Universal Malpractice

Although Americas are hearing political elites promising to end their health care woes with universal coverage, the government that would hand out this treatment does not have a stellar record of delivering the services it already offers. In the U.S. Index of Health Ownership, John R. Graham argues that “Between 1996-97 and 2004-05, the number of physicians receiving no Medicaid revenue increased by 13 percent.” By the government refusing to pay the average fee set by most physicians, only a select few will actually see a Medicaid recipient. If these fees were too high then private insurance companies would refuse to pay them; however, private companies continue to pay the standard, the average, fee set by physicians, yet the government will not.

Meanwhile, even with these price caps in place that lead to less care for the poor whom the program is designed to serve, federal and state officials still have incentives to drive up the cost of Medicaid. At the moment many states refuse to decrease Medicaid even though it is not accepted by many providers. “The federal government matches state payments according to a formula guaranteeing that at least half of a state’s Medicaid spending comes from outside its borders.” With every dollar a state government spends on Medicaid, the federal government will match that dollar. There is absolutely no incentive for a state to reduce its Medicaid spending, when this would result in monetary losses from the federal government. As Graham writes, “States are just picking one another’s pockets in a zero-sum game.”

Inverse to the relationship that exists between governmental insurance and health ownership, unregulated private insurance promotes health ownership, he argues. However, state legislation dictates nearly every action taken by private health insurers. Some states mandate that “drug and alcohol abuse treatment, blood-lead poisoning treatment, or message therapy” are included on individual plans. “Because mandates increase the cost of health insurance and force the insured to buy unneeded and unwanted coverage, more mandates equal less health ownership,” Graham writes. In some states insurance companies are forced to include “drug and alcohol abuse treatment” on a client’s plan even if that person doesn’t drink. People are being forced to buy coverage they do not need because of state legislation and regulation.

Additionally, as explained by Graham, “much of the high cost of American health care is explained by this country’s uniquely expensive tort system.” Thus, conversely, Graham argues caps must be placed on damage awards. “Capping these awards is associated with doctors performing less defensive medicine and with lowering medical costs five to nine percent.” He is for limiting attorney fees. “Although it appears offensive to liberty for the state to regulate how much a client pays his lawyer in a private business relationship, this intervention has a positive externality: the number of physicians goes up by more than three percent after three years.” He believes in pre-trial screening to reduce “the number of cases without merit that clog the courts.” Graham also claims that states should “implement statutes of limitations for medical practices” to help lower the legal costs for physicians. It is these regulations on medical tort that Graham believes will increase health ownership.

Ultimately, Graham argues that health care providers—be they physicians, hospitals, or corporate practices—need to compete. “Privately owned hospitals depend on patients for revenue, they are more likely to have less ‘slack,’ to outsource non-core services, and otherwise to perform relatively well on indicators not immediately obvious through simple accounting measures, despite often having higher costs,” he writes. Government hospitals, relying heavily upon taxes for revenue, do not take the steps to compete with private ones. Government hospitals do not have to have the best service, the best equipment, the best doctors because their sole concern is not about the patients returning . . . since they are collecting from them whether they return or not.

Many states also ban corporate practices and telemedicine (over the phone consults). These states mandate that only a physician can hire other physicians. As Graham explains, “No physician would accept employment from a non-physician unless he thought it in his best interest to do so. Furthermore, his doing so does not interfere with other physicians’ right to act independently of corporate practice.”

Another obsolete regulation in many states is the requirement that a nurse practitioner be directly supervised by a physician. By requiring all nurse practitioners to be directly supervised by a physician, states are hurting both the practitioner and the patients. A nurse practitioner, not being M.D., charges less per visit. “Empowered patients, with consumer-directed health plans, are highly motivated to seek out value for money in health services.” A patient could receive quality health care for a fraction of the price. Again, this regulation lowers both the provider’s and patient’s health ownership.

Finally, Graham uses these variables and groups to rank each state to determine where the greatest and lowest level of health ownership exists. At the top of this list are Alabama, Montana, and Nebraska. These three states have the highest amount of health ownership because of their minimal regulations on providers and private insurance markets. Alabama specifically had “a lightly-regulated private insurance market, and good control of state programs. Also, the state performs well on medical tort indicators. Alabama’s regulatory environment for providers favors competition, and government health programs run more effectively than other states.”

At the bottom of the list were New York, Massachusetts, and Rhode Island. These three states had the most governmental regulations hindering health ownership. He writes that New York specifically “suffers from government health programs that are out of control, a grossly overregulated private insurance market, and almost completely uncompetitive provider markets. It also lies deep near the bottom of the medical tort rankings.”

Lance Nation is an intern at the American Journalism Center, a training program run jointly by Accuracy in Media and Accuracy in Academia.

Nothing contained in this blog is to be construed as necessarily reflecting the views of the Pacific Research Institute or as an attempt to thwart or aid the passage of any legislation.

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