March 8, 2008

March 8, 2008 | Commentary on Health Care

Health Care Solutions

People will suffer needlessly and die before their time if lawmakers don't fix the health care system.

That's not clownish propaganda from lefty filmmaker Michael Moore, producer and director of the movie "Sicko," who celebrates, among other things, Fidel Castro's health care system. It's the cold, sober warning of Harvard Business School professor Regina Herzlinger in her book, "Who Killed Health Care?"

Herzlinger's solution to the health care problem isn't to turn your future health care decisions over to a mandarin class of government-appointed control freaks. For Herzlinger, you are the answer. You need direct control over your health care dollars and the key decisions that affect this very personal dimension of your life. This idea is the polar opposite of the complicated schemes of those on the presidential campaign trail.

Herzlinger's book could not be more timely. This slim volume is targeted at ordinary Americans and is refreshingly free of academic jargon. Herzlinger explains in plain English what is wrong in American health care and how exactly to fix it.

The key fix is to shift health care decision making from today's array of institutions to individuals and families. The result would be a new system driven by the familiar forces that power every other part of the American economy -- personal choice and direct control over the expenditure of health care dollars.

Few Americans today exercise any significant control over their health care dollars; it is done for them, and to them, by third parties -- employers, managed care executives and government officials.

They decide what you buy, how much you pay and what benefits and level of quality you get. Only $3.50 out of every $100 spent on health insurance premiums is under the direct control of individuals.

Because there is little personal control in today's system, the system is not accountable to individual patients. To illustrate this point, Herzlinger posits a composite victim, "Jack Morgan," a small-business man who dies from kidney failure. His condition could have been improved and his life saved if not for the systemic flaws of a dysfunctional, anti-competitive set of institutional arrangements, desperately preserved by the major players and their academic flacks. Like most of us, Jack Morgan, a mere patient, is not a player.

Herzlinger cites numerous examples of patients done wrong by the current system's perverse incentives, and this reviewer could add many more. Many patients, for example, would benefit from easy access to "specialty hospitals" for highly specialized treatment of their conditions, but hospital lobbyists enlist allies in Congress, including champions of national health insurance, to block the growth of these new businesses, because they threaten existing providers' bottom lines.

The major players employ armies of highly paid lobbyists, lawyers and consultants to harness the regulatory power of government and manipulate the health care markets to thwart their competition, micromanage their competitive position at the expense of patients and taxpayers and fatten their bottom lines.

Thus, Herzlinger opens up a vigorous prosecution of the multiple culprits of the health care status quo, including government (Congress particularly), insurance companies, the hospital industry, employers and, most of all, the academic community and its allies in the big foundations.

Already, government spending accounts for approximately 50 cents out of every health care dollar, and the government's share of spending is rapidly growing along with its control over the delivery of care.

So how can we get to a new world based on personal choice and robust competition? Many of Herzlinger's policy recommendations are controversial -- for example, imposing a legal requirement that individuals buy health insurance to protect them against bankruptcy and taxpayers against the rising costs of uncompensated care.

But some proposals are generating consensus. The most important of those is giving individuals federal and state tax relief to buy health insurance regardless of where they get it. It would then be fully portable between jobs, and individuals would own and control their policies, forcing insurers to compete for their business, a novel idea.

The result would be a world where insurers depend on your judgment of their performance and medical professionals compete to provide integrated care of the highest quality in a transparent, information-driven market. Herzlinger's remedies would bring about a radically different system from what we have today, and it would be much, much healthier.

Robert E. Moffit is director of the Center for Health Policy Studies at the Heritage Foundation.

About the Author

Robert E. Moffit, Ph.D. Senior Fellow
Center for Health Policy Studies

First appeared in the Examiner