that will increase the likelihood that they will incur major health care expenses. To keep premiums from rising for ESI plans, health insurers may choose not to cover pre-existing conditions of newly hired workers. To protect those who change jobs from not being covered, several state governments require ESI plans to cover pre-existing conditions, sometimes allowing a short waiting period following the hiring of a worker.

Small companies that provide ESI have an incentive to hire only healthy workers if Advertisement
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regulations do not permit insurance companies to exclude pre-existing conditions from the coverage they offer. A small firm also has an incentive to find an excuse to lay off a worker who develops costly health problems while employed, since insurers are likely to raise premiums for firms whose workers incur higher health costs.

Because all of the existing subsidies and regulations are not enough to keep those with chronic health problems from facing premiums that are much higher than average, the ACA requires insurance companies to provide full coverage for everyone who applies, regardless of health status, and prohibits companies from varying premiums except based on age or whether the insured smokes. It includes an individual mandate so that healthy people will not opt out of buying insurance. The greater the percentage of healthy people paying premiums, the lower the premiums for everyone, including those with chronic illnesses.

No existing government regulation or tax policy has succeeded in preventing many of those with high health risks from being charged more for their health insurance. Even with its mandate, it is doubtful that the ACA will succeed at providing insurance that enables those with chronic health conditions to pay the same prices as everyone else and still receive high-quality health care.

Government may be able to force insurance companies to provide affordable coverage to high-risk people, but without adequate incentives, donít be surprised if the insurance pays for care from a very limited network of health care providers, severely limiting the options of high-risk clients.

Rather than fighting market forces, the best way to promote affordable health care is to allow entrepreneurs competing in the market to devise a solution that would make it profitable for insurance companies to cover those with high health care costs.

One solution, proposed by the Heritage Foundation, is health status insurance, whereby people insure against declines in their health status. If early in their lives people could pay extra for insurance against developing a chronic health condition in the future, then insurance companies could afford to cover everyone regardless of what happens to their health over their lives. Premiums for health status insurance would be affordable, even if set high enough to compensate insurance companies for the expected cost of providing high quality care for chronic illnesses, which some fraction of their clients would develop later in their lives.

Affordable health care remains the goal. To get there, letís leave it to the free market.

Dr. Tracy C. Miller is an associate professor of economics at Grove City College and fellow for economic theory and policy with The Center for Vision & Values. He holds a Ph.D. from University of Chicago.


 

15 comments

Comment Profile ImageSB
Comment #1 | Wednesday, Dec 4, 2013 at 3:28 pm
The free market was bankrupting families! Are you kidding me? What we need is universal, single payer.
Comment Profile ImageTerry Leather
Comment #2 | Wednesday, Dec 4, 2013 at 4:02 pm
Look! I exempted as many of my friends and political allies as I could, what do you people want from me anyway!?
~ BO, Washington DC.
Comment Profile ImageDR DR
Comment #3 | Thursday, Dec 5, 2013 at 8:57 am
We have received our small business monthly premiums for Jan. 14, up 24%. Other companies, according to our broker, have been raised 50-even 90%. One 22 yr old employees' doubled. We aren't increasing his wage ($22.00/hr), he pays for his family 100% and we pay 80% of employee -

Now you tell me how small businesses are going to keep employees? It is cheaper for him to get welfare and gov assistance than work.

SB-your employer can get better rates as a company, and you pay 100% of premium. A universal plan - what drugs have impaired your thinking? Go ahead and enroll with Affordable Act - ha ha ha ha what a joke that is!! Then try to find a doctor who is going to do your surgery...for $1,000 paid by a 'single' payer.
Comment Profile ImageFR86
Comment #4 | Thursday, Dec 5, 2013 at 9:48 am
This may sound really simple but why do we need insurance companies to act as middle men between the patient and doctors...........if we really had a "free market" you'd go to your doctor and pay him directly for the care provided. Another alternative is to pay a monthly healthcare fee directly to the physicians/hospitals like a premium for routine medical care. If you get any treatment it's prepaid if not it rolls over. Fee for Service is the way.

