Ron Paul: How To Solve The Healthcare Crisis

Having practiced medicine for over 30 years, Ron Paul gives his perspective on the past and future of medicine in this country, and the effects of government and special interests on quality, costs and access.

Date: 6/18/2009

Ron Paul: I’d like to talk a little bit about the medical care crisis that we’re facing. Sometimes I’d like to think that it may be a government crisis rather than a medical care crisis, but we do have a mess in medicine and there is a lot of talk about what’s going on, not only throughout the country but here in Washington.

But first I’d like to describe how I see the problem developing and what has happened. A lot of people are arguing that free markets can’t deliver medical care, which I disagree with and the problems that we face today are not a consequence of the marketplace. They’re a consequence, they’re a failure of the government.

This idea of managed care was introduced during the Nixon years and this was a program designed to force people into medical care and provide PPO and HMOs and tax credits for certain groups and not any others. So we have been enduring managed care over these last 35 to 40 years and what has developed from this has been corporate medicine.

The individuals who were best able to gather up the money passed out by the government and were mandated by the government, they became the chief lobbyists. So the drug companies are lined up, the health insurance companies lined up, the health management companies lined and it turned out that they started running the show and actually made it less efficient.

So there is too much management and at the same time, too much of the money was going into these corporations, which was sort of the middlemen and the patients have suffered, the doctors have become unhappy.

The main complaint I hear is that medical care costs too much. “I can’t afford my insurance”, and there’s a lot of truth to this, but one thing that most people don’t talk about is why are the costs high? Why are the costs of medical care higher than say the cost of bread or computers or television sets or whatever?

The truth is it’s a reaction to government. It’s a reaction to our monetary policy. We do inflate the money supply. We do have price inflation. But prices go up, more so in certain areas that the government gets involved in than in others, so the government is more involved in education and medical care, so you have more inflation there and that is part of the problem.

Over these years, there has been less competition in medicine and that has been gradual over a hundred years or so where people couldn’t enter the medical field without getting all kinds of licenses and protecting special groups. But if there’s more competition and there’s less insurance, actually costs go down.

If you look at some of the procedures provided by the plastic surgeons or the eye surgeons who do keratotomies and they’re not under coverage of the insurance company, those prices actually go down.

We don’t have insurance for medical care. We have distorted that word. Insurance is supposed to measure risk and you’re supposed to buy that protection. So if you want medical insurance, you would be insuring against bad accidents or major surgeries or against cancer or something like that. But today, people expect prepaid services. They want every penny taken care of. They want the drugs paid for and then that invites abuse. When third parties pay the bills, doctors, labs, and hospital, and everybody else, all of a sudden, they charge the most, not the least.

I experienced medicine before they had managed care and patients were always charged the least and nobody went without medical care. The churches and volunteer hospitals and other groups took care of the people, but now, everybody has to have this so-called insurance, which doesn’t do a whole lot more than boost prices and then cause shortages and then there’s a demand for what? For more government and that’s where we are today.

So we’re going from corporate medicine, which was deeply flawed and not working and now, the proposal here is to go to government medicine, which is socialized medicine. This has not really worked well any place else. People, yeah, they surely get care if they want to wait and watch, but today, even and in spite of our shortcomings, people come to this country still for top medical care, but that would soon change if we want to equalize everything by leveling it and making sure that everybody gets poor medicine rather than extra medicine, extra and better medical care.

But we could do better. What we could do is introduce the notion that patients do have rights. Anything that comes out of Washington here, and something will, what we ought to fight for is the fact that we have a choice. We shouldn’t be forced into a program. If the government starts a program, we ought to have the right to opt out of the program.

We should be very generous with tax credits. Give tax credits for the entire amount of money you spend on medical care, so you can be independent. The concept of medical savings account is a good concept and we should promote that and encourage that and we should demand privacy.

I mean, this is one of tools that the government agents always used and they’ve already set the program up. It’s been passed already where there would be essentially no medical privacy. So there’s a lot of things that could be done through the tax code, the tax credit and also protecting the individual’s privacy.

Now, the one other thing that we could do, we could pass legislation that would actually help along these ideas with the problems that we have with malpractice suits. What we ought to do is talk about getting rid of the anti-trust laws against the doctors where they could negotiate with their patients and get the attorneys out of the ball game where you would agree on an arbitration board and get a tax credit for buying an insurance policy like that.

