Saturday, March 20, 2010

My comment on health care at HotAir

Below is my comment at a HotAir post about Paul Ryan decimating Louise Slaughter in an argument about Medicare.

But first, the video of the takedown:

The fact is that SS and Medicare are going bankrupt. Medicare costs are growing beyond ability for government to pay.

Cuts will HAVE TO BE MADE at some point. The question is whether to start now so we can adjust gradually and lessen the pain, or whether we continue to bury our heads in the sand and end up with abrupt cuts when the bill comes due.

A second question is what is the most efficient way to keep services up and costs down. And in my opinion, that is through reverting back to utilizing the free market as much as is possible given the current state of things.

Honestly, the best two things I can think of that government could do IF they wanted to mandate something that would lower health care costs are steps that would get consumers more skin in the game:

1. Mandate that all insurance plans have minimum percentage-based co-pays.

For instance, instead of paying somewhere from $0-$30 to go see the doctor, you pay a minimum of 10%-30%. Say you had to pay 20%. Now instead of just going to a doctor and not caring what it costs (say $200) because you pay $20 no matter what, if you pay 20% you now look around for the best price because if you can find a doctor that you like that charges $140 instead of $200, you only pay $28 instead of $40. The competition which drives down costs plus the higher amount that you’re chipping in will reduce insurance rates to save you net cost overall.

In the same way, X-rays and MRI’s and all other medical tests should be paid for on a percentage basis. This gives the users of the services the motivation to shop around for the best price at a quality they are comfortable with.

The market competition will bring down prices, and it doesn’t need everyone in the system to be price conscious. Just as with any other good or service, everyone will benefit from the efforts of the folks who are price conscious.

2. Mandate that all medical care providers post prices or offer on the spot quotes.

Without price visibility, consumers are unable to make informed decisions that include price. Right now, most people go find the best quality care they can and don’t worry about price, because they think someone else (insurance) is paying. There is simply not enough incentive or understanding for people to think through it and say,

“Yeah, I’m going to put in the hours of effort it takes calling my providers and insurance to find out what the best cost is for this visit or procedure, because even though it costs me the same either way, I know that it will ultimately raise my insurance rates if I don’t shop around for the best price.”

Until the health care system gives the consumers of health care both the price visibility and incentive to shop around and/or consume less, costs will continue to increase at an unsustainable rate.

I read a figure somewhere last year, and I wish I could find it again, that back in the 60’s, individuals on average paid for 60% of health care expenses out of pocket. Now they only pay about 10% out of pocket, the rest is covered through insurance (and even the cost of that is hidden through the employer-based system). No wonder we consume 3 times as much health care in number of procedures per person that we did in 1980!

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