Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: TUESDAY, February 21, 1995 TAG: 9502210058
SECTION: EDITORIAL PAGE: A-5 EDITION: METRO
SOURCE: MURRAY WEIDENBAUM
DATELINE: LENGTH: Long
Let us begin with an approach based on the marketplace as the self-policing way of controlling medical costs. When patients pay the bills directly, they become cost-conscious - and so do the people and organizations serving them. Under the current "third-party" payment method, patients usually do not know the prices of their medical care beforehand, if ever.
A sensible step toward the free-market approach is to reduce the subsidies that increase demand for the ``best'' health-care service. The place to begin is to eliminate the tax advantage given to health care over other consumer expenditures.
Employer-paid premiums for health insurance should be included in taxable employee compensation, along with wages and salaries. Employer financing of insurance became popular during World War II as a loophole to get around wage controls. The special tax treatment is not justified by any canon of efficiency or fairness and should be eliminated.
At present, employees - or employers acting in their behalf - cannot buy a modest health-care plan. State insurance commissions dictate the composition of these plans, and they are very amenable to lobbying by special interests. In many states, the plans must include hair transplants, acupuncture and other optional items. Small businesses are especially hard-hit. Each state's insurance commission should shift its focus from serving the special interests of health-care providers to meeting the needs of the patients.
More fundamentally, it makes no sense for most of us to go through an insurance-reimbursement system for routine office visits and outpatient hospital procedures. We should stop looking at health insurance as a benefit program or an entitlement. It must be considered as a form of insurance protecting us from chance but potentially devastating circumstances.
One company in Virginia treats its health program like true insurance, reimbursing for insurable events rather than for routine medical expenditures. Employees are reimbursed for a small number of large claims rather than a large number of small claims. Savings from shifting away from traditional health-care coverage are shared equally between the employer and the employees.
The paperwork burden could be reduced substantially. Providing a standard medical card for each person with the vital personal and insurance information would avoid the repetitious collection of the same data by each health-care provider. The transcription errors that occur so frequently would be avoided, as well as the delays bedeviling patients and medical offices alike. The Quincy Foundation for Medical Research has proposed setting up a network of computer terminals at care-delivery sites. Each patient would receive a code card containing the Social Security number and basic personal and medical data.
Finally, increasing the knowledge available to consumers will enable them to make more informed choices.
In the purchase of medicine, government policy restricts or prevents the patient from acquiring information concerning the prices charged by different providers for the same or similar products.
Many states prohibit advertising the price of prescription drugs, making it difficult for consumers to shop for the best price. Every state that has enacted such anti-consumer legislation should promptly repeal it.
At the federal level, the Food and Drug Administration should reduce the barriers it has set up that inhibit advertising prescription medicines. Because consumers must obtain a prescription from a physician in order to acquire a prescription drug, there is little reason to fear deception in advertising in this market.
Experience shows that direct advertising can reduce the prices that consumers pay. Such evidence was cited by the U.S. Supreme Court in the decision overturning state bans on advertising of eyeglasses.
The FDA discourages prescription-drug ads from being shown on television, a major source of information for many consumers. Meanwhile, the high cost of ads in the print media - resulting from FDA requirements - reduces their use as well. Like so much government regulation, the result is the opposite of what the FDA says it wants.
Because of the restraint on advertising, consumers may not be aware that a treatment exists for a certain condition, and so they will not consult a physician. In other circumstances, consumers may suffer some symptoms (e.g., thirst) without realizing that these are symptoms of a treatable disease (e.g., diabetes). Alternatively, a new remedy with reduced side effects may become available, but patients are not aware of it and do not visit their physicians to obtain a prescription.
No silver bullet is available to cure all the ailments besetting the American health-care system. What will help in a fundamental way is to acknowledge that difficult choices have to be made among imperfect alternatives.
The package of alternatives proposed here, based primarily on the free market, is less imperfect than the others.
Murray Weidenbaum, chairman of the Council of Economic Advisers under Ronald Reagan, is director of the Center for the Study of American Business at Washington University in St. Louis, Mo.
- Knight-Ridder/Tribune
by CNB