Current Issues: Health Care

Over the past few months my thoughts on a number of issues have fluctuated and been influenced by events and information. I’ve decided to put down my thoughts to clarify them for myself and to provide a springboard for discussion, should any thoughtful, reasonable person wish to engage with me. I think it would be useful to see if I can isolate areas where most, if not all, reasonable people can agree, and then try to build cohesive conclusions based on those areas.
Many of the areas of interest are interconnected, but it will still help to discuss them separately, and draw attention to connections when it is needed.
I choose “Health Care” as the first subject.
Any who claim that their own health care is perfect and reasonably priced are either unaware of its cost, or so rich that cost is of no consequence. The rest of us agree that either our care is not as good as it could be, or that its cost is out of proportion to its quality. International statistics show that many countries receive a higher standard of care than we receive in the U.S. In many of these countries, the percentage of income spent on health care is significantly less than our average. The question occurs: “Why is this so?” Let’s discuss some reasons.
1. Cost of Insurance.
Many Americans cannot afford to pay for a reasonable level of health care. Few would be able to afford, out of their own pockets, the costs of major surgery or illness. And the mechanism that we use to spread these costs across the population, insurance, is also beyond the means of many millions of Americans.
For some, age or health conditions have made them uninsurable under current insurance practices. The inability to get insurance is a scary situation. It can lead to lack of timely treatment for serious medical conditions, thus seriously compromising the effectiveness of eventual treatment. Fear of financial ruin, should a major crisis occur, is ever present. I can testify to the truth of this, since I am one of these people.
For other people, the cost of a medical insurance policy is prohibitive. If you are jobless, working at minimum wage, or working for a company that does not provide employee medical insurance, buying an individual medical insurance policy costing many thousands of dollars a year is just not be possible.
It may be easy to ignore the problem of uninsured Americans unless you or someone you know is directly affected, but the effect of the problem on the overall cost of medical care should make us take more notice of it. Some of these uninsured will need and receive care, and others will suffer and possibly die for lack of it. For those who do receive care, it is often made more expensive by having been delayed, and by being provided at emergency facilities, which are the most expensive providers. The costs of treating those who can’t afford to pay must be passed on, and the final effect is a significant cost increase for all those who are paying. This is to say nothing about the cost to society of the misery and despair of those for whom care is not provided.
2. Cost of Health Care
Neither the government nor the natural forces of the market seem able to limit the rise in cost of some components of health care.
The natural desire for profit by companies who invent medical devices or create new medicines results in pricing which is limited only by their users’ ability to pay. If each individual user were faced directly with the cost of each product used, it might be possible to make informed cost/benefit decisions. However that almost never occurs. Instead, there are many layers between the original provider, and the final recipient of the product. There is no direct consumer pressure to hold down costs in these intermediate layers, because the consumer is not exposed to them. For example, doctors and hospitals use devices and medicines out of necessity, but have little motivation to control their costs. And, individually, they have little leverage to do so even when they try. They then pass on those individual costs through a general charge for the service provided.
When the government is a payor, as with Medicare, it attempts control by mandating costs for which it will pay. However, that cost control has little effect on the originator of the cost. Usually the providers just pass the unreimbursed portion of the cost on to the rest of the users who don’t have any power to resist.
Where an insurance company is the payor, it would seem more likely that there would be an attempt at cost control, and often there is some. However, the main interest of the insurance industry is to protect and maximize its profits, and to control costs to the consumer only within the context of keeping premiums within affordable limits. The crux of the problem here is that, since most insurance premiums are at least partially paid by employers, the final users are still buffered from understanding individual costs, and so have little power to affect them. Also, the operative word is “affordable.” Premiums have consistently risen at a much grater level than salaries with which to pay them. And so, to avoid cutting wages, more and more employers either reduce or eliminate insurance coverage.
There is one more significant factor adversely affecting the cost of health care—lack of information. Everyone, provider and recipient, wants the best health care possible. The natural desire of providers to identify and provide the best care is heightened by fear of the results of not doing so. The legal system in the U.S. makes the penalty for providing substandard care severe. And it leaves the judgment of the standard of care, and the penalty for not providing it, up to juries, whose expertise is often questionable, and whose motivation is often slanted toward the injured party. This problem is further heightened by the mechanism for insuring providers against these awards. As mentioned above, the motivation of insurers is to maximize profits. Costs of large malpractice awards can be absorbed only by higher premiums, which then raise prices for the consumer.
If there was cohesive information identifying standards of effective care which could be relied upon by providers and consumers, and if the mechanism for punishing providers who failed to live up to these standards was information available to consumers about the level of care they provide, much could be done to limit the spiral of health care costs. But that information is not now readily available. Each provider, hospital, locality and state has its own responsibility for creating standards, and the natural result is great discrepancy in those standards around the U.S. And here too there is no mechanism for cost containment.
3.  Quality of Health Care
First, let’s state the obvious. For those with sufficient resources, quality health care can be purchased almost anywhere in the world. That exposes the crux of the problem. When costs swell at a rate far in excess of the inflation rate year after year, fewer and fewer people have sufficient resources to pay for quality care. As individual ability to pay diminishes, the inevitable result is a commensurate drop in the quality of care accessed. So there is an increasing gap between what everyone wants, and what most people get.
There are those with a vested interest in convincing us that we have the best health care system in the world and that nothing should be done that might jeopardize it. Because they are partially correct, the best is available for those who can afford it, they are able to cow us into inaction. But the reality is that for most people the level of health care they actually get is far below their dream of quality care. And for tens of millions of us health care of even minimal quality is unavailable because it is unaffordable.
I conclude this portion by stating that it is apparent to me that change in the health care system in the U.S. is INEVITABLE. The only things to be determined are how that change occurs, who decides the nature and extent of the change, and who benefits from it.
Those factors will be discussed in my next essay.

