Tuesday, July 18, 2017

The congressional effort to repeal or reform Obamacare is on life support.

Congress should not let this serious crisis go to waste.

Independent of repealing of changing the Affordable Care Act, Congress should depress health insurance premiums and ignite a revolution in the cost and delivery of health care by pre-empting any state or local law that “unreasonably” burdens telemedicine. Attorney’s fees and costs should automatically be awarded to any plaintiff that successfully challenges such protectionism.

It is fitting that Congress should do so. The Constitutional Convention was provoked by the erection of state barriers to interstate competition. Article I, section 8, clause 3 of the U.S. Constitution thus empowers Congress to regulate or eliminate barriers to interstate commerce. Last year, Congress invoked this authority to make permanent the Internet Tax Freedom Act. It prohibits state or local taxation of internet access or multiple or discriminatory taxes on electronic commerce.

The health care industry is enormous and growing. It constitutes 17 percent of the GNP. More than $3.2 trillion is expended on health care annually. Yet a startling portion is provided through horse-and-buggy delivery systems that inflate costs and vex patients. They persist because of protectionist state or local legislation that prohibit or arrest competition through new ways of providing health care—akin to prohibitions on Uber competing with traditional taxi service.

Telemedicine and its offspring could slash a trillion dollars or more from the nation’s annual horse-and-buggy health care expenditures if it were freed of legal fetters or paralyzing legal uncertainty. Renowned economist Joseph Schumpeter explained in Capitalism, Socialism and Democracy (1942):

“[I]n capitalist reality as distinguished from its textbook picture, it is not …competition which counts but the competition from the new commodity, the new technology, the new source of supply, the new type of organization (the largest-scale unit of control for instance)–competition which commands a decisive cost or quality advantage and which strikes not at the margins of the profits and the outputs of the existing firms but at their foundations and their very lives.”

Local health care providers are well organized to lobby for protectionist laws that shield them from the process of Creative Destruction that earmarks capitalism and would shake the foundations of their economic lives. Their campaign contributions or independent expenditures and votes in state and local elections give them a decided political advantage over their out-of-state telemedicine rivals.

The case of optometrists is illustrative. They confront an existential threat from ocular telemedicine that offers better prices at more convenience in the provision of eye examinations followed by sales of contact lenses or eyeglasses. Optometrists are predictably lobbying furiously with state legislatures to outlaw their online competitors. They are also opposing a Federal Trade Commission rule that would require them to obtain from each contact lens patient a signed document confirming their receipt of their contact lens prescription. The rule is necessary to cure optometrists’ epidemic evasion of the Fairness to Contact Lens Consumers Act of 2004 which requires them to provide the prescriptions, which enable customers to shop for the best price, quality and convenience.

Creative Destruction through technological discovery or innovation has plunged the costs of telecommunications services and photography by orders of magnitude. Creative Destruction promises to do the same for health care if Congress prevents states from arresting that marvelous source of consumer benefit with a preemption statute like the Internet Tax Freedom Act.

Voters would be so delighted with telemedicine marvels that the mess Congress has made with Obamacare might be forgiven.

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