A Medical Doctor Weighs in on Health Care

ACA

This is a good quote speaking to the rationality of good health care as being based on the relationship between doctor and patient. Mark Sklar writing in the WSJ:

The patient should be the arbiter of the physician’s quality of care. Contrary to what our government may believe, the average American has the intellectual capacity to judge. To give people more control of their medical choices, we should move away from third-party payment. It may be more prudent to offer the public a high-deductible insurance plan with a tax-deductible medical savings account that people could use until the insurance deductible is reached. Members of the public thus would be spending their own health-care dollars and have an incentive to shop around for better value. This would encourage competition among providers and ultimately lower health-care costs.

By contrast, the Affordable Care Act’s plans for establishing “medical homes”—a team-based health-care delivery model—and accountability-care organizations will only add more bureaucracy and enrich the consultants and companies organizing these entities.

To improve quality, we need to unchain health-care providers from the bureaucracies that are strangling them fiscally and temporally. We can better control medical costs if we strengthen physicians’ relationships with their patients rather than with their computers.

A True Healthcare Market?

FeaturedImage

There are many small fixes that can help repair the market for healthcare and health insurance – a market that has been seriously distorted for the past 30+ years. This article hits on the basic principle that catastrophes need a functioning insurance market based on actuarial probabilities, but healthcare maintenance is something we all need to SAVE for. Health savings accounts are a necessary component that the ACA attempts to excise. Why?

From Barron’s:

Unmanaged Competition

By THOMAS G. DONLAN

Making health care into a real economy

A reader recently asked, “If the Affordable Care Act isn’t the answer, what is?” Another asked, “Do you really want a health-insurance system without government regulation?” These are fair questions. We have found problems with the new health-care law—both operational and philosophical—to be so compelling that even the status quo ante seems preferable, but we also have a better vision.

Neither a benevolent dictator nor an army of bureaucrats can create an ideal system that serves all possible buyers of health care and properly rewards all who provide it. Only independent individuals can operate in a market, deciding what to buy and what to sell, finding prices that clear the market.

But a market cannot work when third parties stand over the supplier and the customer to fix prices or supplies. So the first element of a good U.S. health-care system must be that all Americans must purchase their own health-insurance policy.

Unlike Obamacare, this mandate should leave lots of room for competition and choice.

Limited Choice

Nearly all health care in the U.S. is paid for by third parties—government, employers, insurance companies—who have neither the provider’s nor the customer’s interests at heart. Individual choice is deliberately limited for the convenience of the real payers.

So the second element of a good U.S. health-care system must be that the citizens must make choices for themselves. Price and scope of coverage are the consumers’ business, not their government’s.

Health insurance is too complicated to be left to policy makers, and if we have a real market, the business will be even more complicated because every insurance company—and new ones—will create more policies tailored to the consumers’ various preferences. In a free market for health insurance, we will have at least as many different styles of health insurance as there are flavors and prices of canned soup in the supermarket.

Insurance, like banking and other potential Ponzi schemes, does need government auditing and supervision, to ensure soundness but not to limit variety.

The current U.S. health-care system is parsimonious. Americans are fearfully aware that their health-insurance coverage may have holes and that they won’t know where the holes are until it’s too late. Some procedures may be excluded from coverage; some health-care providers won’t accept certain types of insurance. Hospitals and doctors do not compete on price; many don’t disclose their inflated official prices, except on the bills; few if any disclose the discounts they offer to the real payers.

Many doctors refuse to accept patients covered by the two biggest government programs, Medicare and Medicaid, both of which have arcane systems for setting what they will pay, regardless of providers’ billed prices.

On the other hand, the U.S. health-care system is not just parsimonious; it is also notoriously wasteful. Insurers, including the government Medicare plan, carefully define what services they will pay for and arrange with providers how much they will pay, but they do almost nothing to limit the number of allowable services they will pay for. Providers living under price fixing make it up on volume.

Plentiful Funds

We often hear that the health-care industry constitutes one-sixth of the U.S. economy, heading for 25% of the economy as the population ages. Less frequently are we reminded that the federal government’s taxpayers and lenders are already paying for half of health-care expenditures. Almost never does anyone note that the federal government’s per capita expenditures on health care for about half its citizens are enough to run a universal health-care system like that in the United Kingdom.

