The American Affordable Health Choices Act of 2009 would require all Americans to have health insurance. To assure access to affordable coverage, the bill expands the Medicaidprogram to cover all adults with incomes below 133 percent of the federal poverty level (FPL) ($29,300 for a family of four), and provides premium subsidies for people living between 133 percent and 400 percent of the FPL (i.e., $88,000 for a family of four). It also requires most employers to contribute to the cost of coverage for their workers.

The bill also establishes an “exchange” that presents a selection of health coverage alternatives including a newly created public plan that would compete with private insurers for enrollment.  Insurance markets are reformed to assure guaranteed issue of coverage to all applicants regardless of health status. Also, insurers would be prohibited from charging higher premiums on the basis of health status. The Act also includes a series of reductions in spending under Medicare. 

Key findings:

The number of uninsured Americans would be reduced by 32.6 million; Medicare and Public Plan reimbursements to hospitals would fall an average 32% below private insurers; 14% lower for physician services; premiums for a public plan would average 20% less than private insurance plans; Public plan enrollment would increase by 33.6 million (if the exchange was open only to small firms) to 103.4 million (if the exchange was open to all); Private plan enrollment would decrease by 34.9 million (if the exchange was open only to small firms) to 83.4 million (if the exchange was open to all); Between 2010 and 2019, if participation is limited to individuals and small firms, the legislation would cost the federal government $902.7 billion before tax increases and Medicare/Medicaid payment reforms, and $100 billion after those changes; If all Americans are permitted to participate in the public exchange, total cost to the federal government over the same ten year period, before offsets, would be $858 billion, and $55.3 billion after the changes.  (But, as we have seen above, the CBO anticipates that rather than "bending the spending curve" downward, as Obama stated in defense of his plan, deficit spending for HR3200 would balloon.) 

In effect, the "public option" would see the end of private insurance.  A public plan does not operate under the same constraints of private companies.  For one thing, it doesn't have to turn a profit.  As an entitlement, it has access to taxpayer dollars.  Individuals will gravitate towards the subsidized, "free" public plan.  Companies will be happy to dump their employer based plans and move workers onto the government program.  As more and more Americans enter the public plan, private insurance will necessarily be forced to raise rates.  Over time, there will be a series of failures and withdrawl from the market by commerical insurers leaving only the public option.  As the government assumes more and more of the burden of health care in the country, with greater demand and cost, there will come the inevitable need to ration.  Expect long waiting lines for your knee replacement, CT scan, or cancer treatment.  Medical research and innovation will depend on the bureacrats and bean counters in Washington.

As we know, state run health care systems such as are found in Europe and Canade are based on government targets and compete against other programs and priorities.  Because funding is never adequate, quality issues inevitably arise that while perhaps accepted in nations grown accustomed to such inefficiencies would be intolerable in America.  These include limiting access to specialists and sophisticated technologies such as MRI or CT scans, rationing, long waiting periods, poor quality medicines, shortages, and hospital and clinic closures at odd times because of budget shortfalls.  When money runs out, the doors close.  There is also much less spent on research and development.  Whereas socialized systems may invest in staff and infrastructure, they tend to shortchange new medicines and technology; the reason is that workers may complain or go on strike.  Research, however, is long term and can be underfunded without anyone noticing.  If one is looking for the latest and most sophisticated procedure, treatment, or drug for a serious or life threatening condition, one would be far more likely to find it in the US than elsewhere.

And, indeed, the US is the world leader in medical innovation, which may drive costs up but also saves lives.  In 2003, for example, the US spent $94 billion in research and development with 57% coming from private industry.  The NIH (National Institute of Health) budget for 2006 was $28 billion.  For all European Union governments, the total was $3.7 billion in 2000 nor have they attempted to narrow the gap since then, this despite the US having a smaller population than core EU nations.  More than four times as much money is invested in private American biotechnology companies than European. 

In the last ten years, American born researchers have won 12 Nobel Prizes in Medicine.  Three foreign-born scientists working in the US have won three, while only seven have gone to researchers outside the country.  The research environment in the US is much more vibrant, competitive, and meritocratic than in Europe, and more tolerant of a degree of chaos and misadventure, conditions sometimes needed for medical breakthroughs.  There are 400,000 European researchers living in the US usually because of better compensation and research capabilities. 

The US leads the world in medical research and development because it rewards risk taking and innovation.  Other nations may then benefit from our medical advances.  Drugs are usually sold at cheaper prices in Europe and Canada.  Drug companies have to sell their products at higher prices in the US to make a profit to fund their research.  Other nations then benefit from their efforts.  The US, it can be said, subsidizes medical research for the rest of the world.  In single payer systems, politicians, bureaucrats, and actuaries will decide how money is spent on medical research.  When faced with limited budgets and competing interests, inevitably research will suffer.  In a free market based system, it is private companies and, ultimately, consumers and health care providers that decide.

