Thursday, July 23, 2009

Healthcare: We Have Met the Enemy, and it is Us

I’m sure that all who are following the debate over government-sponsored medical care have heard a plurality of pundits, so this post is designed to make a few points that I think need to be considered in the debate that aren’t discussed enough. There is a lot of scapegoating directed at the insurance industry by the current administration in order to sell the benefits of government-run healthcare, which is unfortunate, as it is the same old demonizing tactic used last year against the oil companies during the presidential campaign: the charge of “record profits.” In a capitalist society, profits are a good thing, with record profits being even better since it would mean the economy is growing and prosperity is spreading. In this particular case, however, health insurance companies aren’t enjoying profits that are setting any new records. And they are not the enemy even if they were. Just as with auto and home insurance policies, health insurance companies allow us to pool risk and gain access to medical care and drugs that would otherwise not be affordable except for the very wealthy. The current administration would have us believe that since the system is not perfect, it should be completely dismantled and run by government bureaucrats. Instead, I feel we should be thankful that we have a system which works well for most, but requires commonsense reforms such as those proposed by Louisiana Governor Bobby Jindal and Senator Mitch McConnell.

One problem with health insurance is that over the course of several decades a "middle man" (the insurance company) has come between the patient and the doctor, thus affecting market dynamics for better or for worse. Yet if government further gets in the middle it will only make things more complex, not less, because now you're adding a political component, and it doesn't take a rocket scientist to figure out what will happen when healthcare becomes political. Unlike house or car insurance, health insurance is highly personal and something we take advantage of on a more or less regular basis, depending on our current state of health. We have come to expect more and more things to be covered such as the latest medicines and procedures, and it has also become a game of nickel and dime things instead of just big things. Patients and doctors apply pressure to insurance companies to cover sex-enhancing pills, massages and other elective options that are probably better paid for out of pocket. Naturally, premiums rise as insurance companies cover more medicines and procedures. So insurance companies, which must have enough reserves to pay claims and make profits that allow them to invest in their businesses are in a damned if they do, damned if they don’t proposition when it comes to setting practical limits for what they can cover and what they can’t.

A huge issue is the fact that many Americans don't lead healthy lifestyles, yet expect the modern miracles of medicine to save the day. Moreover, we expect these miracles to cost nothing more and have come to feel we have a "right" to new medicines or technology simply because they are available. Yet when the insurance company won’t pay for these miracles or raises its premiums to do so they are at fault when in large part we have brought many illnesses on ourselves through our own poor choices. I am so tired of people complaining about how greedy insurance companies are, because if we didn't have them, we would have to pay these costs out of our own pockets, which most of us couldn’t (or wouldn’t) do. Yet it is us, when we abuse insurance through poor life choices, that have caused premium costs to increase since we demand more while living unhealthy lifestyles that drive up those costs. In fact, preventable illnesses are at the very core of spiraling health costs in America, most directly related to smoking and obesity (due to poor diet and lack of regular exercise). So instead of pointing the finger at insurance companies, I think we should begin pointing the finger at ourselves for living lifestyles that unnecessarily drive up healthcare costs. In large part, we have met the enemy, and it is us.

An important thing we must realize is that all of the new medicines and technologies that make us well or keep us alive cost money to develop. Pharmaceutical companies must literally invest hundreds of millions or even billions of dollars to bring a drug to market, and must absorb the cost of drugs that don’t make it to market. This is not purely science as drugs must go through painstaking clinical trials in order to receive FDA approval. If pharmaceutical companies were not investing their “record” profits on breakthrough drugs, then there would be no new miracle drugs. So we shouldn’t be upset that pharmaceutical companies make big profits if we are looking forward to the next breakthrough drug to cure or treat an existing or future disease. As well, if insurance companies don't make a profit, then they can't pay claims, and since insurance is based on actuarial tables that aren't perfect, there is always the chance that some new disease comes along (such as HIV/AIDS) that causes profits to go down and premiums to possibly go up. Or there may be a new “must have” breakthrough technology that makes premiums go up further. So we have to understand that insurance companies are taking on qualified risk and are not just kicking back reaping profits. It is a tough business.

In general, healthcare access and cost presents a very complex problem that requires sensible, yet imperfect, reform. More competition between insurance providers and sensible regulation is what is needed (such as not allowing insurance companies to simply “drop” existing customers because they contract a disease that is expensive to treat, when the whole purpose of actuarial tables was to account for this risk). I am deeply conflicted about forcing insurance companies to accept pre-existing conditions since these can "break the bank" actuarially and affect others in the insured pool adversely. If the government takes on healthcare, then taxpayers will pick up huge costs as there will be no practical limit to the care that people will lobby the government for since they see their fellow taxpayers as a bottomless pool of money. Of course, the government would have to ration care based on decisions from bureaucrats in Washington, instead of actuarial tables and competition in the open market. So this is all the more reason for the federal government to keep away from becoming an insurance provider beyond the current tax-funded Medicare, Medicaid, and SCHIP programs (in fact, it should get out of these programs altogether and remand to the states since this is not the proper function of the federal government in the first place).

Fundamentally, I think insurers should stop covering unnecessary things such as sex-enhancing pills and massages, to name just a couple. Insurers should offer a basic, catastrophic package for anyone, which would be attractive to young people that don't use healthcare very much and who are also willing to pay if they do need something other than catastrophic care. Yet these same people that can afford healthcare should not be able to simply go to an ER when they get sick and expect someone else to pay for it. It is a grossly inefficient way to receive care. So I would be open to an individual mandate such as that for car insurance, where you set the deductible level with a private insurer that provides some level of reasonable options based on risk profile. Those at certain poverty levels should be eligible for government assistance with premiums (where they would pay something, and never nothing), while those who are unemployed should keep their existing policy with government assistance, possibly at a lower level of coverage. The idea is that everyone gets covered and stays covered.

Finally, I believe that once someone is in an insurance pool, they should be able to stay in that pool without worry of being dropped, but still have the opportunity to move to another pool if it is more cost effective for them. This would at least set a baseline for moving forward so we can get everyone on some type of coverage without a government takeover. For those not covered with pre-existing conditions, possibly we could expand the Medicare and Medicaid pool on a one-time basis as a part of the baseline, instead of forcing them on insurers. Beyond that, as citizens we will be responsible for gaining access to health care among the private and existing public options available depending on the personal situation. Existing employer-provided plans should be portable, so that when one leaves the company their insurance goes with them at the same cost, and an option would be provided to move down to a more affordable level if the person cannot afford it, or whose next employer cannot provide the same level of benefit. Now I am realistic, as I don’t expect an ideal solution since humans are involved, but I do expect a better free market solution than the one currently available. Those who listen to the siren song of government are unfortunately, I believe, looking for perfection, but will only find disappointment when they find that what they’re hoping for won’t live up to expectations.


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