Since 1970, the health care industry has undergone a revolutionary change. Before that time people were overwhelmingly (about 70%) in traditional indemnity plans where patients pay a certain percentage of health care costs. With the passage of the Health Maintenance Organization Act written by Ted Kennedy (D-Mass), very quickly over 70% of Americans were covered by HMOs.
The structure of HMOs was also largely different than traditional indemnity plans. HMOs require primary care physicians to act as gatekeepers of advanced care and it empowered insurance companies to challenge the medical judgment of doctors. It restricted choice to those doctors and providers "in the network" and any care provided by outside providers, care that didn't follow the right regulations or didn't have the right referrals was simply not paid.
It is indisputable that we are currently in a health care crisis with skyrocketing costs and extreme customer dissatisfaction. It is never a good sign when medical providers have to market themselves on customer service. No other industry has to try to convince consumers that "we won't abuse you" and that "you matter to us". The current argument is that health care needs to be socialized because the free market hasn't worked.
First, the central principle of the free market is that the individual parties of a transaction are able to negotiate the terms of that transaction themselves. For instance, if I want to buy a car, I can negotiate with the dealer the terms of the transaction and the dealer can do likewise. If neither of us wishes to proceed, we can move on. Without free choice on both the provider and consumer in deciding terms of the transaction, there is no free market. There is no free market without choice.
The health care system in this country, developed by Democrat Ted Kennedy who now campaigns against his own creation, all but eliminates choice in both doctors and patients.
Limiting the Choice of Patients
Let's say you, Joe Consumer, want health insurance. Because of the structure of the tax system that enforces what is basically an historical accident, you will probably get this through your employer. Your employer is limited by tax law to only let you make decisions about your health insurance provider at certain times, basically when you are hired and once a year thereafter. You will likely get a few choices, an HMO with higher deductibles and lower premiums, an HMO with lower deductibles and higher premiums (from the same company), and a traditional indemnity plan. If your employer chooses Blue Cross Blue Shield, you're only going to be able to choose Blue Cross Blue Shield.
Article comments
— go to most recent comments1 - Jonathan Scanlan
You make a pretty solid case here. People really ought to make the choice for themselves, and have the wages to decide it with.
Of course, that said, there needs to be a safety net for the poor and working poor. And how can you ensure that they will actually spend money on insurance? There in lay the challenge.
2 - troll
John - good description of the 'situation'...why did congress agree to socialized medicine (hmos = government mandated limitations on choice) in the first place - ?
3 - alessandro
It always comes down to choice. Remove the power of the individual to decide for themselves what's best all in the interest of serving the collective good with socialist policies and you get one confused and inefficient problem.
Between Canada and the U.S. it's too bad we can't come up with better systems. Or at least smart solutions to existing problems.
So. Did Ted blame Dubya for his creation?
John, explain me something: is this problem where socialist policy meets corporate greed? Did Kennedy's plan make it worse?
4 - Doug Hunter
The problem with the free market of healthcare is that often when you're in a situation requiring treatment you're in no capacity to make wise, efficient market choices. In an emergency you're taking the first damn ambulance and ER you can find, period. They'll charge you whatever outrageous fee they want, and you'll gladly pay it.
Same goes for advanced treatments, etc. When you're life is at stake you'll pay any amount of money for a shot at being well again. The healthcare system takes advantage of this and makes a killing.
When you need that extreme state of the art care be glad you live here, if you just need to go to the ER to reset a broken arm, you're fucked, take out a second mortgage.
The demand on healthcare is completely inflexible, the answer is increased supply. Regulations should protect providers from quarter million $$$ insurance premiums. The walmart type clinics idea for colds, flu, perhaps x-rays or even minor stitching is at least an innovative attempt to increase supply. Another way would be to allow these minor procedures/basic diagnosis to be performed by someone with less stringent training that a full on doctor.
Allow nurse lvl specialists to perform annual physicals, set bones, stitch people up, and hand out cold medicine. There's no way that could happen now as doctors would see a significant hit to their profits and the liability to anyone performing these healthcare services would be extreme.
5 - Maurice
John,
it is rare that I read all 3 pages of an article like this. Well written and well thought out. One thought about the 3rd pregnancy; I view those annoying visits as a chance for the doctor to catch any anomaly that might otherwise be overlooked.
I work for Micron in Boise Idaho. We have insurance through the company but also have a Health Center on site that employees and their immediate families can go to for minor health issues. This is a great savings for all 3 parties involved.
6 - Clavos
I have a top drawer group health policy through my wife's employer.