Cancer survival rates in the US are also much better than our counterparts in Europe and Canada that employ the single payer model.  The reason is earlier diagnosis and treatment based on improved access and shorter waiting times for crucial imaging studies, screenings, tests, and intervention.  Waiting times of several months can make a big difference for cancer patients.

For example, American women have a 63% five year cancer survival compared to 56% for European women.  For men, it is far worse in Europe: 66% to 47%.  In Great Britain, with its 50-year-old state-run "National Health Service," five year survivals are worse than the European averages: 53% and 45% for women and men respectively.  The US also fares better than our northern neigbors in Canada.  The breakdown by individual cancers, such as prostate, bladder, lung, or breast cancer, all follow this pattern with improved numbers for US patients.  The key, of course, is early detection and then rapid access to treatment.  Far higher percentages of American women recieve regular pap smears and screening mammograms than their counterparts in Europe or Canada.  Five year survival rates for breast cancer are higher in the US than Europe: 84% to 73%.  For prostate cancer: 92% to 57%.  And, so, even with our uninsured, the US performs better than state run alternatives in screening and treating cancer.

Service and efficiency are also greatly compromised in socialized systems.  In Britain, more than 700,000 patients are waiting for hospital treatment. In Canada, after a referral it takes, on average, seventeen weeks to see a specialist. In Germany and France, approximately 50% of prostate cancer patients will die from the disease, but in the United States only 20%.  As a result, many nations with single payer have reintroduced free market approaches to improve their dismal numbers including Sweden, Britain, Australia and elsewhere.   

Waiting times for sophisticated imaging studies, procedures, and treatments between the US and single payer systems is another parameter that merits scrutiny.  Canada, for example, has one-third fewer doctors per capita than the US, because of government policies restricting class size, also known, by the way, as rationing.  Some Canadian towns have lotteries for too few available medical appointments.  Canadians waited an average of 17 weeks before seeing a specialist after a referral by a primary care physician was made.  There is a median-wait-time of nine weeks for an MRI scan, a 31 week-wait to see a neurosurgeon, and a 37 week-wait to see an orthopedic surgeon (nearly nine months).  Canadians are not allowed access to the medicine avastin for colon cancer because of its expense.  There is also an eight month wait for colonoscopies in Canada.  Forty one percent of Canadians with colon cancer die yearly compared with 32% each year in the US.  Hundreds of Canadians in the midst of an acute heart attack come to the US each year to recieve life-saving angioplasties or stents not available in Canada.  Without a "private option" in Canada, Canadians must come to the US for critical and often life saving treatment.  The US is the private option for Canada.  The Cleveland Clinic, for example, has an office in Toronto.  There are also inequities in access to procedures and treatment in Canada (supposed to be equal and universal), based on income.  There are many such examples.  The point is that because of delays in treatment and diagnostic or screening studies, patients in single payer systems based on government rationing of health care through long wait-times and limited access, patients' health is compromised and lives may be lost.

To summarize these points: the single payer system works well as long as nothing major is needed.  But for anyone requiring a significant intervention, whether it be an MRI scan, a hip replacement, cardiac stent or angioplasty, or cancer treatment, say, the results are less than favorable.  When everything is "free," the demand becomes infinite.  But as with any limited resource, such as health care (or anything really, except, perhaps, air), the costs will inevitably go up as more and more people avail themselves of the "free" resource.  The only way to control costs is to limit access, which means long waits and rationing.  There simply is no other way.  Only that it is government bureaucrats and politicians making such decisions in an entirely politicized, centralized, bureaucratic, actuarial, budget strained atmosphere (as opposed to doctors, patients, and families).  Innovation and research, in such a setting, inevitably suffer because no one will fuss about it, until, perhaps, years later when the population realizes how much it has lost over the decades, and when other nations with more open systems are exporting cutting edge technologies and drugs to them.  Perhaps by then they may ask - or perhaps not.  As the eyes gloss over after years of government dependency, the will to challenge the status quo may by then be lost. 

Bureaucrats and actuaries are by nature cautious individuals who are not likely to agree to expensive research protocols, which are needed to determine optimal treatments or to develop new medicines or technologies.  It is simply too random and unpredictable.  For that, the free market is needed, venture capital, risk takers, researchers, and innovaters.  In other words, pioneers who will stake out a new position, step outside the standard templates or paradigms, and come up with new products and services that drive the medical field (or any industry) forward.  There is no room for that sort of mentality in a socialized setting and hence innovation will dry up and the country will fall behind.  Liberty, in other words, (and, hence, innovation) is incompatible with socialism.

