Competition in this industry has for many years survived in name only. In particular, health insurance companies have refused to engage in a legitimate, open and free rivalry with their fellow insurers, preferring instead to practice a form of collusion, price-fixing. Would-be competing insurance companies have worked repeatedly and in concert to increase prices, eliminating the consumer’s option to buy from the lowest cost supplier. For the poor consumer, the simultaneously price hikes have meant that all suppliers suddenly became equally more expensive. Insurance companies have succeeded in supplanting true competition with conspiracy. And the results have been catastrophic, with the cost of health care rising at an exorbitant three to four times the rate of inflation. The insurance industry has been successful in preventing natural competition and the laws of supply and demand from operating. The end result? Companies enjoy windfall profits by exploiting consumers who have no choice but to pay the higher prices. Ironically, health care reform bills have been defeated in part because opponents preyed on public fears that a government run plan would eradicate competition in the health care industry. A deceptive ploy indeed, for no competition ever existed to begin with.
The restoration of genuine competition to the market place is the real key to keeping health care costs down. But how can that be accomplished? We propose a plan by which the government and private enterprise would cooperate to introduce real competition in the market place...competition that would dissolve the clout that now allows insurance companies to act in contempt of our economic well-being.
Here is how it would work: The federal government would create a program that would pay all claims over $50,000. Since statistically, only 1.6% of all claims exceed this amount, the total cost of this program would be approximately $14.4 billion per year, a small fraction of the nation’s total health care bill. What about the other 98.4%? These claims would be paid by privately insured company-run cooperatives. Because small or even midsize businesses cannot assume the risk of catastrophic claims running upwards of a million dollars, self-insured plans are not presently feasible. Only the huge insurance companies are capable of taking such a hit. But that all changes when the burden of paying a potential claim exceeding $50,000 is lifted. With this threat removed by the federal government, small businesses can feel comfortable that their company plan would be able to meet the smaller claims of their workers. Employees and employers alike would contribute a percentage of salaries to an escrow account, and the funds would be made available to meet the medical expenses of participants. The moneys could be invested and the earnings used to reduce premium payments.
The benefits of this arrangement to the consumers would be bountiful. With tens of thousands of businesses now free to self-insure, the monopolistic grip of insurance companies would finally be broken. No longer would they be able to ask whatever the traffic would bear. Their stranglehold on this segment of our system would be shattered. Faced with this challenge to their survival, they would be forced to offer plans equal to or better than those conceived by the many self-insuring groups across the country. True competition would be resurrected and once more it would be permitted to operate in the best interest of the consumer. Price increases in health insurance would, most assuredly, be held to a minimum.
Self-insured cooperatives might also wield their newly acquired economic power with another group...primary care givers. Negotiating for the best deal, they would pledge their business to the hospital or doctors’ group which submitted to them the most beneficial cost-effective plan. Thus private cooperatives would be able to exert pressures on the health care providers as well, fostering healthy competition within this group to keep prices from rising.
For those individuals on Medicaid, for those who would not be covered by employee-sponsored health care plans, or for the uninsurable, states would be required to establish group programs similar to those already adopted in several states. These programs would be financed by diverting funds now used by the state and federal governments on their health care programs and by small payments from individuals in the program.
By combining the resources of the state and federal governments with those of private insurance and employees-sponsored cooperatives, universal health care coverage truly could become a reality for every citizen. And we could attain this necessary goal without the creation of another government bureaucracy, without the socialization of medicine, and without an increase in taxes. The solution is simple: Provide an atmosphere conducive to authentic competition by protecting employer cooperatives from rare but ruinous catastrophic claims.
In summary, we can vastly improve the health care delivery system and lower its cost by mixing the best features of the free-enterprise system with government assistance…a prime example of mixturism at work.
Mixturism...the rational, ethical, and political philosophy for the 21st century and beyond