Resistance Begins at Ohm!

Wednesday, November 11, 2009

Dear Senator Mark Warner

I am writing to say that I agree, the issue with health care is cost. In my opinion, government insurance programs (medicare, medicaid, CHIP) have largely removed cost-based market competition, resulting in the current complete disconnect between the price charged and the cost of the service performed. The market motive right now is get the most possible out of the government program. Given the percentage of Americans that use these programs, the private insurance companies are seriously constrained by having to play in the same market.

For example, for routine blood tests (the usual annual panel) a lab submits charges of $150.00 to BCBS. The allowance is $25.75. Neither of these amounts have anything to do with the actual cost for performing the service. When I negotiated prices for surgery, lab and xray for my (uninsured) son's surgery, I could get reductions of 35-50% for cash in advance. This was for professional services as well as facility costs. (Always get it in writing before paying.)

I do not see how a federal program covering even more people is going to change that market dynamic. I believe consumers are far more effective in driving the cost of service down. Currently, they have no influence in the process, let alone motive. Most people have very few choices for providers (under private or government programs) and little knowledge about service costs because the bill goes to the insurance company. They have no way to make any decision about the price of the service before it is performed.

If consumers have choices and incentive to choose lower cost alternatives among service providers, not insurance policies, costs will go down. As long as the government is getting the bill, it's just a game managed by lobbyists and law makers, who despite what they say, aren't concerned about the price. It always comes back to political motives which is how we got in this situation in the first place.

These factors also need to be dramatically changed:
Tort reform to stop the lawsuit lottery. We require providers to adopt a very low risk stance. That means they will practice defensive medicine. Their vulnerability to large, unpredictable legal costs (not medical or infrastructure costs) makes the price for that insurance more than the price of insuring their own employees.
Federal laws that basically allow price fixing for pharmaceutical products and certain diagnostic practices. Drug manufacturers claim that they need 10 years of patent protection in order to fund their research. The reverse is just as likely, that they perform research based only on what they can get out of the drug in 10 years. So they push products as solutions for diseases they weren't made for, sometimes with horrible results. They do not do research for diseases that poor people have, or that don't affect very many people. If there was a disease that only affected people who make more than $1 million a year, you know they would be on it like a duck on a june bug.
Stop trying to manipulate personal behavior with economic incentives. You are creating yet another game. People will do what they do, including things other people don't like. Embrace this as a sign of the liberty we all are supposed to revere. My freedom to do something you don't like also allows you to do something I don't like. The government cannot disown smokers and embrace drug abusers. If the behavior is legal, than people should be able to chose to "do or not do." Do you not think that lung cancer is enough of a motive? You cannot finance health care by taxing bad behavior. If everyone self-reforms, what are you going to do for revenue? And there will always be some political debate about what should be moderated behavior and what should not. Remember, this is the home of the free. That ain't free.

Stop meddling in the medical equipment market. There is a limited market for purchasing expensive equipment. Things the government does to manipulate that market like raising taxes disrupts both the manufacturers and the purchasers (i.e., hospitals). You will drive this industry off-shore.

I think that having a commission develop legislation that Congress can vote up or down is an excellent idea. Sort of like base realignment. Your idea says a bi-partisan group. How about a non-partisan group? Congress can establish the broader objectives and the commission(s) can develop plans and methods for achieving them. A five year term appointment with a fixed salary for commissioners would be a good idea. I also think that the practice of adding unrelated things to bills should be stopped. You could have maybe three bills a year called "everything else." Legislators could submit their pet projects and orphan programs to that list - in full display on the web for at least 5 days. They should lose points for making last minute submissions. Citizens could add their opinions or just "vote" for the ones they like. The legislators that submit the items need to be listed as the "owners" so people can research the conflicts of interest. And nothing gets added in conference committee. That practice of legislating without voting has to stop.

Odd deficit and/or debt are not on your topic list. Isn't that what worried Virginians most, according to the polls?

My thoughts on your ideas. I wish you success. The country really needs some thinking outside the DC box. I appreciate your willingness to speak what is on your mind.


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