A word on rationing.  The left often counters arguments about "rationing" in single payer systems by stating that private models "ration" by cost, that all individuals cannot access the system because of high costs and inequities in income.  We have already shown how Americans in general enjoy far greater access, cancer survival rates, and shorter waiter times than counterparts in other countries employing a single payer model.  But the argument is actually more fundamental than  that.  Everything in life is "rationed" by price.  Can everyone afford a mansion?  or a Mercedes Benz?  Or a cruise on the Danube River?  Or filet mignon everynight?  No, of course not.  Is that rationing?  Well, perhaps, but it is based on individual choice and one's ability to pay.  Health care is a product like anything else; it does not grow on trees.  It is based on many years of effort, persistance, and intelligence.  If one can pay then one can have it.  But that is between the consumer and the provider of the service or product.  But no one would say that it is a right.  If one has a "right" to a car or, for that matter, to Health Care, then one is also saying that one has a right to someone else's money, because if one is not paying for it than someone else is.  If the government decides that everyone is entitled to health care as a right, then one is defending state mandated robbery, since many individuals are unable to pay for it themselves.  If one provides health care to a patient that pays for it, that is just or proper.  And not based on rationing but rather free choice and normal business relations.  If the government decides everyone must have access to free health care then the government will also decide prices and access, in violation of the rights of the provider who is forced to provide health care at below market prices and the taxpayer forced to pay it.  This is rationing by brute force.  The free market on the other hand respects the rights of individuals to freely choose without coercion.  Even if we accept the notion that health care is "rationed" by price (along with everything else in the economy, and, as it should be, in a world of infinite demand and limited resources), then one can also say that, first of all, no one is denied care.  Secondly, in a free market (to repeat), "rationing" is a result of allocation of prices and is based on individual choice.  In a single payer system, it is rationed by coercion or brute force: central planners making health delivery decisions, restricting access, the use of certain medicines or technologies, or paying well below the market price based on government budgeting targets resulting in waiting lists, poor quality, and a sterile research environment with minimal innovation and progress.  Basically, Soviet or Cuban medicine.  One look at the NHS in Britain, after sixty years of government run health care, completely free at the point of access and funded by taxpayers, where cancer and health disease survival rates run well below that of European neighbors whose consumers at least have to pay something, replete with the most untidy and disheveled hospitals in Europe.

Other points of interest:

NICE or the National Institute of Health, established in the 1990s in Great Britain to ensure that "best practices" were employed in the government run National Health Service, that evolved into - you guessed it - a rationing board.  As health care costs have risen, NICE has taken as its mission to control costs by restricting access, medicines, and treatments to its 61 million citizens covered by the NHS.  They have ruled on any number of items that would never pass muster in the US: limited the use of Aricept for Alzheimers; blocked the use of Macugen and limited the use of Lucentis, both effective treatments for macular degeneration, which can cause blindness; rejected Kineret for rhuematoid arthritis, Avonex for mulitple sclerosis, and lenalidomide, for multiple myeloma (all of the above because of expense of medicines).  Private insurers in the US cover all or most of the cost for these medicines.  Female patients below age 25 are denied PAP smears, some of whom have gone on to develop cervical cancer.  There are many other examples.  In a government run health care system in the US, there will be a NICE equivalent also making these decisions for us.  It is true that US insurance companies deny some reimbursements for care, but this is based on price mechanisms and not by government fiat.  There are always other companies and arrangements that can be made, but none when government controls health care as it will if the Obama plan is passed.

QALY or quality adjusted life year: This is a complex formula NICE has developed by which it has decided that Britain cannot spend more than $22,000 to extend a life by six months.  It is an arbitrary number based on how much Britain wants to spend for health care.  So, in the last six months of life, a very difficult time under any circumstance, and the time in which most health care spending occurs, it will be central board making end of life decisions, cutting off care after $22,000, and not the doctor, patient, and family.  And, so, despite his protestations, as budget pressures rise, with Obamacare there will inevitably be a NICE equivalent telling Americans they are not worth the money.

Health "Insurance" Reform: The tax code benefits or subsidizes employer provided insurance but penalizes single buyer health insurance.  In this way, as in so many other ways, it is government policy at the center of many of the health insurance issues confronting the country.  But for the left, it is never the government but only greedy capitalists.  Let's take a quick look and see.

Most people get their insurance through their employer, which means there is a relatively small individual insurance market, roughly 15 million; it is here where most of the insurance horror stories come from.  In the large employer based insurance market, most of the insured pay the same price because there is a large enough pool where risk is sufficiently diffused, keeping the price down for everyone.  In the individual market, however, with relatively small numbers and high turnover (as they shift into employer based insurance once they find their next job), the risk pool is too small, forcing costs up.  So, we see again the unintended consequences (as we did with CAFE, Fannie and Freddie, Great Society, etc.) of government policy bringing misery not benefit to society.  See below on suggestions for targeted health insurance reform, one of which would obviously be to de-link health insurance from employment by giving individual buyers the same tax break that employer based insurance recieves.