It is a PPO, not an HMO, and thus allows a wide choice of doctors, tests, treatments, etc. We are never subjected to any kind of insurance-dictated rationing, etc.
It DOES work, and works well. As many of you know, my wife is very sick and we are HUGE medical consumers. Her primary medical carrier is Medicare (a whole other BC article unto itself), and the group health policy serves very well to pick up what Medicare doesn't cover, as well as covering my medical expenses.
But, the premium is $850 a month; $10,200 a year, entirely from our pocket.
7 - John Bambenek
Re: PPOs
I love them also, but the problem is the premiums. I have been known to switch to a PPO when I expect to need out-of-network care from providers I trust for special cases, and then go back to HMOs when all I expect is routine care. But having to wait only for benefit choice periods suck.
Re: Socialism and corporate greed
Well, businesses are going to be motivated by profit, that will never change. Capitalism is far from perfect, but it's better than the alternatives we know of so far. The trick is making what is "profitable" also map closely to what is good societally. In the case of health care, insurance companies are out to make money. However, by taking the consumer out of the driver seat, they have less and less motivation to respond to the needs and wants of patients. They get paid by employers, they'll meet *their* needs. Putting the consumer firmly in the driver seat will force businesses to adapt to consumer wants. Not perfect, but a whole lot better.
8 - Dr Dreadful
Good article but, as you do acknowledge in the comments, it deals with HMOs only and PPOs are a whole nother topic.
I'm from Britain originally (as I believe I may have mentioned on occasion) and I hate - hate - HATE the healthcare system over here. We have national insurance in Britain, which covers health and several other services, and most of us regard healthcare as a right, not a privilege. As such, the way things are done in the US seems to us ridiculous and at times, callous.
Doug is spot on when he points out that there are many situations in which the patient is in no position to make an informed choice regarding their care.
I've no complaints with American healthcare itself, but it's utterly ludicrous that even with insurance coverage - especially with insurance coverage - even a simple office visit generates a tsunami of multiply-redundant paperwork and mail. It's as if the electric company were to send you one statement itemizing your usage, another billing you for the meter reader's time and yet another billing you for the electricity itself.
My wife and I always used to always go for the HMO option offered by my employer, on the grounds that it was cheap and being in good health I rarely used medical services. But we've learned through experience that for the same reason, we might as well go for the better choice offered with a PPO - the out-of-pocket expenses are steeper but rare enough for us to absorb them. Neither our doctor nor our dentist takes HMOs: we found them through recommendation and consider it well worthwhile using their services rather than those of some mediocre medic we didn't have a say in selecting.
But we are lucky. We are not poor. The low-income clients I work with on a daily basis do not, by and large, have that luxury.
(Clavos, #6: Ouch!)
9 - Dave Nalle
I'll add my praise for this article. So good and relatively unbiased that I was surprised when I remembered it was a JB article. So non cranky and well-thought out. Refreshing.
Sadly, I'm not sure the article really does much to address the problems we face. How do we reintroduce competition and also take care of those who can't or won't insure themselves?
Dave
10 - John Bambenek
Re: Dreadful
Part of the problem with the European view of the American health care system is that "right" means something different to Americans than it does to Europeans.
To Americans, rights are something you have inherent in nature. If you want to use the Declaration of Independence language, you have them endowed by the Creator. Rights in this country is something you inherently have that government does not have the authority to get in the way of.
Europeans, on the other hand, developed under the social contract theory where rights are something that the government gives you in return for you being under their jurisdiction and paying taxes. A right to health care makes sense in the European context because rights are things the government gives you. To Americans, this idea is absurd. The right of free speech means the government can't get in the way of your own autonomous action. It doesn't make sense to put in an "affirmative" right to health care to us without drastically changing the underlying political foundation on which we were founded.
Re: Dave
Already clocking in at over 1800 words, I didn't think I'd be able to slide in "the fix"... :) As far as cranky, well, I just don't care enough about politics anymore to get upset by it. :)
11 - Doug Hunter
"How do we reintroduce competition and also take care of those who can't or won't insure themselves?"
1) End the government run system medicare/medicaid and remove all current medical deductions and credits from the tax code.
2) Give everyone who buys insurance a flat tax credit
3) Give anyone who can't afford insurance with the credit a credit voucher redeemable for insurance at a qualifying provider.
4) Provide monetary penalties for not doing either 2 or 3. (no one's going to jail for not getting insurance)
5) Provide a pool for reinsurance of the high medical consumption pool.
