Friday, November 20, 2009

Everyday Questions on Health Care

A friend recently asked for my thoughts on health care reform - and here is my casual response:

overall - the overriding moral issue is whether or not health care is a "right" - you know I'm a huge fan of individual rights (the right to life, liberty, the pursuit of happiness (i.e. the right to take actions for your own life) and the right to property (i.e. the right to keep the fruits of your own labor). To claim goods and services as a "right" is immoral, as you have to take away the true rights of some (property) in order for others to make a claim to the goods and services of other (e.g. to say that everyone has a right to cheap health care is to say that doctors and nurses do not have the right to charge what people are willing to pay for their services)

now that we've got the big moral question out of the way, let's move on to some of the politic issues and analysis. to my mind, some key/relevant questions (numbered) with their respective points (lettered) would be:

1) why is health insurance so much more expensive then other insurance (e.g. car or home insurance?)

a) during the Great Depression, hospitals and doctors organized their own insurance groups to promote/sell their services - they pitched it to the government as a "non-profit" that would cover entire communities and charge the same rate for each person - the lobbying paid off and the govt granted them special privileges (tax exempt status and a greatly reduced reserve requirement (i.e. how much money the insurance company must keep available to pay for claims - and this reserve capital is the largest factor for the viability of an insurance company) - who were these dastardly companies using government influence for unfair competitive advantage? The answer: Blue Cross and Blue Shield. Needless to say, the Blues dominated the market within just over a decade. Nothing like government-awarded monopolies to skew pricing! The Blues are only listed as the 44th largest political donor - after bankers, real estate and unions - so is there any mystery why we had the bank bailout, the home buyers credit and the GM bailout before health care?

b) another important factor in health insurance is that during WWII - the govt put a freeze on wage increases but health insurance was exempted (i.e. any health insurance offered by an employer did not count toward the "maximum wage allowance") - so one way that businesses were able to lure workers was to offer the highest wage possible and good health insurance as well. With the dearth of labor available during the war, you can imagine businessmen doing whatever they could to hire good people. This policy led to the "social norm" of employers providing health insurance - but how screwed up is that? Your employer wants to pay as little as possible for your health insurance, but it is to your benefit to use it as much as possible - and you have no motivation to price shop services. Your only concern is co-pay, which for many policies is minimal, so why wouldn't people "use & abuse" such a policy? Imagine if your home owners insurance would cover maintenance items (e.g. mowing your lawn and cleaning your gutters) for a $20 co-pay. Wouldn't you use it all the time? Wouldn't the insurance company need to cover the cost of all the gardeners and maintenance men? Of course - but this is not the role of insurance. It is supposed to be for extreme/rare incidents - but in the case of health care it's been twisted into everyday use, and the person using it has no incentive to even consider the price of the service. Is it any wonder that such a system dysfunctional? Luckily, home owners insurance has not been as heavily manipulated by the government and doesn't cover "little things" - and therefore it is reasonably priced and relatively reliable. I don't understand why more people don't question why other insurance is so good and health insurance so bad...

2) why is health care itself so expensive? (i.e. does not seem to follow normal supply & demand cycles)
a) primarily, I think it's insurance debacle described above that has created the disconnect between the one providing the service, the one receiving the service and the one paying for the service that has skewed pricing so badly, but there are other important factors.
b) current tort law through a variety of precedent cases has made the onus of medical knowledge for medical professionals completely unreasonable. some of the cases that I've looked into seem to imply the standard as an ultra-genius doctor familiar with all aspects of medicine that also never makes a mistake. It's easy enough to imagine juror's that think they are serving justice by hitting insurance companies with outrageous settlements for patients that have had problems - but the cost is astronomical. And it is also true that doctors that make significant errors in judgment should pay - and that they should be insured for when they make errors - but there needs to be a reasonable expectation of what a doctor can know and how difficult medical diagnosis can be.
c) the law that requires ER's treat anyone, regardless of their ability to pay, is ridiculous. Combine that with the low reimbursement rates offered by Medicare and Medicaid and you have another recipe for disaster. These low reimb rates make it difficult for people on Medicare/caid to get a primary physician - but they know they can see a doctor if they go to the ER, so many do. In the eight years following EMTALA (the law that required ER's to see any patient, passed in 1985), ER visits went up 27%, and in that same time 14% of ER's closed down. Is it any wonder?
d) finally, the FDA is such a gigantic and unwieldy bureaucracy that only the largest pharmaceutical companies can have the apparatus required to negotiate the labyrinth to "approval". Because of that, competition is all but eliminated, and guess what...


so, with all those points, you can imagine my amazement that people are calling for more government involvement - when as far as I can tell, it is government involvement that screwed the whole thing up in the first place

kinda like everyone turning to the gov after the credit crash, but no one ever questioned the fed's role in handing out the cheap money that caused the housing bubble to begin with...

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