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What if There Were no Federal Dollars in Healthcare?

One of the biggest points of fear mongering regarding Texit is a series of questions about “what if there were no Federal dollars?”  The Texian Partisan will tackle some of these issues in our “The Sky is Falling” series.  We’ll begin with a big one: medical care. 

Those who opposed self-determination have a predictable series of objections to a free Texas. One common tactic is to say we’d never survive without Federal dollars in a variety of industries. Sometimes they’ll go so far as to say we’re advocating for leaving grandma to fend for herself. The sky is falling! That’s selling fear, not solving problems. Let’s look at what the Texas healthcare system could look like without Federal influence.

Government intervention usually starts with a good idea.  It’s a good idea to have clean water.  It’s a good idea to have paved roads to get us from place to place.  It’s a good idea to pool our resources so that our children can get a quality education.  It’s even a good idea for sick people to get health care services they need to get well, maintain their health, and live longer lives.

Health care is a complex issue.  It would be a good idea if people had access to the services they need in order to stay healthy.  It would be good if these services were available to the poor and elderly, with as much access and quality as are available to the rich and young.  It would be good if medical interventions were based on established best practices, if necessary treatment information was shared seamlessly between service providers, and if the consumer was given as much information as possible.

Federal government intervention, by the time it has made it through the legislative and regulatory processes and is brought to bear on the actual problem, is inevitably the most complicated and expensive solution imaginable.  In spite of the complexity and expense, the original problem is most often only tangentially addressed.  Thomas Sowell put it this way, 

“It is amazing that people who think we cannot afford to pay for doctors, hospitals, and medication somehow think that we can afford to pay for doctors, hospitals, medication and a government bureaucracy to administer ‘universal health care.’”

What about insurance?

Many of us have turned to the insurance industry for help.  We pay a little per month, and if something terrible happens, they foot the bill.  Sounds good in theory, but in practice these are for-profit corporations.  They make money if we pay but don’t get sick.  They make more money if we pay higher premiums, and they make more money if they pay out fewer claims.  They make money by betting that you won’t get sick, and they don’t like losing money by betting on folks who are sick already.  Of course the insurance industry has become more complex than that, but the fundamentals are fairly evident.

Somewhere along the line, folks in government got the idea that the best way to provide health care services is to make sure that everyone has access to insurance.  Medicare and Medicaid have adopted this approach.  Obamacare was the government’s latest solution to the problem of healthcare access, but by mixing up the interests of sick people with the interests of the for-profit insurance companies, and by throwing in plenty of government money, the system had immediate (and predictable) problems.

Supply and demand and the “free market” are supposed to control pricing, to some extent.  When the demand for health care is increasing due to an aging population, chronic diseases, and poor lifestyle choices, one might expect that the prices would rise. This is in fact the explanation given by the insurance companies, such as Blue Cross Blue Shield.  However, when the government props up the industry with guaranteed money, this in turn continues to prop up rising prices.  When profits are protected by Uncle Sam, there are no consequences to an insurance company when they keep on cranking up the rates.  Another factor behind the overall increase in costs is the high cost of new and specialty medications.  This link provides a nice analysis of the costs of treatment for Hepatitis C, for example, and explains that the cost is paid by insurance companies and government services.  Again, when profits are protected by access to Uncle Sam’s money, there’s no reason not to increase the prices.  

Consider also the case of a person who is insulin dependent from an early age.  Do they need insurance?  They’re 100% guaranteed to need insulin, but insurance isn’t supposed to be for things that happen 100% of the time.  Would car insurance cover an oil change?  No, it is only for unexpected major expenses.  Our current system puts access to expected health maintenance under the umbrella of “insurance.”  An “annual wellness checkup” is covered.  Strep throat treatment, or influenza?  Covered, even though these kinds of things may be readily expected.  In the diabetic case, not only is routine insulin covered, the patient is considered as having a “pre-existing condition.”  He may not need insurance for diabetes, only reliable access to his medication and insurance against catastrophe.

Are the pharmaceutical companies entitled to recover costs to develop their product, and to ultimately make a profit?  Of course, that’s basic capitalism.  On the other hand, a substantial portion of the development cost involves maneuvering through the FDA drug approval process.  The cost of the drug is increased because of government intervention (in the name of keeping us safe), and is maintained at a high level because of government funding (in the name of keeping us healthy).  In the end are we better off?  That’s highly debatable, but it appears to me that the good ideas of safety and health have been hijacked by the government with the result that we end up paying higher prices.

Doctors and supply and demand

Government has also restricted the supply of medical providers, by requiring licensing for various levels of care.  Do you need to be a MD to use a decision tree to get yourself some antibiotics?  Must you be a nurse practitioner to get your family something beyond Tylenol?  Do you need to be a gastroenterologist to answer a medical question about a colon?  The government says you do.  By restricting people from accessing medical care themselves, even if that means potentially more risk taken by individuals, the supply of providers remains restricted.  Restricted supply means higher prices, every time.  We are forced to trade independence and personal responsibility for assurances that the state is “only letting qualified people provide care.”

How much should a doctor or hospital charge for a service?  We may expect that as the complexity or risk of the service rises, the price should rise.  As it is now, some folks don’t pay at all, and in other cases the government reimburses at a lower rate than the procedure costs.  Hospitals lose $0.13 for every federal service payment dollar they accept, on average.  Supply and demand doesn’t drive the pricing because of the free flow of government money.  Supply and demand also doesn’t drive the pricing because health care is rarely elective.  If you break your leg, for example, you have to get it fixed regardless of the price.  Consequently, hospitals charge more and obscure costs so that they can keep making money even as they provide services for some people who don’t pay. 

