How Vermont makes healthcare less affordable

Nobody wants anyone else to be without adequate medical care, just like nobody wants anyone else to be without adequate food, shelter or clothing. This is a universal value, whether you’re liberal, conservative, or anywhere in between.

The recent vehement debate over healthcare represents a face-off between two camps: those who believe the best way to live up to this universal value is through government rules and regulations, and those who believe a less-regulated system would work better. Those in the latter camp don’t hold their positions out of some self-destructive desire to see insurance companies become rich while ruining people’s lives, or out of some foul malice toward those who cannot afford medical care, as those of the more government-directed mindset might believe. It is based on principle, and it is based on facts.

The principle is that people are smart and responsible enough to make their own healthcare decisions, if given the opportunity. And the fact is that the more government intervention we have in the healthcare sector, the more expensive (and therefore less accessible) it gets.

We aren’t smart enough

Those who believe in government-driven healthcare don’t trust us to make the right choices, and therefore believe we must be forced to behave correctly through government regulations. This may sound like an extreme statement, but the evidence that it’s true is overwhelming. For example, if Vermont’s very left-leaning legislature believed we can and should make our own decisions, they would let us choose what our own health insurance should cover, based on our actual needs.

But they don’t. For those of us who choose to buy medical insurance, the Vermont legislature forces us to pay for coverage that they think is valuable, regardless of what we ourselves might choose. They do this by requiring that any insurance policies issued in the state include certain coverage, no matter what (about 25 mandates in total).

So if you’re a Mormon who never drinks or smokes, you still pay for smoking cessation and substance abuse coverage. If you’re childless and plan to remain so, you still must pay for child vaccine, newborn, pregnancy, and child dental anesthesia coverage. If you’re healthy as a horse and only want cheap coverage in case of a catastrophe, you still pay for all of those mandates.

In short, the choices you can make to reduce the cost of your insurance coverage are dramatically reduced, and everyone’s coverage is far more expensive than it has to be, making the affordability problem worse.

But these insurance mandates aren’t the only evidence of the legislative and executive branches’ scorn for our decision-making capabilities. For a distilled, concentrated dose of bureaucratic and legislative contempt for the citizenry, one need look no further than the Banking, Insurance, Securities and Healthcare Administration (BISHCA).

It isn’t shy about how it feels about the public. It comes right out and says that we aren’t smart enough to make our own decisions. I wish I were exaggerating, but I’m not. The following is taken directly from BISCHA’s most recent Health Resource Allocation Plan:

“… realistically, the average consumer often lacks adequate information to make many of the most important decisions. This can be true even if the information is readily available. The average person will not always be sufficiently equipped to appreciate and understand the myriad of important nuances in much of the medical science underlying the decision making process.” [emphasis is mine]

This isn’t really what the cover says, but it certainly captures the attitude of the plan’s authors.

It is alarming that our democratically elected government, fueled by our tax dollars, holds such a dim view of our collective intelligence.

To translate their fine prose into layman’s terms: “Vermont residents are generally far too ignorant to make their own healthcare decisions, even if you spoon-feed them the information. Since most of them haven’t gone to medical school and therefore don’t understand medical science, they really have no business allocating their own resources when it comes to healthcare.”

Even if BISHCA’s assumption is less like contempt and more akin to a sort of concerned paternalism, that they want to do this for us because it’s just so terribly difficult, it’s still conduct unbecoming a government of, by, and for the people.

The rest of their Health Resources Allocation Plan report also evinces a low opinion of decisions we make. In that report, the folks at BISHCA provide evidence for their lack of confidence in us by targeting “supply-sensitive care” for particular attention. “Supply-sensitive care,” they explain, is healthcare that is provided when there’s lots of it available. “For example,” says the report, “research shows that availability of more hospital beds in a certain area is directly correlated to more hospital bed usage, even when other care may be more appropriate.”

It also points out that this greater utilization of healthcare doesn’t lead to better health outcomes, and notes other research that shows that “our current system has inadequate controls and oversight to limit the over-utilization of unnecessary and sometimes harmful health care services.”

It’s easy to see where this is going. Healthcare that we choose for ourselves based on the recommendations of our doctors, “even when other care may be more appropriate,” is something the state wants to manage. They’re also concerned that there aren’t enough “controls and oversight” to limit “unnecessary” decisions we make.

