In Wealth of Nations, Adam Smith described the virtues of a market economy where fair prices result from a large number of buyers interacting with a large number of sellers. To achieve the efficiencies of a market economy, we need to reduce the role of both the health insurance cartel and the government by limiting health insurance to the traditional role of insurance - spreading and sharing the risk of catastrophic events.
You can get a tune-up for your car or get minor repairs done without involving the company that provides your car insurance. You can replace a broken window or repair a leaky faucet without involving the company that insures your home. We could achieve a significant reduction in the cost of health care by eliminating routine care from insurance policies. We should be able to get treatment for minor accidents and ailments, without involving a health insurance company.
In any given year, the vast majority of us have no need for anything more than routine medical care. Within a system where insurance functioned in the normal manner, a substantial percentage of the interactions between doctors and patients would take place without generating additional costs for both providers and insurers that result from the review and approval process and the associated paperwork. This simple change in our approach to health care would reduce the cost of health care more significantly than any other reform being proposed.
Consumers would have complete freedom to patronize any doctor or hospital. To help them make informed decisions, a complete list of the fees charged by each doctor and hospital should be available upon request. The transparency of the fee structure alone would help to control costs. The complex deals negotiated between insurance companies and health care providers make it difficult to even figure out the true cost of care.
Some insurance companies already offer plans with greatly reduced premiums and high deductibles. In some cases companies pay for part of the cost of preventative measures, such as annual check-ups, but most of the cost of health care is paid directly by patients.
These types of plans are not very common. They are often considered as a last resort for those who can’t afford the premiums for full coverage. They are also not very popular with many people who are forced to settle for such a plan. Overcoming the resistance to this approach might be difficult.
A system where employers or the government pays your premiums creates the illusion that you are getting something for nothing with regard to health care. A lot of people are addicted to that illusion. They fail to realize that the costs are passed on to them through a combination of higher taxes and reduced pay. (Shall we blame Milton Friedman for failing to convince more people that there is no such thing as a free lunch?)
Article comments
1 - P.Marlowe
good article... Long article... really, really long, but good!
Marlowe
2 - DHL
The catastrophic illness plans are interesting, but may not contribute much to solving the problem of providing coverage to those currently uninsured. The product idea is not new, insurance companies do offer "high-deductibles" to cater to individuals who have affordability problems. If it is not mandatory, not all car owners may buy liability insurance. Our "health care" crisis is not just a health insurance crisis. In reality, health insurance companies are becoming the popular whipping boys. They are blamed for inefficiency, and bureaucracy, and being profit-minded (Blue Cross/Blue Shield are not-for-profit) at the expense of patients' well-being. We are not sure if we can safely remove the roles of insurance companies from our system without creating another form of crisis. Substituting the insurance companies with a government body may not be a better solution, as seen in the public transportation system or our public education system.
The aging population, the availability of more expensive advanced technology that treats diseases that were terminal previously, and even economic growth all contributed to our rising health care expenses as a nation. In the book entitled "The Fattening of America," by Eric A Finkelstein and Laurie Zuckerman, it was reported that over two-thirds of Americans are overweight or obese. Over the past three decades, the number of obese Americans has more than doubled, across the socioeconomic spectrum, and for all racial and ethnic groups, most dramatically, for America's children. According to Eric, America's growing waistline is a by-product of our economic and technological success. It has been estimated that the annual cost of overweight and obesity in the U.S. is $122.9 billion, a sum that is comparable to the economic costs of cigarette smoking.
All health care crisis has to be tackled on all fronts, and as you pointed out, reform could involve a grassroot movement. You suggested that we should band together to limit the role of insurers with or without help from the government. On the positive note, grassroot organizations have already started to direct the effort in discouraging smoking, addressing obesity, and adopting a healthy lifestyle. These are sure steps in bringing health care burden under better control in the long run.
3 - Rod Reasen II
It is interesting that most claims for reform are directed at insurance companies not the system as a whole. I find it mind bogling to believe that Americans are as foolish as many may make them out to be. The health care system is made up of three primary components: You and Me; doctors and facilities and payers.
The main problem with our current system and the direction that we should focus is TRANSPARENCY.
