I heard of a man who had a stroke and as a result he and his wife lost their
home. Many will scream foul, they should have had healthcare. However, the
family in question needed just major medical/catastrophe insurance. But he was
between jobs, and had neither. This was the known problem that Obamacare,
despite its many flaws and sinister intentions to hijack existing healthcare,
was an attempt to solve. But with high
deductibles and high premiums, it has devastated family budgets and appears to
be in self destruction mode. Given trying to be one size fits all for about 320
million people, I’m not surprised.
They
completely ignored understanding risk, the basis of liability insurance. I
suggest separating risks and propose near universal major medical insurance.
Such policies are fairly commonplace. I had one during years of self employment
in my 30’s and 40’s. But as I aged, the premiums became excessive and I dropped
the policy. My experience was typical. However, if I and others had a life
insurance policy purchased at the same time and with the same payments, we
would have been vested in the policy and received a permanent policy with
reduced benefits. Granting vesting and ending unfair cancellations can be corrected
legislatively. Insurance companies would still make ample profits.
But
it would be done in the private sector and be actuarially sound, unlike Social
Security and Medicare. Starting in your twenties or so at a few hundred dollars
annually, almost everyone would be covered. The monies paid in would easily cover those unfortunate younger few who
needed it. By the time most people needed major medical they would be prepaid,
much like a life insurance policy. Many employers would pay their employee’s premiums.
But the policy is yours and stays with you, employed, self employed or just
hanging out. And undoubtedly for some others, the welfare system would pay the
premium. The amount hospitals overcharge their paying customers to cover their
losses for non payers could be significantly reduced.
The
medical system would be simplified with some likely reduction in overhead
costs. In 2011, I wrote on this blog: “A
recent visit to my dermatologist cost $240. My health insurer paid $73 and I
paid $166. What I paid was what the service was worth. What my health insurer
paid did not share the actual expense, but rather represented the cost of the
insurer’s bureaucracy and the doctor’s billing staff.” The last time anyone
visited a health practitioner, the ratio of actual providers to support staff is
rather apparent. With spiraling medical costs grabbing headlines, the experts
not surprisingly hire more experts and usually on the government dole. Of course, their existence adds to medical
costs but they see it as worthwhile it because they claim to wring costs from
the medical system.
They
pay doctors less. Half of our doctors are over 50 and just hanging in there
with retirement on the horizon. While
increasing in number, the new medical students fall significantly short of
future demand. So we import doctors from foreign countries that often don’t
respect us or our culture. Squeezing doctors is a no-win proposition. But it
does provide an incentive to master the medical billing codes and return the
squeeze. Another method used to reduce costs is to deny benefits. The insurer
often gets the accounting benefit of delaying expenses even when the persistent
patient wins in these situations. But they structure the experience to get you
to give up. An office assistant of a health care provider I use was once on
hold for 30 minutes to get approval for a necessary procedure. What percent of
the final price of the service I received was simply the cost of gaining
approval?
Obviously, increasing the demand for doctors at the same time as decreasing the supply is
a prescription for disaster. We have seen a partial solution in the VA and
elsewhere with medication substituted for treatment. For these reasons of expanded sales, the
pharmaceutical companies signed on in the backroom deals that created
Obamacare. Since then, some firms have exploited this situation into public
outrage and headline news. But most Rx drugs are purchased at different prices
by various organizations such as Medicare and groups of hospitals through third
party buying syndicates. Their dealings are beyond the public eye and often
quite murky. They are opportunities for corruption. So aside from some retail consumer
trade, most Rx prices are not free market prices.
How
much would an unfettered free market lower health care costs for everyday
expenses if almost everyone had major medical insurance? Would it be as much as
a third, a half or even three quarters? What if all those paper pushers were
producing goods we now import from China? Certainly the Liberals would cite the
dangers of the irresponsible deplorable masses who would skip annual physicals,
etc. But beyond their prejudicial attitudes, real proof is sketchy. The number
of people driving around on bald tires remained unchanged after annual auto inspection
laws were enacted. Responsible people
had an additional hassle and expense while the auto shop lobbyists were richly
rewarded. No law makes irresponsible people responsible. But some argue, and rightly so, that
responsible people often put off necessary doctor’s visits due to temporary
financial hardships. With the public tab at stake in these situations, many
argue that coercion is necessary. Indiana Medicaid recipients have compulsory
preventive care visits.
Even
with qualifications, my vision of everyone having major medical/catastrophe
insurance along with vastly reduced free market prices for day to day care just
ain’t gonna happen. The change is too abrupt, and too many people are used to
some version of the existing arrangements. And while I have no idea what
changes will come from a Trump Administration, I am pleased to see the major
medical vs. regular care dichotomy enter their discussions along with
editorials urging them to recognize this distinction. I perceive Trump as a
person guided by what works more so than ideology, and I am hopeful for some
sanity to unfold.
Trump
will probably govern with a center/right coalition that includes the blue dog
or moderate Democrats. Politics is the art of the possible. This will isolate
the progressives, the closet socialists or worse. (Leaving the leadership of
the Democrat Party to Keith Ellison, Elizabeth Warren and a behind the scenes
Obama should be an ominous warming to anyone concerned about the survival of
the Democrats.) We will always be split, arguing and compromising, but it is
the progressives that prevent workable solutions.
An
excellent example of this occurred in the UK recently. A system of government run 401(k) type
retirement plans was proposed, similar to a recent program in California, but
with the plan participants required to buy an annuity upon retirement to
protect them from market swings. The progressives were infuriated that the
government didn’t control the whole process and conjured fears of bankrupt
annuity companies. They believe that the
government should take on a massive unfunded liability that can only be met by,
at the very least, higher taxes or inflation or both. But the solution is
simple. Have everyone buy the annuity at retirement age and insure the annuities
with a self funding mechanism like the FDIC for banks. If an annuity company
goes under, the stockholders - not the taxpayers - lose out. That’s how a free
market works. In a worst case scenario, if the annuity insurance fund went
under, the government could make up the difference. But it would be the
equivalent of pennies on the dollar and not a crisis. No retiree would ever
lose their retirement income. While this may not meet the ideological
requirements of some, it is workable and doable. The moral of this story is
simple: Get the government must control everything progressives out of the way
and we can compromise and solve.
Endnote:
Health saving accounts (HSA’s) are likely to remain in some form. They are
another addition to the alphanumeric soup that includes IRA’s (Individual
Retirement Accounts), 529 plans (an education saving plan) and many others. The
goals of all these schemes are all beneficial, but they all miss the salient point.
Once upon a time in America, earnings and savings weren’t taxed away. Today, they
are so high that even prudent people don’t have money available for
savings. But forgetting the cause
doesn’t help the financial firms providing, for a fee, these accounts. And, as
I have noted many times in these posts, we have more and more people counting
beans and less and less people producing them. We borrow money we can’t
feasibly repay to buy manufactured goods made elsewhere. If Trump doesn’t
reverse this we will eventually fall off an economic precipice.
Copyright
2016, Mark L. Bennett
