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A Free Market Proposal For Healthcare Reform
By Daniel Yonts

The healthcare debate revolves around two systems that share common problems – namely, the issues of cost, access and individual choice. Within the current system, consumers are removed from the reality of what medical care actually costs. Since medical costs are shifted to employers, insurance companies, healthcare providers and government, the real economic impact of healthcare decisions are hidden from consumers. This encourages consumption and helps institutionalize inefficiencies within the system – which translates into greater costs, less access and fewer choices. Conversely, a government-run or “public option” is likely to expand these problems, while adding a political context that will limit the ability to optimize the system.

The Problem of Cost

Although inefficiencies exist within any system, most healthcare costs are a result of sick, injured, diseased and dying people. Improving technology integration, tort reform and streamlining processes can help reduce some costs – but, ultimately, the consumer’s behavior and condition will have the greatest effect on the expense of any system. Since these costs are primarily absorbed by the system instead of the consumer – behavior is not guided by its economic impact. The consumer doesn’t care if a procedure costs $20 or $20,000. Under the current and proposed systems, the consumer’s primary concern is whether or not a procedure or medical service is covered or not covered. This places the onus of cost on the system – whether that system consists of private insurers, government, business or a combination of these.

Increasing access to the current or proposed systems isn’t likely to bring down costs. It will, more likely, spread costs to others who wouldn’t ordinarily use nor need either system – as well as to employers, tax payers, shareholders and consumers. Again, when consumers are removed from the economic affect of their behavior and conditions, bringing down costs become an abstraction that interjects corporations and political decision-making into individual choices.

Individual Liberty and Choice

In order to control costs, a structure has to be put in place to determine what and who is covered and not covered. No system has infinite resources and must address economic scarcity in some way. Within the current system and proposed reforms, consumers lack the knowledge and incentives to address this scarcity issue themselves – as they do so well in many other areas of economic life. Instead, the system must impose rationing, restrictions and punitive measures to address costs. These measures – whether from government or insurance companies – are in direct opposition to the ideal of individual liberty and choice.

The current system limits an individual’s liberty and choices in ways that go beyond healthcare. Employees can become indentured servants to employers that substitute health insurance for higher wages, upward mobility, flexible scheduling and rewarding work. The shackles of the current system also provide a disincentive for aspiring entrepreneurs and small business owners. In effect, our current system of employer provided health insurance inhibits the efficiency of job markets and limits economic opportunity.

Proposed reforms, including the government option, offer some hope of portability…but at the expense of politically-charged infringements upon individual liberty and choice. Within a private system, you’re not likely to care if I engage in an unhealthy lifestyle or other behaviors that increase healthcare costs. However, once your tax money goes to pay for the results of my behavior and lifestyle – at the expense of your children’s education, your community and your financial security – you have a stake and a say in what I do. My lifestyle and behavior suddenly take on a political context – flavored with interpretations of “fairness” and “justice”. What used to be just a doughnut and a morning smoke – evolves into an affront against someone else’s economic future. This leads inevitably towards greater government involvement in all things that impact my health and the costs of the healthcare system. Listening to the calls of those affected by my decisions, government will be compelled to impose remedies that restrict individual liberty. In essence, a government that controls your healthcare controls your body.

A Consumer-Driven Solution

A health care system that provides consumers with more information, accountability and control is desperately needed. Consumers who don’t know or feel the economic impact of their decisions will put cost pressures on any healthcare system. They will also cede the ability to make their own decisions to corporate or government bureaucrats. In both cases, the outcome that best serves the system is when you no longer use it. More bluntly, there is an institutional bias towards your exit in the current and proposed systems. An alternative system to consider would turn this model around and create an advocate for your life and liberty.

Plan for Dealing with Catastrophic Care

I can purchase a healthcare plan without catastrophic care for my entire family at around $200 a month. This plan can include reasonable co-pays, doctor visits, prescription benefits and wellness. Catastrophic care, however, would cost my family over $1,000 a month if I purchased coverage on my own. Families, businesses and governments face the same financial reality. One alternative to this broken model, however, might be a system that operates much like Life Insurance. In fact, Life Insurance might be one tool that individuals could use to meet their health insurance needs.

What if everyone ineligible for Medicare or Medicaid had a life insurance policy where a percentage of the payout could be used for catastrophic care? For instance, if you had a $500K policy, you could use $300K to $400K to pay for the care to save your life. Under this option, you will either forgo or reduce the payout provided to your survivors. Insurance companies would be placed in a position where advocating for your life makes good business sense. Consumers, on the other hand, would be given a greater role and incentives for controlling costs. What’s more, difficult end-of-life decisions will not be made by the government or corporations – but by doctors, families and patients.

Monthly payments would be significantly lower under this option. For under $100 a month, emergency coverage could be made available to millions of Americans. In the event of a catastrophe, the cost of services within this plan could be based on Medicare payouts or the lowest negotiated rate. These costs would be deducted from the plan’s payout. In this way, cost of care will cease to be an abstraction that’s absent from consumer decision-making processes. Instead, the real value of care and its impact on those left behind will become a part of our healthcare calculations.

A Plan for Dealing with Basic Care

The same type of option that addresses catastrophic care can be expanded to deal with basic healthcare costs. Whole life insurance provides a model to cover costs associated with routine care, doctor’s visits, prescriptions, and non-life threatening conditions. Unlike medical savings accounts, consumers would essentially be borrowing against the matured value of their policy to pay for medical costs. If these costs are low, the consumer is rewarded with savings that can be applied toward their children’s education or retirement. Again, the cost of services within this plan could be based on Medicare payouts or the lowest negotiated rate. The premiums for this option would be affordable enough to create portability for most American workers, while giving consumers greater control and incentives to manage healthcare costs and quality of care. Government, for its part, can subsidize premiums for low income, unemployed and chronically ill consumers who don’t qualify for existing programs.

Effect of Alternative Plan

A plan that gives consumers more control, flexibility and accountability over their own healthcare will benefit our nation’s future. It will affect wages, personal savings, innovation, job creation and tax revenue. What’s more, it will help to re-establish the sovereignty of the individual over their own lives.

Daniel Yonts is an Executive Consultant and graduate-level professor of Advanced Internet Marketing Strategies at Full Sail University. His education includes a Bachelor’s Degree in Business and Psychology from the University of the State of New York and a Master’s Degree in Business Administration from Webster University. He has worked as a Marketing and Technology Consultant for leading retailers, media outlets, financial services companies, government agencies, start-ups and small businesses. Prior to launching his own consulting firm, http://www.payingattention.net/, Daniel served as the Director of Internet Marketing and Technology for a Top 400 e-Retailer. His work has been featured in books, industry publications and the results of his clients. More recently, he was an invited speaker at the 2009 Internet Retailer Conference in Boston. His interests include politics, philosophy, baseball and writing.

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