NCPA - National Center for Policy Analysis


November 1, 2006

Most conversations about consumer-driven health care discuss the nuts and bolts of how the plans work, and how patients benefit economically. But there are other ways in which CDHC benefits patients. Namely, by solving two perplexing problems:  how to choose between health care and other uses of money, and how to allocate resources in an industry where normal market forces have been systemically suppressed.

Breaking down the latest statistics from the Census Bureau has shown that between nine and seventeen million people could afford health insurance, but choose not to purchase it. Basically, they have decided they have better uses for their money.

Think about it this way: you want a cellular phone. You want a cellular phone that stores 500 phone book entries and will send and receive calls. You discover there are only a few stores allowed to sell phones. Once you start shopping at those stores, you realize you can only buy four different kinds of phone, and they all have to have photographic and text messaging capabilities, and the accompanying services.

What do you do? The choices are: pay for features and services you don't want, or make do without a phone.

Currently, our health care system operates in much the same way; each state has a limited number of insurance companies allowed to sell policies, and those policies all have to cover the requisite state mandates, each of which add a little bit more to the final bill.

Eventually, people start to drop their health insurance because the mandates have driven up the cost, and still aren't providing coverage for services the patient might want or need. Many of the voluntarily uninsured simply don't like what the insurance companies are selling, so they don't buy. 

Market suppression happens because patients never pay a medical bill directly. In many cases, they pay little to nothing when they see a doctor. In economic terms, this sets the price at the point of service to zero. On the surface, that seems like a fabulous price to pay for health care! Except that's not exactly how it works.

As a patient, there is a strong incentive to consume as many health care services as possible, as often as possible, because, hey! I'm not paying for it! But they are; through ever-rising insurance premiums, higher taxes and wage deductions for health benefits.

This type of spending, where a patient consumes health care and an insurance company or the government pays for it, is leading us down a dark path. If we continue at this rate, the U.S. will be spending one-third of the GDP on health care by the year 2050.

Health care, like any valuable resource, has to be rationed. Currently, medical services are rationed by time, on the side of the medical provider, and by the coverage offered on the side of the insurer. The insurer keeps the upper hand by also choosing which doctors they will allow their policy holders to see.

It's probably fair to say neither the providers nor the insurers have the patients' best interests at heart. Providers want to save time and get paid. Insurers want to save money and get paid. Patients want affordable, high quality health care.

CDHC provides solutions by giving the choice back to the patient. By creating a national, competitive health care market for insurance policies, patients could buy health insurance that provides exactly the type of care they want and are willing to pay for.

By allowing patients to choose their own doctors and pay for their own care (up to a point), the health care market would finally be allowed to normalize. Making price the driver in the market allows high-quality providers to enjoy success and pushes low-quality providers out of the market.


Browse more articles on Health Issues