In an effort to help Americans unhappy with the service they’re getting from “managed care” health plans, federal lawmakers are laboring mightily to enact a “Patients’ Bill of Rights” that would let patients sue those plans when they feel they’ve been mistreated.
The details have yet to be hammered out, but one way or another, more lawsuits seem imminent.
Trouble is, lawsuits won’t cure what ails our health care system. Indeed, increasing the likelihood of lawsuits could do some serious harm, as health maintenance organizations (HMOs) respond to the prospect of higher legal expenses simply by increasing premiums. That would force many employers to make their employees pay even more for health care. Worse, some employers may find it necessary to drop coverage altogether.
A better solution is available to us. It’s the same one that gave us 5-cents-a-minute long distance, $10 overnight shipping to anywhere in the world, and 59-cent cheeseburger day at McDonald’s: Free-market competition.
Let Employees Choose
Let workers choose their HMOs—rather than be required to take the one their employer picks—and watch the difference. Some plans will keep costs down but remain as maddening as they are now. Others will be more expensive but offer better service. Some will fall somewhere in between. Still others will go out of business.
And soon Americans will have something they don’t have now: A real choice.
More than 90 percent of Americans with health insurance—HMOs or otherwise—are covered through their employers. Fewer than half have any choice among plans. And even for those lucky few, the list of choices is short, and the employer makes the list.
Given that most workers have the option of accepting their employers’ insurance or having none at all, it’s no surprise some are dissatisfied with their employer-sponsored plans and—understandably—feel frustrated when they can’t do anything about them.
The object of health care policy should be to make it easy for consumers to find coverage that meets their needs, and to arrange for that coverage without going through their employers.
If Americans had real choice, insurance companies would have to compete for their business on the basis of consumer satisfaction. That alone would solve the problem a “Patients’ Bill of Rights” is supposed to address . . . without extra lawyers, who ought to be a last resort for disgruntled patients.
Two alternatives to what Congress and the administration are proposing would give Americans the decision-making power they currently lack.
One is to allow employers to take the money they currently pay in health insurance premiums and instead offer their employees “defined contributions”: an amount employees can use to buy their own health insurance coverage.
Defined-contribution plans would work much like 401(k) contributions do. Employers handle the paperwork, but leave the important decisions to their employees. Employers merely send a check—which includes their contribution and the employees’ contribution (withheld, as now, from their paychecks)—to the insurance company chosen by each employee.
Everyone wins. Employees get the coverage they want, and employers stop shopping for insurance.
The second alternative would help workers whose employers don’t offer health insurance—an audience ignored by the legislation now before Congress. Lawmakers should offer them refundable tax credits. Doing so would give lower-income workers, who make up most of the uninsured, access to comprehensive health benefits.
Research shows that tax credits would make health insurance more affordable and accessible. Roughly three out of every four health plans charge premiums equal to or less than the tax credit amounts called for in the leading proposals.
Tax credits also would give employees and their families the leverage a “Patients’ Bill of Rights” is meant to provide. Employees who buy plans directly from insurers become party to the contract. If insurers don’t live up to the contract, employees can sue . . . but that would likely happen only as a last resort.
The nature of competition means lawsuits would occur far less frequently under a tax credit plan than they would under a “Patients’ Bill of Rights.” HMO officials wouldn’t have to be forced by lawsuit to become more responsive. They’d do it because it’s in their competitive self-interest.
Lawmakers may think they’re doing patients a favor by letting them sue their way to good health, but they’ve made a serious misdiagnosis. Let’s hope they’re willing to consider a second opinion.
Robert Moffit is director of domestic policy studies at The Heritage Foundation, a public policy research institute. He can be reached by email at [email protected].