Reforming Republicans so Republicans Can Reform Health Care
by FCTA's Arthur Purves, 10/02/2017
One of the defining differences between gubernatorial candidates Republican Ed Gillespie and Democrat Ralph Northam is Medicaid expansion, which Gillespie opposes and Northam supports. Medicaid expansion is part of Obamacare, which the Democrats support and which Republicans failed to replace.
The alternative to Obamacare, is founded on Conservative principles that Republicans long ago abandoned and that they must reassert. The abandonment of these principles causes poverty and high health care costs. Medicaid, which pays about 55% of what private insurance pays and causes providers to lose money, is government's latest attempt to fix what it has just broken.
Government-Induced Poverty
Government causes poverty through taxes and regulation, which suppress jobs,
and schools whose flawed curricula have for decades denied African-American
and Hispanic social mobility. If you are in poverty in kindergarten, you
will be in poverty as an adult. Government benefits for unwed mothers,
combined with cultural secularism are undermining marriage and family: forty
percent of births are out-of-wedlock and are paid for by Medicaid.
The damage to African-Americans is epic. The unemployment rate for Blacks is 8.4%, compared to 4.3% for Whites and 3.6% for Asians. While Blacks are 12% of the population, they are 37% of the prison population, account for 45% of HIV diagnoses, and 53% of homicide victims. It is estimated that one of every four black American males spends time in jail. There were almost 8,000 Black homicide victims in 2016. Gun violence is most common with fatherless children.
The damage to Hispanics is also significant. Their unemployment rate is 5.8%. While Hispanics/Latinos are 18% of the population, they account for about 25% of new HIV diagnoses. In 2010 the Hispanic incarceration rate was 2.5 times the White incarceration rate.
Unemployment is also a contributor to the opioid epidemic. A job may be a more important contributor to health than health insurance. Dr. Stephen Shortell of UC Berkeley writes "Fifty percent of the determinants of health are due to our behaviors; 20 percent to environmental factors; 20 percent to genetics; and only 10 percent to having access to medical care."
A January 2017 report by the American Action Forum found that, among small businesses, Obamacare has resulted in the loss of 300,000 jobs. A 2016 Goldman Sachs reports found "... that a few hundred thousand workers might be working part-time involuntarily as a result of the Affordable Care Act." Add to this the job losses due to low GDP growth during the Obama years. The Democrats will give you low-quality medical insurance, but take away your job.
Black lives do not matter to the Democrats, who ignore Black unemployment, homicides, out-of-wedlock births, and incarceration rates. The Republican alternative of cutting taxes caused by entitlements would create jobs and do more to relieve poverty and improve health, but Republicans do not make their case.
Government-Induced Healthcare Inflation
The Bureau of Labor Statistics reports that between 1936 and 1965, average
annual medical inflation was 3.2%; since the creation of Medicare and
Medicaid, medical inflation averaged 5.9%.
A 2008 report by the McKinsey Global Institute, "Accounting for the cost of US health care: A new look at why Americans spend more," gives the cause of overheated medical inflation. In 1960, 47% of medical costs were paid out of pocket; in 2006, 12% were paid out of pocket. Today's medical consumer has little incentive to shop for the best price and forgo non-essential procedures.
A 2013 Harvard Business Review article, "India's Secret to Low-Cost Healthcare", Indian medical costs, even after adjusting for salary differences between the two countries, are 20% of U.S. costs -- and the quality of care is comparable. Indian hospitals operate efficiently, because Indians co-pay 60% to 70% of costs.
Government Medicare subsidies reduce out-of-pocket costs. To get a tax deduction, employers require employees to use its insurance provider. The employee cannot shop for the insurer with the best deal. In addition, once employees have paid the out-of-pocket maximum, they don't care about the costs. Furthermore, the employer typically pays most of the insurance premiums so the patient does not know, or feel, the full cost of treatment.
The Solution
Republicans should reassert the principles of conservatism, which would
reduce health care costs while lifting families from poverty so they can pay
their own way.