Everyone would be insured, competition would be intact, corporations would still rake in the healthcare dough. The only problems would be the massive shockwaves set off by such a monumental shift in everyones budget. Base taxes would have to increase but be offset by healthcare credits. Employers former healthcare costs would need to be passed to employees as increased pay in order to allow them to purchase the insurance. Those things take time to work themselves out.
That's just the first plan that comes to mind, I'm certain someone smart could come up with an even better solution.
12 - Dr Dreadful
John: Europeans, on the other hand, developed under the social contract theory where rights are something that the government gives you in return for you being under their jurisdiction and paying taxes. A right to health care makes sense in the European context because rights are things the government gives you.
That's not entirely accurate. Americans derive their notion of rights and liberties from British ideas. We tend to have a slightly different outlook than the rest of Europe, which, remember, got thoroughly Napoleonized and has never quite recovered.
The Welfare State was a British idea, later imitated across the continent. We have a very personalized idea of our 'rights', which may be why we complain so much!
13 - STM
Nice to see Bamby giving a nod to the notion that the founding fathers just grabbed all their ideas out of thin air. Once again, and I'm sick of saying it over and over again for the benefit of those Americans who are too ignorant to make the effort to understand this stuff, all of us in the English-speaking countries have near-identical rights that as Bamby rightly says, we were born with rather have had bestowed on us by government.
The ideas of the founding fathers come largely from the Magna Carta (the idea of due process comes from a statute of Edward III added to the Magna Carta, and the wording's almost identical to that of the US constitution but predates it by 400), and the unwritten (in the sense that it combines many laws both written and taken to have existed) constitution of Britain that includes such documents as the English Bill of Rights and a zillion judgements made at common law. Even US law is based largely on Blackstone's treatises on English law.
One major guiding train of thought behind the American Revolution was the train of thought behind the ideals that blossomed in Britain in the 17th century and led to the Golden Revolution. It is why the British, probably rightly, saw themselves as the defenders of real democracy and civilisation in that period through to the mid-19th century against the bogus claims of the French Revolution, and dare I say it, the American revolution which was essentially a mockery and a sham that while offering "rights, freedom and liberty", kept one group of people in virtual penal servitude simply because of their colour.
The reality of the US Bill of Rights didn't catch up with its well-intentioned promise until the mid-1960s. This is something all Americans should be cognisant of before they open their traps in regard to rights taken to exist rather than bestowed. As for the French, well ... the guillotine got a fair work out and if that's liberty and freedom, I'll eat my hat.
The founding fathers didn't exist in a vacuum (unlike many modern Americans, including those who can lay claim to a decent education but who still haven't a clue).
Just because these things haven't been written down in a constitition doesn't mean they don't exist as rights every bit as powerful and protected at law as those enjoyed by Americans.
When discussing the deluded and fancy notions in regard to rights that so many Americans seem unable to rid themselves, it's important to have an understandg as Doc does and I do in far off Australia of why they AREN'T different.
They might be different in France, Germany and Spain, but they are essentially the same in all the countries that inherited their legal systems from England.
However, on health care: while I like the right to pay a gap insurance that means I'm never out of pocket, it's also nice to have had a right added should things go belly up ... that's the right to get sick without going bankrupt, and the right to quality healthcare for everyone no matter what social strata they occupy.
I put it in the same league as, say, having the right to catch a bus to work without a lunatic taking pot shots at me with an AK47. I say that right overrides the right for all citizens to bear arms.
So yes, government can bestow some rights in addition to those we have, or at least can enumerate them.
14 - alessandro
Doc, technically the Chinese came up with it. Then Bismarck's Germany. Germany (Britain's pal) is considered to be the first welfare state.
So am I to understand Americans choose their health providers like they do mutual funds?
15 - handyguy
John doesn't really address the illogical connection of employers to health care. Why should employers be the main source for so many? And he doesn't really address the many millions of Americans without coverage. Some are poor; some are not. Some have employers who don't offer care.
I understand the hesitancy about a government-run system. But we let the government finance and run schools and police forces. For some of us, this analogy isn't so far out. And it's just not morally acceptable to allow so many people to be shut out of the system.
The key, whether we end up with a single-payer system or not, is to somehow give incentive to insurance companies to pay for care. Now their incentive is to deny care.
16 - handyguy
It is also, forgive the overused word, disingenuous for John to give Ted Kennedy sole responsibility for the HMO Act of 1973, which was the result of studies and committees developed by the Nixon White House. And Nixon welcomed the bill and signed it gladly.
[Michael Moore in Sicko claims that Nixon was so enthusiastic because Ehrlichman or Haldeman told him it would help insurers make more money, since they could deny care that cost too much or was outside the rules of the system. I'll leave it to others to decide whether MM was overreaching here.]
