Health Care Financing and
Free Market Solutions
Robert P. Nirschl MD, MS
Background information reveals that health care financing has become a complex and difficult problem. Currently, individual freedoms are being eroded and health care
delivery and financing systems are evolving into monopolies, which in many instances, restrain or eliminate cost effective free market competition. For the past 40
plus years, third party payments for the recipients of health care (patients) have resulted in an entitlement mentality and cost control has shifted from prudent
consumer choices to third party oppressive regulation. Insurance products have negatively evolved into non-insurance products by encouraging pre-payment for the
consumption of anticipated medical services rather than maintaining the less costly true insurance concept of coverage for unanticipated events. During this evolution,
business owners have become entangled into providing costly, inflationary, and cumbersome defined health benefit programs rather than the less inflationary defined
cost programs of offering employees a specific cost amount to offset health benefit expenses. This entanglement has largely occurred because of discriminatory tax
policies initiated during wage and price controls of World War II in association with a lack of understanding of true insurance products and free markets as they relate
to medical services.
The following concepts on health care delivery and financing are applicable to resolving the current unacceptable predicament:
Attain maximum value in the purchase of health services through free market competition.
Note: HMOs are the antithesis of free market competition. Free market competition cannot occur in the delivery of individual medical services unless the user of the
service, the patient, is the determinant of the value of the service, and has the freedom to seek this value. Cost control, in turn, cannot effectively occur in
free markets, unless the purchaser of services has meaningful obligation to finance these services.
Allow individuals to choose financing outside of pre-payment third party financing systems (especially the purchase of discretionary medical services).
Note: The most economical purchase of discretionary services is accomplished by direct purchase, thereby, eliminating third party administrative cost and profit.
Health and medical services can be categorized into three basic components: the delivery of emotional and physical comfort, enhancement of defined quality of life,
and the extension of life. The purchase of the first two categories is, in most instances, non-emergency and discretionary.
Foster the development of educational programs to aid individuals and employees in the prudent purchase of health services.
Eliminate and replace current discriminatory federal and state tax policies with fair and equal taxation policies for the purchase of health services whether
individually purchased or employer supplied.
Note: Current tax policy allows virtually no deduction for the purchase of health benefits unless supplied by employers. This policy discourages the purchase of
health benefits for millions of Americans.
Revise ERISA statutes to allow all employers the opportunity of self funding health benefits packages.
Allow the option to transfer employer ownership of health benefits packages to individual ownership and purchase.
Note: Individual ownership eliminates or reduces the problems of benefits portability, denial of coverage for pre-existent problems, as well as, employer
administrative burdens. The implementation of this sensible concept is frustrated by the current tax policy.
Foster the development of group purchasing organizations independent of employers to aid in the purchase of health benefit packages. The emphasis of purchase on
cost effective true insurance products (e.g., coverage for unanticipated catastrophic events) and cost effective individual payment for maintenance and discretionary
medical services.
Note: This approach encourages individual input into benefits selection, solves the portability issue, and achieves the economies of group purchase. Again, the
current tax policy is a major obstruction to this approach.
Dr. Nirschl is a practicing orthopedic surgeon in Arlington, Virginia; Director of Orthopedic and Primary Care Sportsmedicine Fellowship programs in conjunction with
Virginia Hospital Center Arlington; Associate Clinical Professor of Orthopedic Surgery, Georgetown University; and Chairman of the Jeffersonian Health Policy
Foundation.