This raises questions: Who decides what is more appropriate? If doctors and patients aren’t making the right decisions, then who will provide the “control and oversight” to force the right decisions? And finally, who gets to decide what services are unnecessary?

The legislature and BISHCA get to decide, of course.

Solving their previous solutions

But there’s a problem with this approach to healthcare. Although its underlying premise is correct – that we drive up healthcare costs by over-utilizing services that may or may not improve outcomes – the over-utilization is caused by government interventions in the healthcare market. The more money you shovel into any system, the more its prices are going to rise. That’s because those who provide the products or services have to build more facilities, recruit and hire more people, and buy more supplies to meet the demand. All these things jack up the price, and we thus find ourselves in the healthcare situation we have now, where prices constantly outstrip inflation by a long-shot.

But BISHCA doesn’t examine why the system is over-utilized; they merely assume it’s because we are all incapable of making the right decisions about our own healthcare. Neither they, nor our lawmakers, seem to realize that over-utilization is caused by the perverse incentives established by government interventions. Put another way, the Vermont legislature is trying to extinguish a fire that they, and like-minded statists at the federal level, helped to start, and they’re trying to do so by pouring more fuel onto it.

To understand why this is the case, it’s important to understand why we overuse healthcare. We do so because, for the most part, we don’t pay for it. We pay a monthly premium, and after that, it’s just deductible and co-pays, rather than the full cost of services. Let’s say we’re having chronic headaches and the doctor says we need to change our diet and exercise more, but “just to be sure,” he’ll order a CAT scan. We don’t ask how much it costs, or if we can try the cheaper way first; we ask if it’s covered by insurance. Repeat this process a few hundred million times, and you have a system that is absolutely engorged by artificial demand and over-utilization.

But it’s not because we’re fools; it’s a perfectly sensible response to incentives. The government makes health insurance tax deductible for employers, so employers provide good health insurance plans in order to take the deduction. Thus, employees have good health insurance plans with low out-of-pocket costs, so if they can be absolutely sure they or their loved ones are healthy by having more expensive procedures done, then why not? Since you don’t bear the full cost, you’d be silly not to.

I’ve had a recent experience that illustrates this phenomenon. One of my daughters fell during a soccer game and her arm still hurt pretty bad a couple hours later. So much so that she was unable to move it. So we went to the emergency room and had it checked out. The doctor asked a few questions, manipulated it carefully, and concluded that it almost certainly wasn’t broken, but would order some x-rays just in case.

My healthcare insurance is very basic, though, and carries a very high deductible. I would have to pay for all the x-rays, so I had the incentive to ask how much they cost. This is a notion almost unheard of in an age of insurance, and the doctor was surprised. And then I was surprised to learn that he had no idea how much they’d cost!

So I got old-fashioned on him. I asked him if it was his daughter, would he go for the x-rays? He hesitated slightly and said no, he wouldn’t; he’d wait and see how it went. So that’s what I did, and her arm ended up being fine, although bruised, and I saved a few hundred dollars.

But obviously, most people never ask and take the more expensive route, because if it costs them next to nothing extra, why not go that extra mile for yourself or your spouse or kids? Who wouldn’t?

So BISHCA and the legislature can accuse the “average person” of being out of touch with reality and over-utilizing services, but in fact we’re very much in touch with reality – the reality the legislature and their like-minded counterparts in Congress created through their interventions in the market.

And yet they continue to believe that the problems they created through regulations and tax incentives can be overcome by still more engineering of the healthcare system.

For example, one of BISHCA’s truly damaging roles is its ability to deny healthcare organizations the ability to expand, build new facilities, or even buy certain types of new equipment. This is done through BISHCA’s power to issue “certificates of need.” Any new healthcare project must apply for a certificate of need (or CON) in order to proceed, and the requirements are onerous. They must provide dozens of different proofs to the state, including research that their proposed project will improve health, that it can’t be done by collaborating with other healthcare providers, and – believe it or not – doesn’t compete with other healthcare facilities.

That’s right, BISHCA actually prohibits competition in an effort to address the outrageous costs created by the legislature’s interventions.

The logic behind their power to issue CONs is this: more healthcare facilities leads to more usage of the facilities, thereby raising costs, and so the state must therefore control the number of facilities to keep the costs down.

