A Health Care Revolution Is Underway … No Thanks to Government ‘Help’

Published August 1, 2008

Although presidential candidates Sens. Barack Obama (D-IL) and John McCain (R-AZ) have wide differences in their positions on health care, it may not matter much what they or other politicians have to say on the matter.

It is a mistake to think of health care reform as primarily a political issue. Health care is an enormous industry that responds to changes in attitudes and incentives.

There is already a revolution underway, one few politicians are aware of. At least 10 milestones indicate the speed and direction of this revolution, and not one of these developments required new legislation.

1. The end of commercial HMOs as a viable benefit program. Most kinds of HMO programs are dead or dying, killed off by the “managed care backlash” of the 1990s.

2. The growth of Health Reimbursement Arrangements (HRAs). HRAs are similar in structure to Health Savings Accounts (HSAs) but preceded them by several years. They were created by corporate benefits managers who knew HMOs were no longer viable and were looking for a way to put purchasing power in the hands of employees.

3. The advent of retail clinics. The growth of walk-in clinics in stores such as Wal-Mart, Target, CVS and others is addressing several problems that seemed intractable–misuse of hospital emergency departments, the need to provide basic services to the uninsured, and the shortage of primary care providers–and doing it all at great convenience and low cost.

4. The growth of concierge medicine and cash-only medical practices. These practices likewise address the need of patients for greater convenience and more time with their physicians. They can also lower costs by bypassing the administrative burden of insurance claims processing and adjudication.

5. Hospitals abandoning the practice of billing “self-pay patients” the highest possible charge. Instead they are working with these patients on price transparency, reasonable charges, and plans for payment. The hospitals are doing this, not because of new laws and regulations, but because they have been shamed into it by negative press reports and the realization that the market is changing.

6. The advent of low-cost retail generic drugs. Pioneered by Wal-Mart’s policy of charging only $4 for generic drugs, more in-store pharmacies are adopting similar policies or even beating Wal-Mart’s prices. The stores say they are doing this because it makes good business sense, not because of any laws or regulations.

7. The growth of medical tourism and physician-owned specialty hospitals. Faced with a lack of competition among hospitals and the indifference to quality, price, and convenience such monopolization brings, more American patients are choosing to go abroad or to “specialty hospitals” for their inpatient services. Politicians have tried to set up roadblocks to these developments, but empowered patients have chosen them anyway.

8. Converting from employer-based to individually owned health insurance. For years policymakers have been concerned about the problems created when most people rely on their employers for health insurance and lose it if they lose their jobs. Politicians have done little to address these problems. Now they won’t have to, because employers themselves are converting away from employer-based coverage in increasing numbers.

9. Rejection of government-run insurance programs. Growing numbers of people who are eligible for government-run programs such as Medicaid and the State Children’s Health Insurance Program (SCHIP) are simply refusing to enroll or are dropping out after trying it for a year. They are telling the politicians these programs don’t work well and aren’t worth participating in. To date, the politicians have failed to listen and change these programs to make them more attractive.

10. The growth of information technology. While our political leaders fret about the need for health information technology, electronic medical records, and patient support services, and make bold promises that are impossible to achieve, the private market is getting the job done. Great innovation is underway, driven by companies like Microsoft, Google, Revolution Health, and hundreds of entrepreneurs with good ideas and a little bit of capital.

These changes provide the outlines of a totally transformed health care system. This revolution relies on consumer choice, greater competition, more innovation, and personal ownership of health insurance to transform a bureaucratic, inefficient system into one that is affordable, high quality, convenient, and accountable. What the industry most needs now is for government to get out of the way.

Greg Scandlen ([email protected]) is director of Consumers for Health Care Choices at The Heartland Institute.