QUALITY CARE FOR THE UNINSURED ACT OF 1999 -- (Extensions of Remarks - October 07, 1999)

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SPEECH OF HON. RON PAUL OF TEXAS IN THE HOUSE OF REPRESENTATIVES WEDNESDAY, OCTOBER 6, 1999

Mr. PAUL. Mr. Speaker, as an MD, I know that when I advise on medical legislation I may be tempted to allow my emotional experience as a physician to influence my views, but nevertheless I am acting the role of legislator and politician. The MD degree grants no wisdom as to the correct solution to our managed care mess. The most efficient manner to deliver medical services, as it is with all goods and other services, is determined by the degree the market is allowed to operate. Economic principles determine efficiency of markets, even the medical care market; not our emotional experiences dealing with managed care.

Contrary to the claims of many advocates of increased government regulation of health care, the problems with the health care system do not represent market failure, rather they represent the failure of government policies which have destroyed the health care market. In today's system, it appears on the surface that the interest of the patient is in conflict with rights of the insurance companies and the Health Maintenance Organizations (HMOs). In a free market this cannot happen. Everyone's rights are equal and agreements on delivering services of any kind are entered into voluntarily, thus satisfying both sides. Only true competition assures that the consumer gets the best deal at the best price possible, by putting pressure on the providers. Once one side is given a legislative advantage, in an artificial system, as it is in managed care, trying to balance government dictated advantages between patient and HMOs is impossible. The differences cannot be reconciled by more government mandates which will only makes the problem worse. Because we are trying to patch up an unworkable system, the impasse in Congress should not be a surprise.

No one can take a back seat to me regarding the disdain I hold for the HMOs' role in managed care. This entire unnecessary level of corporatism that rakes off profits and undermines care is a creature of government interference in health care. These non-market institutions and government could have only gained control over medical care through a collusion among organized medicine, politicians, and the HMO profiteers, in an effort to provide universal health care. No one suggests that we should have ``universal'' food, housing, TV, computer and automobile programs and yet many of the ``poor'' do much better getting these services through the marketplace as prices are driven down through competition.

We all should become suspicious when it is declared we need a new ``Bill of Rights'' such as a Taxpayer's Bill of Rights, or now a Patient's Bill of Rights. Why don't more Members ask why the original Bill of Rights is not adequate in protecting all rights and enabling the market to provide all services. If over the last fifty years we had a lot more respect for property rights, voluntary contracts, state jurisdiction and respect for free markets, we would not have the mess we're facing today in providing medical care.

The power of special interests influencing government policy has brought us this managed care monster. If we pursue the course of more government management--in an effort to balance things--we're destined to make the problem much worse. If government mismanagement, in an area that the government should not be managing at all, is the problem, another level of bureaucracy--no matter how well intended--cannot be helpful. The law of unintended consequences will prevail and the principle of government control over providing a service will be further entrenched in the nation's psyche. The choice in actuality is government provided medical care and it's inevitable mismanagement or medical care provided by a market economy.

Partial government involvement is not possible. It inevitably leads to total government control. Plans for all the so-called Patient's Bill of Rights are a 100% endorsement of the principle of government management and will greatly expand government involvement, even if the intention is to limit government management of the health care system to the extent ``necessary'' to curtail the abuses of the HMOs. The Patients' Bill of Rights concept is based on the same principles that have given us the mess we have today. Doctors are unhappy, HMOs are being attacked for the wrong reasons, and the patients have become a political football over which all sides demagogue.

The problems started early on when the medical profession, combined with tax code provisions making it more advantageous for individuals to obtain first-dollar health care coverage from third-parties rather than pay for health care services out of their own pockets, influenced the insurance industry into paying for medical services instead of sticking with the insurance principle of paying for major illnesses and accidents for which actuarial estimates could be made. A younger, healthier and growing population was easily able to afford the fees required to generously care for the sick. Doctors, patients and insurance companies all loved the benefits until the generous third-party payment system was discovered to be closer to a Ponzi scheme than true insurance. The elderly started living longer, and medical care became more sophisticated, demands because benefits were generous and insurance costs were moderate until the demographics changed with fewer young people
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working to accommodate a growing elderly population--just as we see the problem developing with Social Security. At the same time governments at all levels become much more involved in mandating health care for more and more groups.