So there are ways you can, through the market place, literally reduce this fear mongering and excessive costs that are involved in litigation against doctors because right now, believe me, if you get a bump on your head, you come to the emergency room because of the third-party payment, we’re fearful as doctors of missing something due to the attorneys. Believe me, you can’t walk out of the emergency room without a $10,000 or $15,000 bill and that is not the way it should be.

There are alternatives. Now, I do want to say that the Campaign for Liberty did such an exceptional job when it came to HR 1207 at the grassroots’ level. So I suspect that the Campaign for Liberty, if they get behind some of this free market approach to medical care, they can do a tremendous job in changing the course here in Washington because right now, we are on a course towards socialized medicine and it doesn’t have to be that way.

I never dreamed we’d see the results that we have seen at the grassroots’ level, which then affected Washington with now over 230 co-sponsors for HR 1207. The same thing could happen with medical care, so I would encourage all who believe in freedom and liberty understand that medicine is no different than any other service. Freedom really works and does a much better job than coercion and just another gigantic government program and socialized medicine can’t work.

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  • Al Bel

    The American Citizen’s Healthcare Payment Plan

    Phase 1:

    1. – Allow all Ins. Cos. to sell nationwide to any and all people groups or organizations.
    Why are there only a few ins. cos. to choose from within each state? Whatever the reason is or was it has no merit. We don’t weather it is corruption, lobbyists or past reasons – it doesn’t matter. Our citizens want (need) more choices and be free to choose any insurance company in business. Any debate against cross state insurance purchases is bogus. People having more places to shop creates competition – competition lowers prices for the consumer – there is no debate about that – it’s a no brainer.

    2. – Health Ins. premiums are to be equal for all people – no discounts for groups or organization. All health ins. plans cost the same for everybody.
    Why should your insurance be cheaper if you work at X company than if you work for Z company? Why should your insurance cost more if you don’t belong to a certain group? Each insurance policy covers individuals within the group called America. We are not talking about shoes here – we’re talking about medical costs. All Americans should be entitled to the price for the same product in a market as big as America. We can put that another way – we want a group policy that offers the best price possible – our group is America – every American is a member of the group called America. Those that get the cheaper price now will bitch about this – they will bitch until they are faced with the situation as others are now – unaffordable medical costs. For those that have no representation – the poorer amongst us – those that aren’t in a union – those that aren’t fortunate enough to have a mouthpiece speaking for us have been at a disadvantage. It’s time we level this playing field and allow every American equal opportunity for medical care. This may result in more cost for some in the beginning (while others get their price lowered) but over time this equal pricing will lower the cost for all Americans. It will also enable all Americans an opportunity to change jobs or any social circumstance without the fear of encountering unaffordable medical treatment. Only the elite that want to suppress others will quarrel with this. Corrupt thinking is the only explanation for disagreeing with fair pricing for all for a product as crucial as healthcare.

    3.- All Employer Healthcare Plans are to be converted to employer healthcare cash payments to employees to enable employees to buy individual health ins. plan.
    All employers that pay for its employee’s health insurance will continue paying for their health insurance. The difference is they won’t pick the insurance company for the employee – the employee will get the money to buy his own insurance from any company he chooses. If the employee chooses not to buy insurance he looses the money – same way an employee that is offered money to enroll in a retirement program now. If an employee joins the retirement plan he gets the money – if he doesn’t enroll he gets no money. Our new healthcare plan calls for ALL people to pay the same price for the same insurance so the change from employer health insurance to employer health payments will have no change – no added expense – no change in coverage. The change will be that the employee will now be able to shop for better cheaper insurance policies than he has now. This will result in cheaper better healthcare for himself and all fellow Americans.

    4. – Employers get tax deduction for providing money to employees for health ins.
    This will encourage employers to continue providing money for health costs. It also provides other employers to provide employees with money for health costs. It is fair and equal – no employers excluded or favored.

    5. – Employees get tax deduction for buying health ins.
    Any and all American citizens shall receive a tax deduction for healthcare costs. A 100% deduction for health insurance and health accounts. There shall be no “special treatment” “special incentives” or any other “special situations or circumstance” for any American citizen no matter what.