We should not want a government care system filled with problems like the U.K. system; the point is that the current U.S. health-care system already has more than enough money sloshing around to provide excellent care for all Americans.

So the third element of a good U.S. health-care system is to subject health-care to the discipline of consumer discretion.

David Goldhill, CEO of GSN, the cable-TV-network company, is the author of a terrific recent book on the American system: Catastrophic Care: How American Health Care Killed My Father—And How We Can Fix It. Most of the book is devoted to the ills of the current system, which Goldhill sums up as, “All of us are spending insane amounts of money, yet the system makes us feel like paupers.” The health-care industry has hardly any accountability to the customer, and thus it offers terrible service, high prices, limitations on supply of doctors and hospitals, excessive errors, underinvestment in information technology, and lack of coordinated care.

Readers will be encouraged to jettison the current payment systems and the current payers, perhaps to take up these reforms:

Market Power
  1. Employers should not be allowed to provide health insurance, and the federal government should provide direct subsidies only for low-income consumers.
  2. High-deductible catastrophic insurance should be encouraged, not limited. That would lower premiums so that citizens could create Medical Savings Accounts for most of their routine care. Those too poor for this system should receive government subsidies for their insurance premiums and their savings deposits, putting them on the same footing as other citizens when they choose their providers of health care and health insurance.
  3. Medical underwriting should be encouraged, not outlawed, with those who are uninsurable participating in assigned-risk pools subsidized by the federal government.
  4. There could also be a direct subsidy to providers, by which the government would pay a percentage of every bill for every payer with income less than the median income. The share should be significant but not so large that patients would lose their price sensitivity and their incentive to shop.

The essence of our health-care system has been to confuse everyone into thinking they have control without paying for it. In health care as in other things, if we pay for what we get, we may get what we pay for.

Ain’t That the Truth?

ACA

Pursuing the follies of social insurance.

Full article here.

The complexities of ObamaCare make it less likely to achieve its goals, but the broader point is that health-care reform didn’t have to be this morass. Liberals and conservatives agree on the two big problems in health care, an industry that accounts for 18% of GDP: that almost 50 million Americans don’t have health insurance, and that employer-provided coverage gives patients little incentive to monitor spending. Even if Americans want to control costs, they have almost no information to let them compare prices.

Both problems grew out of World War II wage and price controls. Companies got around wage controls by providing health insurance, which Washington has treated as an untaxable benefit ever since.

The result is that employees have been largely insulated from the costs of health care, most of which have been paid by employers. That means there is no functioning market. There is little transparency of pricing for medical services, devices or drugs. Pricing fluctuates wildly depending on whether the patient has insurance or what deal the insurer happened to cut with the provider.

Have you ever seen a price list in your doctor’s office or at a hospital? Probably not, except for services like laser eye surgery and elective plastic surgery, which aren’t covered by insurance. In these rare cases, there is price transparency and open competition.

As hospitals have merged to cope with the costs of increasingly complex regulation, competition has further diminished. This is a reminder of the truism that monopolies can only be sustained when government policy supports them.

Simpler reform would provide subsidies for the uninsured while encouraging transparency in health-care costs so that Americans can become better-informed consumers. That simpler approach, alas, is for a future government.

The Case for Obamacare

train wreckI couldn’t resist. The irony is just too rich. From the WSJ’s “Best of the Web” column:

Meet Brendan Mahoney, the young man who is saving ObamaCare. He’s 30 years old, a third-year law student at the University of Connecticut. He’s actually been insured for the past three years–in 2011 and 2012 through a $2,400-a-year school-sponsored health plan, and this year through “a high-deductible, low-premium plan that cost about $39 a month through a UnitedHealthcare subsidiary.” But he wanted to see what ObamaCare had to offer.

He tried logging in to the exchange’s website at 8:45 a.m. yesterday, which is impressive in itself. Most young people don’t get up that early. “He said the system could not verify his identity.” So he called the toll-free help line, whose operator also encountered computer trouble. “But then he logged on a second time, he said, and the system worked.”