Even with the distortions introduced by the tax code, the markets could have still sorted this all out, but in the 1960s government entered the process and applied post office principles to the delivery of medical care with predictable results. The more the government got involved the greater the distortion. Initially there was little resistance since payments were generous and services were rarely restricted. Doctors liked being paid adequately for services that in the past were done at discount or for free. Medical centers, always willing to receive charity patients for teaching purposes in the past liked this newfound largesse by being paid by the government for their services. This in itself added huge costs to the nation's medical bill and the incentive for patients to economize was eroded. Stories of emergency room abuse are notorious since ``no one can be turned away.''

Artificial and generous payments of any service, especially medical, produces a well-known cycle. The increase benefits at little or no cost to the patient leads to an increase in demand and removes the incentive to economize. Higher demands raises prices for doctor fees, labs, and hospitals; and as long as the payments are high the patients and doctors don't complain. Then it is discovered the insurance companies, HMOs, and government can't afford topay the bills and demand price controls. Thus, third-party payments leads to rationing of care, limiting choice of doctors, deciding on lab tests, length of stay in the hospital, and choosing the particular disease and conditions that can be treated as HMOs and the government, who are the payers, start making key medical decisions. Because HMOs make mistakes and their budgets are limited however, doesn't justify introducing the notion that politicians are better able to make these decisions than the HMOs. Forcing HMOs and insurance companies to do as the policitians say regardless of the insurance policy agreed upon will lead to higher costs, less availability of services and calls for another round of government intervention.

For anyone understanding economics, the results are predictable: Quality of medical care will decline, services will be hard to find, and the three groups, patients, doctors and HMOs will blame each other for the problems, pitting patients against HMOs and government, doctors against the HMOs, the HMOs against the patient, the HMOs against the doctor and the result will be the destruction of the cherished doctor-patient relationship. That's where we are today and unless we recognize the nature of the problem Congress will make things worse. More government meddling surely will not help.

Of course, in a truly free market, HMOs and pre-paid care could and would exist--there would be no prohibition against it. The Kaiser system was not exactly a creature of the government as is the current unnatural HMO-government-created chaos we have today. The current HMO mess is a result of our government interference through the ERISA laws, tax laws, labor laws, and the incentive by many in this country to socialize medicine ``American style,'' that is the inclusion of a corporate level of management to rake off profits while draining care from the patients. The more government assumed the role of paying for services the more pressure there has been to managed care.

The contest now, unfortunately, is not between free market health care and nationalized health care but rather between those who believe they speak for the patient and those believing they must protect the rights of corporations to manage their affairs as prudently as possible. Since the system is artificial there is no right side of this argument and only political forces between the special interests are at work. This is the fundamental reason why a resolution that is fair to both sides has been so difficult. Only the free market protects the rights of all persons involved and it is only this system that can provide the best care for the greatest number. Equality in medical care services can be achieved only by lowering standards for everyone. Veterans hospital and Medicaid patients have notoriously suffered from poor care compared to private patients, yet, rather than debating introducing consumer control and competition into those programs, we're debating how fast to move toward a system where the quality of medicine for everyone will be achieved at the lowest standards.

Since the problem with our medical system has not been correctly identified in Washington the odds of any benefits coming from the current debates are remote. It looks like we will make things worse by politicians believing they can manage care better than the HMO's when both sides are incapable of such a feat.

Excessive litigation has significantly contributed to the ongoing medical care crisis. Greedy trial lawyers are certainly part of the problem but there is more to it than that. Our legislative bodies throughout the country are greatly influenced by trial lawyers and this has been significant. But nevertheless people do sue, and juries make awards that qualify as ``cruel and unusual punishment'' for some who were barely involved in the care of the patient now suing. The welfare ethic of ``something for nothing'' developed over the past 30 to 40 years has played a role in this serious problem. This has allowed judges and juries to sympathize with unfortunate outcomes not related to malpractice and to place the responsibility on those most able to pay rather than on the ones most responsible. This distorted view of dispensing justice must someday be addressed or it will continue to contribute to the deterioration of medical care. Difficult medical cases will not be undertaken if outcome is the only determining factor in deciding lawsuits. Federal legislation prohibiting state tort law reform cannot be the answer. Certainly contractual arrangements between patients and doctors allowing specified damage clauses and agreeing on arbitration panels would be a big help. State-level ``loser pays'' laws, which discourage frivolous and nuisance lawsuits, would also be a help.

