Separate Healthcare From the State

Murray Sabrin

The Star-Ledger headline on April 19 says it all, “Waste in health program outlined.” According to a State Commission of Investigation report, New Jersey’s Charity Care program that funds the cost of hospital services for the poor wasted tens of millions of dollars because of fraud and abuse. W. Cary Edwards, the SCI Chairman said, “The shocking thing is there is no third-party accountability and no accountability within the system to trace waste, fraud and abuse.”

The article states: “Hospitals in New Jersey are required by law to treat patients regardless of their ability to pay, and the Charity Care program is designed to help them with the costs of treating the indigent and uninsured. In 2005, nearly 300,000 New Jersey residents received health- care services paid in whole or in part through Charity Care.” The program costs taxpayers nearly $600 million annually. Because of the state’s budget crunch, the annual Charity Care outlay has been frozen since July 1, 2004.

Instead of relying on community based resources (voluntary contributions) to fund healthcare services for the poor and uninsured, hospitals have been lobbying for more taxpayer dollars. It has paid off. So-called Christmas tree grants last year totaled $112 million for the hospitals. In other words, hospitals have become another special interest group seeking to use the state for a “noble cause”—in this case, medical services for low income households and individuals who lack insurance.

Right before our eyes another welfare state program is unraveling. Promising more investigations and overhaul of the Charity Care system, Acting Governor Codey does not get it. Government “charity “is an oxymoron. Charity is a voluntary activity by donors, who voluntarily donate their time and/or money for a worthy cause they voluntarily support, and thus reflect the values of the people in a society.

Government grants and programs are based on coercion. The state first has to tax, i.e., expropriate money from individuals and business owners, and then allocate the ill-gotten gains to the most influential special interest groups in society. That’s how the welfare state operates.

But there is a better way to meet the healthcare needs of the uninsured who lack the income to provide for themselves. Volunteers in Medicine (http://www.vimi.org/) is based on a “culture of caring.” Founded in Hilton Head, South Carolina the first VIM has been a model for communities around the nation that have established similar facilities.

The concept of a voluntary nonprofit providing free healthcare for the uninsured is elegant in its simplicity. That’s one of the reasons the political elites have not embraced it. Unless there is a blue ribbon study commission and a huge bureaucracy overseeing the delivery of a service, the political elites do not want to anything to do with it, because it was not their idea. The other reason the political elites do not embrace the voluntary model is that they become irrelevant to the delivery of healthcare for the uninsured. In addition, if grassroots efforts provide free healthcare better than Charity Care or other state financed programs, then the public should be informed that the welfare state is ripping them off.

The preliminary evidence reveals that VIMs are incredibly cost efficient. (My colleague and I will be investigating this issue over the next few months.) Moreover, the possibility for waste, fraud and abuse is negligible. Virtually all the operating VIMs rely solely on voluntary contributions. The public will not continue to support a VIM if is not operating efficiently. That’s why removing all government support for healthcare institutions and reducing taxes so the public can fund local nonprofits must be implemented as soon as possible.

As Peter Drucker wrote in 1991, “…government has proved incompetent at solving social problems. Virtually every success we have scored has been achieved by nonprofits….We need to learn that ‘nonprofitization’ may for modern societies be the way out of mismanagement by welfare bureaucracies.”

It is time both the Trenton and DC elites embrace Drucker’s insights, and begin dismantling the welfare state and put healthcare back in the control of patients, physicians, hospitals and nonprofits.

Murray Sabrin, Ph.D., is professor of finance in the Anisfield School of Business, Ramapo College of New Jersey, where he is executive director of the Center for Business and Public Policy.