Friday, July 06, 2007

Reforming Health Care - Part I - Evil Insurance Corporations

I think we can all agree that our health care system in America is broken, and that something needs to be done to fix. Health care costs keep going up higher and higher, but the quality of the health care does not go up. There are some 45 million uninsured Americans, and many more under-insured Americans. Last week I saw Michael Moore's documentary "Sicko." It was a great piece of propaganda for socialized medicine. I left the theater trying to figure out what we can do besides resorting to this extreme measure. I'm happy to announce that I have figured out a solution that I believe would work. This will be the first of several posts addressing the issue of health care in America, today looking specifically at those ostensibly evil insurance corporations.

I would break down an analysis of health care, or rather sick care, into several parts, the actual work done to help people, the costs associated with that, and the payee system. The actual work done breaks down further into treatment and prevention, both screening to catch health problems early and preventative measures to stop them from occurring at all. The costs would be the costs of prescription and generic drugs, the cost of equipment, who how much doctors and hospitals charge, administrative costs, etc. Finally you have who is paying (or not paying) for the health care, HMOs (Health Management Organization), traditional insurance, individuals, businesses, the government, or a combination of these. To fully address the problem, we need a plan that addresses all of these parts. We hear a lot about universal health care, which attempts to address only the payee, not the costs and quality of the health care. I think despite people's differences over whether they want government run or private run health care, we can all agree that we need to cut costs either way.

It should be pointed out that there is no such thing as free health care. No matter what approach we take, you're paying. If your business pays, you really pay with a deduction in your salary. If the insurance company pays, you paid them to do so. And if the government pays, you pay in increased taxes.

Let's look at the concept of insurance, as right now in America we have for-profit insurance companies. The basic idea of insurance is to spread out a particular loss, e.g. car accident, fire, disease, etc., so that no individual person, business, or organization bears the full amount when it happens to one of those individuals. Thus it is a way to cope with risk. For example, there's a chance your house burns down. So you buy home owner's insurance that covers among things a house fire. You along with many other people have pooled your money together, and when someone's house burns down some of that money is paid out to that individual. How much you pay takes into account the chance of various covered events happening and their severity and your own particular circumstances. So if you have an expensive house you have to pay more for your home owner's insurance, if you have a pool your liability insurance goes up a lot, if your in an accident your car insurance goes up, etc.

So some people may be tempted to say, why should they pay more for other people's health problems when they themselves are quite healthy. Well, that is the nature of insurance. If you don't like it don't buy it, but don't complain when your bankrupt because you became sick without insurance. So when you do get sick why should you have higher premiums and deductibles? I don't think you really should, if its a health issue out of your control. If its because you smoke or are severely overweight not for any medical reason but because you lack self control, you should. But I don't feel you should pay more because of family history and other factors out of your control.

So should insurance companies charge more or simply flat out deny people with a pre-existing condition? It seems awfully cruel and unusual. Why doesn't Congress pass a law banning this practice, and require that they don't make decisions based off of people's health? Its more complicated than simply the health insurance companies lobbying Congress not too because they want bigger profits, which no doubt they do want. You don't buy home owner's insurance after your house burns down and expect that the insurance company to cover it. And in this light the practice of insurance companies of turning people down or charging more is not unfair. If you could wait until you were sick to buy insurance with no penalty, then no one would buy insurance when they're healthy and the whole system would break down and go broke. If only sick people are paying in, its not going to spread the losses out. So although insurance companies maximize profits by not covering people with pre-existing conditions, this practice is not unreasonable.

So clearly the real problem is not that insurance companies refuse or charge more to people who have pre-existing conditions but didn't have insurance when they were healthy, for whatever reason. If you maintain a continuity of health insurance then you should be protected from your insurance rates skyrocketing when you get sick. I believe most insurance companies only raise your rates based on age and gender, not based on a change in your health. So I think the solution consists in part of requiring that everyone, all legal US residents, have health insurance. Every parent would be required to obtain health insurance for their children before they are born and thus before it is known if they will be born with a serious complication that would prevent obtaining health insurance for them. This would be coupled with requiring insurance companies to accept people, without penalty, with various pre-existing conditions at the time of the passage of the law. Whereas if we only required people to have health insurance, then sick people wouldn't be able to get health insurance. And whereas if we only required insurance companies to not penalize sick people, people wouldn't get insurance until they were sick and the system would break down. These two measures have to come together if either one is to come at all. It should be pointed out that many states have "high risk pools" for the un-insurable, but I believe it would be better if they had access to private insurance instead of having to have a public system to deal with them. And once everyone is insured continuously, pre-existing conditions would be a thing of the past, which would cut down on denied claims.