Insurance companies sap the revenue we pay to support themselves much like the government does with your tax money. Oh and don't forget the lawyers as well. HHMM it seems lawyers are involved in both these none value added beauracracies.

FR86
Comment Profile ImageJon Monday
Comment #5 | Thursday, Dec 5, 2013 at 11:15 am
Why does this right-wing point of view writer get 880 words in the opinion section which is supposed to be limited to 250 words. Id like equal space to do a point by point deconstruction of this apologists defense of the old, failed American Healthcare System and trickle down economics, both of which has been denounced by a vast majority of real economists, healthcare specialists, and even the Pope calls Trickle Down failed capitalism.

Dr. Miller is defending old fiscal and healthcare policies that drove millions of American into bankruptcy, and left nearly 50 million Americans completely uninsured, because of preexisting conditions or unaffordability. Plus many Americans who thought they were insured found out they had junk policies that failed to pay when needed.

Not to mention that we had the high cost per capita for healthcare, but rank far lower than countries who pay half as much, and have much better healthcare outcomes. In other words, before the ACA we had the most expensive system, with the absolute worst outcome, and millions left uninsured completely - which has to be paid by taxpayers, when they show up at the Emergency Room,

The ACA did only four major things:

Created a free and open market where small health insurers can compete with the big guys, with side-by-side comparison shopping - the ultimate free market. No longer a defacto monopoly by the largest insurers who soaked the American public.

Limited insurance companies from spending more than 20% of premiums on profits, dividends, and overhead (Medicare does the same functions for 5%).

Define what is a junk policy and real health insurance, and set minimum standards for companies to represent their products as healthcare insurance.

Demand that everyone take responsibility for themselves - and the uninsured stop having taxpayers pick up the bill, when they inevitably need healthcare.

Its a Republican and conservative idea - literally - it was devised by the Heritage Foundation, and successfully implemented by Romney in Mass. They are now one of the best in the country in terms of universal coverage and healthcare outcomes.

Let me quote a very prominent right-wing conservative radio talk show host, Michael Smerconish, who has an open mind about the ACA, and this week used it to successfully sign up. He confirmed that its a remarkable idea - to have all the major insurances companies competing on a level playing field. Here are his comments:

You know who should be angry about Obamacare? Real socialists. The tea party opponents of the Affordable Care Act promised them a government incursion that the new law does not deliver.

Think back to the rallies of 2009 and 2010. All those signs mocking President Obama with the word socialist emblazoned upon them were as common as Gadsden (Dont Tread on Me) flags. But the health-care exchanges that launched Tuesday bear no resemblance to what Merriam-Webster defines as a way of organizing a society in which major industries are owned and controlled by the government rather than by individual people and companies.

And actual socialists have noticed.

Obamacare cannot be considered socialist in any way, according to Greg Pason, the national secretary for Socialist Party USA.

The ACA program relies on private health insurance companies to manage health services, Pason said. A socialized system would not include health insurance, but would be an actual national health-care system which would be publicly funded through progressive taxation and controlled by democratically elected assemblies of health-care workers and patients.

[Socialists are] right. Under the ACA, health insurance in America is still being delivered by private practitioners and paid for by private insurers. In fact, the vast majority of Americans who receive their health insurance from employer-paid plans will see no discernible change in their coverage or delivery, and need not access the exchanges. The only people who have to access the exchanges are the uninsured or those in the individual market (the 12 million to 15 million who purchase insurance for themselves). Soon, small businesses with 50 or fewer workers will go on the SHOP exchange. Seniors are another group that should experience no change.

Those who are reliant on Medicare need not be concerned, either, Mary Agnes Carey of Kaiser Health News told me. Medicare has its own separate enrollment period. It starts in just a couple of weeks. The Medicare enrollment period is if you want to switch within Medicare to a different plan. ... But regarding the Affordable Care Act and the health insurance exchanges, you dont have to do anything.

