A Remedy for Rising Health Care Costs

Health care reform is slightly off-topic here, but since the President has claimed that reforming health care is the key to economic prosperity, he has brought the subject into play here in the World of Finance.

The idea that increased government involvement in something will help reduce costs is somewhat humorous. Our government is very good at doing a small handful of things, like national defense, for example. Our military is clearly the best in the world, but achieves its results at tremendous financial expense. Our military is renowned for its skill, but not its cost efficiency.

Most of the other activities of the federal government fail to achieve their intended results, yet still manage to incur mind-boggling waste and expense.

How can anybody seriously think that government-run healthcare will be better and cheaper? When has anything run by our government ever met those standards?

Unfortunately, the proposed health care reform legislation does not even address the primary causes of rising costs of medical care in recent years. The primary cure for rising medical costs is tort reform, but this is mysteriously missing from the legislation. The direct costs of the lawsuit-friendliness of our medical system are not overwhelming. Most estimates of the cost of lawsuits and malpractice insurance range between 2% and 4% of overall medical costs.

What these estimates do not consider, however, are the indirect costs created by the culture of "defensive medicine." When doctors practice their art in constant fear of frivolous lawsuits, they may have a tendency to request unnecessary tests and do other activities that go beyond their best medical judgment. Otherwise, a bad outcome could result in a lawsuit.

My simple idea for medical tort reform has two parts. First, raise the bar for crimes of omission. Malpractice should be mainly about doing something wrong, not failure to do something right. The exception would be gross negligence in not doing something completely obvious. Second, completely eliminate punitive damages. Civil lawsuits should be only about recovering actual financial damages (past, present and future) as a result of a medical mistake. Punitive damages don't belong in a civil lawsuit, since punishment is a concept that appropriately belongs to the criminal law system, not the civil law system.

If a doctor intentionally harms someone, or harms someone because of gross negligence, he/she should be prosecuted in a criminal court and then pay fines and/or go to jail if convicted. Again, it should not be the job of civil courts to punish people.

So, instead of replacing a working medical system with a risky social experiment, let's try a little tort reform first and see how it goes. It is reasonable to believe that health care costs would quickly come under control. If they don't, then we can try something more ambitious (and expensive) later.

Am I saying that tort reform will solve all health care cost problems. No, I am not saying that. But it's an easy place to start, so why not try it first before spending trillions of dollars replacing a system that already works for most people.

The next simple step after tort reform would be to allow private insurers to sell policies across state lines. I just visited my mom in Maine, where competition among insurers is pretty much non-existent. She was complaining about being forced to insure through Anthem. Allowing interstate competition would help a great deal in bringing health insurance premiums down. But this is an entirely new subject that should be addressed in another blog post.