Today's Opinions, Tomorrow's Reality
The Misguided Effort to Reform Health Care
By David G. Young
WASHINGTON, DC, November 2, 1999 --
The intense hatred felt by many Americans toward the managed care industry has become so extreme that passage of a final version of the bipartisan "Patients' Bill of Rights" is a virtual certainty. Congressional Republicans, who disingenuously claim to oppose expanding federal regulation, are poised to do exactly that. Their pandering behavior will be a destructive force in the evolution of the American health care system.
People hate managed care companies with good reason. Infuriating anecdotes of denied claims -- some including charges of causing premature death -- abound. These stories mesh well with many people's first-hand experiences of premature hospital discharges and bureaucratic claim processes to paint an abysmal record of customer service.
Public outrage on these issues is certainly justified, but it is off the mark on one account. Generally speaking, people are not the customers of managed care companies, and thus they should not be surprised when they are treated accordingly. Virtually all people covered by managed care have their premiums paid by their employer -- with or without employee contributions. The service contract in these cases is between the employer and the insurance company. The patient, in this arrangement, is nothing more than a financial liability -- and therefore gets treated with near contempt. Insurance companies are totally indifferent to reports of outrageous anecdotes that take place under their plans because they know that patients can't do anything about it, and the employers, who do have the power, frankly don't care. It is precisely this employer-sponsorship that has made the heath care environment so hostile to consumers.
It is ironic, then, that Congress should portray itself as the savior of the American public when it is the very organization that created the dysfunctional system. Congress has created a tax code that allows employers to buy health insurance for their employees tax-free. If individuals buy health insurance for themselves, the payments are subject to the federal income tax, usually adding thousands of dollars to an annual cost per person. These destructive tax codes have make employer-sponsored insurance the norm, and led to the rise of managed care as a means of saving employers money.
The impending "patients rights" bill does nothing to reverse this fundamental flaw. If Congress were truly interested in meaningful reform, it would eliminate destructive tax codes that encourage employers to provide health insurance. Employees, flush with extra money from a more cash-oriented compensation package, would be able to directly choose and buy their own health insurance.
A truly reformed system would lead to a new class of consumer-oriented health insurance plans. Insurance companies would be forced by market forces to design plans that have features people actually want -- including coverage for longer hospital stays, simplified consumer-oriented claims processes, and a wider choice in participating physicians. The consumer would certainly feel any increased costs associated with such plans, but the creation of choice would empower individuals to make such cost-benefit decisions for themselves.
Perhaps the greatest advantage of an individualized system would be the end of the loss of health insurance with each change in employment -- an adverse consequence of today's arrangement that eventually leads to lack of coverage for preexisting conditions. The modern economy no longer embraces lifetime employment, making company-sponsored insurance completely out of date.
However beneficial, a shift away from employer-sponsored health care is not on Congress' legislative agenda. To get it there, consumer consciousness must be aroused. Managed care bashing -- however satisfying -- will do nothing to advance this goal.