Supposedly our healthcare industry is going to be a major issue in the upcoming election cycle. I say "supposedly", because other than the initial (and predictable) pledges from the Democrats running to provide alleged "universal healthcare" through the already bloated and broke federal government, not much has really been discussed. From what information I can gather, both the Democrat Party candidates are offering a system that is pretty much the same as the one provided today, with a couple significant exceptions. Rather than private insurance underwriters placing limits on coverage, the tax burden on our shoulders will have to increase to support new wider limits. And who will decide those limits? Politicians looking to pander to this group, or that, in order to win re-election, or some other political prize. Won't that be lovely? Then we can look forward to the threat of an ever-expanding federal healthcare bureaucracy every election cycle, and a growing sucking sound on our wallets to support it. And in the end, we'll still be just as dissatisfied (or more so) with our healthcare.
Unfortunately, the political party I more closely associate myself with doesn't seem to want to engage the voters on the issue at all, unless I'm missing something. Alright, maybe they're whispering. Maybe they've got a secret plan so wonderful, it'll just sink the Democrat competition when they release it this fall. Then again, maybe not. So I'm going to throw a few ideas out there, and would love to hear what my fellow citizens think.
A Little History
The history of healthcare as I understand it, is that many years ago, when you got sick, or were due for a regular checkup, the doctor either visited you, or vice versa, and was paid directly for their services. If it was serious, you visited a hospital (often established and sponsored by Christian denominations as a charitable outreach) where there was more specialized care, and equipment. Health insurance was paid for like automobile or life insurance, by the individual or head of household, and was meant to cover only unexpected and financially catastrophic medical expenses. Sounds pretty good so far.
Then, at some point, large (and of course,...evil) corporations, looking to ensure a more reliable workforce, with fewer missed days due to illness, offered to provide limited health services and some insurance to their blue-collar employees, who often couldn't afford to pay for their own healthcare expenses. This practice might have become even more attractive following the return of soldiers from the WWII, who had probably been provided comprehensive health services while serving.
As corporations competed for the best workers, they started offering greater benefits packages including retirement, expanded healthcare coverage and the like, until insurance companies, seeing a growing demand, started offering packages for smaller employers. Eventually the market expanded to serve even small businesses, until healthcare insurance benefits became a standard part of the job offer package as they are today.
The Problem
In the process, we, as individuals, by accepting the offer of a third party to bear the brunt of our healthcare burden, have subsequently lost control over our healthcare choices. What originally had been a real benefit, has now become a chain around our necks. We are now in a situation where insurance companies, for the most part, have found themselves insulated from market forces exacted by direct consumer satisfaction, and now primarily deal with intermediaries whose main concern is holding onto the bottom line. These intermediaries, our employers, then must choose the least expensive policies they can for their employees, often resulting in less adequate coverage as the costs of coverage continue to multiply.
So let's talk about why those costs continue to multiply every year.
A major problem, is that without the healthcare consumer bearing the brunt of the insurance and healthcare costs, that consumer has lost sight of what those costs really are. Healthcare insurance after all, works just like every other kind of insurance paid for by the consumer; the more, and more expensive the claims made against a policy, the higher the rates climb. After all, insurance companies don't make money by paying out claims - they make money by not having to pay out, or by denying claims against their policies. While insurance companies market themselves to the consumer as "the company that's going to be there for you when you encounter hardship", they employee thousands of underwriters doing their best to calculate the risk of actually having to do so, and charging you a high enough rate to offset that statistical risk.
Ironically, by reducing the co-pay amounts paid by the healthcare consumer, making services more affordable under the theory that regular preventative visits will curb treatment costs down the road; instead - consumers tend toward utilizing those services more often, resulting in a substantial increase in the number of claims against health insurance policies when they do. This trend of increased claims has invited insurance companies to, in turn, raise their rates to compensate. Unlike with their other insurance policies, however, the consumer does not necessarily feel the impact of the rate increase on their wallet the next month; instead, that hit is absorbed by their employer who's caught in the middle. The employer, concerned with retention and recruitment, must offer a health benefit package that is competitive. However, the insurance companies they must carry policies with, in order to offer such a benefit, continue to institute continual, and substantial rate increases on those policies, cutting into the employer's profitability, or forcing them to downgrade to cheaper policies that offer less coverage, which can affect retention. It's a Catch-22.