“Once it got running, it was fast,” Mahoney tells the Courant. “It really made my day. It’s a lot like TurboTax.” He obtained insurance through ObamaCare. Now, he says, “if I get sick, I’ll definitely go to the doctor.” Even better, if he stays healthy, he won’t need to go to a doctor, and his premiums will support chronically ill policyholders on the wrong side of 40.

So, how much of a premium is strapping young Brendan Mahoney paying to help make ObamaCare work? Oops. The Courant reports that Mahoney “said that by filling out the application online, he discovered he was eligible for Medicaid. So, beginning next year, he won’t pay any premium at all.”

So the great success story of ObamaCare’s first day is the transformation of a future lawyer who was already paying for insurance into a welfare case.

Oh, this is not going to end well for us.

Good Quote

Holman Jenkins on health-care reform, from the WSJ:

ObamaCare, to be sure, was not reform—it was a piling on of subsidies that can only throw fuel on the fire of health-care inflation. Not even the usual mouthpieces pretend otherwise anymore.

But a society can’t give a subsidy to everybody for the same reason you can’t give a subsidy to yourself—you end up paying for your own subsidy and aren’t better off. In fact, you are worse off thanks to the administrative overhead involved in taking money away from you and giving it back to you.

You are also worse off because of the perverse incentives engendered by diverting yours and everyone’s health-care spending through a common pot.

These pathologies have undermined U.S. health care for two generations, and nothing has been solved, nothing has been fixed, due to ObamaCare.

It should be noted, finally, who is really rooting for the Affordable Care Act to be a train wreck: It’s people on the left, like L.A. Times columnist Michael Hiltzik, who anticipates that “glitches, loopholes and shortcomings” will lead to a single-payer system. It’s people like Sen. Harry Reid, whom Mr. Hiltzik quotes telling voters back in Nevada that ObamaCare is “far from having something that’s going to work forever.”

Our health-care wars still have a long way to run.

BTW, we still need reform…

Breaking News: Man Bites Dog!

Not really. But this incident got my attention as an even rarer occurrence. Witness rationality and reason applied to taxes and healthcare. Read on. And watch the video of the speech.

Ben Carson for President

The Johns Hopkins neurosurgeon has two big ideas for America.

Whether this weekend finds you blowing two feet of snow off the driveway or counting the hours until “Downton Abbey,” make time to watch the video of Dr. Ben Carson speaking to the White House prayer breakfast this week.

Seated in view to his right are Senator Jeff Sessions and President Obama. One doesn’t look happy. You know something’s coming when Dr. Carson says, “It’s not my intention to offend anyone. But it’s hard not to. The PC police are out in force everywhere.”

Dr. Carson tossed over the PC police years ago. Raised by a single mother in inner-city Detroit, he was as he tells it “a horrible student with a horrible temper.” Today he’s director of pediatric neurosurgery at Johns Hopkins and probably the most renowned specialist in his field.

Late in his talk he dropped two very un-PC ideas. The first is an unusual case for a flat tax: “What we need to do is come up with something simple. And when I pick up my Bible, you know what I see? I see the fairest individual in the universe, God, and he’s given us a system. It’s called a tithe.

“We don’t necessarily have to do 10% but it’s the principle. He didn’t say if your crops fail, don’t give me any tithe or if you have a bumper crop, give me triple tithe. So there must be something inherently fair about proportionality. You make $10 billion, you put in a billion. You make $10 you put in one. Of course you’ve got to get rid of the loopholes. Some people say, ‘Well that’s not fair because it doesn’t hurt the guy who made $10 billion as much as the guy who made 10.’ Where does it say you’ve got to hurt the guy? He just put a billion dollars in the pot. We don’t need to hurt him. It’s that kind of thinking that has resulted in 602 banks in the Cayman Islands. That money needs to be back here building our infrastructure and creating jobs.”

