Ronin of the Spirit

Because reality is beautiful.

The Health Care debate.

Health care as I see it.

I started this blog just writing down as many facts as I could about the health care system, trying to make sense of it all. The first assumption is that health insurance is the right way to pay for health care, and this leads to two problems. One, that insurance is too expensive, and two since it’s so expensive, to few people have it.

Well, I’ll begin by saying there could be serious improvement to health insurance. First off, insurance is a method of sharing risk. Everybody pays a foreseeable and affordable loss (premium) to the company, who in exchange pays unforeseeable and un-affordable loss affecting a small minority of policy holders.

I’m not sure insurance is a totally appropriate method of paying for health care in this day and age for three reasons. One, modern diagnostics, predictive methods, and techniques mean the unfordable loss is no longer unforeseeable. Two, the big three killers: hypertension, smoking, and high cholesterol, are all preventable and highly dependent upon lifestyle choices. Again, this does not meet the criterion “unforeseeable”. In fact, we could even say high treatment costs for chronic illness are so foreseeable as to be statistically unavoidable. Three, the rate of premium depends upon how expensive the policy holders un-affordable loss is to the company, and the number of policy holders who need it. In an age of 32% obesity rates (obesity exacerbates almost every chronic health condition.) that are likely to be approaching 40% in the next ten years, health care expenses don’t meet the final criterion of only a small minority experiencing an un-affordable loss.

Is insurance too expensive? Probably. Everything I mentioned above can only go one place: premium increases. Are insurance companies pushing the boundaries of ethical behavior? Probably. Is that failure of the insurance companies? Well, not exactly. People and groups have the ethics they can afford. The average health care insurance company runs a 5.5% profit margin. In a free market economy you get what you pay for. The higher the premium the better the service. The lower the premium the worse the service.

The answer to improving the insurance industry is pretty simple. Consumers need better info, with less dead weight losses to changing companies. The insurance companies need to write their contracts at a 6th grade level (Average US reading comprehension), and switching insurance providers needs to be a single sheet of paper or a phone call. However, other then codes requiring simplicity, transparency, and interchangeable standards, the industry needs to be heavily deregulated. This encourages the sort of cut-throat capitalism that makes America a land of opportunity. Also, medical saving accounts are an option. Between private capital in medical savings accounts, credit union style insurance companies, and D-regged private insurers, competition would make companies leaner.

But ultimately, we are talking about companies fighting for tenths of a percent. The cost of premiums is decided by the frequency and cost of care. Insurance companies can profitably only reduce unnecessary visits. Visits which prevent costly claims increase profitability, so a huge reduction is frequency of care is unlikely. The real cost of health care rests not on insurance companies, but upon care providers.

This case is further born out by the fact that about 1/3 of the cost of health care in the US is paid for by the Medicaid, Medicare, SCHP, and VA government plans. If the problem of cost was one of insurance alone, one would expect that there would be a significant saving to socialized health care, but analysis of the cost of gov-care versus private care show no significant reduction in price for identical procedures. The additional 5% private insurers make as profit disappears into the significantly more expert administration of the private insurers, so gov-care is not 5% cheaper.

So insurance is just a middleman, the real cost in the health care providers. Why is American medicine so expense? Supply and demand says, consumers demand will use up the supply, raising costs until producers can create more. The producers will make so much it will lower the price. The tension of supply and demand drives the price down to market equilibrium, where the consumer is paying as little as he can, and the producer is charging as much as he can. That’s the miracle of free market economy. It pushes the price to where it the lowest possible, ensuring the greatest number have access to the good. Yet in the US 100 million people are on some kind of gov-care. That’s a third of the population!

Every body needs health care, the demand is universal, so it should be decreasing supply, increasing the price, raising the incentive to enter the field which would result in increased competition. This competition would result in innovations which would increase the supply and lower the cost. For some reason, this isn’t happening. In fact, the American medical system is running so badly, that planned economies are achieving greater results with less spending, both in raw dollars and as portion of GDP. The US spends more on gov-care (Medicaid, Medicare, SCHP, VAB, etc.) than countries with fully socialized health care spend on it, to get lower rates of health for a 1/3 the per capital population. Then the 60% of Americans pay again! American private health care costs more then any other industrialized nation. France in particular stands out (!) with the average American paying over 200% more for private health care, and 75% more for gov-care, while having maintaining statistically worse health.

When planned economies are running better then capitalism, we know something is rotten in Denmark.  I’ll address what later.

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August 23, 2009 Posted by | Government, Pharmacology, Self discovery, skepticism, Uncategorized | , , , , , , , , | 5 Comments