Health Care: A Diagnosis and Prescribed Treatment

If the recent election of Republican Scott Brown in Massachusetts was about anything, it was clearly related to the growing opposition against the so called health care bill. In fact, the legislation that had hundreds of millions in earmarks has possibly come to an abrupt halt as a result of one senate seat. It is becoming clear that this transcends simple Democrat and Republican politics. Many people have legitimate concerns over the massive overhaul of health coverage and are beginning to stand against it. The problem has never been about access to health care but rather access to affordable heath coverage.

While many agree that a government-run takeover of health care is frightening to say the least, we must come to terms with something. The current incarnation of our health care system in the United States is dysfunctional. Insurance premiums are rising exponentially higher than salaries, administrative bureaucracy often slows care and fear of lawsuits drive providers to perform unnecessary tests for the sake of liability.

Some in the conservative media have implied that the current system is fine and should not be altered. While the United States does clearly have the best health care in the world, there is a dark cloud on the horizon. A breakdown is almost inevitable unless we come to the realization that our current system is simply not market-based. The end user is not determining the cost of health care based on their ability to pay for it. Our lack of involvement in the process has allowed the cost to skyrocket.

A large part of the blame lies with employer-provided health benefits which came to fruition in the middle of the twentieth century when employers wanted to attract workers and were given a tax break for making such programs available. In the decades that have passed, the typical employee has expectedly developed a mentality that simply presenting a plastic card pays for the health care they receive. The real costs rarely become tangible in a system where fees are negotiated and paid behind the scenes between health providers and insurance companies. A simple co-pay or low deductible will not cause users of health care to price check or determine if a particular procedure is warranted. We have fallen prey to the mantra that one can not put a price on one’s health. This is easy to adopt if we don’t ever realize the actual dollars being spent on our behalf.

Another point is that our view of health insurance is measured by a different standard from other insurance products. When we need an oil change or other routine automobile maintenance, do we drive into the service station and present our auto insurance card? Do we call our homeowners policy agent when we need to replace a leaky window? Insurance is intended to be protection against unforeseen issues or catastrophic events, not a means to provide every need or want. If insurance does not pay for everything, then the price of an oil change and windows is held in check by normal market forces. A claim due to fire damage or a minor car accident is even typically paid via reimbursements. This allows the insured to control costs by obtaining competitive bids.

So what then is the solution? In order to be a market based system, consumers of health care are going to have to pay more out of pocket. This is understandably a hard sell but premiums will decrease when insurance providers are not paying for every billable procedure. This is the basic structure of Health Savings Accounts (HSA’s) where insurance kicks in after a predetermined limit has been reached. When the consumer is responsible for basic fees, then they will also become aware of the real cost of health care. An educated consumer will then demand competitive and affordable costs just as they would with any other service.

Many will argue that driving prices down would cause the quality of care to lessen but as in most businesses, new efficiencies could make up the loss. Imagine a doctor’s office that does not require over half of the staff to be a billing department.

The employer provided insurance system has perpetuated the problem so in order to shift control over to the end user, we need a new direction. One possibility is to allow companies to transfer what they spend on heath coverage to a non-taxable portion of the employee’s salary. After all, it is a part of their overall compensation package to begin with. Once this is routinely seen as part of wages, then subsequent premium increases would be “felt” and would make us educated to the unsustainable nature of the typical annual increases. Small businesses, the self employed and even some large employers are very aware that the current system cannot continue unchecked. There will be a breaking point as compensation packages rise above company growth due to disproportionate premium increases.

The goal is fairly simplistic in nature. If consumers demand some degree of value for the care they pay for, then prices will come down. Astronomic fee increases would be rare, particularly for routine procedures and visits. For major expenses above the out of pocket costs, insurance companies will be slower to price themselves above what consumers can pay in premiums.
We cannot expect a perfect health care system but can have reasonable expectations for it. The high level of medical breakthroughs, technology and expertise we already have is not in question but how we pay for it is. A new era will come one way or the other. Heaven forbid that it be government controlled.