[Congressional Record Volume 140, Number 7 (Wednesday, February 2, 1994)]
[Extensions of Remarks]
[Page E]
From the Congressional Record Online through the Government Printing Office [www.gpo.gov]


[Congressional Record: February 2, 1994]
From the Congressional Record Online via GPO Access [wais.access.gpo.gov]

 
            EMPOWER PEOPLE, NOT GOVERNMENT, IN HEALTH REFORM

                                 ______


                          HON. PHILIP M. CRANE

                              of illinois

                    in the house of representatives

                      Wednesday, February 2, 1994

  Mr. CRANE. Mr. Speaker, during the Ways and Means Committee's 
consideration of the President's health care reform package, I have 
raised a number of objections to the plan's costs, its bureaucracy, and 
the specter of health care rationing that it raises. In an article from 
the November 1993 issue of Imprimis, a publication of my alma mater, 
Hillsdale College, Matthew J. Glavin examines these issues and explains 
how the President's plan rejects the medical ethic by interfering with 
the doctor-patient relationship. In addition, Mr. Glavin shows how the 
free market can be used to achieve the bipartisan goals of health care 
reform to expand health coverage and contain costs. I urge my 
colleagues to read and consider Mr. Glavin's article as the debate on 
health care reform proceeds.
  The article follows:

                     Health Care and a Free Society

  (By Matthew J. Glavin, president, Georgia Public Policy Foundation)

       Preview: In this month's Imprimis, public policy expert 
     Matthew J. Glavin examines some of the issues involving the 
     alleged ``health care crisis.'' Most important, he warns that 
     if we choose ``managed competition'' over genuine free market 
     solutions, we will never be able to turn back--socialized 
     health care will be here to stay.
       Mr. Glavin's remarks were delivered before a Shavano 
     Institute for National Leadership audience in Atlanta last 
     May.
       Health care reform is one of the most complex public policy 
     issues to face this nation since the creation of the social 
     welfare programs of the 1960s. And, like the welfare programs 
     of the sixties, the decisions currently being discussed in 
     Washington will affect not only health care for millions of 
     individual Americans, but the very foundations upon which our 
     free society was built.
       Our current health care system has been characterized as 
     ``in crisis.'' What we ought to remember is that it is the 
     best in the world. However, there is no denying that there is 
     room for improvement and that there are serious problems that 
     must be addressed. After all, nationwide, health care costs 
     Americans more than $2 billion per day. Health policy experts 
     have considered a variety of reform proposals including the 
     Canadian-style universal, single-payer program. We have 
     studied the ``play or pay'' system which would have 
     instituted employer mandates. We have tried tinkering with 
     insurance laws to control costs or expand access. And we have 
     even heard about, albeit fleetingly, market-based reforms 
     based on competition and consumer choice. However, many of 
     the proposed cures currently being debated are worse than the 
     disease.
       The centerpiece of the Clinton health care proposal is 
     ``managed competition.'' Managed competition is being 
     presented as a compromise that would supposedly preserve many 
     free market aspects of health care, while making the market 
     more accountable to government control. As envisioned under 
     the Clinton proposal, managed competition would establish a 
     system of collective purchasing agents on behalf of employers 
     and individuals. All residents of a state would be enrolled 
     in one of these purchasing cooperatives, either through their 
     employer or individually. The purchasing cooperative would 
     negotiate on behalf of its members with ``Accountable Health 
     Partnerships'' (now known as insurance companies) for a 
     benefits package. This ``Uniform Effective Health Benefits'' 
     package would be established by the government as a minimum 
     standard benefits requirement.
       Accountable Health Partnerships would be required to charge 
     all citizens the same rate, regardless of age or lifestyle 
     factors. You would be charged the same whether you were 65 
     years old, smoked three packs of cigarettes and drank a quart 
     of whiskey a day, and weighed 275 pounds or whether you were 
     25 years old, exercised an hour a day, never smoked or drank, 
     and were in perfect health. You would be charged the same 
     whether you were monogamous and disease-free or whether you 
     had AIDS as a result of drug use or promiscuity. You would 
     not realize any financial benefit because of the lower or 
     higher risk you represent, resulting from your personal 
     decision as to your lifestyle.
       Managed competition also will severely limit consumer 
     choice--choice of insurer, choice of benefits, and choice of 
     physician. Because the Clinton proposal prevents insurers 
     from competing on the basis of their ability to price and 
     manage risk, most traditional insurers would be driven out of 
     the market. The criteria established for Accountable Health 
     Partnerships essentially limit the market to the ``the 
     Blues''--Blue Cross and Blue Shield--and a handful of large 
     HMOs. The insurance business, now among the top 10 
     ``industries'' in the United States, will no longer exist as 
     we know it. The economic impact of this alone will have a 
     devastating effect on the American economy.
       As one noted economist has said, managed competition is not 
     so much a coherent government plan as an oxymoron. It is 
     possible to have either managed health care or to have open 
     competition in health care services. It is not possible to 
     have both simultaneously. As proposed, managed competition 
     appears to offer a great deal of management and very litle 
     competition.


