Friday, November 15, 2013


There’s a lot of talk (justifiably so) these days about how bad Obamacare is. Which brings up a couple of questions:

·        If we get rid of it, doesn’t that put us back in the same mess we were in before Obamacare was put out there as a solution?
·        Instead of just being negative about the mess that is Obamacare, why not offer some positive alternatives?
The best starting point is often principle. The economic principle behind the problem of high health care costs is—something has interfered with the natural market price. Get rid of the interference, and prices reach an equilibrium point with demand.
We went through some of this in the November 6th post, showing the history of government interference leading to separation of who gets services from who pays for services. I remember a student paper I edited back in college on socialized medicine. My purpose as a writing tutor was to help the student make his/her point clearly. But this one I had to say just wasn’t convincing. And it was with a fellow tutor, so I was allowed to be tougher than on a regular student. His point was that medicine isn’t like other free market services, because you never know when you’re going to need the service—so the solution is for government to step in. I argued that, while I might not know all the solutions, the pricing problem would be better solved by getting closer to the market rather than further away.
I did have to think, though, about whether medical care was different in some way from all other goods and services. It can be unexpected and unplanned for.
But so can car care. Even with an aging car, there are some things you can predict. You can, for relatively low cost, do some basic maintenance that will help the car’s longevity: change the oil, check the fluids, clean whatever needs cleaning, replace whatever needs replacing. You can budget in for those things. As the car reaches a certain age, you start expecting bigger things to need repair or replacement—like transmissions. If you own an aging car, a good rule of thumb is to expect to pay in repair close to what you’d be paying in payments on a new car—and then if you get lucky enough not to have that many problems, you’ve got savings in your budget.
Most of us do typically get insurance for accidents—to help pay for our own repairs, if necessary, and, even more important, to pay for repairs of anyone we cause damage to. We can try to avoid accidents with all kinds of safe driving, but, still, accidents happen. So insurance coverage for those car versions of catastrophic illnesses is probably worth putting in the household budget.
We don’t buy insurance to cover basic car maintenance, because the basic principle is to insure against the unpredictable, not against the expected. You can, of course, buy maintenance plans, if that helps even out your budget—but you can be certain the seller of those extended warranty plans is doing it as a money maker, not as a service-out-of-the-kindness-of-their-hearts.
Is health care different? Most medical services are basic maintenance and repair. The costs would have been responsive to market pricing, if the payer had stayed in touch with the cost. Some people have pointed out how responsive veterinary medical care still is—because the pet owner, not a distant insurer, is directly paying the cost.
Would it be a good idea to also budget for unforeseen catastrophe? Yes, that is what insurance actually is.
The point is, medical care is still like other things we address through the marketplace. It just looks impossibly expensive—it is. Because the connection between the service receiver and the payer has been broken. Any solution has to move in the direction of the market, so that prices can realign.
Are there any such solutions?
Yes. Yes, actually, some of these have been on the table since long before Obamacare. The standard list includes: allow insurers to offer policies across state lines, increase use of health savings accounts, encourage low-cost clinic care for the uninsured rather than emergency rooms.
The list was repeated by Senator Ted Cruz on Tuesday’s Mark Levin radio show. Cruz suggests we repeal the entire Obamacare bill and start over. And what then? I transcribed a few paragraphs:
[At 5-minute mark]: We ought to enact real healthcare reform, that allows people to purchase health insurance across state lines…. Economics 101: if you want to expand access, cost is the biggest barrier, and ideally we should see a marketplace where cost goes down and people have a lot more choices…. We ought to empower patients so that insurance is personal, it’s portable, it’s affordable. Like your car insurance, it goes with you from job to job and you own it. And you can buy it across state lines. That would do far more to improve healthcare than anything in Obamacare.
[At 7-minute mark]:  If we would simply allow people to purchase health insurance across state lines, what we would see is a 50-state marketplace—real competition—so that, for example, young healthy people, many of whom don’t have health insurance now; if they had the access to low-cost catastrophic policies, they may well choose to buy it. But if a 22-year-old single man has to buy a comprehensive plan that covers everything, including a hip replacement, which he’s not going to need for 50 years, he’s not going to buy the insurance, because no one wants to spend the money that Obamacare is trying to get people, to use to subsidize other folks. It’s a totally misguided policy.
[At 14-minute mark]:  Imagine three years ago, when this was being debated, if President Obama said, “I’ve got a great plan. I’m going to take away the healthcare of 5 million Americans in order to cover 100,000. And while I’m at it, I’m going to jeopardize the healthcare of 100 million Americans who have employer-provided plans…. And while I’m at it, I’m going to cost millions of jobs and force millions of people into part-time work, working 29 hours a week.” Is that a good deal for America? People would have laughed at it. If he’d simply been honest, he would have been laughed out of the room…. [When he said you could keep your plan] He “misspoke”? He said it 28 times, unambiguously. Because the only way to sell this law was to mislead the American people.

There are a few out-of-the-box ideas as well—as you’d expect from a real free market. I’ve heard a couple of interesting interviews recently on radio, with doctors who suggest a new model for basic medical care. A few days ago I wrote down a name to look it up later. I found an article about the model presented by Dr. Josh Umbehr. He has a practice in Kansas, along with two other doctors and one nurse.
Dr. Qamar of MedLion Direct Primary Care
on Fox Business News
He calls it a concierge model. It’s also called direct primary care practice. Families pay a set fee, something like $50 per month per person, and get access to their primary care doctor as needed—by phone, in office, whatever is needed. Like having your doctor on retainer.
Prescriptions can be filled at very low wholesale rates. Many tests can be done at minimal costs as well. Off the bat, there’s an overhead savings of 40% just by avoiding insurance paperwork. This type of service covers the basic maintenance issues that you need to budget for, not hedge your bets against with insurance. They encourage people to additionally get a low-cost catastrophic policy, or self-insure with a health savings account if they can.
When I was searching for more information about this idea, I came across an interview on Fox Business News on November 13, with Dr. Samir Qamar, of MedLion Clinics. His plan seems similar to Dr. Umbehr’s. It’s a model that can be picked up by primary care doctors across the country—to save money for themselves and their patients.
When there are pricing problems, there are always market solutions. Even when the product is medical care.

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