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Health care policy: Unintended consequences
By David M. Budge
If you have ever helped a five year old attempt to untangle a ball of fishing line, you know that it is usually easier to cut the whole mess apart and start with new line. This is now the point we have reached with federal health care policy. Again we are subjected to seemingly endless hours of debate on the injustices of HMO's and a litany of anecdotal horror stories of low level clerks denying coverage. Congress tends to treat the symptoms rather than the illness. Bad legislation begets bad legislation, and the unintended consequences of law often provides congressional twaddlers subject matter to avoid addressing real solutions.
The health care system began to fall out of balance when President Richard Nixon signed the HMO Act of 1973 providing huge subsidies to the fledgling HMO industry. It fell into further despair in the early 1980s when Congress attached the HMO requirement under the Employee Retirement Income Security Act of 1974 (ERISA) by an amendment to the Public Health Service Act. ERISA required all employers with more than 50 employees to offer an HMO choice in their health plans. The outcome of these two legislative gems was to: A) cause the HMO industry to grow at an explosive rate well beyond what market forces would have provided and B) institutionalize the practice where payer and provided are one in the same. In other words, by legislative mandate we created a mammoth industry where the economic incentive is to reduce (HMOs would say "optimize") services. In the short term, revenues are fixed, and the only way to increase profits is to reduce expenses. This is the single reality that has caused the cacophony of complaints from disempowered patients and doctors.
The most recent knock to the health care system came with the passage of the Kennedy-Cassenbaum Act (formally known as the Health Insurance Portability and Accountability Act of 1996 (HIPAA). HIPAA mandated, among other things, that any insurance company offering insurance to an individual leaving a group plan must accept that individual without exclusion of preexisting conditions. This protection seemed to serve well those in group insurance plans. The unintended consequence was really rather devastating to the rest of the citizens not enrolled in group insurance. Insurers, now faced with a take it or leave it proposition on underwriting individuals, have largely decided to leave the business. Those companies who chose to stay were forced to raise rates significantly. In 1999, the National Association of Life Underwriters reported that choice for individual policies from state to state where decimated. For example, in New York the number of companies offering these products had been reduced from a few hundred in 1995 to one, Blue Cross/Blue Shield of New York. Tennessee and Washington State were left with two. Most other states were down to four or five. Things have improved a bit as a few companies have tried to capitalize on the market void. Regardless, choice for individuals is now only 5 per cent of what it was prior to HIPAA, and premiums are up nearly 40 per cent. In the process the number of uninsured Americans has risen by 20 per cent to almost 50 million people by some estimates. Obviously price matters.
The current legislative push for the Patient's Bill Of Rights is equally full of unintended consequences. It is not yet understood exactly how these proposed rules will affect prices. It is generally accepted that prices will increase. The Congressional Budget Office estimates that the rolls of the uninsured will increase anywhere from 900 000 to 1.3 million.
Additionally, and perhaps more disturbing, is the corporate welfare built into the law by requiring HMO's to pay for clinical trials of non FDA approved drugs. This will cause HMOs to fund clinical research from which the intellectual property rights will belong to pharmaceutical companies. We will introduce the pseudo-socialization of research and fund it with individual's insurance premium dollars. Unfortunately we can expect more laws causing more problems in the future. Most likely we can also expect that individuals in and outside of group insurance will increasingly find fewer options and higher costs.
The real solution is for Congress to repeal all of these laws and let the market work again. Senator Ted Kennedy has said that his proposed legislation is what the working people of America want. It is doubtful that he really asked. To this law, and its inevitable future fixes, we must resoundingly say, "No thanks!"
This is David M. Budge's first contribution to Enter Stage Right.
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