Not surprisingly, a practicing physician has un-PC thoughts on health care:

“Here’s my solution: When a person is born, give him a birth certificate, an electronic medical record, and a health savings account to which money can be contributed—pretax—from the time you’re born ’til the time you die. If you die, you can pass it on to your family members, and there’s nobody talking about death panels. We can make contributions for people who are indigent. Instead of sending all this money to some bureaucracy, let’s put it in their HSAs. Now they have some control over their own health care. And very quickly they’re going to learn how to be responsible.” [Editor’s Note: there is absolutely only one way we can fulfill our demands for healthcare over the full course of our lives – by saving for it. HSAs and the correct tax treatment can help us do this. It isn’t rocket science, folks. 85-90% of our healthcare needs can be met this way. Insurance and public subsidies can then manage the remaining unpredictable contingencies, like pre-existing conditions. BTW, death is not a pre-existing condition, it’s more certain than the ACA tax!]

The Johns Hopkins neurosurgeon may not be politically correct, but he’s closer to correct than we’ve heard in years.

The Lessons of Universal Healthcare in America

The unfolding legacy of RomneyCare. Evidence from the state of Massachusetts:

Health care was 23% of the state fisc in 2000, and 25% in 2006, but it has climbed to 41% for 2013. On current trend it will roll past 50% around 2020—and that best case scenario assumes [Governor] Patrick’s price controls work as planned. (They won’t.) In real terms the state’s annual health-care budget is 15% larger than it was in 2007, while transportation has plunged by 22%, public safety by 17% and education by 7%. Today Massachusetts spends less on roads, police and schools after adjusting for inflation than it did in 2007.

The Unforeseen Entitlement Crisis

The alternative is not a pretty future. It’s a future in which older people receive Social Security checks but still go hungry, in which Medicare is a paper entitlement because doctors and hospitals can’t be found to provide services for what Medicare is willing to pay.

We’ve explained before on these pages how the crucial issue in healthcare is not only making it affordable, it’s making it available. In economic terms it means we have not only the effective demand issue of paying for it, but a supply challenge of producing the goods and services demanded. Thus, healthcare can only be provided where supply intersects demand at the right price. Accurate price signals are the only way to coordinate this market process – there is no other proven method in the history of civilization. Unfortunately, the ACA disregards this simple truth. So, are you voting for solutions, or for more of the same failed promises?

From the WSJ:

Robots to the Rescue?

The flip side of an entitlements crisis is a labor shortage.

By HOLMAN W. JENKINS, JR.

In 1999, a golfer named Payne Stewart and crew were rendered unconscious by a loss of cabin pressure and their private jet crashed when it ran out of fuel. What does this have to do with the fiscal cliff? Read on.

Even in 1999, one could puzzle over why controllers on the ground couldn’t take command of a plane and bring it down safely. Technology certainly existed to make such a thing possible. Yet today we’re skipping right past pilotless airliners in anticipation of self-driving cars.

Why? Because we’re old. Technological innovation is less miraculous than it seems: It responds to need, and we’re an aging country with more people who need help and fewer people to do the helping, including driving us around.

All this was once foreseen by Alan Greenspan, the Federal Reserve chairman in the 1990s, who pointed out a corollary to the giant unfunded long-term liabilities of Social Security and Medicare. Not only does an aging population mean fewer workers to pay for the oldsters’ benefits. It means fewer workers to actually produce the goods and services that idle oldsters will want to consume. The corollary to an entitlement-spending crisis is, by definition, a labor shortage.

Robots are coming because robots are needed. In 2013, we can already see the appetite in the transportation sector. Aviation analyst Kit Darby figures the industry will need 65,000 new pilots in the next eight years to cover expected retirements. One reason for the millions Google has been spending to develop a driverless car is to meet anticipated market demand from America’s growing elderly population.

Or take another example, arising in Baltimore, where a local entrepreneur, following the logic of need, invested seven years and $30 million developing a robotic system for packaging prescription drugs for long-term patients in nursing homes and hospitals.

In a conversation last year, inventor Michael Bronfein told me if he’d known what it would cost him in time and money, he might never have started. How many entrepreneurs say the same? Probably all of them. But Mr. Bronfein saw a need and the power of technology to meet it, and the result was the Paxit automated medication dispensing system.