The ACA as implemented bears little resemblance to the fears that were once expressed in fierce opposition. Typical was an event that occurred Aug. 2, 2009, when Kathleen Sebelius, secretary of Health and Human Services, and Sen. Arlen Specter faced a raucous crowd at the National Constitution Center prior to the passage of Obamacare. On that summer Sunday, an overflowing crowd booed and jeered the duo. The Inquirer reported that a group in the back continually disrupted the gathering with shouts of Assisted suicide, Abortion, and, of course, Socialism. One photograph shows a sign that said, Welcome to the United States Socialist Republic.

On Friday, I asked Sebelius whether those complaints bore any resemblance to what has just been implemented.

Well, it actually, Michael, couldnt be further from socialism, she told me. These are private insurance plans being sold in a very competitive market. So one of the things the Affordable Care Act has done is to create a market. We had monopolies in many states for people who were in the so-called individual market -- one company selling whatever they wanted and actually very few consumer protections. So, many of the people now eligible for not only financial assistance from the federal government, but insurance products for the first time, have the same kind of easy way to shop that people could shop for a television and look at an amazon.com website.

The further irony is that those who were quick to level the socialist charge were advocating for the right of people to remain uninsured and burden everyone else, which CNNs Jake Tapper recently raised with Sen. Mike Lee (R., Utah): When did Republicans start saying, Thats OK, you can freeload?

I dont think thats a fair characterization of the Republican position on this at all, Lee replied.

Tapper responded: If youre against the individual mandate, or any sort of requirement that people have health insurance, then that is your position.

The only liberty interest being sacrificed under the ACA is ones ability to be uninsured. And even that is violable. Carey reminded me that you can still exercise your right to be uninsured, but you will pay a fine.

Obama never effectively rebutted the socialism charge, not that it would have made a difference. The proof that the opposition was rooted in something other than the S-word was evident when Mitt Romney captured the GOP nomination, even though Romneycare and Obamacare have so much in common: Each fashioned a government solution to the problem of the uninsured, and both provided universal coverage, utilized exchanges, offered a subsidy to those who cannot afford coverage, and included no opt-out provision.

Only time will tell if the affordable portion of the acts title is warranted. In a Time magazine piece in February, Steve Brill explained that the disparity in health-care costs was often dependent upon who was paying the bill, and argued that we need government regulation of pricing. He worries that Obamacare is all about who pays rather than how much is paid. Its much too soon to know if it will work, and surely it will be tweaked.

The only thing for certain is what it isnt -- socialism.

****VILLAGE NEWS REPLIES:

Jon,

Perhaps you didn't read the note at the top of that opinion piece. It stated it will not appear in our print version due to its length of 880 words. In all fairness, your website postings regularly run into very high word counts. I'm not complaining about that, I'm just not sure why you think you've been wronged. Please remember that we do invite opinions on ALL sides of issues. Just in case you didn't run a word count on your piece above, it came in at 1,261.
Happy Holidays. ---Debbie Ramsey, Editor

Comment Profile ImageWrenchers
Comment #6 | Thursday, Dec 5, 2013 at 11:18 am
Fee for Service is the way.

Yes, then the hospital can charge you $500.00 directly for three stitches vs. going through the insurance companies. And BTW, Free Markets can only exist with competition. What hospitals do you know of that are competing for your business?

Do you even know what your hospital charges in relation to other hospitals, or, what you are actually being charged for?

Here are some scary stats:

http://www.pbs.org/newshour/rundown/2012/10/health-costs-how-the-us-compares-with-other-countries.html
Comment Profile ImageRay (the real one)
Comment #7 | Thursday, Dec 5, 2013 at 11:23 am
The reason why families were going bankrupt is not the fault of the insurance companies but hospitals, doctors,. nurses, drug companies, etc. All Bozocare did was reward the problem and punish the solution.

Bozocare was designed to fail, that was the initial plan. Just wait, more and more insurance companies will leave the market leaving everyone screwed.

Doctors will still make $150.00 for 30 second consultation. Nurses will still make $35.00 an hour for sitting at the nurses station. Hospitals will still charge thousands of dollars for equipment paid for over a decade ago, life goes on.