This approach completely ignores the fact that the reason there is more usage is because people have little or no incentive to cut down on their usage. It’s a rational response to incentives. But those who favor state control of healthcare are ever-ready to ignore root causes and instead focus on the symptoms, so they can “fix” the system. This is a bit like dabbing some makeup over skin cancer and pronouncing the patient cured.

What would really make a difference?

Insurance coverage mandates, tax-deductible health insurance, certificates of need… these are just a few of the many government interventions in the healthcare market that keep costs high, thereby reducing access to healthcare and providing policy-makers with new problems to “solve.” And this doesn’t even begin to cover it all; there’s still guaranteed issue, community rating, licensing restrictions on doctors, nurses and other healthcare workers, liability concerns, and thousands of other regulations that all pump up the prices we have to pay for healthcare.

How do you fix such a mess? There’s only one way to fix the problems BISHCA and our lawmakers have identified, and that’s for the state to take over decision-making in healthcare. A single-payer system would address all these problems by telling us what “necessary,” “unnecessary,” and “appropriate” healthcare is, and allocating it accordingly, regardless of our wishes.

That appears to be the Governor’s and the Legislature’s take on it, anyway. Many others, however, would advocate a solution that does not involve the government taking away our control over healthcare decisions, along with a pile of our money. Unfortunately, the non-governmental solutions would require the state’s lawmakers to trust their constituents to make their own decisions with their own money, which they are typically reluctant to do.

One of the best things Vermont lawmakers could do is simply allow us, the citizens, to purchase medical insurance policies from other states. This means they’d have to get rid of all the mandates they have placed on insurance coverage sold within Vermont. So if we want a very basic policy that has a high deductible and only covers catastrophic care, we can get one, and it’s cheap. This would achieve the legislature’s stated goal of making insurance more affordable for more people.

It would also have the positive effect of spurring people to take better care of themselves, since not doing so has real financial impact.

The second thing this would do would be to reduce the number of procedures being “over-utilized,” to borrow one of BISHCA’s favorite terms. Just like the situation I described when my daughter hurt her arm, the more people are spending their own money for healthcare services, the more price conscious they are.

As that kind of decision-making takes place, multiplied by millions of doctor-patient interactions every year, the prices of medical care are forced downward: Doctors and hospitals are forced to compete for our business, because more of us are actually paying for it. Their prices come down. They start explaining their procedures more thoroughly. They start offering less expensive treatments that are more innovative and produce better results, and they compete on that basis with other healthcare providers.

Meanwhile, we need protections in place. And that’s the legitimate role of government:

  • Those who can’t afford healthcare insurance should receive government help on a sliding scale, based on their ability to pay.
  • Insurance companies that breach their contracts by dropping customers just because they become an expensive liability should face dire repercussions.
  • Liability laws should be amended to control the stunning costs of liability insurance.

The nation’s healthcare system is on an unsustainable path, and ObamaCare has only worsened its prognosis by adding myriad regulations, fees, taxes, mandates and other cost-inflating measures. The Vermont executive and legislative branches are colluding to see if they can’t one-up the feds by ruining Vermont’s system even faster.

By making one simple change – allowing us to buy insurance across state lines – we would really, truly be able to bend down the cost curve of healthcare. It’s not a painless change; it’s rarely painless to suddenly have to make tough choices about what’s affordable with a limited budget. But we do it for food, clothing, shelter and millions of other goods and services our whole lives. Healthcare should be no different, unless we find it acceptable to resign ourselves to government control and crippling price increases in perpetuity.


About Jamal Kheiry

Public relations consultant with experience in domestic and international journalism and public relations. At it since 1995.
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One Response to How Vermont makes healthcare less affordable

  1. Carol DeFreitas says:

    After reading this assessment of future Health Care in Vermont, and the parental attitude of BISHCA towards Vermonters in that BISHCA feels that they have all the answers, and we have none, I would like to know where they got all these answers if the Legislators can’t be bothered to read the bills that they pass. The voters of Royalton, VT, voted out of office one of the few Representatives who actually took the time to read the bills that came across his desk. And on the national level, Pelosi’s recommendation was to pass the bill, and then we’ll find out what it is all about. I’ve come to the conclusion that the Progressive Party is for those who neither want to think nor work too hard.

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