Guaranteed Issue: this is another garbled attempt by politicians to fix a problem they created in the first place with another misguided policy that will only make it worse.  To prevent "discriminating against the sick," Obama and his merry crew will force insurance companies to cover everyone at anytime at near uniform rates.  The effect of this will be that many individuals will wait to buy insurance until they actually need it, thus driving up rates for everyone else including those who responsibly buy insurance before they need it.  Those inclined to do so, will be less inclined when they see the high costs, thus magnifying the problem.  Fewer customers, more of them high risk, waiting for the last minute to buy.  Costs go up.  Further, individual insurance companies have abandoned those states with such regulations making it more not less difficult for single buyers. 

Community Rating: Another well intended reg that makes things worse.  This reform imposes uniform premiums regardless of health status.  On the surface, it sounds wonderful, keeping insurance companies from gouging the sick.  The reality though is something else.  And for similar reasons as "guaranteed issue."  Young or low risk individuals will not enter the market because of the high rates needed to cover all those individuals with prior significant illness.  Insurance companies then have to raise rates even higher, refuse to cover certain high risk individuals, or, again, simply abandon the market because of the exposure. 

This is why so few states today have guaranteed issue or community rating and allow varied premiums.  The three states today that have both regulations, Massachussets, New York, and New Jersey, have the highest rates in the country, two to three times the national average.

Obamacare would impose these failed regulations on the entire country, and in so doing destroy what is left of the private insurance market.  There are far better, targeted free market solutions.

Mandates, Regs, Commissioners, Committees, Payback, surveillance, Bureaucracy, Big Government: HR3200 is nearly 1100 pages chock full of legalistic, technical language that will complicate life and squeeze off free market health care; it was not written nor read by our "representatives."  There will be a massive bureacracy with 55 newly created agencies, new mandates, regulations, taxes, a health care council and commissioner (perhaps, "czar" would be more appropriate), and, of course, armies of lobbyists, PACS, and politicians making decisions based on competing budget priorities and spending caps over health care: in other words, life and death.  

Some of the choicer items: A government committee will decide treatments and benefits (some version of NICE); Government will audit self insured businesses; direct government access to your bank accounts; use groups such as ACORN to sign up individuals to for public option; government will decide salaries of doctors; mandatory end of life counseling; community based home medical services (ACORN, again); government payment to community based organizations.  (above from an email by a physician who states he read the entire plan)

Some more egregious aspects of the HR3200 (among many): Health care will be provided to illegal aliens; bailouts for union pension plans (payback).

Medicare and Medicaid: Total Medicare spending in 2oo7 was $440 billion.  The Medicare Trust fund will be insolvent in 2017.  Medicare and Medicaid together will rise from 4% of GDP in 2007 to 12% GDP in 2050 to 19% in 2082, which is roughly the same percentage of the GDP of the entire federal budget today.  Either we will have a massive government covering - what? - 80% of GDP (and virtually no private sector), or everything else the government does will be crowded out by health care.  And this is without Obamacare.  No defense, transportation, education, social security, etc.  The three major entitlements, Medicare, Medicaid, and Social Security, will consume 65% of the federal budget in 2030, up from 44% today. 

Social Security and Medicare spend more than they take in already, even with the ongoing payroll (FICA and Medicare) taxes, let alone accumulating savings for future obligations.  As baby boomers begin retiring, that deficit will only continue to grow.  By 2012, 10% of income taxes coming into federal coffers will go to pay for SS and Medicare.  In 2020, eleven years from now, these two programs will consume 25% of income taxes to cover the shortfall.  By 2030, they will consume 50% of federal income tax revenue (some of this from previous blog: exodusmd.com). 

A recent CBO report showed that by 2050, these two programs will take over the entire federal budget, pushing out everything else including national defense, education, SS, infrastructure, everything.  The government, in other words, will provide only for health care and nothing else.  Further, Medicare trustees indicate that Medicare will run out of money in 2017.  To this horror story unfolding, Obama indicated that he wants to fund his new middle class entitlement, Medicare-for-Everyone, in effect, by cutting "waste and abuse" from Medicare.  The Senate plan he approves of will cut $500 billion from Medicare, but there is no section in the Medicare system called "waste and abuse," so where he will find it remains a mystery.  One such candidate is Medicare Advantage, the successful Medicare program that allows seniors to buy their own private insurance, encouraging them to shop for cost and value within a limited budget.  Some 24% of senior Medicare beneficiaries are enrolled in this program, with a doubling of enrollees since its launching in 2003.  From this success story, Obama, who has no fondness for the free market and private insurers, wants to cut $177 billion.  This, along with the planned $500 billion total cuts coming, not to mention the council of doctors, actuaries and other "experts" he plans to form to look for more "waste and abuse" is the reason seniors are rising up against Obamacare. 

