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Ways to Lower Health Care Costs

The following is a philosophy article by Scott Hughes. Posted Oct 21st, 2009.

With health care reform at the forefront of American politics, many politicians have claimed to want to reduce health care costs. Indeed, lowering the costs of health care seems to me like the most effective way to get health care coverage to those who currently have none and to get more comprehensive health care coverage to those who currently have an insufficient amount.

Of course, reducing health care costs does not mean shifting who pays for it. People, governments, health insurance companies, charities and businesses all pay for health care in various ways. Changing who pays for what does not necessarily reduce the overall costs. If Joe pays for $200 in health care costs for himself or someone else, making it so John has to pay that $200 instead for the same health care for the same person does not change the overall costs; it just changes who pays for it. Some people may want to debate who to charge for the health care costs, but that is a different issue than the issue of reducing the overall costs of healthcare.

To focus specially on the overall costs of health care for everybody in sum, below I will list the ideas I have that I support and that I believe would significantly lower overall health care costs.

Tax Unhealthy Behaviors and Promote Healthy Habits - I think the healthiness of the behaviors and habits of the population has the biggest ability to affect health care costs. On average, it costs a lot more to provide health care to an overeating, obese, cigarette-smoking alcoholic who rides a motorcycle above the speed limit with no helmet and gets into bar fights on a regular basis than it costs to provide health care to a person who eats healthy, maintains a healthy weight, exercises regularly, and doesn't drink, smoke, do drugs or engage in reckless behavior. We all pay the costs of other people's unhealthy choices, whether these unhealthy choices raise the premiums of our health-care package at work or they waste tax-payer funds when the unhealthy people go to the emergency room. So I think it would be fair in addition to lowering health care costs to retrieve some of what everyone spends on these people's unhealthy behavior by taxing those unhealthy behaviors. It would lower health care costs by discouraging the behaviors by making it more expensive to engage in the unhealthy behaviors. Also, some of the revenue from the taxes could fund public health campaigns to further reduce how much people engage in unhealthy behaviors. We could raise taxes and fines on all of the following: cigarettes, alcohol, fast food, television, speeding, fighting, candy, soda, and foods containing high fructose corn syrup, food colorings, sugar substitutes, or carcinogenic ingredients. (Discuss the idea of lowering health care costs.)

Lower Insurance Company Profits - A significant portion of the money consumers spend on health care coverage does not go to doctors, hospitals, or the people who work at the insurance company. It goes to their profits, not into the pay of employees but into profits. A non-profit company can do the exact same thing without paying money to shareholders, thus putting the money that would go to profits into lowering prices, paying employees more, or otherwise providing a better service--in this case, more health care per dollar. Creating a government-run non-profit health care insurance company that is funded through the fees it charges its customers and not subsidies from the government is perhaps the least intrusive way to do this. For-profit insurance companies would have to give up some of their profits to lower costs or provide a better service to compete with the non-profit company. Another way to promote non-profit health care is to make a requirement that all state employee plans are bought from non-profit companies. That would also help stop special interests from convincing governments to buy overpriced plans just so the cronies of the politicians and bureaucrats can profit. (Discuss the idea of lowering insurance company profits.)

Base Insurance Premiums on Habits - For most people who get insurance from their job, insurance premiums are the same for every person at the job who chooses the same amount of coverage. This would be like charging the same amount of car insurance to a safe driver who has never had an accident or even gotten a ticket as to a reckless driver who has a DUI, has been in several car accidents and frequently gets speeding tickets. It's not fair, and it encourages people to engage in costly habits because they do not have to pay for it. Granted, we may not want to charge people for being unlucky and coming down with cancer, being born with a defect or some other condition out of their control. Nonetheless, let's charge for example a higher insurance premium to someone who voluntarily chooses to smoke cigarettes and a lower premium to someone who does not. The same goes for engaging in overeating, criminal violence, recklessness, drug use, alcohol consumption, consuming carcinogens, not getting medical checkups, etc. (Discuss the idea of basing premiums on habits.)

Health Care Pooling - People who work for a big company or a government usually do not have nearly as much trouble as everyone else when it comes to health care costs. That's because the per capita costs of health care coverage go down as more people are in a health care pool. Small businesses and individuals have trouble affording coverage because they are not part of a pool or not part of a big enough pool. That raises the health care costs for everyone because these people often cannot afford to get preventative care and use expensive, taxpayer-funded emergency rooms. One controversial way to increase health care pooling is to have a health care mandate that requires everyone to get coverage. Another great and more agreeable way to increase health care pooling is to allow individuals, small businesses, non-profits, and municipalities to buy into the health care plans of the state or federal employees. That's not giving them free health care subsidized by the state, but rather to let them voluntarily join the health care pool by paying their own premiums. The premiums would likely be much lower than they can get on their own because there are so many people in the pool. This would also lower the health care costs for the state and the state's employees by lowering the per capita cost of the pool. Unfortunately, healthcare pooling system proposals have been defeated by powerful health care insurance lobbyists who want to keep health care insurance prices artificially high. (Discuss the idea of health care pooling.)

Lower Health Care Fraud - Health care fraud is estimated to cost taxpayers more than $60 billion annually. Eliminating this would obviously lower health care costs by $60 billion a year. The fines and penalties for health care fraud could be drastically increased. That would discourage fraud. Also, the revenue from the fines could be used to further fund a crack down on fraud and to return the stolen money to taxpayers and to the health care system. (Discuss the idea of reducing health care fraud.)

Many possible reforms can drastically lower health care costs. Individuals would spend less on health care premiums. Businesses would spend less. Small businesses especially would be more competitive considering how much more the expensive status quo burdens them. And taxpayers would benefit greatly from lower health care costs considering how much the government spends on health care. But powerful special interests, namely the health insurance companies, stand to profit from wasteful government spending. They can lobby to prevent no-brainer reforms that would lower health care costs for individuals, small businesses, and taxpayers. It's up to taxpayers, small businesses and those struggling with their own health care costs to battle special interests and demand health care reform that lowers costs.

After each suggestion above there is a link to a thread to discuss that specific suggestion. You can also comment on the article as a whole and post your own suggestions of how to reduce health care costs in this thread.