Over the past few months my thoughts on a number of issues have fluctuated and been influenced by events and information. I’ve decided to put down my thoughts to clarify them for myself and to provide a springboard for discussion, should any thoughtful, reasonable person wish to engage with me. I think it would be useful to see if I can isolate areas where most, if not all, reasonable people can agree, and then try to build cohesive conclusions based on those areas.

Many of the areas of interest are interconnected, but it will still help to discuss them separately, and draw attention to connections when it is needed.

I choose “Health Care” as the first subject.

Any who claim that their own health care is perfect and reasonably priced are either unaware of its cost, or so rich that cost is of no consequence. The rest of us agree that either our care is not as good as it could be, or that its cost is out of proportion to its quality. International statistics show that many countries receive a higher standard of care than we receive in the U.S. In many of these countries, the percentage of income spent on health care is significantly less than our average. The question occurs: “Why is this so?” Let’s discuss some reasons.

1. Cost of Insurance.

Many Americans cannot afford to pay for a reasonable level of health care. Few would be able to afford, out of their own pockets, the costs of major surgery or illness. And the mechanism that we use to spread these costs across the population, insurance, is also beyond the means of many millions of Americans.

For some, age or health conditions have made them uninsurable under current insurance practices. The inability to get insurance is a scary situation. It can lead to lack of timely treatment for serious medical conditions, thus seriously compromising the effectiveness of eventual treatment. Fear of financial ruin, should a major crisis occur, is ever present. I can testify to the truth of this, since I am one of these people.

For other people, the cost of a medical insurance policy is prohibitive. If you are jobless, working at minimum wage, or working for a company that does not provide employee medical insurance, buying an individual medical insurance policy costing many thousands of dollars a year is just not possible.

It may be easy to ignore the problem of uninsured Americans unless you or someone you know is directly affected, but the effect of the problem on the overall cost of medical care should make us take more notice of it. Some of these uninsured will need and receive care, and others will suffer and possibly die for lack of it. For those who do receive care, it is often made more expensive by having been delayed, and by being provided at emergency facilities, which are the most expensive providers. The costs of treating those who can’t afford to pay must be passed on, and the final effect is a significant cost increase for all those who are paying. This is to say nothing about the cost to society of the misery and despair of those for whom care is not provided.

