A Bureaucracy to Eliminate Bureaucracy

I heard the craziest thing I have ever heard on my way home last night on the Sean Hannity talk radio program. Sean was interviewing Tom Daschles (former Democratic Senator from South Dakota). In his interview, Daschle was talking about how he would reform health care. His plan to save health care is to get government involved since over 30% of all health care costs are not health care related. To put it in context, Daschle was referring to the costs associated with insurance companies and Medicare dealing with paper work. He then quoted that in most countries (none mentioned) this cost was typically less than 15% (source not quoted).

So Daschle proposes there be a Federal Reserve-like board that oversees health care. This board would be independent, like the Fed, and be immune to influence from politics. Now what he did not propose was how the new bureaucracy would actually eliminate 15% of health care costs related to paper work. Just that an independent bureaucracy like the Fed could use its power to force lower costs.

There are a couple of problems with this. One, the Fed is not perfect. The most recent example is the Housing Crisis we are in right now. The Fed's cheap money policy created this run up in prices that was unsustainable with current wages. Now we are paying the price. Would a healthcare Fed be any different?

Another problem is the 30% that insurance companies spend on paper work is what keeps costs down. The profit motive is what gives insurance companies the incentive to reduce waste in their system. This means carefully monitoring what doctors and hospitals are charging. This oversight will not go away with more bureaucracy. It most likely will raise health care costs as their will be more, not less, regulation. Regulation means more costs for businesses and most likely, more paper work. Banks are not paper work-free institutions.

If insurance companies cannot provide a product that people can afford, or that people find valuable, they will move on to another provider or product. The market will provide the solution, not another government bureaucracy.

Here is an example of Health Care Innovation in Wichita, Kansas.

Health Care Innovation at Work