Insurance Reform Now, Part I

As the deadline approaches, many are questioning why we need to rush to pass reform. Make no mistake, our perilous financial state demands that we reform how we pay for health care. Why has this debate shifted from health care reforms to insurance reform? Because it’s in the financing where our system is failing us. What you pay for health care services is more like roulette than accounting. And insurance is at the heart of our system’s financial failures in addition to the uncertainty and care denials that give health care consumers a raw deal.

In the US, we spent about 15% GDP on health care. This is the highest figure in the world, and almost 50% higher than runners-up Switerland and Germany. Estimates show that this year the US will spend 18% of our GDP on health care. The startling figure is that in terms of overall health outcomes the United States does no better than the countries that cluster around the 11% GDP range like Sweden, Switzerland, and Germany…So in fact, somebody is getting a raw deal here.

We know that the US has many of the most advanced health care centers and the best technology available. We also have rigorously trained doctors who work long hours and are devoted to their practice. Given those facts, we should either have less expensive, more efficient care, or better care that results in better outcomes. Some people probably do have great outcomes, when they can afford to get the care they need, it turns out to be really good. But for others, they are getting sub-standard care or are getting ripped off.

Why should Americans, who live with the “freest” market, with no organized care, be getting the worst deal in the world. The prices for most other goods are set by market forces: food, restaurants, gas, property, electronics. These prices are generally the same in terms of quality except where there are some subsidies, of which there are a few in 1st world countries. However, the free market has failed for health care and health insurance.

In most states, for the private consumer of insurance, there are one or two choices. Imagine having just two parties to choose from when deciding on elected officials… Heh, well there you go. Hold your nose and choose the one you think is “best,” and prepare to be disappointed. When you end up with a broken leg or get cancer, you may or may not get what you thought you would to cover your medical bills. If you are lucky, you will have your care covered, but maybe the wheel will come up double zero and you get the “pre-existing condition excuse.” Maybe you thought you could use your doctor, but he turned out to have gone out of network, and you get to pay 50% of the bills for your orthopedic surgery. How can one make a good decision if they don’t even know what they are getting? Can Adam Smith’s invisible hand operate if it is also blind?

If the system worked well, you would submit your bill for services that a doctor said were essential to bring you back to health, and an insurance agent would quickly look to see that it was signed by the doctor and quickly pay off the bill. Instead, there is an entire bureaucracy using your premium dollars to make your service as bad as possible. Once you get an expensive malady, the insurer has no reason to care if you are satisfied or not. Now, with a choice of many insurers, one could read reviews of different providers and there would be competition in customer service if they wanted anybody new to sign on. In reality, with virtual monopolies (or duopoloies), you don’t have a choice, both can collaborate to be equally stingy in payouts, and if you become an unsatisfied customer, you can switch providers but if you manage to succeed in changing, you will never get coverage for anything related to the now “pre-existing condition” that was so poorly treated by the other insurer.

Let’s go a little further shall we. Many of us have coverage through our employer. Here, your health care is subsidized by the government by virtue of it coming out of pre-tax employment benefits. If you are unfortunate and have to purchase coverage for your and your family, give Uncle Sam his due first. Here, there is probably not much consumer choice as you are stuck taking what your employer gives you. It’s probably better insurance and a better deal; but don’t get fired, or you will only be able to keep that great deal for 15 months under COBRA. And you will have to pay through your nose to commission the help of an evil terrorist organization bent on taking over the world. And once it’s over, hope that you don’t have any health problems when you want to pick up one of the privately available providers or you will be denied. Great choice there.

So the market for health insurance doesn’t hold a candle to a free market. There is low consumer mobility, lack of choices, and light competition. There is also a lot of uncertainty in the services that are provided, a lot of subsidies, and a lot of overhead. Remember, health insurance is like paying for services before they are rendered, so the financier benefits by paying out as little as possible.

This is only the insurance part of health care financing. In the next installment we will look at the free market failures of pricing, billing, and compensation.