The seventy five year unfunded liability - that is, the gap between revenues and obligations - for Medicare is $36 trillion.  To this, Obama wants to add as many as 131 million additional covered lives to the public fisc and tells us he will save money.  The arrogance is overwhelming.  How about fixing Medicaid and Medicare, two massive government health care programs that are quickly going broke and don't work, first, before adding another?  And with Medicare and the country drowning in an ocean of red ink, why should we trust him to create another major health care entitlement - this one for anyone under age 65 - and believe him when he says he won't "add one dime to the deficit, not now or in the future, period."  Keep in mind, this is all before the 70 million baby boomers begin turning 65.

Other Medicare Follies: So, yes, Medicare is going bankrupt.  It also already underpays doctors and hospitals.  Providers depend on private payers to subsidize Medicare (and Medicaid).  This is known as "cost shifting."  And it occurs to the tune of $1788 per year per family enrolled in a private plan to compensate for reduced Medicare and Medicaid payments, a hidden tax on private insurance totalling $89 billion.  If private insurance paid at Medicare or Medicaid rates, the whole system would collapse.  Providers would not be able to cover their costs and would have to shut their doors.  Medicare also is already rationing, far more so than private payers.  It limits the number of days in a hospital or skilled care facitility, for example.  Seniors must cover about fifty percent of their health care costs through supplemental insurance or out of pocket.  It is not a model for comprehensive health reform.  It has not evolved since 1965 when it was created, other than for the addition of the Medicare Prescription Program in 2003 (another unfunded liability).  Private insurers offer wellness and preventive care, best practices, more choices, researches most effective drugs, incentives for healthier life styles and choosing the most effective health care, coordinating care for best outcomes, managing chronic illness.  All important items missing in what is, in effect, socialized medicine, or our already existing "public option."  Decisions are made in Washington.  All this will only get worse when budgetary pressures increase as our yearly deficits and accumalated debt skyrocket, especially after the baby boomers arrive en masse.      

Both government plans by the way are already heavily subsidized by private payers to the tune of about $90 billion.  Medicare and Medicaid pay below cost, which is why many providers do not accept such patients.

Cost of Obamacare: estimates vary between $1trillion and $1.5 trillion over the next ten years, or $100-150 billion a year.  This is probably much lower than it will actually be.  Health care costs go up every year and the population will increase.  Then there are the baby boomers.  Obamaites claim they can control costs through information technology, preventive care, and comparative effectiveness research.  CBO estimates health information technology will reduce spending by .3% - maybe.

CBO estimates that Obama's budget will average 5.2% of GDP over the next decade and will be 5.9% in 2019.  The CBO bases this on rosy economic forecasts.  More likely, it the deficit will be 8% of GDP in 2019 and a government debt of greater than 100% of GDP with no signs of shrinking.  Even at yearly 5% of GDP deficits, it is, as Peter Orszag described, former CBO director and current White House budget director, unsustainable.  At baseline, that is, existing policies and programs before Obama took office, the CBO projects a deficit of 2% of GDP.  This is before Obamacare.  Those numbers will only get worse.  CBO also underestimates the cost of HR32oo.  It projects a cost of $1 trillion.  That will mean, by the way, an additional $300 billion in interest payments.  The House bill will cover millions of additional families with incomes three times poverty level ($66,000/year).  Many employers will simply drop their insurance coverage and transfer employees to the public option.  CBO ignores this incentive.  For this and other reasons, Obamacare will more likely cost $2 trillion.  All of this will result in a nation drowning, not swimming, in red ink.  The massive deficits will inevitably lead to rising interest rates, inflation, higher taxes, and an economy in permanent decline.    

Forty six million uninsured: we've already hashed through this.  But let's accept that number as cold, hard fact.  If 85% of Americans are insured and satisfied with their health care, does it make sense to revamp the entire system for the 15% that need some assistance?

How will Obama pay for Obamacare: Companies (with payrolls greater than 500,ooo) that do not offer insurance to employees will pay a tax of 8% on payroll.  Individuals without insurance will pay a 2.5% levy on income.  Try to squeeze out some $6oo billion from Medicare (including $177 billion from Medicare Advantage, the popular program that allows seniors to buy more cost effective private insurance).  Raise taxes on high earners (eliminate the Bush tax cuts for those earning more than $250,000 per year and an additional surtax that will impact small businesses).  And, possibly, a VAT (value added tax) or national sales tax.  The VAT is a favorite in Europe, used to finance the various European welfare states.  It adds a tax to all goods and services at every level of transaction.  It is also a "hidden tax."  It would lead to greater spending.  Rates would inevitably rise to European rates of 15% on top of existing payroll and income taxes. 

