Union University

Union University Department of Political Science

Department of Political Science



We Can Cut Health Care Costs

Sean Evans, Chair and Associate Professor of Political Science
Sep 18, 2009

Health care costs are out of control. Yet, we can reduce costs and improve health care if we take personal responsibility for our health and make the health insurance system more responsive.

                First, high health care costs are our fault. The Health Project Consortium (HPC) reports that 70% of all health costs result from changeable personal behaviors like overeating, smoking, alcohol abuse, not wearing a seat belt, sexual promiscuity, a sedentary lifestyle, overexposure to the sun, etc. To rectify this, we need to incentivize healthy behavior through lower premiums and rewards for participation in wellness programs while punishing unhealthy behavior through higher insurance premiums and taxing unhealthy behaviors.
                Second, health promotion programs make us more savvy patients.  These programs educate people to self-diagnose and treat minor illnesses, provide counseling that identifies personal health risks and means of managing them, provide phone nurses that answer medical questions without appointments, etc.  The HPC reports that these programs help people make better medical decisions and reduce use of the health care system.
                Third, we can become more consumer savvy with greater transparency in prices and quality measures. Currently, the health insurance system disguises costs and discourages competition with differential and non-public pricing and regulations that make starting medical care facilities difficult. Furthermore, the CDC estimates that hospitals account for 1.7 millions infections and 99,000 deaths each year while a RAND study shows that only 55% of patients receive the recommended, proven care for leading causes of death and disability. Give patients knowledge of prices and quality measures and they will find better, more affordable health care.
                Moreover, more public information on quality measures would encourage medical professionals to more quickly adopt electronic record keeping and infection prevention systems which would improve health care. And comprehensive tort reform would reduce defensive medicine and eliminate nuisance suits arising from greater transparency.
Yet, transparency will not work unless the health care system becomes more competitive. The AMA reports that 42 of 45 states, for which data is available, are highly concentrated using the Department of Justice’s index to measure market concentration. This means that one or two insurance companies dominate the state health care insurance field which allows them to charge higher premiums.
However, competition can change that. A recent University of Pittsburgh study shows that premiums are 12% lower in more competitive markets. This is why some support a public option. Yet the public option is unlikely to reduce costs due to administrative costs relating to collecting premiums, marketing itself, maintaining a reserve fund, and managing care.
Moreover, it would be more efficient to create a national insurance market and let companies compete against each other. Currently, business practices are regulated by states and the various regulations makes entry into the market cost prohibitive. A national market with one set of regulations would increase the size of the insurance pool making claims payments more manageable, predictable, and stable, could increase competition among insurers, provide more insurance options, and potentially allow consumers to choose health insurance as easy as car insurance.
Fourth, the system needs fundamental change that rewards quality medical care. Currently, insurance companies use fee-for-service plans that reimburse doctors, clinics, and hospitals for each visit, test, procedure, etc. This model creates financial incentives that reward quantity, not quality, care that does not result in better outcomes according to Dartmouth College.
                Therefore, some suggest bundling fees (combined fee for all costs of a procedure) forcing hospitals and clinics to manage costs, creating a comparative effectiveness research center to improve decisions about the type, frequency, and volume of treatments, and using pay-for-performance models that reward quality health care.
                Yet these suggestions have drawbacks. Do we want more intrusive government mandating physical fitness? Will patients be better consumers with more information or face information overload? Will congress choose regulation over competition? Will a comparative research center implicitly set national standards for care leading to rationing or cookie-cutter medical care?
                Can we cust health care costs? yes we can -- if we take responsibility for our health and increase transparency and competition in the health care system.
Article originally appeared in Sept. 18, 2009 edition of The Jackson Sun