Dan

Calabrese

Read Dan's bio and previous columns here

October 15, 2007

Sink the SCHIP: Get Rid of Health Insurance (Well, Most of It)

Health insurance is so expensive that you’re convinced you can’t afford it, which is why Democrats are scoring political points by proposing to expand the State Children’s Health Insurance Program (SCHIP), because everyone needs health insurance.

What almost no one understands is that health insurance is the reason you can’t afford health care, and the federal government made all this happen more than 60 years ago.

More access to health insurance only perpetuates the problem. The solution is to get rid of health insurance – or most of it – thus eliminating one of the federal government’s worst mistakes.

It all started in 1943, when, with a federal wage freeze in effect because of World War II, the federal government permitted another form of compensation by declaring employer-paid health insurance tax deductible for employers. Few people had health insurance prior to this, but this one little tax deduction created a monster.

The health finance bureaucracy was born. It grew. And grew. And never stopped.

Today, health care costs so much because the health care finance structure is about the most convoluted, bureaucratic behemoth known to man. Health insurance makes health care more expensive in several ways:

• It separates the consumer of the product from the party who pays for the product. You’re not very cautious about how much you buy if the product or service is “free,” which is what people think health care is because insurance pays for it. Making health care seemingly free results in almost unlimited demand, and more demand for anything means higher costs.

• It creates a massive bureaucracy that needs money. How many people do you think work for Blue Cross Blue Shield, just to name one example? How many offices does BCBS have? How many executives? How many computers? Do you think they all work for free? The premiums your employer pays, which could be padding your paycheck, pad theirs. They need to collect enough money to pay your claims and still pay themselves. They also need enough money to pay their lawyers and lobbyists and to fund their political action committees. You pay for all this.

• It creates built-in corruptions. Consider: In my home state of Michigan, a hospital cannot buy an expensive piece of equipment without getting a “Certificate of Need” that certifies the equipment is necessary. Otherwise, the state and the insurance companies argue, the cost of the equipment will drive up the cost of health care. The CON Commission relies on recommendations from local nonprofit groups. The one here in Grand Rapids invites the hospitals to be members of its organization for the price of a small bribe, er, contribution.

Who do you think pays for that? You do, dummy. Oh, you think your boss pays for it? Fine. The last time he told you he couldn’t afford the raise you wanted, why do you think that was? Your health premium just went up so the insurance could pay the higher hospital bills, which in turn paid for the hospital’s membership bribe to the nonprofit that tells the CON commission what to do.

The Democrats now argue that the federal government should pay for health insurance for children in families who make up to $85,000 a year because they can’t afford insurance. So they want to make it essentially free for those in the SCHIP program. Again, what happens when you make something free? Demand goes through the roof, and the cost of the “free” thing goes right up with it.

If your objective is out-of-control government, this is brilliant. Create a mechanism that drives up health care costs. Subsidize. Repeat. Finally, offer to “solve” the problem by taking over the very mechanism that caused the problem in the first place, which you created.

The right solution is for people to pay for their own health care. This would be feasible if the money their employers spend on their health premiums would instead be put into their paychecks. This is the idea behind health savings accounts. Buy a high-deductible health insurance policy to protect you against a catastrophic situation, and take the rest of what would have been used for health insurance premiums and use it to pay your own doctor bills.

I have one. It works. I save thousands every year that would otherwise go to pay health insurance premiums.

You want to make health care more accessible to more people? Eliminate the tax deduction for employer-paid health insurance and offer one only for HSAs or similar funds through which people pay their own health bills.

And don’t even think about the government paying for health care. Because if you think health care is “free” now, just wait until Washington is paying for it. It will be so “free,” no one will be able to afford it.

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