He saw workers spending hours under the old system sticking pills in monthly blister packs known as “bingo cards,” a process expensive and error-prone. He saw nurses on the receiving end then spending time to pluck the pills out of blister packs and into paper cups, to create the proper daily drug regimen for each patient. (By one study, the 40 million Americans over 65 take an average of eight drugs a day.)

He saw that the bingo-card system was not just wasteful of labor. When a patient died or was moved to a new facility or had his prescription changed, a month’s worth of drugs might have to be thrown out too.

He followed the economic logic that indicated that all the people involved in the old system were becoming too valuable to have their time wasted by the old system. Backed by his company, Remedi SeniorCare, Paxit—in which a robot packages, labels and dispatches a daily round of medicines for each patient—is spreading across the mid-Atlantic and Midwest and winning plaudits from medical-care providers.

Writ small here is an answer to our entitlement morass, when more of us will be living off our savings (or transfers) and fewer of us will be contributing our labor to society. Robots aren’t the only solution. We will still need better incentives for younger baby boomers to save for their own retirement and depend less on Uncle Sam. We still need better incentives for Americans of all ages to supply labor rather than leaving it to someone else to be productive (which means revisiting our massive expansion of unemployment and disability subsidies over the past four years).

We need to preserve the incentive for investors to bring us the robots that will make the future bearable, rather than burying entrepreneurs in taxes in a vain attempt to seize the returns of investments before those investments are made.

None of these matters, of course, has been allowed to intrude in the empty theatrics that President Obama, primarily responsible, has ordained should be the substance of the fiscal-cliff war. But even from the perspective of the fiscal cliff, let’s welcome the new year by envisioning a future that won’t be so bad, where modest entitlement reform and proper incentives for robot builders will save us from the Soylent Green solution to an aging society.

Make no mistake: The alternative is not a pretty future. It’s a future in which older people receive Social Security checks but still go hungry, in which Medicare is a paper entitlement because doctors and hospitals can’t be found to provide services for what Medicare is willing to pay. If we weren’t still in a New Year’s mood, we’d say the latter future is the more likely one.

Healthcare SUPPLY is the Issue

What makes US healthcare the best in the world is the abundant supply. Yes, because of subsidized demand we may have even too much supply in light of the trade-offs that are subsidized by tax policy. Supply via R&D is what makes the US system the envy of the world, not demand or distribution. We had better pay attention to that fact as we try to reform the system to balance a “fairer” distribution.

From the WSJ:

Why the Doctor Can’t See You

The demand for health care under ObamaCare will increase dramatically. The supply of physicians won’t. Get ready for a two-tier system of medical care.

By JOHN C. GOODMAN

Are you having trouble finding a doctor who will see you? If not, give it another year and a half. A doctor shortage is on its way.

Most provisions of the Obama health law kick in on Jan. 1, 2014. Within the decade after that, an additional 30 million people are expected to acquire health plans—and if the economic studies are correct, they will try to double their use of the health-care system.

Meanwhile, the administration never seems to tire of reminding seniors that they are entitled to a free annual checkup. Its new campaign is focused on women. Thanks to health reform, they are being told, they will have access to free breast and pelvic exams and even free contraceptives. Once ObamaCare fully takes effect, all of us will be entitled to a long list of preventive services—with no deductible or copayment.

Here is the problem: The health-care system can’t possibly deliver on the huge increase in demand for primary-care services. The original ObamaCare bill actually had a line item for increased doctor training. But this provision was zeroed out before passage, probably to keep down the cost of health reform. The result will be gridlock.

Take preventive care. ObamaCare says that health insurance must cover the tests and procedures recommended by the U.S. Preventive Services Task Force. What would that involve? In the American Journal of Public Health (2003), scholars at Duke University calculated that arranging for and counseling patients about all those screenings would require 1,773 hours of the average primary-care physician’s time each year, or 7.4 hours per working day.

And all of this time is time spent searching for problems and talking about the search. If the screenings turn up a real problem, there will have to be more testing and more counseling. Bottom line: To meet the promise of free preventive care nationwide, every family doctor in America would have to work full-time delivering it, leaving no time for all the other things they need to do.

