Wednesday, November 25, 2009

The Free Market Alternative to Health Care Reform

The Free Market Alternative To Health Care Reform
Health Care by mintznathan

By: Nathan Mintz, Chairman, Los Angeles South Bay Tea Party

In the current debate over health insurance reform, too many of the proposed solutions offer more government intervention, more insurance and more managed care. However, none of these proposals answers the simple question of whether we should continue building on a health care model that puts ever greater distance between you and your doctor.

Health insurance involves transfer of risk from an individual to a larger pool better able to manage it. The insurer makes money by betting that insurees won’t need to collect on their policy. The only problem with this is that routine, preventative care isn’t a risk but a necessity to stay healthy. While insurance companies can manage catastrophic coverage well, the insurance model makes no sense for routine coverage, and the costs reflect this.

Low deductibles which decouple patients from the cost of care remove much of the economic incentive for care providers to reduce costs. Areas of medicine not covered by insurance, such as plastic surgery and laser eyesight correction, have actually seen a decrease in costs in recent years due to competitive forces.[1]

Further, virtually every doctor’s visit comes with substantial administrative cost. As of 1990, administrative and office costs have grown to represent nearly 60% of doctor’s clinical costs. These costs now amount to over $140,000 per physician— that’s $50 billion/year nationwide.[2]

What if we could create a system where a doctor’s visit cost only $50 out of pocket, without ever dealing with an insurance company? This is exactly what Dr. Robert Berry’s PATMOS clinic has achieved in Tennessee. He accepts only out of pocket payment for care, and the average cost for a visit is $53. By cutting insurance out entirely, they have reduced costs dramatically.[3]

This direct care model frees doctors from the trouble of haggling with insurance companies over what services are covered and which aren’t—leaving them time to focus exclusively on providing quality care. The results are startling: Dr. Berry's clinic charges 60% of what other physician's charge and 10-20% the cost of visiting the ER.

Dr. Berry’s case isn’t a fluke: dozens of direct care practices exist across the US. All of them offer medical care at a fraction of the cost of an HMO. These practices carry substantially lower patient loads than regular physicians, focus primarily on preventative rather than reactive care, and report patient satisfaction rates of over 90%.[4]Further, patients enrolled in a direct care system report 80% lower hospitalization rates than those with commercial insurance.[5]This is the affordable well care system America needs.

With this in mind, a reform plan that will actually reduce costs should focus on three central themes:

* Shifting Decision Authority. Shifting the power to make health care decisions away from insurers and back to families and doctors.
* Shifting back to a catastrophic insurance model. Refocusing health insurance companies on what insurance does best: catastrophic coverage.
* Freeing Doctors to Practice Medicine. Curtailing malpractice issues that are keeping doctors from focusing on prescribing the appropriate amount of care.

Proposed Policy

In support of these goals, we propose the following reforms:

1) Encourage payment for routine services from Health Savings Accounts (HSAs) by structuring them like a retirement plan. Decouple HSAs from insurance companies and make them private accounts in the name of the individual that can be rolled over when you change employers or insurance providers-- just like your 401(k).

2) Remove tax incentives for an insurance system driven on employment by taxing employer provided health benefits as regular income. To ensure individual taxes don’t increase, raise the minimum taxable income to cover the difference. This evens the playing field for the self-employed and eliminates the insurance gap faced by the unemployed.

3) Limit contingency fees for medical tort settlements. While medical liability claims resulted in 5 billion dollars in payouts in 2005, 93% of doctors admit to overprescribing treatment for fear of liability, so the indirect costs of litigation are much greater.[6] Capping contingency fee awards at 1% or labor charged, as opposed to the current statutory 1/3 of damages, will remove much of the incentive for attorneys and clients hoping to hold out for multi-million dollar settlements.

4) Establish a national “no fault” settlement system for high risk specialties such as obstetrics. In this system, a set amount is awarded where a mishap is determined to have occurred, with the intent being to finance care for the injured. Certain medical procedures are riskier than others, and doctors should be lauded, not penalized for choosing to perform them.

Going further down the road of more involvement with insurance companies will only lead to further rising costs. The reforms mentioned here will reduce costs and bolster the patient doctor relationship. These steps will help put our health care system back on track to success.

Nathan Mintz is the Chairman of the Los Angeles South Bay Tea Party, an organization of over 1000 voters in the South LA region advocating for common sense and fiscal discipline in government. Him and his wife reside in Redondo Beach, CA.

[1]Schiff, Peter Fox News Interview, August 14th, 2009. Available:

[2]Gonzalez, Physician Marketplace Statistics; and Gonzalez and Zhang, Physician Socioeconomic Statistics 1997/1998. Assume 300,000 physicians in private practice nationwide.

[3]Berry, Robert MD, Prepared remarks from testimony before the Joint Economic Committee of Congress, April 28, 2004. Available:

[4]MDVIP, “Reasons to Switch”. Available:

[5]MDVIP, “Health Statistics” Available:

[6]Sage, William, MD et al. “The Jury’s still out: a critical look at malpractice reform”. Center for American Progress.

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