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    Monday, February 18, 2008

    Health Care Solutions, Chapter 1: How We Got Here

    That our current health care system has serious flaws can not be denied. I can not believe there is a single serious Conservative or Liberal who could not agree on that. Yet, both sides differ greatly in their prescriptions for the problems that ail us.

    I am a free marketer, a believer in capitalism, and have a general distrust of the government's ability to do anything well where we want innovation and cost control. I believe Ronald Reagan's greatest legacy to this country was to re-prove the ability of free markets to drive innovation up and costs down. He showed us that when we removed the shackles of government, in the form of high taxation and excessive regulation, the free market was the best friend the consumer could have, and the only natural way for economies to function.

    As history, the current employer-provided health care system grew out of wage and price controls instituted during WW2. To attract the few qualified people not actually fighting the war, employers began offering health plans. Unions picked these up as parts of collective bargaining agreements, and during the explosive growth years after the war, health plans became more and more comprehensive and feature rich. Ultimately, the government got into the act, favoring employer-sponsored plans via large tax incentives to the employer. It is estimated the value of these tax incentives is $150B annually.

    So, after 60 years, we're got a health care system that essentially is tied to employment. If you're employed, you have health care, if not, well, you probably don't, unless you fall into one of those groups that the government plays the 3rd party role - the poor via Medicaid, or seniors, via Medicare. Roughly 60% of people in the US are covered under employer-provided heatlth plans, with about 10% covered under privately-purchased plans. The remainder of the covered are covered under the two government programs. Most estimates are that about 16% of the population is uncovered at any given time.

    Medicaid is a true transfer payment, where we all pay income taxes that get redistributed to those unable to care for themselves. It's welfare. Like it or not, we have chosen that system through our elected officials. It isn't changing, and as a safety net, it's a necessary system in this country.

    Medicare plays the same shell game we play with Social Security, and is tied to it. Via payroll taxes, we all "pay into" Medicare as we work, so that we can draw from it after we retire at age 65. That's the story, but, like Social Security, we're actually paying today for someone else's Medicare. Regardless, the idea is it's insurance bought for the future. Die at 61 and, well, your Medicare taxes work for someone else. Live to be 100, and, well, you get the picture.

    I think we can all agree that there are many structural problems with our health care system, chief among them:

    1. The market is controlled by 3rd parties (an insurer/employer cabal)
    2. The system is focused on the provider.
    3. Costs and quality are unknowns to the consumer. Quality is unknown before the fact and costs are often unknown forever.
    4. The system focuses on sickness and disease and not prevention
    5. Medicare faces significant funding issues.
    6. Large number of Americans are uninsured

    I'll address my thoughts in posts to come.... Nothing after the jump

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