                      doctor-patient relationship

       While our economy may be able to survive the destruction of 
     the insurance industry, an even more insidious problem lies 
     ahead with managed competition. Managed competition holds the 
     potential of severely disrupting the traditional doctor-
     patient relationship. Because everyone pays the same, 
     regardless of current health status or lifestyle, managed 
     competition changes the historical role of insurers from 
     ``financial intermediaries with expertise in underwriting 
     risks'' to ``health care delivery systems'' organizing, 
     managing, and purchasing medical care.
       In short, the Clinton administration apparently believes 
     that physicians should be responsible to insurers, rather 
     than their patients. This means the patient's choice of a 
     physician will be limited to give the insurer increased 
     bargaining power with the doctor. It also means increasing 
     insurer control over the physician's choice of treatment, so 
     that insurers can ``apply quality assurance or review 
     appropriateness.'' As Swiss medical philosopher Ernest 
     Truffer has noted, the increasing interjection of third 
     parties between doctor and patient ``amounts to a rejection 
     of the medical ethic, which is to care for a patient 
     according to the patient's specific medical requirements, in 
     favor of a veterinary ethic, which consists of caring for the 
     sick animal not in accordance with its specific medical 
     needs, but according to the requirements of its master and 
     owner, the person responsible for meeting any costs 
     incurred.'' Are Americans willing to reject the medical ethic 
     in our health care system in favor of a veterinary ethic?


                    the cost of national health care

       The cost of socializing American health care has been 
     estimated to run from $100 to $300 billion. Even these 
     estimates may be too low, but regardless of the final price 
     tag, we would be buying surprisingly little health care. The 
     one common characteristic of all socialized health care 
     systems is a shortage of health care services. For example, 
     in Great Britain, a country with a population of only 55 
     million, the waiting list for surgery is more than 800,000. 
     In New Zealand, a country with a population of just 3 
     million, the surgery waiting list now exceeds 50,000. In 
     Canada, citizens must wait nearly 10 months for hip 
     replacement surgery, 2.5 months for a mammogram, and 5 months 
     for a pap smear.
       What do these statistics mean in our everyday lives? In 
     January 1990, two-year-old Joel Bondy needed urgent heart 
     surgery. It was a serious operation, but one that was 
     performed many times each day in hospitals across America. 
     Unfortunately, Joel did not live in this country. He lived in 
     Canada, where the country's socialized health care system has 
     resulted in a severe shortage of cardiac care facilities. 
     Canada has only 11 open heart surgery facilities to serve the 
     entire country. The United States, by contrast, has 793.
       As a result, Joel's surgery was repeatedly postponed as 
     more critical cases preempted the available facilities. 
     Alarmed at their son's deteriorating condition, Joel's 
     parents arranged for him to obtain surgery in Detroit. 
     Embarrassed by the media coverage of Joel's situation, 
     Canadian authorities told the Bondys that if they would stay 
     in Canada, Joel would be moved to the top of the list and 
     surgery would be performed immediately. Joel was taken on a 
     four-hour ambulance ride to a hospital equipped for the 
     procedure, but there was no bed available. The family had to 
     spend the night in a hotel. Joel Bondy died the next day.
       Sadly, while this is a true story, it is not the exception; 
     it is the rule. Physicians in Canada report that, for heart 
     surgery, you have a better chance of dying on the waiting 
     list than you do of dying on the operating table.
       One basic question that has received very little attention 
     throughout the recent debate is whether our government is 
     even capable of providing quality health care at a reasonable 
     price. For a preview of government-run health care programs, 
     we need only look in our own backyard. Medicare and Medicaid 
     are prime examples of health care delivered via bureaucracy. 
     They are rife with mismanagement, fraud, and abuse. Will the 
     federal government be able to control costs? History would 
     suggest otherwise. Between 1987 and 1992, for example, total 
     Medicaid expenditures rose at three times the rate of total 
     national health expenditures.
       If government is not the solution to our health care 
     ``crisis,'' how do we solve its problems? How do we maintain 
     quality in health care while assuring accessibility and 
     affordability? The only reforms likely to have a significant 
     impact are those that draw on the strength of the free 
     market.