None of which will cover the costs of his plan anyway.  Nor does it take it into consideration that we are already exploding the deficit without this latest $1trillion extravaganza.  Nor does it take into consideration the negative impact the increased taxes will have on the economy, in the midst an ongoing recession.  The inconsistencies and unreality of the Obama plan are not subtle.

Free Market Health Care Reform:

Here we go.  Let's review the existing problems and inefficiencies that do, indeed, exist in the American health care system, the system that, despite the various inequities, provides the highest quality health care in the world.

The primary problems of health care in America are the uninsured, affordability, portability, and preexisting conditions.  All of these problems can be addressed through free market approaches.  They are as follows:

Leveling the tax playing field.  The current tax code rewards employer based insurance and penalizes the individual buyer.  But if the tax code subsidizes employer based insurance (a $300 billion subsidy), then it is reasonable to give individual buyers the same break: a tax credit or deduction for any and all premiums paid.  Many who cannot afford insurance will be able to do so now with the same tax break given to employer based health insurance.  It will also increase the individual insurance market, which will lower costs.  It might even make sense to take on the politically sensitive issue of taxing health care benefits to employees (as a form of income, which it is), and then giving them a tax credit for their premiums.  It is, after all, the group employer plan tax deduction that has so severely damaged the single buyer market.  By giving a tax credit or deduction to individual, portable, preferably high deductible plans, a vast new and more competitive individual insurance market with competitive prices can be created.  For single buyers, health insurance would be one third cheaper because of the tax credit or deduction.  This leads into the second point.

De-link insurance from place of employment.  Workers, quite simply, should have their own insurance.  Do workers get car, home, or life insurance from their employers?  No, and they probably shouldn't get their health insurance from their employer either.  Gone are the days of single job careers.  Most people move around or lose jobs.  It's a different world.  And, so, it doesn't make sense to have insurance from a job that is in all likelihood temporary.  If employers want to provide insurance to employees that is well and good, but then it should be owned by the individual who can take it with him wherever he goes.  It is then "portable."  Free market based regulations could be set that would make all health insurance policies portable.  Allow individuals to buy portable insurance through place of employment with pretax dollars.  This will, again, augment the individual market, which will tend to lower costs for individual buyers (bigger pool, greater spreading of risk).

Gold Plated First Dollar Coverage:  In 1943, an IRS ruling gave a tax exemption to employer based insurance.  Employers could, of course, deduct the cost while employees recieved a benefit tax free.  This was a jackpot for employees who could obtain a dollar's worth of health insurance (tax free) instead of giving back some portion of that dollar to the government in the form of taxes as it would have been had they had to buy their own insurance with after tax dollars (as all single buyers must today).  This, however, had the effect of encouraging employees to demand gold plated "Cadillac" first dollar health insurance coverage.  This, in large measure, explains much about the endlessly spiraling costs of health care.

Does anyone know how much it cost for their kid's tonsillectomy?  Or their knee replacement?  Or an office visit, for that matter?  Probably not because they did not pay for it - at least directly.  Or, perhaps, just a co-pay.  If someone had a "food" insurance card and could buy whatever they wanted, just hand the card over to the cashier or pay some nominal co-pay regardless of what he bought, it stands to reason the individual would be dining on steak and lobster and not much hamburger or canned tuna.  

One of the single most important drivers of rising health care costs today derives from the existing insurance model that insulates the consumer from the cost of health care because the consumer does not pay for it directly, the so called "third party payer system."  In today's insurance dominated world, the normal price-signaling free market mechanisms that exist everywhere else in our economy do not exist in health care.  So, of course, insulated, as they are from the direct cost of health care, today's health care consumer purchases health care with no regard to the pricetag and whether one actually needs it.  HSAs and high deductible catastrophic plans (see below) would help with this.

Have you ever noticed how the cell or smart phone or computer or dvd player or flat screen high definition TV you bought recently is so much better, more powerful and cheaper than the one you had five years or even one year ago?  Have you ever wondered why?  Probably not, because you know the reason.  It is free market competition, which means competitive pricing, price transparency, skillful marketing, producing the best possible product or service, and comparison shopping in a free market by savvy knowledgeable shoppers, looking for high quality at low prices.  Americans buy their own iPhones, Blackberrys, computers, cars and homes.  They know how to shop, compare prices, study the various brands and models, and make wise, cost effective choices - all of which serves to force companies to give better products and services at lower prices to outsell their competitors.  And yet, because of the employer based tax free first dollar coverage health insurance model, this dynamic is missing entirely from our health care economy.  We need savvy shoppers buying high deductible, portable, wholly owned health insurance policies (including across state lines) that are tax deductible.  We have never had a true "free market" health care system, at least not since WW II, and certainly do not today.  We have a very distored, mixed system, of public and employer based first dollar health insurance, but not a true free market system.  But the same benefits that accrue in all other areas of our economy in terms of ever increasing innovation and quality of products along with lower prices would accrue in health care as well.  We need the free market to be unleashed in health care now!  

