Since 1970, the health care industry has undergone a revolutionary change. Before that time people were overwhelmingly (about 70%) in traditional indemnity plans where patients pay a certain percentage of health care costs. With the passage of the Health Maintenance Organization Act written by Ted Kennedy (D-Mass), very quickly over 70% of Americans were covered by HMOs.
The structure of HMOs was also largely different than traditional indemnity plans. HMOs require primary care physicians to act as gatekeepers of advanced care and it empowered insurance companies to challenge the medical judgment of doctors. It restricted choice to those doctors and providers “in the network” and any care provided by outside providers, care that didn’t follow the right regulations or didn’t have the right referrals was simply not paid.
It is indisputable that we are currently in a health care crisis with skyrocketing costs and extreme customer dissatisfaction. It is never a good sign when medical providers have to market themselves on customer service. No other industry has to try to convince consumers that “we won’t abuse you” and that “you matter to us”. The current argument is that health care needs to be socialized because the free market hasn’t worked.
First, the central principle of the free market is that the individual parties of a transaction are able to negotiate the terms of that transaction themselves. For instance, if I want to buy a car, I can negotiate with the dealer the terms of the transaction and the dealer can do likewise. If neither of us wishes to proceed, we can move on. Without free choice on both the provider and consumer in deciding terms of the transaction, there is no free market. There is no free market without choice.
The health care system in this country, developed by Democrat Ted Kennedy who now campaigns against his own creation, all but eliminates choice in both doctors and patients.
Limiting the Choice of Patients
Let’s say you, Joe Consumer, want health insurance. Because of the structure of the tax system that enforces what is basically an historical accident, you will probably get this through your employer. Your employer is limited by tax law to only let you make decisions about your health insurance provider at certain times, basically when you are hired and once a year thereafter. You will likely get a few choices, an HMO with higher deductibles and lower premiums, an HMO with lower deductibles and higher premiums (from the same company), and a traditional indemnity plan. If your employer chooses Blue Cross Blue Shield, you’re only going to be able to choose Blue Cross Blue Shield.
Employers decided which insurance company to work with. Their motivation is clear, to save money. As a secondary objective, they want happy employees. However, the insurance company is selling insurance to your employer, not you. So they craft policies that are lucrative to your employer. Maybe 60% of employees are happy with what they get, but the other 40% are pretty much hosed. If they want a different insurance company they need to pay full price and the employer is not allowed to compensate the employee on what their portion might have been. End result: consumers do not choose their insurance company, their employer does. If they want to change their insurance, they can’t until the next benefit choice period dictated by the IRS.
Now you, Joe Consumer, want to go to the doctor. You take your handy dandy provider directory (or go online) and you select from the list of doctors your HMO allows you to go see. You may know you need an orthopedic doctor to deal with your knee problems but that’s too bad, you need to go to a primary care physician first (and pay for that useless appointment that you don’t need). This primary care physician’s job is to limit the amount of advanced care patients receive. In fact, in some cases, primary care physicians get a bonus based on how few referrals they give.