June 16, 2009
Health Care Is Not That Complicated
It is no more practical to have "health insurance" to pay for prescription drugs and routine doctor visits than it is to expect your auto insurance to pay for your oil changes and tire rotations.
But we do.
Consider: if a health insurance type system existed for auto insurance, it would certainly result in those quick lube oil changes costing about 95 dollars instead of something like 29. It would require an army of public and private sector bureaucrats to shuffle mounds of paper with hundreds of mouse clicks to make sure you were eligible for your lube job, that you paid your 10 dollar "lube co-pay" and that the remaining 85 bucks was eventually approved by a Chevy lube specialist underwriter.
We won't even mention the fact that your wait in the quick change waiting room would likely resemble the long wait in a doctor's office, as every other customer transaction would become the paperwork root canal yours is.
(And of course, those who do not have "lube insurance" or the 95 dollars in cash to pay for the lube, will go to the emergency engine shop where they will gum up the works for real emergencies and their lube can be done at no charge to them. This is also known as a different kind of lube job to those of us who pay our own way, who will get hit with a 1200 dollar tax tab for their "free" job.)
Thus, our healthcare dollars get eaten up by processing claims and indigent care.
Bottom line? The confusion between "health care" and "health insurance" as public policy issues -- along with the near universal misunderstanding of what health insurance is (or should be) -- is making what should be a rather simple financial planning market solution a national nightmare.
Moreover, the nuanced difference in the language used has turned the issue much more emotional and much less rational, politically. We say we must reform the system to prevent families from going bankrupt over medical bills, then turn around and debate systems that micro-manage the costs of pills and routine check ups. Well, which do we really want to do? Those are entirely different issues.
The problem begins with the almost universal misapplication of the terms. Health insurance does not insure your health, nor was it ever intended to. Health care insurance, formerly called "medical insurance," is merely an instrument of neutralizing risk. Financial risk, that is.
It was brought about by a need to insure a family's assets against a dread disease requiring care so expensive it would wipe that family out financially. As a strictly financial planning endeavor, the issue never seemed to be discussed in terms of being "a right" or in terms of "compassion."
But "medical insurance" as a component of financial planning has morphed into "health care" as a right for everyone in the new political parlance. And not only is the insurance a right, but the insurance should be "free" and it should cover everything from routine care visits to erectile dysfunction to ADHD to gender re-assignment surgery.
Yes, gender re-assignment surgery. I'm not sure even Ayn Rand saw that one coming.
Instead of being viewed as a financial instrument to keep a family from losing everything in an effort to pay for a cancer treatment or heart surgery, it has become viewed as an endless supply of other people's money to pay for everything related to healthcare -- so the family can buy every car, boat, flat screen, iPod and laptop they want with their own money.
And families that like to have other people pay for their needs so that they can invest in the toys are easy fodder for politicians promising more of the same. Especially when those politicians use vaporous and misleading terms like "investing in healthcare" as part of a "stronger economy" and so on. This language enables the takers in society to simultaneously take what they want from others and feel good about their right to do so.
This mindset has not only led to exorbitant costs to taxpayers to pay for government employee health plans, it has forced skyrocketing costs onto private plans who have to include all kinds of coverage mandated by various legislatures and well-connected unions. It even led to early release of criminals in California to pay for the healthcare of those who remained behind bars.
The media would have you believe this is just more proof that the private sector "is failing us." Alas, just like the mortgage and housing meltdown, in reality it was a private sector failing under the weight of unsustainable government mandates.
Which of course leads to the inescapable conclusion that the very worst thing we can do to solve it is to allow that very same government to have total control over it.
The solution is to get back to the original intent of health insurance and an understanding of what it is. And more importantly, what it is not.
Health insurance, like any other insurance, is the spreading of financial risk. Period. The financial risk in health care is - as Fred Sanford used to say - "the big one." To purely insure against that eventuality would not cost a lot. It would not require an army of paper pushers and mouse clickers at every step of your life. (Wait until we see how much fun that can be.) It is a rather simple actuarial equation.
Insuring this way would take the huge administrative burden off of the system. It would reduce costs dramatically. It would by definition encourage healthier habits. It would shrink the rolls of the uninsured.
As an example, our family pays about 11 thousand a year for a health plan that includes two adults and two children. With that, we have a confusing schedule of co-pays and deductibles that sometimes results in an illogical refusal of coverage on some procedures, but of course it covers a lot of things that are also illogical. And we get our scrips for something in the range of 10-50 dollars on a co pay.
With so much of our provider's costs eaten up with paper pushing, our catastrophic protection is not what I would like. But thanks to government, I have no choice. To get licensed in our state, companies are forced to cover certain items that dictate their entire pricing structure.
As someone with some 29 business ventures in the last 30 years - including a stint as a Life and Health Insurance Agent - I think it's a reasonable guess that something like a minimum of 2500 to 3000 dollars of our 11 thou in health insurance costs are eaten up by the bureaucratic piece of processing co pays and claims for routine services. It is only that low because the insurance industry has been a driving force in efficiency software innovation because they are such huge customers of it.
(Obama-care will not provide such efficiencies. They'll just refuse or delay care to patients and pay to providers to feed their huge bureaucracies. In other words, a typical government program. I will let you interpret what "delaying" care means to elderly patients.)
What would be preferable to not only our family but to the "system" itself is the option of a policy that simply allows us to pay the first 8 or 10 thousand ourselves for care, instead of to an insurance company. Then we could pay the insurer a few thou to provide catastrophic insurance, so if the "big one" hits, we are not wiped out.
In the meantime, that first 8 or 10 thou would go a lot further since it would be paying for "care" and not for administration of paperwork and claims and so on. You know, the same reason you get a pill from mail order at a third of the price at your local pharmacy.
It really is no more complicated than that. Oh, it will be hard, because nearly a generation of Americans never bothered to think through a little analogy like the auto insurance example - and they like to have their needs met by OPM - and they have convinced themselves it is a right.
But complicated? No. It might even bring the cost of gender reassignment surgery down.