Then there is this whole notion of what "insurance" actually means.  When you buy car or home insurance, there generally is a high deductible (and, therefore, a lower premium) that covers for major accidents or events such as a vehicular accident or significant fire, storm, or flood event in a home, for example.  Such insurance would usually not cover oil changes or tune-ups for the car or painting the deck or changing the gutters at the house.  The individual car or homeowner would pay for those items out of pocket.  Yet, when it comes to health insurance, the working model seems to be that everything should be covered including routine office visits, blood pressure checks, or immunizations.  This gold plated health insurance model will obviously drive up the cost of health insurance.

And then there is the phenomenon of employer based insurance (again).  Do Americans get their home, car, or life insurance from their employer?  Of course not.  It almost sounds silly just to suggest it.  And yet, 90% of Americans not on Medicare or Medicaid get their health insurance through their job, an anachronism based on government policy during WW II (another one of those unintended consequences of government policy, like so many others, that in this case has distorted thoroughly our health care system much to its detriment).  At the time, because of wage controls in place under FDR, companies could compete for limited workers only by offering health insurance.  The government then gave an exemption to employees for that benefit (see discussion above).  And with that, the nation shifted into the employer based health care insurance model we have today, with all its problems and inefficiencies, some of which have already been alluded to.  By linking insurance to employers, the single buyer market went dry.  With smaller numbers, the cost went up.  When individuals lose their job they lose their insurance, and then, because of smaller numbers and inequitable tax treatment, which drive up the cost, they cannot afford it.  Or they don't leave jobs they are unhappy with for fear of losing insurance.  Perhaps, in a prior age when an individual could look forward to keeping one's job for a lifetime, the employer based model made sense.  But that world is gone.  Most Americans will have multiple jobs and even careers in a life and so it is time to jettison the employer based model too.

Deregulate Insurance Industry: Individuals should be able to buy health insurance across state lines.  Those states with heavy insurance mandates (acupuncture, marriage counseling, viagra, hair transplants) will find their residents buying their insurance in other states without the prohibitively costly regulations.  This increases competition and lowers costs.  It improves affordability.  The free market at work.  High Mandate States have what is referred to as an "adverse selection death spiral."  Because with high mandate states, young healthy people opt out, leading to smaller pool of older, sicker individuals, thus driving up the costs.  It is a "risk selection" crisis caused by coverage mandates.  Obama wants to increase "competition" with his so called "public option."  If he wanted true competition, he would deregulate health insurance and allows Americans to buy insurance whereever they could get the best buy including out of state.

It is also critical to increase the single buyer market by letting employees buy their own insurance (with employer insurance if they are willing).  Health insurance companies today do not cater to the individual market, looking instead to cash in on major companies with large numbers of employees, where they can pool risk because of higher volume and reduced price.  The single buyer market, because it is smaller, is also higher priced.  By delinking insurance from the employer and increasing the single buyer market, insurance companies will then be forced to cater to and compete for single buyers.  We are inundated with commercials on our TV screens or newspapers for auto, life, home and property insurance (All-State, Geico, Progressive, etc) but never for health insurance.  Through targeted, limited health care reforms in tax code and portability (and others), we can drive down the cost of health insurance through normal free market mechanisms without costly, crude, and heavy handed government involvement). 

Allow individuals to form voluntary associations:  This would go beyond their employers.  Professional groups, clubs, civic groups, churches, business federations, unions, and the like.  So one is not dependent on his employer for his insurance.  By increasing volume, prices go down.  More risk spreading, greater numbers. Perhaps states can assist in forming exchanges or pools that can negotiate lower cost insurance.  Utah has had success in creating such a health care exhange:  there is a state website where individuals can compare policies, costs, benefits, financing, and sign up electronically, based on their needs and costs.

Health Insurance Innovations: Preexisting conditions are problematic, especially in the context of a small, high cost individual market.  In the life insurance market, one can purchase a rider for term insurance that will guarantee one the right to buy the same insurance in the future at a set price.  A "guaranteed renewable " individual health  insurance contract will allow a consumer to purchase insurance for the year and the right to buy the same policy at a set price for life.  If one would get insurance through an employer than one can simply pay for the guarantee for future use.  If one changes or loses one's job, one still has the right to buy health insurance.  Most importantly, and the genius behind the straightforward scheme, is that this protects one from losing insurance or being unable to afford it if one later develops a serious illness.  It is protection against the "preexisting condition."  This protection would be transferrable if you would change jobs.  It could even be placed into a health savings account.