Now being the author of this piece received their degree at U of C Hospitals in Hyde Park where I and Obozo are from, the author should know the political climate back in Chicago and that the machine democrats will NEVER do what is right, but to payback and purchase votes.

A single payer system? talk to someone in Canada, United Kingdom, France, Germany, all have failed but a single payer systyem would pay off a lot of democratic baggage, the plan from the get go.

I for one will NEVER subscribe to Bozocare.......... period!
Comment Continued : The comment above was written from the same location.
Post Continued
Comment Profile ImageRay (the real one)
Comment #8 | Thursday, Dec 5, 2013 at 11:24 am
Tracey:

Send me a Medici pizza....... please.
Comment Continued : The comment above was written from the same location.
Post Continued
Comment Profile ImageRay (the real one)
Comment #9 | Thursday, Dec 5, 2013 at 1:48 pm
DR: It usually takes Jon Monday to 1200 words or more just to say "hello". In all fairness, the word count should apply to everyone, not just me.

Happy Holidays.
Comment Profile ImagePink
Comment #10 | Thursday, Dec 5, 2013 at 1:50 pm
The problem with ACA (Obama Care) is that it is being funded on the back of the middle class!! Higher premiums, fewer services and larger deductibles. No matter how many, so called, wonderful statistics that Jon, and other well meaning, liberal minded individuals throw out there, the fact remains, the middle class is being royally screwed. I would love to see everyone in this country have medical care. The truth is the vast majority of ''poor'' people already have free medical care, thanks to us and our tax dollars, and the rich can afford to buy the best medical care available. Meanwhile, the insurance companies, have no choice but to stick it to those of us, who already have good insurance. Most of us have worked hard all of our lives to be able to get good insurance. Now, due to the ACA, we are seeing our premiums skyrocket and our services dwindle. I have never minded paying my "fair share" but this is ridiculous. I love the spin the Obama camp is putting on this fiasco. I will wait and see just how many "happy" people there are at this time next year.
Comment Profile ImageJustwondering
Comment #11 | Thursday, Dec 5, 2013 at 3:19 pm
Just a note for editor..bless you for counting mr Mondays words..I don't think I'm alone when I say after about 100 words,if your point isn't made,then it's not going to be...and honestly I can't read something so dang looooonnnnngggg.
Comment Profile ImageRedneck Bill
Comment #12 | Thursday, Dec 5, 2013 at 7:46 pm
Hey Debbie,

My post was less than 250 words, disagreed with the esteemed Dr. Miller, and got deleted! At least Jon makes sense.

But I still love your show!

****VILLAGE NEWS REPLIES: Hey RNB, had to be wording or something - not what you agree or disagree with. Re-submit after taking a look at re-phrasing slightly and that will probably do the trick. Sorry I don't remember specifics. Love your show too. Whether or not we personally have the same view point item by item, I admire your posts as being good and thought-provoking, not to mention in many cases, funny. Thanks - Debbie R.
Comment Profile Image@FR86
Comment #13 | Tuesday, Dec 10, 2013 at 7:12 am
The reason for an health insurance is the same reason you have car insurance and homeowners insurance. True you could deal directly with your mechanic or your home builder, but there is risk that the damage will be too great. Same with health insurance. The problem with all Government run insurance programs is politics will screw it up. Take a look at the National Flood Insurance Program or the SSDI. The Government screws everything up. Even the Post Office is running up huge debts now.
Comment Profile ImageJohn the Baptist
Comment #14 | Tuesday, Dec 10, 2013 at 2:29 pm
I'm all for a free market economy. I just wish we had one.
Comment Profile ImageTerry Leather
Comment #15 | Thursday, Dec 12, 2013 at 12:44 pm
Really?? Higher deductibles?? When did THIS happen and why has nobody reported on this!?!?!?!? I'm shocked !!! You mean it's not really "free" healthcare?

Article Comments are contributed by our readers, and do not necessarily reflect the views of The Valley News staff. The name listed as the author for comments cannot be verified; Comment authors are not guaranteed to be who they claim they are.

 

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