The free market fix for health care

You might remember last year when Whole Foods CEO John Mackey sparked a furor among progressives for having the temerity to exercise his First Amendment rights and pen an Op-Ed in the Wall Street Journal that proposed an alternative to the big government takeover of health care that Obama/Pelosi and Reid have been pursuing.  Mackey had the gall to point out a central truth that the left seems to ignore time and time again: incentives matter.  If you continue to shield patients from the true cost of care through an overly regulated, overly complex system,  while insisting that they not be financially responsible for all but a tiny fraction of their treatment, you will get abuse of the so-called "health care dollar".  It's a pretty basic concept for those who understand (and accept) that human behavior is sensitive to incentives: when things are perceived as "free" or when someone else is paying, consumption goes up.  When people have "skin in the game" they require more information, look harder at choices and tend to make better (more cost-effective) decisions. Businessmen like Mackey at Whole Foods and Steven Burd, the CEO of Safeway, understand this much better than do the politicians in Washington.  Of course, Mackey and Burd view the health care issue as a problem in search of a rational solution, rather than as an opportunity for government to achieve its ideological goals while taking over one-seventh of our economy.  They both instinctively know that doubling down on government entitlement programs like Medicare and Social Security are not the answer. Burd, in particular, has written a number of outstanding op-eds on how Safeway has used incentives to drive down the cost of their company's health care programs, principally by rewarding healthy behavior and making employees financially responsible for a portion of their out-of-pocket health care costs.  As Burd notes, what Safeway has done has been successful beyond dispute:

As a self-insured employer, Safeway designed just such a plan in 2005 and has made continuous improvements each year. The results have been remarkable. During this four-year period, we have kept our per capita health-care costs flat (that includes both the employee and the employer portion), while most American companies' costs have increased 38% over the same four years.

It is clear to me after watching the recent "Health Care Summit" that neither Obama, Pelosi, Reid or their fellow ideologues on the left are really interested in solving the health care cost problem.  If they were, they would be looking at the real world examples where market-based solutions have worked.

And its not just in the private sector.  Indiana Governor Mitch Daniels -- who has been getting a lot of positive attention recently for his handling of Indiana's fiscal house during the recession -- has penned an opinion piece today that takes the Safeway model and expands it for government workers.  The foundation of Daniels' program are Health Savings Accounts (HSA) that put tax-free cash into accounts for patients to use for their own health care.  It's the kind of market-based innovation that promises to create incentives for patients to ask questions about how much things cost and about how effective a given treatment is (not surprisingly, ObamaCare eliminates the use of HSA's altogether -- all the better to keep patients out of their own health care decisions.)  Daniels describes this as "individually owned and directed health care coverage" -- a description that big government progressives will undoubtedly dislike, since it actually puts power in the hands of people.  But the Indiana experience shows that in health care plans where the patient has "skin in the game" the use of medical care is more judicious and effectively applied.  Indiana state employees enrolled in the plan will save some $8 million in 2010 compared to their co-workers enrolled in the old-fashioned PPO system where the employee pays nothing more than a co-pay.

It should be no surprise that the real solution to rising health care costs is to let the free market work: empower consumers with more information, give them a stake in the process and then let dollars flow to the most efficient, effective providers.  Health care has an example it can look at today in the area of cosmetic surgery -- a fee-for-service market place that is highly competitive.  Patients shop for the best combination of quality and price because they are generally paying out of pocket for the service; the result is a true market where providers actually compete for business.  Its the best way to enforce the twin goals of quality and cost.

One can only hope that Pelosi and her band of merry socialists fail to jam through Obamacare now, and that a new Republican majority in November will enact a series of market-based solutions that will work to make care both more accessible and affordable.