Consider also the availability of qualified doctors and nurses within the market.  In a free Texas, without Federal waste and under-payment, salaries could potentially rise.  Imagine if a huge percentage of healthcare money wasn’t going to waste… where would it go otherwise?  First, it would stay in the pockets of consumers.  Second, it would go to the pockets of service providers.  Texas would attract the best and most qualified healthcare providers if for no other reason than the lack of Federal red tape, but also for the opportunity to participate in a free market health system. 

Down the Drain

Another challenge associated with Federal dollars is increased waste.  David Cutler put it this way in an article in Health Affairs. 

A Large Part Of Spending Is Wasteful

A large number of studies have estimated the waste in health care. Estimates suggest that between one-quarter and one-half of medical spending is not associated with improved health, although this view is not without controversy. Waste in medical care comes in many forms. One clear cause is misallocated treatments: spending on care that is not clinically valuable or not spending on preventive services. Examples of overuse include preterm elective induction of childbirth for women at low risk,  back surgery for lower back pain, and excessive end-of-life care. Wasteful undertreatment includes recurrent use of emergency departments and hospitalizations for people with inadequately treated congestive heart failure.

High prices are a second form of wasteful spending. Prices for the same services vary greatly across the country and between the US and other countries. Pharmaceutical price differences are the most notable international price differences, but physicians and hospitals are paid more in the US as well. Estimates suggest that even very valuable medications are now priced so high in the US that the costs may exceed the clinical benefits. 

Excessive administrative costs are a third form of wasteful spending. About one-quarter of US medical spending is estimated to be spent on administrative costs—twice what is spent on cardiovascular disease, and three times what is spent on cancer.  Finally, fraud and abuse may account for up to 10 percent of costs for some payers, though the exact amount is difficult to know. 

The magnitude of wasteful spending deserves particular attention. If one-third of medical spending is wasteful, the aggregate waste in medical care is about 6 percent of GDP. That is equal to the amount collected in Social Security and Medicare taxes, and it is two-thirds of the amount raised by individual income taxes. It amounts to about $3,500 per person annually.

Day one of science class starts with the scientific method, and step one has always been “define the problem.”  It is to this point that we need to return with regard to health care.  Sure, the issue is complex.  Granted, there are many divergent interests at stake.  But when it comes to the bottom line, the issue has been poorly defined.

“How can we pool our resources to get people access to health care?” is the fundamental question.  Such access should be affordable, and I’ve made the case that the rising cost is due primarily to the for-profit nature of the insurance companies we pay for this so-called “service”, increased because of the availability of guaranteed payments from Uncle Sam, and increased due to restrictions on providing medical care to ourselves.  The true problem won’t be solved until we get the government out of the health care business in all but the extreme cases.  If the poorest and sickest need government assisted health care, that seems reasonable, but to have Federal influence at so many points in the service delivery stream gets you exactly what we have: a mess. 

The solution seems likely to include some version of insurance.  If we focus first on access to services and not just on access to insurance, things would change for the better.  Fully de-regulating and then re-regulating the insurance industry is a great opportunity for reform. 

When it comes to medical costs, what we need isn’t a “repeal and replace”, what we need is a “retire and rebuild.”  Scrap it all, every single word, and start with the problem of health care access.  Craft a solution with as little government involvement as possible.  Craft a solution where access to a doctor is fundamental, not access to insurance.  Craft a solution with less regulatory burden, less licensing, less documentation requirements, where patients can get medications they need without going through the insurance system.  

An Opportunity

When Texit occurs and the flow of Federal money “stops”, this is the perfect opportunity to rebuild a better-functioning system.  Rebuilding is hard.  People will lose services, people may die waiting for a doctor, and people will go broke waiting for a solution.  It’s naïve to assume that there’s an easy way out of this mess, but it is also idealistic to assume that the best solutions have already been presented.  The government-in-bed-with-insurance solution has been in play for a while now, with the primary result of increased costs.  It’s time to try something different, even if the effort is painful in the short term.  As the words of Hebrews 12:11-12 remind us, “No discipline seems pleasant at the time, but painful. Later on, however, it produces a harvest of righteousness and peace for those who have been trained by it. Therefore, strengthen your feeble arms and weak knees.”  The people of Texas can solve their healthcare and other problems, if we hold to discipline, and if we stop looking to Washington for answers.

Texas will have many healthcare issues to solve, and each of these decisions will impact both the cost and quality of Texans’ healthcare.

  • Who can prescribe medicines?  If there were some that could be prescribed by nurses or moved over the counter, costs could go down. 
  • Who can treat minor injuries?  Can a veterinarian do sutures as well as a human doctor?  Can a nurse learn to sew?  
  • What happens when someone’s wrong?  Right now everyone gets sued, so costs stay high.
  • Who decides what drugs are safe, and how?  Right now there are substantial regulatory roadblocks to drug development, which increases the cost. 
  • What if you can’t afford the care you need?  Who pays?  Right now it’s “the government” and so costs for everyone else stay high. 

Affordable quality healthcare is a basic human need. Some would even say it’s a “right.”  In a Federal-free Texas, we could build a system to solve the problem more effectively.  As it is, there’s too much money floating around.  This drives up costs and lessens our ability to fix problems on a local level.  Things will be tough in the transition, but as Thomas Paine said, “I prefer peace.  But if trouble must come, let it be in my time so that my children can live in peace.”

Written By

Noah is the Acting Editor of the Texian Partisan. He has written for the Texian Partisan, the Texas Nationalist Movement, and several other large-circulation publications and sites. Named for an early Texas settler and veteran of the Texas Revolution, Noah pours his passion for Texas independence into his writing. He is a 6th generation Texan from the Hill Country.

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