The Heritage Foundation

Executive Summary #1168es on Health Care

April 16, 1998

April 16, 1998 | Executive Summary on Health Care

BG1168es: Building Bureaucracy and Invading Patient Privacy:Maryland's Health Care Regulations

Maryland is a microcosm of the serious problems besetting the health care system in the United States. Health care in Maryland is a $15 billion industry in which doctors and patients are losing control and the number of uninsured persons is rising. The state's health care policy-an incoherent bundle of regulations and contradictions-is driving up the cost of health care while artificially trying to hammer down prices. In 1996 alone, the cost of a hospital stay increased almost twice as fast as the national average. Yet, by mid-February 1998, legislators had introduced 85 new health care and companion bills and 18 mental health bills in the state's General Assembly.

Politics, not patient choice, has been the driving force behind the growth of Maryland's health care system. The health care behemoth grew rapidly after the enactment of the Health Care and Insurance Reform Act, an 81-page, last-minute bill pushed through in 1993 at the height of the national debate on the failed Clinton Health Security Act. One legislator aptly described it as the "Clinton Plan in miniature." As a result, Maryland's system now features:

  • No fewer than five regulatory bureaucracies to control health care delivery at a cost of over $30 million a year.

  • A government-run health care database that violates a patient's right to
    privacy
    . In Big Brother fashion, sensitive information on every visit to doctors and hospitals is entered without a patient's consent. Ironically, Marylanders can protect the confidentiality of their driving records, but not that of their medical records, in the state's computerized data banks.

  • More mandates on the health insurance market than are imposed by any other state. As a result, many Marylanders are unable to purchase a benefits package tailored to their own specific needs but are forced to pay for access to treatments and procedures that legislators target for politically favored body parts. According to a recent U.S. General Accounting Office report, Maryland's mandates add 22 percent to the cost of a typical health benefits package. This puts Maryland-based insurance plans at a competitive disadvantage when trying to attract the business of federal workers and retirees in the popular, consumer-driven Federal Employees Health Benefits Program.

  • Policies that frustrate the federal medical savings account (MSA) program enacted by Congress in 1996.

  • An agency that sets all rates hospitals may charge for medical services, regardless of supply and demand. Prices bear little or no relation to market forces. Under this rate-setting system, a hospital in Prince George's County charged $13,434 for an angioplasty in 1994 while one in Baltimore charged only $4,492.  

HEALTH CARE SPENDING

Maryland ranks 1st among the states in Medicaid payment per child and adult beneficiary, 7th in spending on physicians' services, and 11th in spending on miscellaneous medical services. Yet its health care initiatives have done little to expand the availability of health insurance. The number of uninsured persons has climbed from approximately 570,000 in 1992 to over 700,000 today. The cost of uncompensated care reached $408.1 million in 1996 and is climbing still. And contrary to the claims of supporters of the health care regulatory system, recent figures indicate the system is not controlling hospital costs effectively. In 1996, the cost of a hospital stay increased by 4.5 percent, compared with a national average of 2.3 percent. During the second half of 1997, under the state's complicated price-fixing system, Maryland's hospitals saw their profits cut in half; 15 of the state's 52 hospitals lost money.

A BETTER SYSTEM

Excellent medical care, increased access, and a return in value for investment can be achieved only by sound policies that rely less on bureaucratic regulation and more on consumer choice and price competition. Legislators across the United States can learn what not to do by examining Maryland's efforts to micromanage health care through a burgeoning bureaucracy. Instead of adding more mandates and rules to an already top-heavy regulatory structure, state legislators should focus on policies that improve health care opportunities for workers and their families. Specifically, they should:

1. Promote personal ownership and portability of health insurance by giving tax credits to middle-income workers and vouchers to low-income workers.

2. Protect the confidentiality of patient records to ensure that no personal information is transmitted to any public or private entity without a patient's consent.

3. Reduce costs and replace benefit mandates with solid catastrophic coverage.

4. Eliminate outdated regulations and dismantle unnecessary bureaucratic programs.

If health care access and affordability are genuine goals, a far better approach would be to empower individuals and families to make health care choices that suit their own needs, restore the independence and integrity of the medical profession, and force insurance companies to compete for consumers' dollars. The health care delivery system at all levels should be accountable directly to the individuals and families being served.

-Dale Snyder is a Severna Park, Maryland, consultant specializing in issues related to health care and labor and employment. Robert E. Moffit, Director of Domestic Policy Studies at The Heritage Foundation and a Maryland citizen, also contributed to this paper.

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