The end result, is that this current system is hurting just about everybody; doctors, patients, their employers, and yes, even the insurance companies. Everybody that is, except perhaps, the trial lawyers.
Consider how things have changed for doctors. In the old days, the doctor performed a service, and was paid directly. Now a doctor, prior to performing a service, must verify insurance, determine the co-pay required of the patient, and in many cases, the patient must obtain pre-authorization from their insurance carrier for coverage of those services. Once coverage is verified, before deciding on treatment, the doctor must understand what treatments are covered by that carrier, or if that carrier's level of coverage is adequate to proceed. Then once treatment is performed, the doctor must submit a request for payment, and process the correct paperwork, according to insurance company guidelines, in order to receive payment in full. If any of the above is not completed correctly, the physician risks non-payment in full or in part. Imagine the administrative burden this adds to the process, nevermind the cost associated with hiring quality people to ensure its proper completion.
But wait, there's more. With increased documentation, comes increased ease of litigation. With so much documentation available, it doesn't take as much effort for lawyers to determine whether they have a case or not. After all, all it takes is a mistake on the paperwork; a documented procedural error, or even clerical error, to invite a lawsuit in today's litigious society. Without limits on the amount of money that can be rewarded to the plaintiff, which might affect the amount of lawsuits brought every year, insurance companies have found it nearly impossible to assess risk in such an unpredictable environment, and therefore, are forced to set artificially high rates for malpractice insurance, or risk unacceptable losses. Even so, insurers still face considerable risk of loss.
With the high cost of medical school education, the risk to their livelihoods from malpractice, or to the profitability of their practices from unresolved patient bills, insurance rates, insurance payouts, and increasing administrative costs; many fields especially vulnerable to these forces are shrinking rapidly, or being extinguished completely in some areas. For the healthcare consumer (translate: me and you) this means more scarce, and therefore, lower quality care, than was previously available.
Speaking of the consumer, we are now in a position where, with the exception of the independently wealthy among us (kudos to them), we are now forced to accept one of several inferior health insurance plans offered to us through our employer (who can barely afford them). These policies, until we get really sick, don't seem so bad (as they tend to offer attractive basic health services like low pharmaceutical and scheduled visit co-pay rates) , but fail to protect from financial ruin in the event of a medical catastrophe, which is what insurance was supposed to guard against in the first place, right? Furthermore, the rarer the illness we face, or the more specialized care required, it seems, the less coverage we can expect to receive. And lest we forget, there's always the "pre-existing condition".
Where To Now?
So, the question facing us now is,"How can we break the cycle?" Universal healthcare, as previously discussed, doesn't solve any of these problems, but simply shifts the financial burden to taxpayers, and will encourage politicians to forever "tweak" the system as they pander to one group or the other, inevitably resulting in more regulation, bogging the system down even more with administrative requirements (think IRS - a multi-billion dollar industry exists mainly to avoid audit or penalty from this government bureaucracy, instituted to collect an income tax - but that's for another article). Instead, we must find a way to restore market forces to the healthcare equation. Consumers need to once again be made directly aware of the costs of healthcare (and therefore, the costs of risky behavior or unhealthy living). Insurance claims need to once again be reserved for catastrophic protection, not for the basic visits and prescriptions. Tort reform must be enacted in order to limit, and make more predictable, the risk to both doctors and their insurers. Employers need to be removed from the equation all together.
How we go about accomplishing this, should certainly be a continuing conversation, but I plan on offering some ideas that I think make sense next week. To be continued...