In addition to a welfare mentality many have developed a lottery jackpot mentality and hope for a big win through a ``lucky'' lawsuit. Fraudulent lawsuits against insurance companies now are an epidemic, with individuals feigning injuries in order to receive compensation. To find moral solutions to our problems in a nation devoid of moral standards is difficult. But the litigation epidemic could be ended if we accepted the principle of the right of contract. Doctors and hospitals could sign agreements with patients to settle complaints before they happen. Limits could be set and arbitration boards could be agreed upon prior to the fact. Limiting liability to actual negligence was once automatically accepted by our society and only recently has this changed to receiving huge awards for pain and suffering, emotional distress and huge punitive damages unrelated to actual malpractice or negligence. Legalizing contracts between patients and doctors and hospitals would be a big help in keeping down the defensive medical costs that fuel the legal cost of medical care.

Because the market in medicine has been grossly distorted by government and artificially managed care, it is the only industry where computer technology adds to the cost of the service instead of lowering it as it does in every other industry. Managed care cannot work. Government management of the computer industry was not required to produce great services at great prices for the masses of people. Whether it is services in the computer industry or health care all services are best delivered in the economy ruled by market forces, voluntary contracts and the absence of government interference.

Mixing the concept of rights with the delivery of services is dangerous. The whole notion that patient's ``rights'' can be enhanced by more edicts by the federal government is preposterous. Providing free medication to one segment of the population for political gain without mentioning the cost is passed on to another segment is dishonest. Besides, it only compounds the problem, further separating medical services from any market force and yielding to the force of the tax man and the bureaucrat. No place in history have we seen medical care standards improve with nationalizing its delivery system. Yet, the only debate here in Washington is how fast should we proceed with the government takeover. People have no more right to medical care than they have a right to steal your car because they are in need of it. If there was no evidence that freedom did not enhance everyone's well being I could understand the desire to help others through coercive means. But delivering medical care through government coercion means not only diminishing the quality of care, it undermines the principles of liberty. Fortunately, a system that strives to provide maximum freedom for its citizens, also supports the highest achievable standard of living for the greatest number, and that includes the best medical care.

Instead of the continual demagoguery of the issue for political benefits on both sides of the debate, we ought to consider getting rid of the laws that created this medical management crisis.

The ERISA laws requiring businesses to provide particular programs for their employees should be repealed. The tax codes should give equal tax treatment to everyone whether working for a large corporation, small business, or is self employed. Standards should be set by insurance companies, doctors, patients, and HMOs working out differences through voluntary contracts. For years it was known that some insurance policies excluded certain care and this was known up front and was considered an acceptable provision since it allowed certain patients to receive discounts. The federal government should defer to state governments to deal with the litigation crisis
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and the need for contract legislation between patients and medical providers. Health care providers should be free to combine their efforts to negotiate effectively with HMOs and insurance companies without running afoul of federal anti-trust laws--or being subject to regulation by the National Labor Relations Board (NLRB). Congress should also remove all federally-imposed roadblocks to making pharmaceuticals available to physicians and patients. Government regulations are a major reason why many Americans find it difficult to afford prescription medicines. It is time to end the days when Americans suffer because the Food and Drug Administration (FDA) prevented them from getting access to medicines that were available and affordable in other parts of the world!

The most important thing Congress can do is to get market forces operating immediately by making Medical Savings Accounts (MSAs) generously available to everyone desiring one. Patient motivation to save and shop would be a major force to reduce cost, as physicians would once again negotiate fees downward with patients--unlike today where the government reimbursement is never too high and hospital and MD bills are always at maximum levels allowed. MSAs would help satisfy the American's people's desire to control their own health care and provide incentives for consumers to take more responsibility for their care.

There is nothing wrong with charity hospitals and possibly the churches once again providing care for the needy rather than through government paid programs which only maximizes costs. States can continue to introduce competition by allowing various trained individuals to provide the services that once were only provided by licensed MDs. We don't have to continue down the path of socialized medical care, especially in America where free markets have provided so much for so many. We should have more faith in freedom and more fear of the politician and bureaucrat who think all can be made well by simply passing a Patient's Bill of Rights.
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