This addresses the problem of getting the sick insured, but it doesn't address the problem of people who can't reasonably afford health insurance. As you are probably aware, the best deal for insurance is through work, if you are lucky enough to work for a large company that offers health insurance. Why is this? One reason is you have a large pool of people being insured and as it is cheaper to sell a large volume it is cheaper to sell a company a policy than an individual or small business. If your sick its definitely cheaper because they're not allowed to charge you more, your additional health costs are spread out over the company's employees. But, a major reason is also because companies get a tax break on their employee's health coverage, but individuals do not qualify for the tax break. This seems a bit unfair. President Bush has said that he's in favor of allowing small businesses to form pools together to buy health insurance. But why not simply give individuals the same tax benefits that large companies get?

My plan would be to give people a tax rebate equivalent to the cost of an average health insurance policy, what companies get now, which they would then use to buy health insurance. You could not use this money for anything but buying health insurance. If you wanted to buy into you company's plan, you could, or if you wanted to buy individually a plan that you felt better met your needs, you could. And of course if you wanted to buy a plan that costs more than your rebate, you could use your own money to cover the difference. A certain level of minimum coverage would be required, some sort of catastrophic insurance, where once you've paid so much of a deductible you'd be covered for good. That would protect against people going bankrupt. If people wanted plans to cover all their costs, they could do so, good luck finding that plan though. The rebate would adjust each year to keep up with rising costs, ideally inflation only, but probably not. Health insurance voucher might be a better description, but I hesitate to use the term since they haven't had the best run.

As every American individual and family would be receiving money for health insurance, we would get rid Medicaid (for the poor) and phase out Medicare, reducing the size of our government. Now your insurance can be independent of your job. If you lose your job job, quit your job, get fired, you'll still be covered. In the past, health insurance through your job made more sense, since most people didn't move around. But today, people don't work for one company their whole life, they change jobs pretty frequently. So it no longer makes any sense to tie insurance to your employer. Think of the freedom this offers people. If you don't like your job, change jobs, without fear of how are you going to get health insurance. And if you change jobs, you can keep going to the same doctor since you'll be on the same plan. The same goes for retirees. If we get rid of Medicare, when you retire you can still go to the same doctor you're comfortable with and who knows you better than a government bureaucrat.

Additionally, I would change health savings accounts, which allow you to put aside money tax free to cover medical costs, such as visits to the doctor, contacts or glasses, and prescription drugs. The problem I see is that you loss your money after a year. So while these encourage saving what you know you're going to need, it doesn't encourage saving for the long-term. I would take away the expiration date on your money. Then you would be encouraged to save enough money that in the event of a major medical emergency, you would have enough to cover your deductible. Obviously there would be a limit on how much you could save away. Health savings accounts encourage people to use insurance only to cover big expenses, reducing premiums for all of us.

I believe this plan would work, making sure every American is insured and can afford it without resorting to government-run health care. Keeping competition would help make health care more efficient, cheaper, and of higher quality than it is now and than if we had socialized medicine. Of course more has to be done to fix the system than make sure everyone is insured. That alone will not cut costs by much, and in later posts we will address this.


Anonymous Anonymous said...

Health Savings Account roll over each year. They are similar to IRAs but the owner can withdraw from it to pay for valid medical expenses. You do not have to spend the money within a set amount of time or lose it.

Many corporations offer pre-tax medical accounts that don't rollover - they usually have a $1000 limit and it must be spent within the calendar year. THis is *not* the same as an HSA.

Tue Jul 10, 08:03:00 PM EDT  

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