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POLICY BRIEF FROM AMERICANS FOR TAX REFORM
Health Marts, A
Free Market Health Care Solution
by Peter
J. Ferrara
In this Policy Brief:
Introduction
A new Republican health care proposal,
spearheaded by Rep. Tom Bliley (R-VA), would greatly expand freedom
of choice and control by workers and consumers over their health coverage
and care. This idea would be far more effective in helping patients
than federal regulatory proposals masquerading under the label of a
patient bill of rights, which would actually reduce the freedom of choice
of patients in some ways.
The Health Mart Proposal
Health Marts would be co-ops of workers,
employers, insurers, and consumers. Instead of picking the health insurer
for all the company’s workers, the employer would sign up with
a Health Mart. The Health Marts would offer workers a wide range of
health coverage choices – HMOs, traditional insurance companies,
Medical Savings Accounts (MSAs) and others. The workers would then each
pick the health insurer they preferred.
People who like HMOs could then still
choose them. Those who did not want HMOs could choose traditional insurance,
or an MSA. Health Marts would in fact make the highly attractive MSA
alternative far more broadly available. MSAs include traditional insurance
coverage for catastrophic expenses, and a savings account for lesser
expenses that patients can keep if they don’t use it up. These
plans maximize patient control and choice over their own health care,
with incentives that have proven even more effective than HMOs in reducing
costs.
The Patient Bill of Rights Fallacy
Proposals for a so-called patient of
bill of rights are motivated by restrictions on access to health services
and treatments imposed by HMOs and similar managed care insurers. These
proposals would grant patients various rights of appeal and to sue in
court to force access to the care and specialists or other health care
provider the patient wants.
HMOs offer patients a tradeoff. They
reduce costs and, in some cases, expand services. But in return, patients
give up ultimate control over their health care to the HMO. To the extent
the HMO finances the care, it ultimately decides what care and services
the patient receives and from whom.
However, a large proportion of Americans
do not want to accept this tradeoff. They do not want to cede such decisionmaking
authority over their health care to an HMO. This is particularly so
given the incentives an HMO faces. Take the case of a cancer patient
continuing to pay the HMO a standard monthly fee. The HMO loses a fortune
every year it keeps the patient alive. While HMOs do not affirmatively
seek to deny essential care to such patients, the perverse HMO incentives
have their wearing effect over time, particularly in regard to judgment
calls on whether to use more ore less advanced, expensive, and heroic
treatments.
Nevertheless, people should have the
choice of the HMO model if they want it. Millions of people across the
country, including very sick people with expensive illnesses, report
great satisfaction and high quality services and care from HMOs. For
healthy, busy, young people, HMOs may be a good deal, particularly when
they offer services like 24 hour walk-in clinics.
But proposals for a so-called patient
bill of rights effectively deny people the freedom to choose the HMO
tradeoff if they want it. To the extent such proposals are effective
in forcing HMOs to pay for any medical services the patient desires
from any specialist or health provider the patient wants, HMOs would
no longer be HMOs. They could not cut costs by eliminating expensive
or unnecessary care, and by using lower cost health care providers.
HMOs would be forced to be just like traditional, high cost, insurance
companies.
Health costs would then rise sharply
again, more people would become uninsured as a result, and people would
lose the choice of a real HMO option.
Choice v. Regulation
Yet, there is a serious problem in
the health care system that the supposed patient bill of rights is trying
to address. More and more across the country people today are not choosing
the HMO option freely. Employers are increasingly sticking workers in
HMOs regardless of their preferences. Forcing the HMO tradeoff on people
who don’t want it is what is creating the growing animosity toward
HMOs across the country.
The Republican Health Mart proposal,
however, is the perfect solution to this problem, far better than a
so-called patient bill of rights. In the Health Mart, people who like
HMOs would still have the choice of real HMOs. Indeed, competition between
several different HMOs the worker could pick would force all of them
to behave better.
But those who did not like HMOs could
avoid them and pick something else, including low cost MSAs. And when
workers are unhappy with a choice they made, they could leave for another
health plan.
In contrast, with a patient bill of
rights the patient has to rely on faraway government bureaucrats to
enforce their supposed rights. When HMOs evade compliance, patients
have to get a lawyer and sue. Indeed, if the bill of rights just grants
patients rights of appeal to independent boards and then the right to
sue, patients will not necessarily have the right to the health care
or providers they want in any event. Such rights of appeal and suit
don’t change the right of the HMO to say no when it thinks the
cost savings are justified.
Just choosing another option in the
marketplace through Health Marts is far more practical and effective.
Workers and patients could then pick the health plans, like MSAs, that
allow them access to the care and providers they want.
The bottom line is that freedom of
choice, as through Health Marts, is far more effective than federal
regulation, as through a so-called patient bill of rights.
Republicans should vigorously promote
their Health Mart proposal to the public, and drop ineffective regulatory
patient bill of rights proposals.
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