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The Problem and Solution to Health Care - Page 3

October 20, 2009 - 8:00am
Nick Coons by Nick Coons

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There are several key turning points throughout our history that got us to where we are now. Without some deep study, it's difficult to put all of the pieces together. So I've done the work for you.



It started in the 1910s when Congress gave licensing authority to the American Medical Association (AMA). Prior to this point, medicine was a fairly free market aspiration. Many families were able to get a year's worth of health care coverage for the value of a few day's worth of labor. The cry of the medical profession was that health care costs were too low, that Congress must do something to stop this outrage; and so they did. The public reason was to increase the quality of health care, which was not an issue at the time, nor was higher quality the result.

Once licensing authority was passed on to the AMA and the practice of licensing was restricted, the supply of physicians decreased. As with any service, artificial restrictions on the supply leads to higher prices. Restrictive licensing leads to higher prices, whether the service is health care or anything else. (7). Restrictive licensing doesn't allow as many providers, because licensing is not easily obtainable. For instance, one mustn't be an M.D. in order to set a broken bone, just as one mustn't have a Ph.D. in engineering to repair your vehicle. To set a broken bone, one must simply know how to set a broken bone. But knowledgeable and skillful health care staff are prevented by law from providing such services if they don't have permission via a license.

The Kefauver-Harris Amendment of 1962 was another major step in the wrong direction as it expanded the FDA's powers. Prior to this, the largest catastrophic incident of death caused by an unsafe prescription drug, Elixir Sulfanilamide, was that of 107 individuals (8). Since then, the FDA is credited with 50,000 deaths annually due to delays caused by their "quality assurance" process. Additionally, the FDA's requirements for approving a drug add huge amounts to the cost, sometimes consisting upwards of 85% of the cost of the drug (9).

Next, we have tax revisions of the early 1970s, which provided tax benefits to employers that provided health coverage to their employees, but did not provide the same benefits to individuals. As a consequence, it is cheaper to have health coverage through your employer than it is to purchase it on your own. Incentivizing businesses to tie employees to their jobs via health insurance isolates individuals from the true costs. When the consumer doesn't care what something costs, neither does the provider, and the market forces controlling prices quickly vanishes. Would you care what a prime steak costs if instead of paying for it out-of-pocket, it was paid for by your "food insurance provider"?

And finally, there are restrictions on health insurance companies. In California, for instance, maternity care is a part of your health insurance whether you want it or not. If you're male, your chances of becoming pregnant are zero, so this is an unnecessary expense for you. Such mandates on insurance companies are common place, preventing the insurance company from offering individuals with a-la-carte service (10) (mandates lobbied for by the insurance companies themselves). This is like instituting a law that says the only car you can buy is a Cadillac with loaded options, otherwise you have to walk.

Additionally, it is illegal to purchase your insurance across state lines. I live in Arizona. If there's an excellent health plan in Utah that I like, I'm legally restricted from buying in to it. This practice reduces competition, which increases prices, without providing any benefit to the consumer.

It's taken a long time to create this mess. With proper information propagated and an understanding of how we got here, we can solve this in short order. But there are many special interests at play that continue to push for more government intervention when history is crystal clear that such actions are the problem.

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