    6. – Doctor Care Insurance is legal and encouraged. This is a new type of healthcare ins. for primary doctor visits and doctor treatments. Each doctor may operate their own plan for his own patients. Doctor care insurance is a plan where patients pay regular premiums to their own doctor and receives free visit and treatment – same as current health ins. Doctors will be encouraged to operate these insurance plans. All doctors shall be eligible and no doctor shall have preference in any way or for any reason whatsoever The rules and guidelines shall be written by a team of doctors and insurance executives with no interference or input from congress government officials or government agencies.
    These plans will have many benefits. Among the benefits are the strengthening of doctor patient relates. It will make the doctors payment collections more secure and less stressful. The doctor will have more time for patients and spend less time on complicated book keeping. The excessive paperwork and requirements by government and insurance companies will be gone. These plans will remove fraud and misuse. This means the patient will be making payments directly to the doctor and not to a third party. This will control doctor visit costs and eventually decrease the cost of visits. It will encourage patients to see the doctor more regularly and not wait until an illness festers and worsens and becomes more costly. This will cause many people to maintain 2 insurances – health and doctorcare. This will not be redundant or more costly. Health insurance companies will now be able to offer policies where doctor visit are an option (like dental and vision are now) thus reducing the cost of the normal health insurance policy.

    7. – Doctors will receive tax incentives and tax deduction to establish Doctor Care Ins. Plans.
    This will reduce the price a doctor must charge for Doctor Care Insurance. It will also provide the incentive for doctors to operate ins. plans.

    8. – Give people tax deduction for doctor payment plans and all health ins. premiums.
    There shall be a 100% tax deduction for health insurance and health accounts. There shall be no “special treatment” “special incentives” or any other “special situations or circumstance” for any American citizen no matter what.

    9. – All people below the poverty level receive medicade/medicare – the same as the elderly receive (elderly will have no change from the present.
    This is included here to insure these people will not loss the benefit they have now. Those that don’t have ins. and those that can’t afford to buy ins. are currently a big problem – they are draining our resources. But now each of these people that work would have health accounts and would potentially repay part or all Medicaid/ medicare payments. As worker’s healthcare account balances rise the number of uninsured and those unable pay will shrink. All the improvements contained in this healthcare plan will also dive down medical costs both enabling more people to be able to pay and when the government has to pay the cost will be less.
    Fact; no person in America today is refused medical care. If you don’t have ins. and/or can’t pay your medical bills ALL people are covered by Medicaid/ medicare and/or other government agencies. That’s the current law. All the talk about poor people not having medical coverage is propaganda – no person in America has to go untreated. All the “powers that be” are playing on your sympathy – it’s a real con job by ALL government people.

    10. – No illegal residents shall receive government paid healthcare. Only American Citizens receive any medical payments – without exception.
    No explanation required.

    11. – Guidelines shall be established for doctors tests – no unneeded testing – no “defensive tests”.
    This will give the medical and legal system rigid rules about what negligence is and what is not considered negligence. This will give juries a rigid standard to go by in deciding lawsuits.

    12, – Reform lawsuit laws to discourage excessive lawsuits
    The cost of a frivolous lawsuit will become the cost of the lawyer that initiated the suit.

    13, – Develop guidelines and parameters for doctor negligence dollar settlements.
    Juries and non-affected parties now use emotion when determining awards. This eliminates excessive awards.

    14. – Develop punitive damages guidelines – no settlements to be super-excessive.
    Juries and non-affected parties now use emotion when determining awards. This eliminates excessive awards.

    15. – Phase all healthcare changes over a 2 year time frame.
    This will make the transition possible.

    Phase 2:

    A). – Individual healthcare accounts are now established – these are individual accounts similar to current retirement accounts (same basic rules) except it is mandatory (like social security). The deduction shall be 3% of the gross of employee’s paycheck. This shall be tax deductible. All employers will make proper deductions from paychecks and forward the money to the employee’s health care administrator (bank mutual fund etc.). The account is in the individual’s name and NOT held or administrated by government. The money in these accounts is used only for medical costs and nothing else. In the end, all remaining money in an individual’s account goes to heirs or elsewhere as directed by the individual – this money shall not be taxed. The individual owns the account, the only involvement of government is to insure proper administration and that the money is used for the owner’s medical expenses to the end. From time to time an individual’s account may have a negative balance (see other clauses) in that event there shall be no penalty or interest charge to the account owner. If at the age of 60 or at a later age any individual account balance exceeds a minimum amount – set by figuring the average medical cost expectation for the individual – the individual may withdraw the excess (tax free). If and when an individual’s healthcare account totals an amount equal to the average medical cost spent yearly then all money above that figure shall be eligible to be invested under the same terms and conditions as retirement