2. Cost of Health Care

Neither the government nor the natural forces of the market seem able to limit the rise in cost of some components of health care.

The natural desire for profit by companies who invent medical devices or create new medicines results in pricing which is limited only by their users’ ability to pay. If each individual user were faced directly with the cost of each product used, it might be possible to make informed cost/benefit decisions. However that almost never occurs. Instead, there are many layers between the original provider, and the final recipient of the product. There is no direct consumer pressure to hold down costs in these intermediate layers, because the consumer is not exposed to them. For example, doctors and hospitals use devices and medicines out of necessity, but have little motivation to control their costs. And, individually, they have little leverage to do so even when they try. They then pass on those individual costs through a general charge for the service provided.

When the government is a payor, as with Medicare, it attempts control by mandating costs for which it will pay. However, that cost control has little effect on the originator of the cost. Usually the providers just pass the unreimbursed portion of the cost on to the rest of the users who don’t have any power to resist.

Where an insurance company is the payor, it would seem more likely that there would be an attempt at cost control, and often there is some. However, the main interest of the insurance industry is to protect and maximize its profits, and to control costs to the consumer only within the context of keeping premiums within affordable limits. The crux of the problem here is that, since most insurance premiums are at least partially paid by employers, the final users are still buffered from understanding individual costs, and so have little power to affect them. Also, the operative word is “affordable.” Premiums have consistently risen at a much grater level than salaries with which to pay them. And so, to avoid cutting wages, more and more employers either reduce or eliminate insurance coverage.

There is one more significant factor adversely affecting the cost of health care—lack of information. Everyone, provider and recipient, wants the best health care possible. The natural desire of providers to identify and provide the best care is heightened by fear of the results of not doing so. The legal system in the U.S. makes the penalty for providing substandard care severe. And it leaves the judgment of the standard of care, and the penalty for not providing it, up to juries, whose expertise is often questionable, and whose motivation is often slanted toward the injured party. This problem is further heightened by the mechanism for insuring providers against these awards. As mentioned above, the motivation of insurers is to maximize profits. Costs of large malpractice awards can be absorbed only by higher premiums, which then raise prices for the consumer.

If there were standards of effective care which could be relied upon by providers and consumers, and if the mechanism for punishing providers who failed to live up to these standards was to publish information about the level of care they provide, much could be done to limit the spiral of health care costs. But that information is not now readily available. Each provider, hospital, locality and state has its own responsibility for creating standards, and the natural result is great discrepancy in those standards around the U.S. And here too there is no mechanism for cost containment.

3.  Quality of Health Care

First, let’s state the obvious. For those with sufficient resources, quality health care can be purchased almost anywhere in the world. That exposes the crux of the problem. When costs swell at a rate far in excess of the inflation rate year after year, fewer and fewer people have sufficient resources to pay for quality care. As individual ability to pay diminishes, the inevitable result is a commensurate drop in the quality of care accessed. So there is an increasing gap between what everyone wants, and what most people get.

There are those with a vested interest in convincing us that we have the best health care system in the world and that nothing should be done that might jeopardize it. Because they are partially correct, the best is available for those who can afford it, they are able to cow us into inaction. But the reality is that for most people the level of health care they actually get is far below their dream of quality care. And for tens of millions of us health care of even minimal quality is unavailable because it is unaffordable.

I conclude this portion by stating that it is apparent to me that change in the health care system in the U.S. is INEVITABLE. The only things to be determined are how that change occurs, who decides the nature and extent of the change, and who benefits from it.

Those factors will be discussed in my next essay.

2 Responses to “Current Issues: Health Care”

  1. stevenspruill Says:

    I just discovered this blog. What a thorough discussion of the issues from one who clearly knows what he’s talking about. Once the new reform is passed, I’ll hope for an analysis of its strengths and weaknesses at this site. That would be great. I’m printing this out for my own use in future discussions with folks. Thanks for taking the time to do this!

  2. msblog Says:

    Really great commentary, Dad. Wish I could add this to my Facebook page.

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