Healthcare: One tough coconut

Brudder bought a coconut, he bought it for a dime,
His sister had anudder one she paid it for de lime.

She put de lime in de coconut, she drank ’em bot’ up…
She put de lime in de coconut, she call de doctor, woke ‘im up,

Said “Doctor, ain’t there nothin’ I can take?”
I said “Doctor, to relieve this belly ache?”…
Now lemme get this straight… — Coconut, Harry Nilsson, 1971

lime-coconutWhat do you do if you’ve got something worse than just a belly ache, and you’re uninsured?

During the recent Republican debate, CNN’s Wolf Blitzer asked Ron Paul a gotcha question about mandatory health insurance. Blitzer used the hypothetical case of a 30-year-old man who chooses to opt out of insurance. The man becomes seriously ill and will die without treatment. Blitzer asked, “Are you saying that society should let him die?”

Ron Paul strongly opposes mandatory health insurance and believes people should accept the consequences of their choices, however foolish. He answered Blitzer’s question with a “No, but…” His answer was interrupted by a chorus of shouts from the crowd insisting that Blitzer’s sick man should die.

Blitzer’s question exposes a difficult public policy question: what sort of safety nets should America build for people in need?

The crowd’s reaction was appalling and juvenile. America is a generous and compassionate nation steeped in Christian mercy and neighborliness. Long before FDR’s New Deal ushered in government assistance programs, private hospitals, churches and benevolent foundations had a long history of philanthropy and mercy towards the poor.

But Blitzer conveniently left out a critical piece of information that makes his hypothetical moot: under a federal law passed in 1986 known as the Emergency Medical Treatment and Active Labor Act, hospitals that serve Medicare and Medicaid patients (nearly all of them) are required to provide emergency medical care to patients whether they can pay or not, until the patient agrees to be discharged. Unfortunately, there is no provision in the law to reimburse hospitals for this charitable care.

I recently had some experience with this. Just before Christmas, one of my relatives became seriously ill. He was admitted to the hospital and soon slipped into a coma. He was unconscious for over a month, and as the days dragged on his condition became more grave. The doctors gave little hope that he would pull through, but his family and friends prayed for a miracle.

He had no insurance coverage and few assets, yet the hospital gave him the same standard of care insured patients get; his treatment was excellent, but very expensive. While family members worked to get him accepted by the state Medicaid system, a lengthy and difficult process, the hospital paid all of his medical bills out of its own contingency funds.

By God’s grace he awoke from the coma, fully recovered and was able to leave the hospital after a 4-month stay. His medical bills are astronomical. Medicaid finally accepted him, which means the hospital may be partially reimbursed for his treatment.

Every year, U.S. hospitals provide enormous amounts of unreimbursed care to indigent patients. The Congressional Budget Office did a study in 2006 called Nonprofit Hospitals and the Provision of Community Benefits. They compared nonprofit, government and for-profit hospitals in five states: California, Florida, Georgia, Indiana and Texas. The CBO found that the combined total of uncompensated care by hospitals in those five states in a single year was more than 7 billion dollars. More than 40% of that care was provided by nonprofit hospitals, which also had 68 percent of all the Medicare-certified beds.

The earliest hospitals were built as a direct result of the spread of Christianity and its teachings about compassion for the poor and sick. Nonprofit hospitals, many of which were founded as a practical response to the Gospel of Christ, continue today to provide special services to the poor, often free of charge.

In recent decades, more and more hospitals have been built as an opportunity for profit rather than altruism. For-profit hospitals have a natural disincentive to serve those who cannot pay, namely their fiduciary duty to investors. It was partly this new reality that pushed Congress to pass the badly-named Affordable Healthcare Act (aka Obamacare).

Obamacare is seriously flawed. Despite claims that it would “bend the cost curve down,” it has in fact made healthcare even more expensive by adding new, mandatory benefits, by creating a huge new federal health management bureaucracy, and by scaling back insurance competition. It’s the wrong answer, but it was motivated in part by the realization that the ever-expanding free healthcare assistance required of hospitals is unsustainable, and that the model of healthcare as a business enterprise has left many without affordable options for ordinary medical expenses.

A less expensive, less complex answer would be to use tax policy to create new incentives for the wealthy to support indigent patient care through tax-deductible gifts to healthcare foundations at nonprofit hospitals. For-profit hospitals could also, with the proper firewalls in place, set up separate and parallel nonprofits to take advantage of tax free gifts designated for indigent healthcare.

Tax policy could also be used to give everyone a healthcare tax credit that could be used to purchase private insurance. This would create an incentive for individuals to take more responsibility for their health needs. A personal healthcare tax credit would force consumers to make more intelligent choices with their healthcare dollars, and would decouple healthcare from employment, making plans truly portable and available to many who are presently not able to get benefits at work.

Government programs encourage dependence on a ponderous, faceless and heartless bureaucracy. Our healthcare challenges won’t be solved by a massive new federal Rube Goldberg machine, but they can be solved by getting back to the bedrock American values of self-reliance lived out within the context of an altruistic community where neighbors help neighbors in need.

Photo credit: Dionisvero, iStockphoto

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  1. Even with incentives, it’s unlikely that there would be enough donations to fund a indigent care. The main reason for this is that, as a percentage of total income, donations to charity decrease as the income of a person increases:

    For that reason, I have trouble finding that line of argument persuasive, even though it would be nice if the Mr. Potter’s of the world were more compassionate.

    I also disagree that adding a new way for insurance companies (who are basically “death panels” people gladly pay for) to get paid by the government through a tax incentive is a way to improve the system.

    I also recommend this documentary from a few years ago – it goes through a bunch of other countries methods for paying for health care:

  2. Hi Zack. Good comments. You’re right about the way charitable giving falls off as income increases, but we could improve that, if healthcare became a national priority, by giving healthcare contributions a preferred status. For instance, we could allow someone to take $1.10 in tax reductions for every $1.00 of actual donations. That would create an incentive to donate to healthcare rather than the local opera house or art museum. The tax code already expresses such national values (home mortgage deductions, exemptions for children, etc.).

  3. Thank you for some really good points. However, the remark by Zack regarding insurance companies and the “death panels people pay for” is untrue. Health insurance and in fact insurance in general is one of the most regulated industries. They are businesses who must attract customers for the most part. Each state has an insurance commisioner to ensure they play by the rules. The difficulty comes if you need or want some sort of experimental treatment or to use a therapy for a condition which is not approved for. I understand experimental therapies possibly not being paid for by them; I’m not so sure about the latter, though.

    Thank you for the interesting points.

  4. “For instance, we could allow someone to take $1.10 in tax reductions for every $1.00 of actual donations. That would create an incentive to donate to healthcare rather than the local opera house or art museum.”

    This makes sense to me.