Ron Paul's Texas Straight Talk - A weekly Column
December 14, 1998
Medical costs can be cut with freedom
Allowing consumers access to MSAs will improve health care

An often-made claim is that it is expensive to be sick in America.

That may be true, though no more so than any of the more socialist systems in the world perceived as "inexpensive" by those desiring similar government programs here. In those nations, the cost is hidden in individual tax-rates in excess of fifty percent, so the extremely high costs for care are still being paid by the patient, they just don't write the check to the doctor, they write it to the tax collector.

The reality is that for Americans major expense is not in major illnesses (insurance bears most of the brunt in typical cases), but in routine care.

For many years, the federal government has taken an ever-expanding role in our nation's medical care through regulatory and legislative activism. Of course, to oppose federal involvement is to be "anti-health care" or "anti-patient." Never mind that routine health care is arguably less efficient and less accessible than in our recent past, with sick people receiving worse care at higher costs.

What the politicians and their bureaucrats refuse to acknowledge is that the cost of routine health care is spiraling out of control precisely because of the federal involvement.

Most obviously, there is the direct government meddling. Bureaucrats, under authority granted to them by years of irresponsible congressional action, now dictate how medical care is to be offered, in what timetables, quantities and situations. Of course, these directives have nothing to do with the realities of medicine or even the demands of the market, but are simply political directives issued for soundbite effectiveness. While sounding nice, these regulations increase costs by forcing the medical provider to expend greater resources to meet the regulations.

Resources once devoted to assisting patients with their needs must be diverted to meeting bureaucratic regulations. Federal regulations imposed on state governments regarding medical care delivery, or on insurance providers, or employers, or directly on doctors and hospitals, all eventually come back to the consumer in the form of higher checkout costs.

To deal with the ever-rising costs, consumers feel forced to relinquish more control to insurance companies and health maintenance organizations (HMOs). At the same time, doctors are forced into the systems so that the burden of regulatory paperwork can be lifted from them.

The insurers and HMOs only make matters worse by further restricting the consumer's choices and limiting the services a physician in their group can offer. The incentive to cut costs is lost, as physicians (now working essentially as low-level employees) seek to make as much as they can in the new corporate environment, will charge the maximum the HMOs allow.

Consumer complaints about insurers and HMOs compel politicians to write new laws and more regulations to curry voter favor. More regulations breed more costs, limiting more choices, causing more anguish, and the cycle continues.

There are several ways to break the cycle. The most obvious solution is to pull the plug on federal intervention. That, however, is tantamount to political suicide. Who wants to be depicted as wanting to stop "good" regulations and laws, and "hurt" patients?

A more viable solution is to let the consumer and his doctors pull themselves out of the system, by means of medical savings accounts. While this does not solve the entire problem, it provides a larger degree of freedom for those who desire it.

Under an MSA system, a consumer could save pre-tax dollars in a special account. Those dollars would be used to pay for health care expenses, with the patient negotiating directly with the physician of their choice for the care they choose without regard to HMO rules or a bureaucrat's decision. The incentive for the physician is getting paid in cash as the service is rendered, rather than waiting months for an HMO or insurance provider's billing cycle.

With the cash for the MSAs coming from pre-tax dollars, most Americans could afford deposits that would cover routine expenses families' experience in a year. To cover larger expenses, major-medical insurance policies are readily available and fairly inexpensive.

Medical care will always be expensive, regardless of the system. The real question is how much freedom will a patient have in determining the care they receive. It is only when the patient controls the purse strings of his own money that he will have that freedom.

Project FREEDOM.