Another option is the creation of "high risk pools" within each state, whereby individuals with chronic conditions are able to purchase insurance at roughly the same rate as healthy individuals.  These state based high risk pools can spread the risk of caring for such individuals amongst all the insurance companies.  The larger volume may tend to decrease costs somewhat.  The difference can be subsidized by the government.  But, again, it is the government helping high risk individuals with preexisting conditions to buy private insurance at a reasonable price, not a government takeover of health care.

Health Savings Accounts: let individuals buy high deductible insurance plans and put away tax free dollars for future medical needs or even to become a small part of one's retirement(if they make it to retirement without using it - another incentive for cost concious health care and healthy lifestyles).  This lowers the price of health insurance premiums, lowers one's taxes, and incentivizes healthy lifestyles.  If one can keep one's HSA contribution, or if an employer wants to contribute to one's HSA, it can be tied to healthy lifestyle changes (weight loss, stopping smoking, proper diet, exercize, etc) by allowing it to be rolled over the following year all the while growing tax free.  If used for future medical expenses, it can be withdrawn tax free.  If used for other needs, say, after retirement, then taxes would be owed.  The perfect free market solution.

Subsidies for Low Income Individuals: Yes, despite all this, there will be some that are left out.  For these individuals not eligible for existing government programs but unable to afford their own insurance, than government subsidies to purchase private insurance and pay out of pocket expenses.  This can be arranged to incentivize healthy behavior and prudent health care shopping by allowing a certain amount to be rolled over to the next year.  Perhaps a debit card for up to $5000 for this purpose that will allow such individuals the opportunity to get out the medicaid morass and to have the dignity of owning their own private insurance.  Switzerland covers virtually its entire population with private insurance, including subsidies for low income individuals to purchase their own private insurance.

Medical Malpractice Reform: I would be remiss not to at least mention medical malpractice reform.  I do not consider it to be a top tier cost driver (aging population, advancing medical technology, an American culture that demands nothing be spared), but nonetheless it can be significant.  Doctors tend to order as many tests as possible to identify often very unlikely conditions or disease processes to avoid the possiblility of future malpractice liability, commonly known as "defensive medicine."  The AMA estimates that defensive medicine adds as much as $151 billion per year.  Would they have ordered the tests anyway?  Who knows?  Perhaps they just don't want to miss something regardless of the threat of malpractice.  I would say the greater danger of the ever skyrocketing costs of malpractice insurance in many states and in certain high risk specialties such as Ob-Gyn or Neurosurgery is that such specialists will not practice in certain locales or will move across state lines to a more doctor friendly state with lower malpractice rates; in the process, however, it leaves many communities without the benefit of the services of a particular specialty, especially Obstetrics.  Malpractice Tort Reform would have to be a part of any comprehensive health care reform, curiously, but not unexpectedly, missing from Obamacare.  Caps on punitive damages and on overall damage awards, attorneys' fees, and two year limitations of filing claims would go a long way to reducing malpractice insurance costs. 

In summary, the single payer system, which is the direction Obama and the Democrats want to take the country, will stifle research, create long waiting lists, and lead to limited access, rationing, and poor quality.  The American health care system still offers the best quality medicine in the world precisely because it remains at least partially free.  It is a system that rewards innovation and research, as free market capitalism does in every economic endeavor.  US cure rates in all major cancers is better than nations with state run health care.  America continues to lead the world in cutting edge biomedical research and technology, procedures, and pharmaceuticals.  Our medical teaching centers are the envy of the world, and health care providers from every nation on earth come to learn, study, and train here.  The world depends on the US for medical progress.  To pursue a state run system is to take the country down the road where no incentive exists for quality or innovation; it will result in an inevitable decline in what had been one of America's great success and growth stories - and a superior quality of health care for our citizens.  This quite apart from the whole issue of cost, for with the nation swimming in debt, the addition of yet another unfunded entitlement will surely bust the budget.  It would create yet another grotesque bureaucracy, with armies of lobbyists and constituencies battling for over funding priorities, ripe for yet more corruption and government aggrandizement; it would be horrendously expensive, and inefficient; it will stifle research and reduce quality: it will be, perhaps, the dream of the left: Cuban-style Medicine (of which so many on the left seem enamored) here in the US, but most Americans will not like it.  It will be centralized, state controlled medicine with bureaucrats and politicians making life and death decisions, not doctors and families.  Furthermore, patients, quite frankly, will die.  The lack of access to prompt screening modalities, imaging studies, specialists, cutting edge research, technology, and drugs - in other words, to proper and early diagnosis and treatment - will result in higher mortality rates for disease processes that are curable.  And let me repeat again: it will bankrupt the country. 

There are problems in the American health care system, but they can be addressed through limited and targeted free market mechanisms and reforms that will increase competition, improve quality, and lower cost.