When demand exceeds supply in a normal market, the price rises until it reaches a market-clearing level. But in this country, as in other developed nations, Americans do not primarily pay for care with their own money. They pay with time.

How long does it take you on the phone to make an appointment to see a doctor? How many days do you have to wait before she can see you? How long does it take to get to the doctor’s office? Once there, how long do you have to wait before being seen? These are all non-price barriers to care, and there is substantial evidence that they are more important in deterring care than the fee the doctor charges, even for low-income patients.

For example, the average wait to see a new family doctor in this country is just under three weeks, according to a 2009 survey by medical consultancy Merritt Hawkins. But in Boston, Mass.—which enacted a law under Gov. Mitt Romney that established near-universal coverage—the wait is about two months.

When people cannot find a primary-care physician who will see them in a reasonable length of time, all too often they go to hospital emergency rooms. Yet a 2007 study of California in the Annals of Emergency Medicine showed that up to 20% of the patients who entered an emergency room left without ever seeing a doctor, because they got tired of waiting. Be prepared for that situation to get worse.

When demand exceeds supply, doctors have a great deal of flexibility about who they see and when they see them. Not surprisingly, they tend to see those patients first who pay the highest fees. A New York Times survey of dermatologists in 2008 for example, found an extensive two-tiered system. For patients in need of services covered by Medicare, the typical wait to see a doctor was two or three weeks, and the appointments were made by answering machine.

However, for Botox and other treatments not covered by Medicare (and for which patients pay the market price out of pocket), appointments to see those same doctors were often available on the same day, and they were made by live receptionists.

As physicians increasingly have to allocate their time, patients in plans that pay below-market prices will likely wait longest. Those patients will be the elderly and the disabled on Medicare, low-income families on Medicaid, and (if the Massachusetts model is followed) people with subsidized insurance acquired in ObamaCare’s newly created health insurance exchanges.

Their wait will only become longer as more and more Americans turn to concierge medicine for their care. Although the model differs from region to region and doctor to doctor, concierge medicine basically means that patients pay doctors to be their agents, rather than the agents of third-party-payers such as insurance companies or government bureaucracies.

For a fee of roughly $1,500 to $2,000, for example, a Medicare patient can form a new relationship with a doctor. This usually includes same day or next-day appointments. It also usually means that patients can talk with their physicians by telephone and email. The physician helps the patient obtain tests, make appointments with specialists and in other ways negotiate an increasingly bureaucratic health-care system.

Here is the problem. A typical primary-care physician has about 2,500 patients (according to a 2009 study by the Centers for Disease Control and Prevention), but when he opens a concierge practice, he’ll typically take about 500 patients with him (according to MDVIP, the largest organization of concierge doctors): That’s about all he can handle, given the extra time and attention those patients are going to expect. But the 2,000 patients left behind now must find another physician. So in general, as concierge care grows, the strain on the rest of the system will become greater.

I predict that in the next several years concierge medicine will grow rapidly, and every senior who can afford one will have a concierge doctor. A lot of non-seniors will as well. We will quickly evolve into a two-tiered health-care system, with those who can afford it getting more care and better care.

In the meantime, the most vulnerable populations will have less access to care than they had before ObamaCare became law.

Common Sense and Healthcare Reform

There is no other economic model out there that delivers a desired good, priced efficiently, and in abundance, other than an open, competitive market. We need to move in this direction if we want enough 1st rate healthcare to go around. No matter what political ideology we subscribe to. Aside from the economy, this is more important than all the other partisan B.S.

From the WSJ:

The Wrong Remedy for Health Care

The Affordable Care Act will exacerbate the problems with our current health-care system. Fortunately, market reforms are still possible.

 By JOHN F. COGAN, R. GLENN HUBBARD AND DANIEL P. KESSLER

In upholding the Affordable Care Act, the Supreme Court has allowed the president and Congress to put the country’s health policy on a path that will restrict individual choices, stifle innovation and sharply increase health-care costs. Now the only recourse is to repeal the law through the legislative process and replace it with policies that rely on the power of the markets.