Dear Opponents of Health Care Reform

I was wrong. You are right. Although I still believe that our medical system is the biggest threat to our solvency as a nation, you are right; I admit it. Those few “plants” in town halls--whether self-motivated by “good intentions” to ask questions about a subject they thought relevant while misrepresenting themselves, or being part of the Big Brother Obama Fascist Communist Anarchist Peacenik Surrender-monkey Death Squad--were so heinous that I now believe that we, as pro-reform advocates, must now withdraw our grievances against the current health care system and wait at least 16 years before failing to pass health care reform again. This is the appropriate recourse, despite the victory of a presidential candidate who ran on a platform including health care reform, the fraction of one percent of people who have disrupted the debate are so heinous that we must abandon efforts to bring the system and it’s costs in line with other industrialized nations with similar outcomes. The savings of trillions of dollars, the shoring up of our already socialized medicine for seniors, the promise of everybody paying their fair share for insurance but no longer facing the threat of bankruptcy, the assurance that doctors and hospitals will be paid more for the services they provide, and the hope that our emergency rooms will no longer be primary care clinics for the uninsured; it can in no way justify the actions of a few people who dared to make false statements for political gain.

I give up. In fact, these trespasses are so outrageous, that I even give up my past complaints about Republicans and all of the Bush policies. Taking softball questions from planted reporter Jeff Gannon? Forgiven. Lying and exaggerating to drum up support for a war against a non-terrorist-harboring regime that was a natural enemy to a nation that was harboring terrorists? Forgiven. $5 trillion more in debt, growing government to record levels, while government itself provided less? Forgiven. The largest expansion of socialized medicine, Medicare part D, while standing against socialized medicine? Forgiven. Throwing anybody out of presidential speeches who dared wear a T-shirt that supported the troops but not the war (bring them home, etc…)? Forgiven.

Yes, because of this, and because it happened in support of Democratic policies, you are right, I am wrong. We democrats must now climb into holes for the next two-years, nothing we do is correct, no matter how many people agree with the public option, or how necessary we believe it to be.

Conservative Arguments for Rail Transit

Anybody who knows me knows that I am an advocate of mass-transit over vehicle traffic. Many though think that this is a liberal-conservative issue. A smart interview with William Lind should end that notion. Among many interesting points, Lind suggests that the conservative-liberal divide has more to do with geographic placement than relative transit choices. Rural and suburban areas tend to be more conservative, and they also have almost no access to transit, nor are those areas well served by the same mass transit that is advocated for cities. Meanwhile, city dwellers can see an immediate need, and/or already experience mass-transit and usually want more of it.

I have always been surprised that my conservative friends actually like rail transit when the option is competitive with cars, and people these days are getting hooked on any form of transit that allows one to take his eyes off the road.

Many have argued that with the advent of the automobile, rail transportation became obsolete; the changes in our infrastructure grew out of conscious consumer choice. Lind has the money quote to allay any misconceptions:

Another idea that’s pervasive is that public transportation is subsidized but the gas tax fully pays for highways.
That’s a powerful argument the libertarians make to conservatives, and it’s bunk. The current dominance of roads is due to massive subsidization by government which through most of the twentieth century competed with privately owned, privately operated railways including streetcar systems that had to pay taxes. Every conservative understands very quickly what happens when you tax one mode and subsidize the other. The taxed mode disappears and the subsidized mode becomes dominant. Nothing about our current imbalance in transportation is a free market outcome. Not in the slightest.

The notion that the gas tax covers all highway expenses is a notion that will send any state Governor into fits of laughter. The highways require enormous support, local state and federal, that goes well beyond what gas taxes bring in. So it’s not a question of a subsidized mode versus an unsubsidized mode.

Government subsidies for the auto industry were and continue to be the problem. Lind even goes so far as to suggest that the gas tax can be raised. He points out that gasoline and our automobile dependence is a national security issue; one that the previous administration paid little attention to, and one that our current administration is not paying enough attention to.

Some other things to keep in mind. Electric cars are not going to save us either. It will take a huge amount of money and continued subsidies to get electric cars out there, and we are still going to have to generate the electricity for them. So far, there are almost no electric cars, and we've been told for the last 15 years that the electric car is just around the corner. Electric cars still don't address the other costs of roads, and the traffic problems that are never solved by adding lanes.

Lind discusses high-speed rail as, "icing on the cake." It supplements a good passenger rail system, but can't substitute for one. It's most important for people to have a competitive alternative to cars, which means a robust network in urban areas, and inter-city trains that run at the 79-90 mph range. HSR is not economical, and will take a lot to compete with airlines for medium and long-hauls.

Transit systems are inherently social. You can meet people on the train. And you don't have to pay attention to the road. Plus, people will always be more attracted to rail transit than for buses. Rail makes sense, the train has to follow the lines and stop at the stops. It's predictable and comfortable. And it usually has it's own right of way.