The first principle is personal responsibility. Government does not owe you a living, whether it is food, housing, education, or health care. Government's obligation is to provide an economy with low taxes and regulation, which would result in good jobs so families can provide for their own needs. Also, on average, everybody must pay for all their own medical costs. Democrats require no personal responsibility and instead require someone else to pay for your health-care costs.
The second principle is free markets. The consumer pays out of pocket. Competition will lower costs and provide needed services. Consumers will look for the best value, avoid unnecessary procedures, and check their bills for fraud. Providers will have to post their prices and will have an incentive to be frugal. Consumers will have a monetary incentive to exercise and improve diet.
Insurance should be for catastrophic costs only. The consumer should pay for doctor visits and medicines. Even catastrophic insurance should include a 5% copay for hospitalization, so patients have an incentive to check their bills.
According to a 7/10/2017 article on www.thebalance.com, " The Rising Cost of Healthcare by Year and Its Causes", chronic illnesses, such as diabetes and heart disease, are responsible for 85 percent of health care costs. More out-of-pocket costs would provide a powerful incentive to diet and exercise, thereby avoiding or delaying chronic illnesses. Personal responsibility implies that I will pay the costs of my decisions.
A June, 2004, Health Services Research article, "The Lifetime Distribution of Healthcare Costs", states that "lifetime health care expenditures average $300K and that half of the expenditures are incurred after age 65." Out-of-pocket spending would encourage the use of hospice care instead of expensive end-of-life treatments.
Free markets will provide the most needed services due to the profit motive. Profits are highest for the services most in demand, and these profits will attract more providers, which will eventually reduce profits. Free markets produce abundance, prosperity, and low costs, while government central planning redistributes scarcity.
Free markets also means less regulation, including eliminating in a revenue-neutral way the tax deduction for employer-provided health insurance. Employees could take the $3000 they pay for the employer plan and spend it on a catastrophic plan that they could keep if they change employers. Deregulation would be needed to allow privately purchased insurance to be portable across state lines.
Paying one's own lifetime medical costs is more affordable if insurance premiums are paid starting at a young age. Incentives would be higher premiums if you delay buying insurance coverage plus the threat of even higher premiums if you develop a "pre-existing condition" before buying insurance.
The third principle is marriage and family, which is a powerful antidote to poverty. Children of married couples have a much higher probability of being successful in school, healthy, law-abiding, and self-sufficient. The family is the first-line safety net for income, education, and health care.
A critical issue is the low fertility rate resulting from making career a higher ideal than child rearing. When Social Security began, there were 16 workers paying payroll taxes for every Social Security recipient. Now there are three, and they also have to pay for Medicare and Medicaid. Do I have the right to tax other people's children to pay for my Medicare? With declining fertility, young people have to pay so much for senior care that they cannot afford to marry and have children of their own. Our misplaced ideals are a major cause of the $20 trillion Federal debt.
The final ideal is the Judeo-Christian faith, which teaches honesty, self-sufficiency, fidelity in (and before) marriage, forgiveness, and importantly, caring for the poor. Free markets must be tempered with Judeo-Christian morals. Paying your own way rather than living off of Other People's Money, and if you are an employer, paying your employees fairly, requires selflessness and discipline. While these attributes might be motivated by a final judgment in the next life, a far more powerful motivation is the peace that comes with doing the right thing as defined by nature's God. Those who are prosperous are obligated to help those in need, which help is better done by private charity than by politicians. The Judeo-Christian faith provides the understanding that families continue into the next life, aiding balancing between prolonged medical care and hospice care.
The Democrats spent decades spinning the welfare web, and unwinding it will take years. The sooner reforms are begun the more people can have current benefits grandfathered. The Democrats' expansion of welfare and central planning will perpetuate poverty along with either higher medical costs or shortages.
On the other hand, personal responsibility, free markets, reliance on marriage and family, and a return to the Judeo-Christian faith would reduce poverty, build a middle class that can pay its own way, reduce medical costs, improve health, eliminate Federal deficits, and allow adequate funding of infrastructure and defense without tax increases.
We must actively work for this fourfold solution.