The American health-care system’s principal strength is its ability to produce ever more impressive innovations. The U.S. has no equal in developing new medical technologies, surgical procedures and pharmaceuticals. These extraordinary advances are not the product of government direction but rather the efforts of scientists, investors and entrepreneurs pursuing their individual goals and aspirations in a competitive market system. The Affordable Care Act puts these strengths at risk.

The law also exacerbates the central problem of our health-care system: high costs without corresponding value. The “individual mandate” will require that people purchase health insurance with generous benefits and limited cost-sharing. This flawed conception of health insurance has created the bad incentives that have led us to where we are today.

The principal factual claims made by the individual mandate’s supporters are that the failure to purchase conventional health insurance causes harm to the uninsured person (in the form of worsened health) and to others (in the form of a shifting of the burden of the costs of care).

The evidence supporting each of these claims is weak at best. Peer-reviewed studies from the National Health Insurance Experiment and other data dating back to the 1980s have concluded that there is little or no causal relationship between health insurance and a person’s health outcomes.

What about the claim that the costs of caring for the uninsured are significantly shifted onto doctor and hospital bills, thereby raising insurance premiums? George Mason University Prof. Jack Hadley and John Holahan, Teresa Coughlin and Dawn Miller of the Urban Institute published a comprehensive, peer-reviewed study on this in Health Affairs in 2008. It concluded that “Private insurance premiums are at most 1.7 percent higher because of the shifting of the costs of the uninsured to private insurance.”

The problems with the U.S. health-care system are mainly the result of a handful of government policies that have prevented market forces from reducing costs and making services more widely available. So what to do?

Fix the tax code. First and foremost is the federal tax code’s long-standing exclusion from taxation of employer-sponsored health insurance. The exclusion has created a tax advantage for purchasing health care through insurance rather than directly with out-of-pocket dollars. This, in turn, has caused consumers to overutilize health-care services as they and their physicians perceive that someone else is footing the bill. As a result, health-care costs have been driven upward.

Policy makers should make the tax treatment of health care neutral by allowing out-of-pocket expenses and individual insurance to be tax deductible. Alternately, neutrality could be achieved by eliminating the tax exclusion for employer-sponsored health insurance. The Affordable Care Act’s tax on high-cost health plans is a first step toward tax neutrality. Unfortunately, the act couples this policy with others that work at cross-purposes.

Redesign Medicare and Medicaid. The Affordable Care Act includes numerous reforms to the way that Medicare pays health providers, some of which are on the right track. But in Medicare, the main problem is the nearly complete neglect of patient incentives. The Medicare Part B average copayment rate has fallen nearly in half during the past 35 years. One near-term solution is to allow beneficiaries to choose health plans that have lower premiums but higher deductibles, more coinsurance, or more tightly managed networks of providers than those in traditional Medicare. The long-term solution is to provide beneficiaries with a defined level of support to allow them to purchase a private insurance plan. Such an approach is modeled on today’s Medicare prescription drug coverage and is similar to one proposed by Rep. Paul Ryan (R., Wis.) and Sen. Ron Wyden (D., Ore.).

In Medicaid, the emphasis on access to health insurance, rather than access to health care, has stifled innovation in delivering care to the uninsured. The Affordable Care Act does little to change this. Medicaid should be converted to a block grant in which states are given a fixed sum of money and allowed greater flexibility to experiment with new approaches, such as delivering care through organizations that tailor available services to patient needs at reduced costs.

Reform insurance markets. State price controls and the proliferation of state mandates that insurers cover particular medical services and providers have driven up the cost of insurance by as much as 15%, made it less portable, and increased the number of uninsured by as many as 10 million. Unfortunately, the Affordable Care Act enshrines many of these flawed policies in federal law.

The key objective of insurance regulation should be to increase the availability of low-cost, portable health insurance—insurance that delivers the benefits that people want, at a price they can afford. To this end, individuals should be allowed to purchase insurance across state lines or in a federal market that is free of insurance mandates.

The Affordable Care Act will expand the reach of government into our personal health-care choices, while exacerbating the problems with our current health-care system. Market forces, if allowed to work properly, are the best means for reducing the growth in health costs, encouraging continued innovation, and ensuring that consumers have access to quality health care.