Reviewed By: Abhas Gupta
- Private health insurance breaks down - healthy people avoid insurance and insurers select against sick people. This results in many left uninsured and considerable dollars wasted on adverse selection and administrative costs. The solution would be a single-payer system (the government being the payer), but Kling indicates that there is no reason to believe that Medicare, and thus the government, is more efficient or able to control costs better than private insurance
- Health care providers overcharge for their services - Kling quickly debunks this narrative with a crude financial model, concluding that "the increase in total health services consumed was slightly larger than the increase in the relative cost of health care services." Translation: health care costs are skyrocketing because of higher consumption and not higher prices
- Premium medicine accounts for the rise in health care costs - described in greater detail below, premium medicine is the "greater use of specialists and advanced technology" with negligible increase in health care outcomes (life-expectancy, in particular). Kling believes that this narrative is the most persuasive and he offers his thoughts on how to revise our health care system
Physicians today rely more heavily on expensive diagnostic techniques (MRIs, CT scans, etc), thus contributing to the rise in premium medicine. Kling acknowledges that this trend is in part due to the culture of modern day medicine--physicians are expected to definitively determine the cause of illness and treat the causes directly. Moreover, Kling states premium medicine is compounded by redundancy--devices/approaches that provide negligible increases in diagnostic/treatment ability but are significantly more expensive. So why are such service overuses not controlled by the current reimbursement restrictions of private insurance? Kling believes that insurance companies are so overwhelmed with frivolous claims that they cannot effectively regulate "gray area" claims-reimbursement requests for approaches with incremental benefit and a substantial price tag. Moreover, denying "gray area" claims exposes insurance companies to negative publicity, lawsuits, and so on.
Kling contends that a perfect health care system would accommodate three central principles: 1) Unfettered access (health care is readily available to everyone); 2) Insulation (patients are removed from the financial burden of care); and 3) Affordability (society is able to bear the cost). However, these three qualities are not compatible with each other and a perfect health care system is therefore unattainable. One could achieve two of the three principles, but not all three. For example, ready access to care without regard to cost is possible, but it would quickly make health care unaffordable to society.
Nevertheless, Kling suggests numerous steps that we can take to improve our current health care financial system:
- Remove patients' insulation from average health care costs - making individuals bear the cost of their care forces them to shop around for the best price. Physicians will reciprocally be much more cost-conscious in their diagnostic and treatment recommendations. Eradicating patient insulation can be achieved by increasing deductibles to a sufficiently large number ($10,000) and encouraging personal savings through tax-deductible health-savings accounts
- Discourage employer-provided excessive coverage - such coverage fosters health care overuse and inflates health care spending. Instead, cap the amount of insurance that employer's can provide tax-free or even tax the employer-provided insurance as employee income
- Introduce a national commission to standardize best practices - such a commission would define protocols for diagnosis and treatment. These protocols would in turn dictate physician reimbursement and mitigate physician's exposure to malpractice risk
- Phase-out Medicare - Presently, Medicare makes up more than 80% ($68 trillion) of the federal government's unfunded liabilities (services the government has promised but does not have the funds to support). What does this mean? Medicare is unsustainable and we must either a) get rid of it gradually, or b) raise taxes immediately. Kling suggests eliminating it altogether. Instead, he proposes that individuals should be mandated by the government (through taxation) to accumulate at least $100,000 in personal savings for health care costs over the age of sixty-five. A quarter of these savings would used towards premiums for "Catastrophic Coverage"--insurance for very expensive treatments with a high deductible ($75,000)--and the remainder for typical costs and paying the high deductible
- Ease licensing restrictions - In line with simple supply and demand principles, increasing the number of available practitioners (physicians, assistants, therapists, etc.) will decrease the cost of services and thus the cost of care overall
2 comments:
how would you mandate people to have 100,000 saved by the time they are 65? What about people working at mickey-d's or receiving government subsidies like welfare as is? What if you are a widow? and why 100,000? where did that number come from? once again, the cato institute proves that being a libertarian is an ethical viewpoint that some people just can't afford...
Keep up the good work.
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