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Friday, July 31, 2009

Thoughts on Healthcare Reform

Just a few random thoughts on this subject...

Market Based Reforms...did you ever notice that people that call for strictly "market-based" health care reform are mostly those who probably aren't bothered by the actual cost of health care themselves?


Rising Costs...Doctor Bob's costs increase in aggregate about 3-4% per year, which he passes along to his patients. Mega Health Insurance Company is publicly traded, and the financial markets want it to increase it's returns about 12-15% every year (and they can probably only increase efficiency to drive down costs about 2% per year). Parma Corp is also a publicly traded company and has an even higher profit expectation of 18% ROI increase per year.

Patient Steve gets his health insurance through Mega Health at work and sees his premiums increase 10% this year. He goes to the doctor and sees that co-pay increase 3% this year. His medication costs increase by 10% per year.

Seeing a pattern here?

The bottom line his this: in a market-based economy, the emphasis is on profit. That's fine when you are making toasters, less so when you are talking about health care. In the "business" of making people well, the emphasis should be on that...making people well first...profit second.

Government Involvement...Medicare has an overhead rate of about 3-5%. The average health insurance company has overhead that is in the neighborhood of 18%. Now does that mean Medicare is automatically better suited to manage health care in this country? Not necessarily, but it does mean that the impact of requiring a profit (which is what publicly traded companies require) has a direct impact on cost. Denying that is at best silly. Overhead isn't the whole story here, because for example the government is pretty damn horrible at things like innovation. The trick, I suppose, is to find some way to have a system whereby you have private sector innovation and constant improvement without the corrosive impact of market-demanded double-digit increases in profit year-over-year.

The Notion of Insurance...Most people really don't understand the concept of insurance. One core principle of insurance is that of spreading out risk. Insurance can provide a benefit to someone who is sick in part because there should be healthy people paying into the system who are not sick (and are unlikely to want or need a benefit). One of the problems in our current system is that there are people who fall outside of the system of paying for insurance but yet still end up getting the benefit. That then drives up the costs for everyone.

Long on Problems, Short on Solutions...This is pretty damn complex stuff. However in my mind there are a few common solutions threads:
  • Required Coverage - People should be required to purchase health insurance, period. Simply being out of the system but then receiving a health care benefit (we don't turn people way who need medical attention in this country) isn't fair to those of us who do pay into the system. The cost of health care needs to be spread out among everyone, period. Even if you have a minimum wage job, you should in fact be paying some portion of you wages into buying health insurance. That sounds harsh, but I think that's one of the core solutions.
  • Screw the Tax Code -Some know, that group that claims that the tax code is too complicated...want to "fix" the current system in part by offering tax credits/rebates for the poor to purchase health care insurance in the private market. Now correct me if I am wrong here, but wouldn't such as thing actually make the tax code more complex???? Let's stop using the tax code as a slush fund for any and every social problem.
  • The Poor - This is an issue that goes well beyond just health care, but I have to add a comment about it here. If you are physically able (and by that I mean you have at least one functioning arm and you can read) you should be working, period. No one in this country should be getting something for nothing. That ties directly to health care, because right now some folks do just that. If you are poor and you can't find a job, I'm of the opinion that the government should provide you with some measure of support, but then you should be working for the public good during that period...and some of what you receive from the matter how small...should go towards the cost of your health care.
  • Profit - Private health care needs to be regulated in the same sense that public utilities are regulated, but in a much more vigorous sense. Just as people need water to survive, the reality is that people also need health care. What's more, I view it as being almost immoral for a health care insurance provider to make an 18% profit when it's customers are struggling to pay their premiums and co-pays. Simply put, we can't have it both ways (high profits and low costs), but we can require reasonability for both costs and profit. Some will not like that, but I'd argue to the death that free markets fail in certain conditions, and health care is a classic example of just such a failure.
  • Government - Whether some like it or not, the role of the government is in part to "promote the general welfare" (see the US Constitution). No where is that more apparent than in the case of health care. Government must play a role in health care costs, if only because it is the only entity that can reach across state lines to enforce a set of uniform standards to prevent the zest for profit to erode the need for health care. Does that mean that the government should provide free care to all? No. Nothing related to health care should be free. But it does mean that, perhaps, the government should be in the business of providing basic health care insurance coverage (and note that there is a BIG DIFFERENCE between providing insurance and making medical decisions) at the bottom of the risk scale.
  • Personal Responsibility - Last, but not least, people in this country have to take personal responsibility for their own health. We've raised a generation to believe that there is no link between their actions and the costs of providing medical care, and nothing could be further from the truth. The first part of the personal responsibility equation here is that everyone should be paying for coverage (be you working poor OR someone who has such generous coverage now that they pay virtually nothing...not that such a thing happens much). The second part is that the best way to pay less for health care is to be healthy in the first place.

Complex? Yes, but often times the longest, most difficult journeys are the most rewarding.

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