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Public Statements

Issue Position: Healthcare

Issue Position

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I strongly believe that the best way to control costs in any industry, health care include, is free markets. But health care is an industry that is one of the most regulated by our federal government. Therefore we must think of an alternate approach.

Not all issues are cut and dried when we try to apply consistent principles. Often the application of ideas can bring about an unexpected position. This is the case with my stand on health care costs. After all, it is not the government's responsibility to regulate commerce except to make it fair. So how does that lead to a Libertarian solution for out of control health care costs?

The solution that I want to bring to the issue is to enforce competition such as should occur in a free market health care arena. We can't say that the health care market can decide, because the industry is tied down with a labyrinth of government regulations and interference from the insurance industry that is also laden with regulation. So the best answer is to tie in place a competitive system that can be the catalyst for introducing more competition and fostering an environment where government intrusion can be weaned out.

Looking at competition, from basics we know that supply and demand affect prices. Since we have a big but limited supply of health care and a virtually limitless demand, we naturally expect prices to be high, and we are not surprised to find that to be true. But we can make sure they are not pushed higher by non-market forces.

Let's look at one example to see how the prices become unstable. Consider an aspirin administered in a hospital. Many of us are familiar with the $100.00 aspirin. Why should a hospital be able to charge such an outrageous amount? I don't accept that dosing sensitivities or other medical magic determines price. If I had to pay that out of pocket, I would have a friend sneak in a $1.99 bottle and the case is closed. So why would this happen?

The answer that we all know is that we don't have to pay for it. Directly. If insurance agrees to pay $100.00 for a pill, that is not worth arguing about. And yet, if the insurance company and the hospital can negotiate a price without patient involvement, then there is no way that competition will ever push the price down. Ask me what I am willing to pay and there is a good chance I could save the insurance company about $99.00.

This example is common, although the results are different for different people. If I come into the health care provider with my top of the line Blue Cross PPO plan, I can be sure that even though the provider wants to charge $100.00 for a routine visit, my plan will negotiate a price of $70.00. I then pay my portion of the $70.00 and everyone is happy. Everyone?

Maybe the next person has Medicare and Medicare agrees to pay $50.00 for that same visit. That is still better than $100.00, but we didn't get treated the same. Nor will the next person, who comes in without any insurance and gets billed for the whole $100.00. The person who may be least able to pay is charged the most. Unless that person is indigent, in which case the whole bill may be written off by the doctor. In each of these cases where insurance is involved, the patient is incidental to the financial part of the transaction.

Since Medicare represents a public subsidy, and the private PPO represents a private subsidy, competition does not occur and prices remain artificially high. There is no incentive for the provider to compete for your money, nor for you to shop for the best price. This is a complicated but obvious price fixing scheme in which the patient is incidental to the negotiation.

This situation is also potentially discriminatory. The obvious distinction from first sight is one of employment. The PPO plan may likely be provided by an employer, since such high priced plans are out of reach for most people. The Medicare plan is often for lower income, elderly and handicapped people. And, too, the uninsured may be from the ranks of the unemployed or those in jobs that pay less. This leaves open the potential for class distinctions that are unfair or provide unequal access based on some attribute of the consumer. Not everyone in a free market can afford all levels of service, but this market isn't free and benefits are not proportional to any attribute of the patient, only of the insurance plan.

If we were to mandate that all prices must be advertised equally, regardless of patient or the patient's class distinctions, then the patient is reintroduced into the price negotiation process. This would be like a menu of prices for the patient's consumption. For example, a regular visit will be charged at $90.00 to all who enter. If an insurance company pays for only $80.00, then the patient pays $10.00. Unless the office down the street offers the same treatment for less. The patient can then choose the lesser price. Competition is again in effect for the benefit of the consumer. The downward pressure on prices will have the same effect as free markets in an otherwise over-regulated business.

The same can be said for services that are paid for by job or by the hour. As long as the price is advertised and the menu is the same for all customers, the provider is at risk of losing business if the rate is too high.

One of the advantages of this solution to escalating health care costs is that it can be done at the state level without the need for national government interference. In fact, national initiatives attempt to insert more layers of regulation which will further marginalize the consumer. Along with some modest improvements to insurance rules that also encourage a freer market, the present national plan could be pre-empted entirely.

I favor a state solution to perceived problems in the health care system. I will work to establish by law that all providers use one menu of prices for all health care products and services. Graduated pricing based on individuals' level of insurance or other class determinant is discriminatory. Menu pricing will re-introduce competition into the health care industry.


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