Commentary: A different prescription for health care reform

Tuesday, March 30, 2010 at 1:27pm
Crom Carmichael

This is Part II in a series. Read Part I here

We all know the truth in the expression “time is money." I wish President Obama and our own Rep. Jim “damn-the-costs-anything-called-reform-is-good” Cooper had considered this truth before they passed the monstrous health care reform bill. Unfortunately, they not only ignored this basic economic principle, they made things worse.

The typical family spends perhaps $3,000 to $4,000 every month on autos, home and groceries without filing an insurance claim. It uses cash, credit cards, debit cards and checks. That is, this family buys gas, tires, makes monthly car payments, pays for general car maintenance, makes house payments, buys and fixes appliances, pays for a plumber, and buys food — without using insurance. Only if it has a car wreck, flood or fire does it actually file a claim with its auto or home insurance company. The family knows the cost of the goods it is buying. It pays in full each time. This is efficient, and it keeps the costs down.

Yet when that same family goes to the doctor’s office, insurance is part of the equation. Typically, the patient pays a co-pay of, say, $30. Then the doctor’s billing company files a claim with the insurance company. Then the insurance company checks the claim to be sure everything is in order. Then it pays the doctor part, sometimes all, of what the co-pay does not cover (and mails an explanation of benefits that is not a bill to the patient). Then, when there is a remaining balance (and there often is), the doctor bills the patient, who then pays the balance.

No wonder the cost of health care is so high. To paraphrase James Carville, “It’s the paperwork, stupid.”

Doing away with the tax deductibility for employers for health insurance, plus reforming our tortuous legal system, would dramatically lower the ridiculous amount of paperwork involved in health care. The much lower costs associated with providing health care would lead to much lower prices.

Real tort reform is the other driver to lowering costs. While malpractice insurance premiums are way too high, they are a tiny cost when compared with the amount of defensive medicine doctors practice to protect themselves from lawsuits. The difficulty is compounded by the lack of consumer awareness and transparency in pricing, problems that would quickly disappear if consumers paid in full at the time of service for all health care save hospital stays, which should be insured based on ability to pay.

Gee, what an absolutely novel idea. The customer would actually know what he is paying for and the price. Hallelujah!

There you have it. Reform health care so the consumers and providers interact directly rather than through opaque intermediaries. 

Crom Carmichael is CEO of Nashai Biotech in Nashville. He is a longtime political commentator for various local media outlets.

12 Comments on this post:

By: Slappy on 3/31/10 at 7:49

See, that only took 9 paragraphs...not 2,500+ pages!

You only need 2,500 pages if you are laying the foundations to the "Single Payer" system.

By: NonyaBidness on 3/31/10 at 8:02

The huge flaw in this whole line if reasoning is assuming that health care is just like any other product or commodity that you can either choose to consume or not. If you contract a serious illness or disease, you must consume health care...or die. It's not a matter of budgeting. Yes, the system could be improved by making costs more transparent, and the new health care bill actually does make costs more transparent than they currently are. And most health care economists will tell you that the whole tort reform/preventative medicine issue is a red herring, yet when Democrats offered to include tort reform in the Heath Care reform legislation, Republicans still refused to make any compromises or provide any support. Why include something you don't agree with if it won't win you any concessions anyway.

This argument also fails to recognize the costs to all of us incurred when uninsured individuals are treated in the most expensive way possible (in emergency rooms) for minor illnesses or conditions because that is the only place they can get treatment.

Lastly, w/o casting aspersions on Mr. Carmichael's qualifications, I think it is disingenuous to list his position as the CEO of Nasai "Biotech." It carries the implication that he has some unique qualifications or understanding of the health care industry. Just to be clear, Nasai Biotech, LLC is marketing herbal supplements derived from tea. Their products are not FDA approved, and I believe most doctors would call them snake oil salesmen.

By: vechester on 3/31/10 at 8:37

Hey Nonya, your last paragraph actually makes the best argument of all against the monstrous health care bill. What qualifies ANYONE in Congress to design what constitutes my health care and its impending limitations. Nothing! They are just a bunch of mostly lawyers who just want the power and money associated with this.

