HMOs at heart of
health care crisis

As the House prepares to vote on a version of a so-called “patient’s bill of rights” – including, quite possibly, a version not supported by President Bush – some experts, policy analysts and lawmakers say they don’t expect much improvement overall because the main culprit, Health Maintenance Organizations, or HMOs, will survive any reform efforts.

Secretary of Health and Human Services Tommy Thompson, in an interview last weekend on “Fox News Sunday,” said the president “wants to sign a good bill.” But increasingly, there is a consensus that any “good bill” would severely reduce or eliminate the federal government’s role in the health care industry – which is not likely to happen, at least this time around.

“There are no easy answers,” says Jeff Deist, spokesman for Rep. Ron Paul, R-Texas – a lawmaker who is also a medical doctor. But, he told WND, “the best thing to do would be to get the government out of the health care business.”

“The government should get out of the health care industry,” added Frank Brady, president of Brady & Associates, a Kansas City, Mo.-based health care consultant firm.

Other lawmakers have also expressed regret over enhancing the federal government’s role in health care, especially the regulation of health insurance.

“It is true that I was awake when the Health Insurance Portability and Accountability Act [of 1996] passed, and the case is actually worse than that – I voted for it,” House Majority Leader Dick Armey, R-Texas, told a CATO Institute health care conference Tuesday, according to CNSNews.com.

“It started out as a modest little bill claiming to make coverage portable from job to job,” said Armey. But “it grew to become a whole package of reforms, most of them having nothing to do with portability.”

Short of radical reforms that would allow the market to dictate the cost of medical care, as well as the type of coverage Americans could choose, it will be difficult to resuscitate the health care industry.

“We should abolish Medicare and repeal the HMO Act of 1973,” Deist said. “Most people don’t realize that HMOs didn’t arise because there was a market for such a thing. They mostly have arisen by virtue of the tax treatment of them versus the tax treatment when individuals pay for their own treatment.

“HMOs have virtually been mandated on every employer with … more than about 15 employees,” he said, which accounts for the reason why “about 75 percent of the working American public has an HMO.”

“Generally speaking, about 30 years ago there wasn’t a third-party payer for most people,” said Deist. “Once that was lost – once Medicare or a third-party biller becomes involved – then all of the deficiencies arose and the incentives between the doctor and patient to keep costs down disappeared.”

Brady agreed.

“Everything always does exactly what it is designed to do,” Brady said. “And HMOs were designed to reduce costs by rationing health care. If you want to ration health care, then an HMO is the business model that you pursue.

“On the other hand, if you want to provide access to medical care – without all the impediments to it – you won’t subsidize the HMO model,” Brady added. “If people want to use the HMO model, let them – but let’s see if it will survive in the free marketplace.”

Removing “the end purchaser from the cost of use” is the most damaging health care problem, Brady said. “We’ve perverted the marketplace by removing customers from the financial consequences of their purchasing decisions” in health care.

“The best way to keep costs down is to let the cost of things be what the market will bear,” said Deist, who also said his boss believes that allowing Americans to create tax-free medical savings accounts to pay for their own treatment would enhance that free market approach and would work to drive prices down.

Armey shares that view. His solution involves lifting the limitations Congress put on tax-free medical savings accounts and flexible health care spending accounts and, in the short run, passing refundable tax credits for the uninsured, CNS News said.

“Long ago, most people only had catastrophic-type insurance,” Deist said. “Most insurance companies can offer that profitably. Most people paid cash when they went to the doctor. Of course, that gave both the doctor and the patient, at the time, the incentive to save money.”

Besides enhancing choice, Brady said caps on lawyer’s fees – a provision sought by President Bush – “would be good” because about one-third of all medical expenses are “defensive,” and, hence, needlessly raise medical costs.

“The best way to say it is, one out of every three medical tests ordered in hospitals” is done to protect doctors from being sued, Brady said.

Even though many physicians know such tests are unnecessary, even the most remote possibility they could be wrong – and then sued – forces them to order tests and procedures that aren’t needed, he added.

“It’s the exorbitant awards that are one of the major problems” driving up costs of medical care, Brady said. “Anything that reduces the award trial lawyers get for filing frivolous suits is positive. We ought to really be talking about tort reform, however, because we ought to be able to sue anybody we want if something is wrong, but not for the wrong reasons.”

Politically, however, there is another problem facing any radical reform effort.

Says Deist: “There has been created this belief that somehow people deserve the right to have their medical expenses covered through the taxes charged to others. That includes the new push to have prescription drugs covered, too. But if you look in the Constitution, you’ll see that there is no congressional mandate for the government to provide people with health care.”

“That’s like slavery,” Brady noted. ” The notion that health care is a right, enforceable by law, is egregious, because it forces somebody to work for somebody else for nothing.”

He also criticized lawmakers who initially helped pass the current HMO legislation and who still insist the government can fix the problems.

“It’s worth remembering that when HMOs first burst upon the scene, they were proposed by statists and, oddly enough, by the very people who are now trying to demonize them,” Brady told WND.

“The thing that drove them was an attack against the ‘fee for service’ part of medicine,” he said. “The notion was that these people were evil profiteers who needed to have their incentives to make ghastly profits at the expense of patients taken away.

“The geniuses who thought that human beings would respond to opportunities to make money forgot that people are motivated to make money another way,” Brady added. “The inevitable result [has been] that, once people decided they could only make money on an HMO if you ration care … that care has been rationed.

“So, it’s a little bit disingenuous for some of these same people – lawmakers and such – to now complain about the results that they were trying to get to when they proposed it in the first place back in the 1970s,” Brady said.

Under the terms of the HMO act, Deist said, if people were to buy their own insurance instead of choosing HMO coverage offered by an employer, they cannot take those payments as tax deductions at the end of the year. Employers, however, can.

“That deduction ought to apply to individuals as well,” Deist said.

Regarding the current debate about a patient’s rights bill, Brady – who has done business with over 10 percent of the acute care hospitals currently operating in the U.S. – says the term “rights” is “a misnomer.”

“Health insurance and health care are not the same thing,” Brady said. “This bill is really designed to give government access to people’s medical information.”

And, Armey warned, legislation now being considered will very likely only make matters worse.

“The Senate has passed a so-called ‘Patient’s Bill of Rights’ that would vastly expand federal regulation of health insurance, …” Armey told the CATO conference.