You and I don't actually know where most of the cost comes from in a bill. I submit that if we were fully aware of all charges from all parties we might have a basis for discussing change. Until we have this, we are simply submitting ourselves to idle chatter.
Rod Reasen II
President TriplePoint Consulting
4 - bliffle
The insurance companies have created a marvelous illusion: that somehow Health Care depends on Health Insurance. They've employed this illusion to place themselves at the center of the entire "Health Industry" and thus reinforce their monopolistic grip on that entire segment of society. They've created the notion that you can't have Health Care without Health Insurance.
Now, we have presidential candidates who are seriously advancing proposals to enslave US citizens to Insurance companies though 'mandates', which put one in mind of Indentured Servitude, which is the (only slightly) less ugly sister of slavery.
Hasn't it occured to people yet that the jury-rigged facade of capitalistic health care has completely collapsed?
Nothing could be further from the truth.
5 - Rod Reasen
Again, blaming the insurance industry for rising costs is simply misplaced energy. They do play a part: Manage Risk. If you want to solve the problem of rising costs you must see where the costs are located.
I have spent the last 12 years representing employer groups. We have helped them maintain modest levels of costs (around 1-4% annually) by knowing what causes the increases. It is not the insurance company.
The insurance industry adjudicates claims and manages risk. They do not hoard your dollar. I am sure many will contest this but prove it.
If we want lower costs than we need to be wiser consumers, frugal in our spending on health care and be forward looking about our health. The old saying "garbage in, garbage out" really does apply to your health.
6 - bliffle
Bah! All insurance companies are arrogant monopolists (OK, let's call them oligopolists - the effect is the same).
They are enabled in their monopolistic endeavors by the 1945 McCarran Ferguson act which prohibits Federal regulation of ALL insurance companies, thus leaving only the weak state regulators to fight their predations.
It is this which enables their 40% profit margins.
We need to revoke the McCarran-Ferguson act and enforce Federal anti-monopoly laws.
7 - Ruvy
You and I don't actually know where most of the cost comes from in a bill. I submit that if we were fully aware of all charges from all parties we might have a basis for discussing change. Until we have this, we are simply submitting ourselves to idle chatter.
I wish to respectfully disagree with you on some of this, Mr. Reasen.
My son was born a preemie about 19 years ago and he needed to stay in the hospital for over three months. At the time, my wife's health insurance required a $400 co-pay. When we saw the hospital bill, a voluminous document that weighed several kilos and came to over $180,000, we were extremely grateful for the coverage my wife had. We got a similar bill from the physicians attending our preemie for $85,000. It too, weighed several kilos. We had to pay a nominal sum, if any at all, an amount of money I honestly do not remember.
But the point is that every little jot and tittle of "treatment" my baby got was accounted for from the bilyrubin lights to the diapers and tissues, and was was noted and charged for. Need I say that we were overcharged? We probably weren't terribly overcharged - the insurance company would have refused to pay - but we were overcharged.
The hospital was a private hospital and needed to show a profit, so that was part of the charge. But there was transparency. No attorney could have argued that these huge bills were not clear.
I suggest to you that the problem is not necessarily the insurance company - though insurance companies do have a nasty habit of setting themselves up as care brokers and cherry picking the population in the process.
I would look in the hospital supply room instead. When I was a kid, hospitals used to sterilize equipment and reuse it. Today everything is use once and throw. The oil companies make a fortune on the plastics used for much of the use and throw equipment. And it costs a fortune. That is just one place to look to trim costs in the health system.
8 - Doug Hunter
"Republicans never miss an opportunity to push the message that government is incompetent and incapable of providing services as efficiently as private enterprise. If they truly believe that, they have nothing to fear from offering people a choice between private insurance and a government-run program."
I agree that we need universal healthcare, but this little jab is totally nonsensical. It's an apples to oranges comparison. Government programs are subsidized with hundreds of billions of dollars every year. Medicare takes premiums from every worker young and old, then only covers old ones and still operates at a loss. The government can 'lose' tens or hundreds of billions on a program every year and still maintain it by diverting taxes or simply printing more money. The largest mega corporations can only lose money for a year or two in much smaller amounts without going bankrupt.
Private industry DOES run more efficiently and effectively because of limited resources, that is also it's weakness. The government runs sloppy and inefficient but is in no danger of running out of money as long as they own the printing presses.