                         deregulate Health Care

       There should be a thorough examination of the extent to 
     which well intended but mistaken federal and state government 
     policies already are responsible for rising health costs and 
     the unavailability of health care services. I believe that 
     such an examination will prove that government can lower 
     health care costs and expand health care access by taking 
     immediate steps to deregulate the health care industry, 
     including elimination of state mandated benefits, the repeal 
     of state Certificate-of-Need programs, and the expansion of 
     the scope of practice for non-physician health professionals.


                         restructure tax policy

       Current tax policy allows employers to purchase health 
     insurance with pre-tax dollars while individuals pay with 
     after-tax dollars. This difference in tax treatment creates a 
     disparity that effectively doubles the cost of health 
     insurance for people who must purchase their own.
       For example, the family of a self-employed person who earns 
     $35,000 a year and pays federal, state, and Social Security 
     taxes must earn more than $7,000 to buy a $4,000 health 
     insurance policy. A person working for a small business that 
     offers no health insurance would have to earn more than 
     $8,000 to pay for a $4,000 policy. Tax equalization would add 
     a measure of fairness to current tax policies that penalize 
     the self-employed, part-time workers and employees of small 
     businesses, while subsidizing health care for the most 
     affluent in our society.


                 establish individual medical accounts

       Individual Medical Accounts (IMAs) are another key to 
     controlling health care costs and strengthening the role of 
     the individual as a health care consumer. An Individual 
     Medical Account would work like this: Individuals would be 
     exempt from taxes on money deposited in an IMA, in the same 
     way they currently pay no taxes on deposits to Individual 
     Retirement Accounts (IRAs). Money to pay medical expenses 
     could be withdrawn without penalty.
       The current corporate insurance policy costs about $4,500 
     per year. With Individual Medical Accounts in place, 
     employers could be expected to change the way they provide 
     insurance. Once a year, a corporation (or an individual, if 
     self-employed) would deposit $2,000 into an employee's IMA. 
     This money, and any interest accrued, would be exempt from 
     taxes. The employer or individual would also purchase a 
     catastrophic health insurance policy that would have a $2,000 
     deductible. The cost of the catastrophic policy would be 
     about $1,800. The employer who previously provided a $4,500 
     insurance policy would save $700 a year. Individuals could 
     withdraw money from the IMA without penalty to pay medical 
     expenses. Money left over at the end of the year would 
     accumulate and belong to the individual.
       Only about 10 percent of families in this country spend 
     more than $2,000 per year on health care. This means 90 
     percent of all doctor visits would require no paperwork for 
     insurance because they would be paid directly by the consumer 
     out of the IMA. This also would increase consumer 
     responsibility because there would be an incentive to control 
     costs; the consumer keeps what he doesn't spend.
       The use of deductibles in traditional insurance policies 
     right now offers a perverse incentive, particularly for low-
     income workers. Low-income workers have little discretionary 
     income, and as a result are often forced to forego preventive 
     care or early intervention because they can't afford the 
     deductible. Yet, once the deductible is met, they have no 
     incentive to limit additional expenditures. With an IMA, the 
     incentive is to spend wisely throughout the year.
       Individual Medical Accounts would also be completely 
     portable. One of the most serious problems of our current 
     medical system is that insurance is so closely linked with 
     employment. Individuals who lose their jobs or change jobs 
     often lose their health insurance as well. Of the estimated 
     37 million Americans uninsured at any given time, half are 
     without insurance for four months or less, and only 15 
     percent are uninsured for more than two years, but it still 
     leaves them vulnerable, if only for a short time. With an 
     IMA, individuals would continue to have funds available to 
     pay for health care during temporary interruptions in 
     employment.