    accounts. If healthcare money is placed in investments and a future illness occurs where the individual’s medical costs exceed the amount of cash contained within the account the investments shall not be deemed necessary to make up the deficit, instead a government loan shall be issued to pay the remainder of the outstanding medical costs. That loan shall then be repaid over time by the individual. Gains from investments shall not be taxed.
    How do we start a direct payment method – there would be no money in health accounts? Anytime a person needs medical treatment but doesn’t have enough money in there health account an automatic (interest free) government loan would enable loan payment to be made from the health account. The patient would then repay the loan when insurance reimburse them and/or regular health account deposits would enable repayment of the government loan. That would mean your health account may sometimes have a deficit. That would be just like a credit card is now except there would be no interest penalties or fees. There will be people that become disabled or die or otherwise can’t repay the loan. In those instances the government would absorb the loss – just like they do now – it’s Medicaid/medicare.
    How would health accounts work? They would work similar to the way social security does – mandatory payroll deductions. The difference is that instead of your money going to the government and the government administering your account the healthcare deduction would go into your own special bank account and you administer it yourself. This money can only be used for medical purposes. Government would not be able to take your money – use it for other purposes or keep your money in the end. Your health account would be yours and in the end you would decide what to do with any excess remaining – give it to your heirs or whatever you want. If you manage your healthcare properly you may have a substantial sum later in life.
    The vast majority of Americans will have health insurance and doctor care insurance. Between these two medical treatment methods of payment a person that manages their healthcare costs properly might never need to use the money that accumulates in their healthcare account. This individual could end up accumulating a substantial sum later in life.
    Healthcare accounts will become thought of as a sort of a nest egg or a rainy day account. This will give additional incentive for individuals to shop carefully and control the cost of medical treatment thus driving down the overall medical costs for all Americans.
    How would banks and administrators handle these health accounts? They would be handled similar to the way retirement accounts are now. All that needs to be done is apply the same rules to health accounts that banks mutual funds and others do for retirement accounts.
    Why confuse things by establishing a new primary doctor care ins.? This would open up a new world of benefits and improved health care. It personalizes and strengthens doctor patient relations. It secures payment without over regulation costs – without excessive booking – without risk of nonpayment. It eliminates fraud and abuse that occurs now. It also strengthens direct payment – that direct interaction between doctor and patient will reduce costs and enable better treatment.

    B). – All American citizens shall be qualified for government healthcare loans. If any citizen requires medical treatment but doesn’t have healthcare insurance or enough money in their personal healthcare account and can’t afford to pay the cost of the treatment the government shall make an interest free loan to the individual for medical care payment. If, for valid reasons, the loan goes unpaid the government absorbs the loss.

    C) – There shall be no third party healthcare payments. All healthcare payments are made directly from patient to healthcare provider (except Medicaid / medicare and other government subsidy payments). . It is the insured responsibility to pay healthcare bills.
    How can people pay first and then wait to be reimbursed? Each and every person will have a health account where a portion of there pay go directly into (like social security payments are now) They are allowed to draw on this account to pay medicals costs only and when they are reimbursed by ins. that money goes back into the health account. Over time all people would have money to pay first and get reimbursed. If/when there is not enough money to pay first and wait for reimbursement the government shall issue an interest free loan to bridge the payment. Insurance companies should not pay directly to health providers – this makes costs high and enables the potential for fraud and misuse. All people should pay health costs and then be reimbursed by ins. Co. Also; by doing this people would negotiate the fees for medical costs – any savings they negotiate would benefit themselves and this would allow people to keep tract of the costs. If every person were to pays for their own medical costs those costs would be a small fraction of what the costs are now. Patients would negotiate to drive prices down. The competition would demand suppliers take less.
    In every single incidence where a third party pays (Ins. Co., Gov. etc.) the cost is higher. A few examples:
    • Auto accidents; if you pay it’s cheaper than if an Ins. Co. pays
    • Apartment rental; if you pay it’s cheaper than when Gov. welfare pays the bill
    • Business travel; you get it for less if you pay – if the employer pays it costs more.

