Socialists argue for government health care on the basis that Europeans pay less for health care and live longer. Yes, but they have to live those years in Europe, so that’s a wash.


Europhiles and statists may be disappointed to learn that unhealthy people spend more on health care and live shorter lives; it has very little to do with who pays their doctors. Unless you propose that we kill them – which would provide the additional benefit of reducing CO2 emissions, so maybe I shouldn’t have suggested it – nationalizing health care will not make us healthy.


Americans are not particularly healthy people; and this is a choice we have made fully informed. In case you are an orphan who just awoke from a coma, here is what you missed: don’t smoke, eat less, exercise, manage stress, floss, stretch, get your teeth cleaned, have your eyes checked, drink in moderation, don’t shoot yourself or others, wear a helmet, wear a seatbelt, don’t do drugs, practice safe sex, stay out of the sun. If you need more tips, ask your mom, spouse, or that skinny overbearing neighbor who makes that face if you light up within 100 yards of her.


In last week’s post, entitled Medical Choice, I described a market-based proposal (Libertarian Health Care) to reduce the cost of health care by up to 30% by increasing choice and competition and having consumers directly pay for health care services using an expanded Health Savings Account (HSA). In Part II, we will now shift to health insurance reform.


The solution for health insurance is hiding in plain sight. Let’s think about driving. There are good drivers and bad drivers, and all points in between. For the most part, your driving costs are the consequences of your choices and behaviors. Your choices decide direct costs of driving, and you also choose from a wide array of insurance products, based upon your own needs, preferences, behaviors, and economic circumstances.


A family with two vehicles might spend $1,500 a month on driving with car payments, insurance, gas, maintenance, etc. $1,500 would not be untypical for that same family to spend on health care insurance, co-pays, and misc. out of pocket expenses. We have a need for both driving and health care; neither one is a right (apologies to socialists and teenagers). There are many parallels between driving and health care that are instructive.


Some driving/health care tasks we do ourselves – check the air in our tires and take blood sugar readings if we are diabetic. The amounts we pay out of pocket each month for gas and generic prescriptions is probably not so different. Every three months, we change oil and we get our teeth cleaned. Every so often we need a brake job or break a wrist – both will set us back several hundred dollars. Every few years, we buy a new car or have a major hospitalization - $30-60,000 let’s say. And once or twice in a lifetime, we get sued for half a million, or have a catastrophic injury or medical condition that runs up into six figures.


Although driving costs and risks are similar to health care costs and risks, we approach auto insurance and health insurance completely different. One approach works, the other clearly does not.


The best template for health insurance reform is driving insurance. You choose to buy liability, comprehensive, collision, and theft insurance independently. Each represents different types of risk of unpredictable costs. In each category, you choose deductible amounts, coverage amounts, caps, and exclusions. You choose how much you are willing to pay, and you choose which company you will buy from – your choices run into the several thousands. The key phrase is “you choose” - not your employer, or the government. Insurers must earn your business, not lobby some board of bureaucrats.


Driving insurance crosses state lines; health insurance can’t (regulation). Driving insurance offers plans tailored to individual circumstances; health insurance can’t (regulation). Driving insurance varies with the number of drivers in a family; health insurance doesn’t (regulation). All other insurances are regulated to insure solvency; health insurance is over-regulated to restrict benefits. It needs to be de-regulated to the same general level as other insurances are.


The driving insurance template can be easily applied to health care. There might be separate insurance for injuries (collision), catastrophic care (liability), and occasional illness (comprehensive). Your rate would depend on your own risk rating – just like your driving insurance does. Live safe, pay less; live large, pay large. A single person should pay less than Octo-mom. Just as most states have an uninsured motorists fund, provisions for a safety net must be incorporated.


There is another insurance model that can be applied to health care – life insurance. You can choose term life, whole life, or universal life policies. The premium cost is different for each type, and they pay out differently – lump sum, fixed annuity, and variable annuity. Let’s apply this same principle to health care.


For a low premium, you can by “term” illness insurance; if you are diagnosed with disease x, you immediately receive a lump sum payment of y. You are free to seek any treatment and spend it (or not) as you deem best. Or “whole illness” illness insurance that pays a fixed amount per month for life upon diagnosis. Or “universal illness” that reimburses you for the variable costs of your treatments for life.


The novel idea of “term” illness insurance (credit to another Dr. Nerenz, brother David, a recognized expert in the health care field) is transformative. It shifts every economic incentive in the whole health care system to outcomes, as every one of us will seek the most effective treatments at the best price. Innovation and quality would be rewarded; ineffective and inefficient practices would be punished and purged from the system through predictable market forces.


Like so many other things, improving our health care financing system is not as difficult as we were led to believe. In the last post, we introduced the concept of Medical Choice – taking control for medical spending away from corporations and governments and giving it to consumers through the use of expanded Health Savings Accounts. In this post, we have added a conceptual framework for insurance reform.


In both, we have used existing vehicles – the HSA and the network of private insurance companies and local agencies – to fix what is broken in our health care system without sacrificing quality or availability. Tammy Baldwin has made government-run health care her #1 legislative priority; she thinks the government should make your health care choices for you. I think you should.


And now it will be for you to decide. Vote Libertarian Health Care. Vote for Tim, Not Tammy.