                           privatize medicaid

       The current Medicaid system has been one of the greatest 
     failures of American government. Costs are skyrocketing, 
     patients are receiving second-rate care, and providers are 
     being shortchanged. Actual expenditures for the Medicaid 
     program in 1992 were $124.6 billion. This compares with just 
     $52.1 billion in 1988, meaning expenditures have increased on 
     average 24.4 percent annually over the last four years. The 
     states' share of this joint federal/state program is growing 
     twice as fast as overall state spending. In 1970, Medicaid 
     consumed only four percent of all state spending. Today, the 
     average state spends more than 14 percent of its budget on 
     Medicaid.
       As spending increases, states are cutting back on their 
     payments to health care providers. Nearly all states 
     reimburse at a rate well below the actual cost of procedures. 
     The result is that fewer and fewer providers are willing to 
     treat Medicaid patients. Those providers that do treat 
     Medicaid patients often offset losses by passing along the 
     costs to patients with private health insurance, a practice 
     known as cost shifting. The federal government should begin 
     to restructure the system to give Medicaid and Medicare 
     recipients more flexibility to obtain private health 
     insurance that meets their individual needs. As much as 
     possible, responsibility for care of the poor and the elderly 
     should be moved from the public to the private sector.
       The average cost per person on Medicaid is more than $3,300 
     per year. This compares to $1,500 for a privately insured 
     individual. These figures only include direct health care 
     benefits; administrative costs are excluded. For a Medicaid 
     family (a mother and two children) in the United States, we 
     spend almost $10,000 per year in direct medical benefits. The 
     obvious question is: ``Why don't we simply privatize 
     Medicaid?'' Privatizing Medicaid would create market 
     mechanisms that would achieve all the major goals in health 
     care reform: affordability, accessibility, and quality.
       Privatization could be achieved in a variety of ways. 
     Individual states could provide vouchers to Medicaid 
     recipients. The value of each voucher would be equal to the 
     current average Medicaid expenditure for a family of the same 
     size as the recipient's family. Recipients may pool vouchers 
     for the purpose of purchasing group policies. For example, 
     residents of a public housing project may choose to pool 
     their vouchers and purchase a group policy for themselves. 
     Insurance policies purchased with a voucher would include 
     coverage for all federally-mandated Medicaid services. 
     However, all other mandated benefits, including optional 
     Medicaid services, could be exempted. Another option would 
     allow individual states the ability to contract with private 
     insurers (after competitive bidding) for large group policies 
     that would cover Medicaid patients. The state could offer 
     Medicaid patients several private options, including 
     traditional insurance, PPOs, or HMOs.
       Regardless of which method is selected, privatizing 
     Medicaid would result in substantial benefits for Medicaid 
     recipients, health care providers, and taxpayers. Medicaid 
     recipients would no longer be treated differently from the 
     privately insured--because they would become part of the 
     privately insured. A Medicaid recipient going to a hospital 
     or physician and presenting his insurance card would be 
     indistinguishable from any other patient. No one would know 
     how that insurance was obtained. And, finally, the patient 
     would have an expanded number of providers to choose from, no 
     longer excluded from the 35 percent of physicians who refuse 
     Medicaid.
       Since reimbursement would be at the same rate as private 
     insurance, health care providers would no longer be 
     shortchanged for treating Medicaid patients. Cost shifting 
     would be eliminated, with a beneficial effect on all health 
     care consumers. Further, by eliminating many of the costly 
     optional benefits and by encouraging insurers to experiment 
     with cost containment, privatization would stop the spiral of 
     increasing Medicaid costs.
       Insurers would compete for customers on the basis of the 
     benefits offered, crafting policies to meet the needs of the 
     purchaser. While many of the costly optional benefits no 
     longer would be covered, individuals would be able to 
     purchase a policy that more closely meets their individual 
     requirements. Insurers also would compete on the basis of 
     which cost containment mechanisms they include. Some may 
     offer managed care. Others may offer co-payments and/or 
     deductibles. Still others may offer fewer benefits. Some may 
     even offer ``lifestyle incentives'' or rebates for nonuse. 
     Everyone would have the freedom to choose the plan that is 
     best for them.


                               Conclusion

       It has long been noted that the Chinese character for 
     ``crisis'' is the same as the character for ``opportunity.'' 
     If America's health care system is indeed in crisis, as the 
     Clinton administration has alleged, we also have a unique 
     window of opportunity to reform it in a way that will make 
     health care affordable and available to all Americans.
       What is outlined here is a series of proposals that tend 
     toward increasing freedom of the market, proposals that draw 
     on the strengths of competition, consumer choice, private 
     ownership, and personal responsibility. The Clinton 
     administration has offered a plan that tends in an exactly 
     opposite direction. It is an about face. The Clinton proposal 
     creates more centralized government control. Government 
     bureaucrats will decide what services you receive. Government 
     bureaucrats will decide how much you will pay. Government 
     bureaucrats will decide what services your doctor can 
     provide. ``Competition'' will be managed--not competitive. 
     There will be a single source of revenue--the taxpayer.
       This is socialism! And, like the social welfare programs of 
     the 1960s, once socialized health care is in place, we will 
     never go back to a market-based system.
       All agree that the time for reform is here. But, what 
     decisions will we, as a nation, make? Will we move in the 
     right direction or are we going to make an about face? Will 
     we continue to preserve the heritage of our founding fathers, 
     the principles of a free society, and a market economy based 
     on individual freedom and responsibility, or will we embrace 
     the failed policies of central planning and socialism? 
     Freedom and free enterprise are sweeping the globe. While 
     Europe, Canada, and the former Soviet Union are searching for 
     ways to restore market mechanisms to their socialized health 
     care systems, America is in serious danger of adopting one--a 
     bureaucratic, government-run, taxpayer-financed health care 
     system that will limit patient choice and ration the 
     availability of care, while doing nothing to hold down health 
     care costs.

                          ____________________