    • If you have to make a $10,000 down payment to buy a house you buy a $100,000 house – if you don’t have to make any down payment you will buy a $150,000 house.
    • Teeth cleaning; if you pay it’s $30 – if Ins. pays it’s $60
    Why do Doctor visits cost so much? There was a time when you went to the doctor and paid the doctor $10. then doctor visits converted mostly to a third party payer. There is now no direct interest in the amount paid and the cost skyrocketed. Direct payment will dive these costs down.

    If you think medical costs can’t get dramatically cheaper – you’re wrong. My first computer cost me $9000 – my last computer is 100 times better than the first one was and it cost me $1800. I paid for every computer I bought – competition drove those prices down. The key ingredient to a free market is the payer shops and the shopper pays – not someone else with misaligned interests pays. Medical costs are no different than any other exchange of goods. Simple eyeball to eyeball – consumer to supplier works. Receiver is the payer controls fraud – receiver is the payer controls prices.

    D) – Healthcare payment is first paid by the individual’s health ins. If not insured or ins. doesn’t cover the amount owed healthcare account money is used. If both those options are exhausted or do not cover the costs the government will supply an interest free loan to the individual for payment. If the individual can not repay the loan for valid reason the loss reverts to Medicaid / medicare and/or the government.

    E) – Phase 2 will implemented over a time frame that completes phase 1 and 2 into a complete plan.

    F) – Covering Preexisting conditions; Any insurance company may offer insurance that covers preexisting conditions but it will not be mandatory. it would be nice to have it mandatory for ins. to pay for preexisting conditions – but that isn’t a good idea. If ins. cos. have to cover preexisting conditions your premiums would soar. An ins. co. collects premiums and hopes you won’t get sick until you have paid enough in premiums to cover the payout – that’s a gamble – a gamble they are willing to take. If they have a huge payout for a known prior condition before they collect enough premiums to cover the payout where would the money come from? It would have to come from others without a preexisting condition – from huge premium increases for all. Also; if you knew you would be covered for a preexisting condition why would you buy insurance? You wouldn’t – you would wait until you’re sick and then buy insurance to pay the bills (that is currently called fraud – rightfully so). After your illness was cured why would you continue buying insurance – you wouldn’t. The only way covering preexisting conditions would be feasible is if every person were forced to buy ins. from cradle to grave. Now you know why the ins. cos. aren’t screaming against the current healthcare plans – it would be a bonanza for ins. cos.

    G) – There shall be NO add-ons, NO misdirected funding, No pork-barrel inclusions – NO gimmicks added to this plan.

    Supplemental possibility; Healthcare transition stimulus package to bridge the transition:
    There are 350,000,000 American citizens. There are between 135m and 140m employed people in the U.S.
    (We are going base this on a figure of 140m) 140,000,000 American workers. If each person were given $2,000 to open there own health account the total amount would be 280,000,000,000 (280 billion) – that’s too much.

    Assumption; the average income is $37k. 40% of the workers make over $60k. 40% of the workforce makes under $50k – Assumption; 5,600,000 workers make under $50k
    Assuming there are 5,600,000 American workers that make under $50k. If each person were given $2,000 to open there own health account the total amount would be 11,700,000,000 (11.7 billion) – that seems doable.

    Another idea; It is possible to give the 12,500,000 lowest paid workers $2,000 each for healthcare ins. – the total would be $25b. Can America afford that?
    If some sort of health accounts were established that required immediate funding we could give the 12.5m lowest wage earners $2,000 each to get them started. This would cost us $25b
    If health insurance premiums were drawn from healthcare accounts and if an individual health ins. Premium was a $200 per month “cost gap” the $2,000 would cover a 10 months cost gap.
    If 3% of wages were deducted from pay checks and the wage was $37k = $1,110 deducted per yr. – $92.50 mo.
    If $90mo. were paid the draw on health accounts would be $110mo. – The $2k health stimulus would last 18mo. If we could do this it would bridge the gap from the current payment procedures to the new plan.

    Al Belardinelli 9/20/09

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