Honestly, really, my health care is nobody's business but mine and my docs!

By: govskeptic on 3/31/10 at 8:43

Does that disqualify Crom from having a pratical solution
or submitting an idea? I think not! It beats what we heard
out of elected "officials" for over a year.

By: NonyaBidness on 3/31/10 at 8:56

Well, here's a classic quote from Mr. Carmichael that might give you an idea about his ability to provide "practical solutions" to any given problem. Mr. Carmichael on Paul Reid, the serial killer currently on death row for several fast food robbery/murders:

"What I would like to see is this boy Reid’s voting record. I’ll bet you he voted for Clinton both times. The sort of moral fuzziness that is the hallmark of Bill Clinton is also the hallmark of a mass murderer. Most mass murderers have liberal leanings. They are LIBERALS, LIBERALS, LIBERALS!"

Now, I don't know about you, but to me, someone that thinks "liberal" is equivalent to "mass murderer" is automatically disqualified from being taken seriously.

By: NonyaBidness on 3/31/10 at 9:40

Oh, and "...perhaps $3,000 to $4,000 every month on autos, home and groceries...". Don't know where Mr. Carmichael got his numbers, but that's $36K to $48K a year. Since median household income in TN is (as of Dec. 2009) is only $43,610 (meaning that HALF of TN households earn less than that), then using Mr. Carmichael's numbers, most folks don't have much left over for savings, health care spending, or any other spending for that matter.

I just want people to consider the source before the jump to agree with someone who appears to know what they are talking about. Since you don't know who I am, you are free to ignore me. But I'd advise you to ignore Mr. Carmichael as well.

By: Strider on 3/31/10 at 10:03

Nonya, you are using the Clinton playbook of personal destruction. Attack the person to deflect from defending one's position. Stick with the issue and I might take you seriously. I do not read Crom stating that health insurance for catastrophic health instances is a bad thing. I have auto and home insurance for such instances, and not for the routine expenses. As far as I see it, we are being forced to comply with getting worse than more of the same. So far none has convinced me otherwise.

By: Strider on 3/31/10 at 11:21

Nonya, you make a good point about median income in TN. A good follow-up question would be what amount in public assistance is being provided to those at or below the median (sans Obomacare) that should factor into "income". And, at what point is "enough is enough". I can tell you that a good portion of my young adult life fell into the category you speak of. I never expected anyone to subsidize me or my family's lifestyle - I took full responsibility to make do and improve my lot. For me, to think otherwise would have been to accept my own laziness and thievery. That said, I fully support having public support for those who are truly "poor", that is, those who are physically and mentally unable to care for themselves. I believe the irony with Obamacare is that these are the Americans who will suffer most from it.

By: kennyj on 3/31/10 at 11:25

Basic point is "What has the Government done economicaly and efficiently?. Answer--
none (that I know of). They've made a mess of Social Security and Medicare--Obama admitted the same when he said he could cut $500 million in Medicare fraud.

If you think the law itself is onerous, just wait until the bureaucrats get their hands on it and start "interpretating" it and writing regulations. We are not a nation governed by laws, we're governed by bureaucratic regulations.

By: Loner on 4/1/10 at 5:16

Where's the April 1st NCP product?

By: free thinker on 4/1/10 at 7:09

What people seem to forget: the most efficient insurance is under government control. Fedral Civil Service has the lowest costs and a single administrator. Employees usually have a minimum of 6 companies to choose from.
As for tort reform, why aren't attorneys and judges filtering case filings before and at time of discovery phase for a trial? Reason: MONEY in their pocket.
Resonable and customary charges are not that when billing and paying insurance claims.
There is bargaining power with all phases of health care, based upon numbers of clients.
That is what makes the VA so effecient as well.
"Bring on National Health Care". You still have to buy it from an non-government insurance company. There will always be a percentage of people needing help, so they don't fit into normal circumstances of the majority.

By: Strider on 4/2/10 at 2:09

Free Thinker, I get the feeling you are smoking way too much. You may be on to something, but lordy your comment is dis"joint"ed. Maybe you should go with "Structured Thinker".