Ron Paul's Texas Straight Talk - A weekly Column

July 2, 2001

"Patients Bill of Rights" or Federal Takeover of Medicine?

For decades, the U.S. healthcare system was the envy of the entire world. America had the finest doctors and hospitals, patients enjoyed high quality, affordable medical care, and thousands of privately-funded charities provided health services for the poor. Doctors focused on treating patients, without the red tape and threat of lawsuits that plague the profession today. Most Americans once paid cash for basic services, and had insurance only for major illnesses and accidents. This meant both doctors and patients had an incentive to keep costs down, as the patient was directly responsible for payment, rather than a third-party insurance company or government program. Not coincidentally, there was far less government involvement in medicine during this time. Somehow, however, the clear connection between government involvement in medicine and the decline in our once-proud healthcare system has been lost in the current debate.
Today most Americans obtain health care either through an HMO or similar managed-care organization, or through government Medicare and Medicaid. Since it is very hard to make actuarial estimates for routine health care, HMOs charge most members a similar monthly premium. Because HMOs always want to minimize their costs, they often deny payment for various drugs, treatments, and procedures. Similarly, Medicare does not have unlimited funds, so it generally covers only a portion of any costs. The result of this system is that doctors and patients cannot simply decide what treatment is appropriate; instead, they constantly find themselves being second-guessed by HMO accountants and government bureaucrats. When a third party is paying the bills and malpractice lawsuits loom, doctors have every incentive to maximize costs and order all possible tests and treatments. At the same time, patients suffer when legitimate needed treatment is denied. HMOs have become a corporate, bureaucratic middleman in the healthcare system, driving up costs while undeniably degrading the quality of our medical care.
So what should we do about the HMO mess? Before we call for government action, we should recognize that the federal government has virtually mandated HMOs on the American people First, the tax code excludes health insurance from taxation when purchased by an employer, but not when purchased by an individual. Second, the HMO Act of 1973 forced all but the smallest employers to offer HMOs to their employees. So while many in Congress are happy to criticize HMOs today, the public never hears how the present system was imposed upon the American people by federal law. In fact, one very prominent Senator now attacking managed care is on record in the 1970s lauding HMOs as "effective and efficient mechanisms for delivering health care of the highest quality." As usual, government intervention in the private market has caused unintended consequences, but Washington blames only the HMOs themselves- not the laws that created them.
Not surprisingly, the loudest voices on Capitol Hill now calling for a so-called "patients bill of rights" don't want to abolish the HMO mandate. Instead, more government is proposed to fix the problem. Congress wants to micromanage the system, deciding what treatments and drugs should be paid for by health insurers. Congress also wants to create new rules allowing lawsuits against employers when the HMO refuses treatment to an employee! Surely the trial lawyers will support the new laws, but Americans certainly should understand that more federal involvement will only increase the cost of health insurance for everyone. Undoubtedly, lower-paid workers will find themselves completely uninsured when their premiums increase beyond affordable levels. The truth is that any new legislation will only serve to increase government involvement in our health care system, to the detriment of us all. Without question, the true goal of some in Congress is to create a socialized medicine system. It's politically expedient to slap a "patients rights" label on legislation which simply leads us closer to a complete government takeover of medicine.
We can hardly blame the market for our current healthcare woes. As with all goods and services, medical care is best delivered by the free market, with competition and patient responsibility keeping costs down. Government has neither the constitutional authority nor the wisdom to determine appropriate contract terms between individuals and health insurers. Congress needs to abolish the HMO mandate and allow favorable tax treatment for individuals paying for health care directly. Medical Savings Accounts (MSAs), which are tax-deductible and tax-exempt accounts used to pay medical expenses, should be made available to all Americans. When patients spend their own money for health care, they have a direct incentive to negotiate lower costs with their doctor. When government controls health care, all cost incentives are lost. No "patients bill of rights" will help us when the money runs out.