17 - Clavos
"And he doesn't really address the many millions of Americans without coverage. Some are poor; some are not. Some have employers who don't offer care."
The only uninsured Americans deserving of concern are those who can't afford insurance, or those denied insurance because of a "pre-existing condition".
The fact that your employer doesn't offer it is literally irrelevant, because insurance is available for the vast majority of the population, provided they can pay for it, regardless of whether or not it is offered by an employer.
There are literally millions of self-employed people who are buying insurance on their own.
Rather than try to set up a government-paid insurance program which would, inevitably, end up as corrupt and wasteful as Medicare, I think we should seek solutions whereby the poor and those who have been denied insurance are able to get it. We should do this without attempting to completely tear down and re-build the medical industry.
As bad as our government is at doing anything right, the last entity in the world we want controlling our entire health care infrastructure is the people who build bridges in Minnesota using $600 hammers.
18 - bliffle
#15 " February 19, 2008 @ 23:43PM " handyguy
...
The key, whether we end up with a single-payer system or not, is to somehow give incentive to insurance companies to pay for care. Now their incentive is to deny care.
There's NO way to incentivize an InsCo to pay for a million dollar operation on a 30k auto mechanic, so eventually the InsCo bureaucrat MUST deny the operation and condemn the guy to death.
The whole system of "incentives" has to be demolished in order to reveal the real costs of maintaining a facade of "free markets" and "private enterprise".
19 - Lumpy
The problem is that there are operations that cost a million dollars. That's unjustifiable on any basis. Fix that and u fix the system.
20 - STM
If the dems get in, you guys are going to get a form of universal health care. I know that Hillary was in Australia looking at our system on a visit with Bill, so if you get something like ours it probably won't be so bad, because it combines optional private hospital cover with public cover. The good thing about it is that with Medicare, even as a private patient, with no waiting lists and doctors and hospital accomodation of your choice, a lot of stuff is free.
That keeps the cost down for the individual.
A lot of people were sceptical when we first got our system, but it's been honed nicely over 3 decades, has led to a lot of work in the health sector, and is world-class.
Perhaps you can learn from the mistakes made by others and step in just at the right point.
One thing I am certain of though is that once you get and you realise how good it is, you'll be kicking yourselves and wondering why you haven't had it since the year dot.
People on both sides of the political spectrum here love it, which is always a REAL measure of how good something is.
It is really nice to know that if you get sick, and ultimately you can't keep working, you have care that is world-class and isn't going to cost you a cent.
It's not perfect, obviously, but it's still pretty damn good.
This is the kind of stuff governments should use your taxpayer dollar for, not spending billions on aircraft carriers and fleets of bombers that are sitting around rusting away because, dang, there just ain't no more superpowers in the same league.
A happy country is a good country.
21 - Clavos
Without questioning the validity of what you say, SS, I do have to point out that I can't recall anyone from another country with socialized medicine being as enthusiastic about their system as you are about yours.
Australia's system apparently is much better than most.
22 - Dr Dreadful
Well, Clav, from his description it does seem that Australia has managed to strike a happy balance between universal access to free health care and providing top-quality health services.
I'm sure the system must have its critics, and one of these days I'll read up on it a bit. But to be frank, Australia's health service could be on a par with rural Burkina Faso and I'd still want to live there. Now remind me why haven't I bought my plane ticket yet, again?
23 - STM
It isn't perfect, though, I have to say.
But it works. How it might translate from a country with a population of 20 million to one with 400 million, however, might be the acid test.
I suspect that a big bureaucracy would be needed, although that DOES create work.
Remember: you have nothing to fear but fear itself :)
24 - John Bambenek
Well, we have Medicaid now that's supposed to cover all the poor people... yet we still have 50M insured supposedly. That, and at least in Illinois it takes 180 days for a provider to get their first denial letter from medicaid for payment. Then the cycle of sending more information begins. Medicaid has forced providers to operate on a Net 450 for those patients!
No insurance company is anywhere as bad as medicaid with screwing doctors. Do we want to put everyone under their care?
25 - bliffle
Bamby misses the point, as usual:
"No insurance company is anywhere as bad as medicaid with screwing doctors. Do we want to put everyone under their care?"
A healthcare system exists for the benefit of peoples health and not primarily for the enrichment of providers and insurers.
We have to remove Insurance companies as gatekeepers and restrict their roles. The first step is to repeal the odious McCarran-Ferguson act of 1945 which enables the insurance company oligopoly.