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Two trends have converged in
recent years to significantly compromise the confidentiality of
medical records, a long-term trend of increasing involvement by
insurance companies and government in private health care decisions,
and a recent move to centralize the medical records of every American
into a single national database. Since medical records are among the
most sensitive of personal information, an excellent case can be made
for policies that reverse these dangerous trends.
About one in every seven dollars
Americans spend is spent on health care.14
A surprisingly large component of high health care costs has nothing
to do with the treatment of illness or injury, but with maintaining
detailed records of the care given to each patient. If these records
were merely to assist with future care or diagnosis there would be
little cause for concern, but the explosion of data gathering and
reporting in recent decades has little to do with providing better
care. Rather these databases are designed to enable third parties to
monitor and control health care decisions which once were made by
patient and doctor in strict confidence.
There is a simple reason for
this: about 95 percent of all hospital bills and 83 percent of
physicians' fees are paid by private and public third-party payers,
not by patients.15
This puts upward pressure on medical costs that is unrelated to the
quality of treatment. Because patients are spending other peoples'
money in the health care marketplace, they have little incentive to
economize or shop around. For their part, doctors and hospitals tend
to earn more when they increase medical costs, since third party
payers reimburse on a cost-plus basis. Of course, the insurers who
directly pay for this care have the opposite incentive: they strive to
control costs as much as possible. One way they do this is through
detailed regulation of what medical procedures are "covered"
under which circumstances. This is a form of rationing.
Proving compliance with these
rules requires doctors and hospitals to share information with third
parties which once was confidential between doctor and patient. This
information is increasingly accessible through computer networks to
the public, prospective employers, insurance companies, and anyone
else who knows how to gain access to the files.
To exacerbate this breach of
privacy, the Health Insurance Portability and Accountability Act of
1996 mandates the assignment of a "unique health identifier"
to every citizen that enters the health care system. The New York
Times described this as a "computer code that could be used to
create a national database that would track every citizen's medical
history from cradle to grave."16
Once this database is assembled, the uses to which the information
will be put and the number of people who will be able to access it
will multiply.
An exciting plan to restore the
privacy of medical records and provide a host of other important
advantages is to expand the availability of Medical Savings Accounts,
also known as Medical IRAs because of their similarity to Individual
Retirement Accounts. This plan addresses the privacy breach at its
root cause: the interference of third-party payers in health care
decisions. In the process, it offers solutions to health care
rationing, rising costs, and the problems of millions of uninsured
citizens today.
Most people are insured through
their employers because earnings paid in the form of health benefits
are non-taxable under current law. This tax-break drives people into
plans with low deductibles17
that cover as much of their health care expenses as possible, while
punishing them when they pay out-of-pocket. This explains why health
care expenses are overwhelmingly covered by third-party payers, and
accounts for the efforts of these third parties to monitor and control
the decisions of patients and their doctors.
Medical IRAs allow people to
take the pay they previously received in the form of an expensive
low-deductible insurance plan and deposit it in a personal
interest-bearing account. This money may be used to pay ordinary
medical expenses and to purchase low-cost, high deductible insurance
policies to cover infrequent or catastrophic medical events. The money
in your Medical IRA would have the same tax advantages as your costly
employer-provided health plan, but the money in your account would be
your money. Whatever you hadn't spent from your Medical IRA each year
would roll over into a regular IRA as a retirement investment or to
finance the first-time purchase of a home. Most individuals would find
that their Medical IRA allows them to self-insure for all their health
care needs. Thus, information about their health and the care they
receive would never need to be passed on to third parties and would
remain confidential.
Perhaps more important to most
people, widespread use of Medial IRAs would dramatically reduce the
cost of health care and of health insurance. Goodman and Musgrave
estimate that by encouraging consumers to shop prudently in the health
care market, increased competition and reduced waste would cut as much
as a fourth off of health care expenditures without any change in
health outcomes. By separating health insurance from employment,
insurance would become portable and affordable to millions who are
currently uninsured because of job changes, self-employment, or
unemployment.
Congress passed legislation in
1996 permitting 750,000 Americans to obtain Medical IRAs, but the
restricted nature of the law prevents even the limited test group from
enjoying the full benefits. The affirmative plan should eliminate the
cap on the number of Medical IRAs and remove other restrictions to
consumer choice.
While people have good reason to
be concerned about the privacy of their medical records, the ability
to make private decisions about the care they receive is of even
greater concern. By restoring freedom of choice and restraining third
parties from interfering in the doctor-patient relationship, Medical
IRAs have been shown to significantly improve the quality of care that
people receive. Extending the tax-exemption currently given
preferentially to employer-provided health benefits to include
self-insurance through Medical IRAs would make these advantages
available to a much wider group of people.
Author: David Beers
Questions and comments welcome: Send to adc@mackinac.org
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