Monday, October 19, 2009

The Health Care Mirage

Most people do not know what health care costs, because most people do not pay of it: their employers pay, they pay out or their paychecks, but at the doctors office or pharmacy counter, they never see a bill.

This helps lead people to believe that health care is free, but it is not. One cannot repeal the laws of economics. Health care is a service delivered for a fee, which somebody pays. That sombody is usually an insurance company which collects premiums in exchange for covering the cost of the services. Individuals usually do not even pay all of the premiums, large fractions of which are often covered by the employer as a benefit to the employee.

So individuals do not often see the true costs of health care, and the belief spreads that health care is, or should be, free.

That is impossible, of course, because there are costs associated with delivering any service. But the belief that health care is free is behind the popularity of the idea of health reform: in this case the government will pay, but it will still be free, especially the so-called "public option".

That idea is totally wrong, and I think many American will be shocked to learn who will end up paying for it: the middle class will pay. They will pay either through increased premiums of their employer provided plans, through increased taxes, or they will pay the premiums directly.

Huh, what?

That's right. The "public option" is government defined health care, and government mandated health care, but it is not government paid health care, or at least not yet, and not for people with means. Only the very poorest will pay not premium to be covered under the public option. And it does not attempt to reduce health care costs. The primary goal of all proposals currently in Congress is to cover the uninsured, and the services used by the currently uninsured must be paid for by somebody, and that will be the majority of Americans that already have health care, or have the means to pay for it.

I think that Americans will be disappointed by the fact that post-reform they will be paying more out of pocket for health care and taxes. But there may be a light at the end of the tunnel, that once the first round of reform is in place, a second one addressing growing costs can be passed, and this article in the New York Times describes how this might be done:

But there’s another path, equally radical, that’s more in keeping with the traditional American approach to government, taxation and free enterprise. This approach would give up on the costly goal of insuring everyone for everything, forever. Instead, it would seek to insure Americans only against costs that exceed a certain percentage of their income, while expecting them to pay for everyday medical expenditures out of their own pockets.

Such a system would provide universal catastrophic health insurance, in other words, while creating a free market for non-catastrophic care. In the process, it would marry a central conservative insight — that we’ll never control spending so long as Americans are insulated from the true price of their medical care — to the admirable liberal premise that nobody should go bankrupt paying for life-saving treatment.

The key point to this view of health care is that we begin to treat it just like any other service. We shop around for the best quality versus price for all kind of services, and service providers have an incentive to innovate and run their businesses more efficiently in order to remain profitable and competitive. Once the cost of health care is advertised in an office just like an oil change for your care, Americans can then manage their health care costs themselves, and true reform will have been accomplished.


Anonymous said...

"...That is impossible, of course, because there are costs associated with delivering any service...."

The rest of the world begs to differ:

and taken directly from that link "The United States is the only industrialized nation that does not have a universal health care system."

Seriously? Please, the paid for politicians of this age will never actually make this a reality so stop getting so upset at this.

LeftCoastConservative said...

Yes, I agree that we are the only industrialized nation that does not have universal health case. But I stand by my thesis: everything costs, and someone has to pay. Even in those other countries.

And I also disagree: it would seem that the "paid for politicians" are going to make something a reality, so I do get upset when I fear that they will piss away a load of cash for an ineffectual system.