Thoughts and Adventures From Greenlite Heavy Industries

Tuesday, February 16, 2010

Health Care

Like many in this country I suppose, I’ve been talking health care with family and friends quite a bit lately. I must confess to a bit of frustration at times as it seems to me that the need for health care reform is simply obvious – like the need to treat a malignant tumor.

I’m a big fan of free market economics, the laws of supply and demand naturally gives the customer the best product at the best price. Whether or not that customer really gets what they think they are getting or whether or not price they pay is an accurate reflection of the cost of the product, well that’s another story. But on a conceptual level I like the law of supply and demand. Obviously there are two constraints when it comes to supply and demand: one you must have a supplier who can deny sale of their product or service, and two you must have a demander (i.e. customer) who can walk away if the product or price is not acceptable. When it comes health care neither criteria is met.

Say a commuter train goes off the rails and one of the injured passengers ends up in an emergency room with a sucking chest wound, he’s not in the position to haggle over price and what type of services he’s willing to pay for. Conversely the doctor is morally and ethically bound to treat that chest wound regardless of whether or not the injured passenger is capable of paying for the services. The free market model just doesn’t work for health care.

For years the model we’ve had here in the United States was health care insurance – typically provided as part of an employee/employer compensation package. This worked fairly well when medical care was relatively cheap, but it begins to break down as medical technology becomes more advanced, and consequently more expensive. Take for example the MRI, if a parent shows up in the emergency room with a child who has suffered head trauma and the doctor advises three MRI’s – at three thousand dollars apiece – that parent is going to sign on the bottom line and worry about paying later. Twenty years ago a parent didn’t have to make this decision as MRI’s didn’t exist. As the cost of medical care goes up the insurance companies start denying coverage for certain procedures (MRI’s for example) and increasing premiums, as this happens people start losing coverage due to an inability to pay, as this happens we get more uninsured, as the number of uninsured goes up so do the premiums (as somebody has to pay for the cost of the uninsured) and that raises the number of uninsured and so it goes. How do the insured pay for the uninsured, consider the following example.

Three guys, Bill, John and Rick all get into a car accident and sustain head trauma. They all go to the hospital where the doctor advises MRI’s for all three. Now Bill works for a large company and has a so-called “Cadillac” health plan which covers MRI’s. John, on the other hand, works for himself and has a bare bones health plan that doesn’t cover MRI’s. Rick works a low paying job and has no health insurance whatsoever. So let’s say each MRI costs three thousand dollars for a total of nine thousand for the three guys. Now the hospital is only getting money out of the two insured guys so they bill each of them forty five hundred. In the short term Bill don’t care as the cost is invisible to him (he should care in the long run because as costs increase eventually his “Cadillac” plan is going to devolve to a bare bones plan). John cares a lot because he has to dig an additional fifteen hundred out of his pocket. Rick walks away (he really doesn’t walk away, he may get sued for the three thousand, but you can’t squeeze blood from a turnip). So it’s the John’s out there – the guys who have insurance and pay their bills (both the premiums and the cost of uninsured procedures) – who are getting screwed. I’d be willing to bet that that’s a lot of Limbaugh listeners out there.

There are three ways to fix this: one, socialized medicine; two, requiring every citizen to purchase insurance; three, a government run health insurance program. I’ve lived in a country with socialized medicine and I don’t want that. Many countries with socialized medicine rely on private companies in the United States to provide the medical breakthroughs. In other words our free market approach to medical technology provides many freebies to countries with socialized medicine. So I don’t want that. Requiring, under penalty of law, that an American has to purchase anything, let alone something from a private company, is absurd. If I start a bicycle company I can provide one at a great price if everyone in these here United States is required to buy one; the whole concept is silly. So that leaves us with the government run program.

The government program isn’t a perfect solution as it puts the immense influence and buying power of the US government up against private companies. This would indeed put the private companies at an inherent disadvantage; it’s no wonder that they squealed so loud whenever the public option was proposed. This is also kind of a bad deal for the medical profession as a government run program with massive buying power would negotiate lower prices, which would result in lower compensation for medical professionals. So admittedly it’s not a perfect solution, but it’s the only one that isn’t fatally flawed.

The job of our public servants is to do the greatest good. I believe that it is possible to introduce a public option without heavy impact to the medical and health insurance industries. They would obviously have to work together to find this solution, and therein lies the rub.

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