Myth 14: We must choose between the “status quo” and the Democrats’ “reform” plan

The strategy during the August recess was outlined by Paul Begala, a Democrat strategist close to the White House: “Supporters of reform have to put the status quo on trial” ( 7/26/09).

“If somebody told you that there is a plan out there that is guaranteed to double your health care costs over the next 10 years, that’s guaranteed to result in more Americans losing their health care, and that is by far the biggest contributor to the federal deficit, I think most people would be opposed to that,” Obama said. “Well, that’s the status quo,” he claims (ibid.).

Members of Physicians for a National Health Program (PNHP) identify the 70-some health plans with which they have voluntarily contracted as the status quo, or even as the “free market,” and complain bitterly about the poor remuneration and costly administrative hassles.

AAPS does not support the status quo, but over years and decades has advocated fundamental reforms that—unlike the Democrat plans—

  • impose no new net burdens on the taxpayer;
  • do not hasten the bankruptcy of federal and state governments;
  • create no new bureaucracies or stakeholders; and
  • involve no expansions of government or additional accrual of unconstitutional powers.

Instead, AAPS supports reforms that:

  • improve the quality of care by encouraging innovation;
  • decrease systems-gaming and nonproductive work related to justifying price-controlled fees;
  • allow physicians to concentrate on healing rather than constantly changing administrative rules;
  • restore the patient/physician relationship and the joy of practicing medicine;
  • increase supply, availability, and competition, and thus decrease costs and make it easier to serve those who are most in need of help; and
  • discourage frivolous or predatory litigation.

Reform can begin immediately at the individual level, as physicians quit participating in third-party arrangements, and patients fire health plans that insist on intruding into the patient/physician relationship.

Specific desirable legislative changes include the following:

  1. The freedom of patients and physicians to choose or decline to enter relationships on mutually agreeable terms for medical services must be guaranteed. This amounts to keeping the promises made, and codified into law, when Medicare was enacted(1). It is also in the spirit of Obama’s promise that people could keep their health plan or their doctor.
  2. The determination of insurance reimbursements must be separated from the determination of fees: the reimbursement involves insurer and subscriber, and the professional fee involves the patient and the professional. This means repeal of the Medicare ban on balance billing, as well as other forms of price controls. Without market determination of fees (i.e. value-based payment, with patients determining the value), shortages, as of primary physicians, can never be remedied. With balance billing allowed, physicians can continue to serve patients even if reimbursements must be cut for budgetary reasons.
  3. Tax discrimination must be ended. Under current federal tax code, all medical services paid for through employer-owned insurance policies are purchased with pre-tax dollars, while individually owned insurance or out-of-pocket payments must be made with after-tax dollars. Eliminating this inequity should decrease both expenditures and actual costs: (1) by eliminating over-insurance and thus excess demand for services of marginal benefit, and (2) by encouraging direct payment at the time of service, without the administrative overhead that inevitably accompanies third-party payment.
  4. The McCarran Ferguson exemption that protects the business of insurance from antitrust law should be repealed. Monopolies and cartels increase prices; competition drives prices down. The insurance industry should have to operate under the same rules as other enterprises.
  5. Barriers to market entry should be removed. These reduce access and increase prices. Anti-competitive barriers include certificate-of-need requirements and restrictions on physician-owned hospitals.
  6. Americans should be allowed to purchase insurance across state lines. Residents of states such as New York and New Jersey, whose state mandates have made individual policies prohibitively expensive, could buy a policy in Nebraska or another state with a reasonable regulatory regime. Rep. John Shadegg (R-AZ) has introduced such legislation.
  7. Government insurance benefits should be paid to the beneficiary, through a dual-payee check, instead of directly to the provider. This change would virtually eliminate fraud from providing fictitious “services” to nonexistent beneficiaries, and would involve beneficiaries in the scrutiny of all bills. Like credit-card fraud, medical insurance fraud would become self-revealing.
  8. Medical professionals, and all Americans, should be protected against takings, including the court-ordered seizure of their property for the private benefit of plaintiffs and their lawyers, beyond just compensation for actual damages. Subjective “pain and suffering” and punitive damages are the equivalent of criminal fines; they should be subject to an appropriate higher standard of proof and should be paid to the state, not the lawyer. Applying the equal protection of the laws to plaintiffs and defendants should decrease predatory or frivolous litigation, and thus decrease excess costs from defensive medicine. It should also stimulate the development of other means of protection against bad medical outcomes, including better disability insurance purchased by patients.

A coalition of state and specialty medical societies has drafted a letter to Congress espousing a patient-centered system rather than a government-controlled system—the right kind of change from the status quo.

Additional information:

(1) § 1801. Nothing in this title shall be construed to authorize any Federal officer or employee to exercise any supervision or control over the practice of medicine or the manner in which Medical services are provided, or over the selection, tenure, or compensation of any officer or employee of any institution, agency, or person providing health services; or to exercise any supervision or control over the administration or operation of any such institution, agency, or person.

§ 1803. Nothing contained in this title shall be construed to preclude any State from providing, or any individual from purchasing or otherwise securing, protection against the cost of any health services.

8 thoughts on “Myth 14: We must choose between the “status quo” and the Democrats’ “reform” plan

  1. This program is fine, except the pre-tax dollar contribution point. Both I and my colleagues are covered by our medical center (NY State) group insurance that comes from pre-tax dollars. We, of course, want to continue this. Why not make all insurance from pre-tax dollars or at least make medical insurance on individual policies fully tax-deductible?

    Thank you.

  2. Where is the alternate plan or any of these reform suggestions other than the here on this website? Why aren’t we hearing this from the Republican’s in Congress as an alternative? You’ve been advocating this for years? Well, where’s the beef?

  3. matthew pincus,

    The reason is that you create a tax incentive for health care consumption over other types of consumption (which we currently have). This results in consumers buying more health care than they otherwise would if based purely upon market prices. The result of that is excess demand for health care and increased health care prices.

    The effect is the same for any consumption. If tennis shoes became tax deductible (while other consumption was not), then demand for tennis shoes would rise. That added consumption is not a reflection of people’s desire for tennis shoes, but a reflection of people’s desire to save on taxes.

    That is not to say health care isn’t more important to many people than other types of consumption, but it is important that consumer’s values for the service are correctly reflected in the prices. If taxes in themselves are making health care unaffordable, then it is across-the-board tax cuts (e.g. income tax cuts) that should be employed.

    The correct approach is not to increase people’s taxes, but to replace employee benefit tax deductions with a revenue neutral income tax cut.

    Your employer is currently spending your money on your benefits. If you encourage your employer to let YOU choose how to spend your money, then your benefits become instantly portable, and your ability to choose drives down prices and creates a market that caters to you, not your employer.

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