Patient Power: Solving America's Health Care Crisis. - book reviews

Business Economics, April, 1993 by Thomas G. Emerick

AS A RESULT of President Bill Clinton's promise to institute health care reform, the United States is now at a crossroads in health care. Because my main job is to help corral Wal-Mart's nearly $500 million annual health bill, I have been following the national debate over health care reform with intense interest.

The country has two clear choices to make: "reform" the health care system through increased government regulation and greater politicization of health care planning and delivery, both of which will inexorably lead to a national health insurance plan; or look for a market solution. John C. Goodman, president of the National Center for Policy Analysis, and Gerald L. Musgrave, president of Economics America, Inc., make a convincing case for the second option.

Most of the debate about health care reform in the United States today is based on several myths that Goodman and Musgrave expose. Here is a small sampling of the myths this book examines:

1. Countries with national health insurance have succeeded in controlling health costs.

2. National health insurance would lead to better health care.

3. A national health insurance plan would hold down costs by operating more efficient health care systems.

4. National health insurance would lead to equal access to health care.

Tracing the origin and evolution of the American health care system, the authors explain how we arrived at a system filled with distorted incentives that have fostered "job-lock," given the wealthy more tax advantage than the poor, and financially punished those who do not get their health insurance through an employer while rewarding those who do.

Patient Power proves that the real problem with health care is not a dearth of government control but a lack of normal consumer sensitivity to prices. As the authors point out: "The United States is the only country in the world where people can consume medical care almost without limit, unconstrained by market prices or by government rationing. If we paid for other necessities such as food, clothing, housing and transportation the way we pay for health care, costs would explode in each of those markets."

Some argue that the solution to the health care crisis is to create greater health care bureaucracies and let Washington decide who gets health care, how much they get and what the price will be. But health care would have to compete for government funds against other government services such as education and welfare, and there would never be enough money to cover all of the needs. Health care rationing would be the inevitable result.

The only effective way to control health costs while preserving the quality and availability that Americans expect is to get patients more involved in the economics of their own health care decisions. "More government and more bureaucracy won't work in health care any better than in any other field," Goodman and Musgrave write. "The only thing that works is people pursuing their own self-interest in competitive markets." In contrast to the current fads of managed care, managed competition and global budgets, Goodman and Musgrave argue that "the only way to control costs and maintain quality is to let patients control the money and restore the doctor-patient relationship." Patient Power:

1. Calls for medical savings accounts to be used to give health care consumers, i.e., patients, the economic incentives to approach health care purchasing decisions the same way they approach other purchasing decisions.

2. Sets forth a simple, step-by-step plan to create tax equity, which presently could hardly be more unfair to those who are not beneficiaries of employer-sponsored group health insurance.

3. Systematically shatters the notion that the laws of classical economics just do not apply to healthcare.

Goodman and Musgrave argue that most of the popular reform ideas in Washington would lead to a national health insurance plan. However, the authors point out that the on-going Medicare fiasco today stems "from the federal government's attempts to do something of which it is incapable: operate a giant insurance company." Patient Power asks how one can explain a federal Medicare plan that forces those with the most severe health problems to face the greatest financial burdens? Only one explanation is possible: politics.

Do we want health care managed by the bureaucrats in Washington, whose Medicare program arbitrarily cuts off benefits for the elderly with catastrophic illnesses while paying generously for low-cost and predictable expenses (a notion completely out of step with benefit planners in the private sector)? Or would we rather depend on the self-interest of individuals acting as prudent buyers in a competitive marketplace to be the driving force in the system? Goodman and Musgrave make the answer abundantly clear.

Penned by two economists who are seen by benefits managers as the leading advocates for market-based health reform, Patient Power is a must-read book for benefits managers, health insurance planners and health economists. If I had a chance to recommend one book on the subject of health care to President Clinton and Hillary, this would be it.