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The Health Care Crisis in America

It is routine for politician, media, and the economically-uninformed to speak of a health care crisis and the need for universal health care. In so doing, they generally quote misleading statistics, appeal to fringe, emotional stories, and demonstrate a fundamental lack of understanding about economics.

The Health Care Crisis is a Myth

There is a difference between health insurance coverage and health care that is routinely ignored in these discussions. For example, Kaiser Foundation states that 46 million Americans are "uninsured." Does this mean that they cannot or do not receive health care? Absolutely not. I can walk into almost any medical clinic in our town, ask to see a doctor about some condition, and receive service, as long as I am willing to pay for that visit. In fact, they usually give me a discount if I pay by check, cash or credit card versus paying via insurance.

In addition, hospital emergency rooms are required by law to provide emergency medical care regardless of insurance coverage. And, according to the same Kaiser Foundation, millions of people are eligible for insurance coverage but don't have it simply because they don't sign up for it.

"But some people can't afford insurance and don't have enough money to pay for the service." What people don't understand is that buying insurance is really, from a statistical perspective, like gambling. The insurance institutions have the odds set steeply against the average person. Every now and then, someone "wins" -- that is, they get out of the system more than they put in, sometimes much more -- but most of us will spend our whole lives contributing hundreds of dollars per month to the insurance companies, never to receive services commensurate with what we have paid. That is the harsh reality of insurance. But it is only part of the problem.

The second factor is that, by using insurance, we are separated from the actual costs of the provided medical services and so never engage in competitive shopping. The medical providers experience little or no competitive market price pressures that keep other service businesses in check. We don't ask "how much will it cost?" We ask "will it be covered by insurance?" And as soon as a health insurance card is produced, the doctor's hands are tied. In all other healthy economic sectors of society, we ask multiple providers how much something will cost, and compare that against the quality of services we will receive, then make an informed decision or even attempt to negotiate pricing.

Not only are we separated from pricing and comparisons, but prices are often artifically propped up by insurance companies. We recently had a child delivered. Everything went fine, quickly and uneventfully. We received a bill from the nurse midwife for $3500. This came out to about $1000 per hour for her assistance, which I argued was simply unethical. She replied that she would be happy to charge a lower price, especially in our case since so little help was needed, but that she was forbidden to do so by law and by the very same insurance company that claims to be helping us. The price for the event was set by the insurance company, and she is not allowed to adjust it relative to actual costs or time, or engage in any price negotiations with the client. I thought this was ridiculous, and called the insurance company for confirmation. Sure enough, they said that the doctor would be sued by them (and probably worse) if she negotiated the price with us. She had to charge us the full amount, irrespective of the actual costs. That is completely incompatible with a properly-operating economy.

A third, related factor is the urgency of service. My wife recently had a gall bladder attack that resulted in a 45 minute surgery to remove the offending organ. She spent a total of two and a half days laying in a bed with a saline drip, a little morphine, and chicken broth, tea, and jello to eat. The total bill came to about $20,000. That is nearly my annual take home salary, but when someone is in that much pain, you can't stop and say "wait, I want to call three other hospitals and see which will perform this operation for the lowest cost." You go with what you have immediately available so that your loved one can be well, and find a way to deal with the bill later. In fact, as you can see from the preceeding paragraph, if insurance is involved then the comparison shopping becomes irrelevant, anyway.

A fourth factor is the problem of plenty. Current technology allows doctors to perform feats that, just a few decades ago, would have been thought impossible. But it is all at a price. And that price is whatever people are willing to pay. Some months ago I was experiencing intestinal discomfort and, at my age, was concerned about possible colon cancer. I spoke with a doctor about it and he set me up for a cat scan at the local hospital. I didn't ask about price or the like (because I'm stupid). I just trusted and followed the instructions given me by the doctor. Shortly afterwards I received a bill for about $1000 for the ten minutes I spent laying in a machine while it spun around and clicked pictures of my insides. Totally awesome technology. Of course, if they had found anything, right now I'd be writing about how it was all worth it. But the truth is that, had I made some calls, I could have had the exact same service done for half price at a hospital 20 miles away.

A fifth factor is that people don't realize that their insurance coverage, even if provided by their employer is, effectively, money out of their pockets. And that expense will necessarily (almost) never be matched by the total cost of services provided. Much of it is absorbed by the infrastructure of the insurance company. This is one of the reasons that all the talk about universal health care is just smoke and mirrors. Politicians speak of it as if it is free health care for everyone, when it will be just the opposite because it amplifies all of the above problems.

A sixth factor is the use of statistics to lie or promote a particular political agenda. Using the Kaiser reports, for example, politicians and media make it sound as if as many as 80 million Americans have no medical care when, if you look at the fine print, they are merely counting the number of people who had any lapse in health insurance coverage in recent years -- even if it was only for a single day.

The Reality

Mankind has survived for thousands of years without health insurnance, but today we act like someone is a complete idiot to take a breath without it. However, full coverage usually runs several hundred dollars per month, and causes or amplifies much of what is wrong with the health care economy. An excellent change to the insurance system would be to make it more like accident insurance, where it has a set pay-out direct to the customer, then let the customer choose the best provider and best price.

Health Savings Accounts, high deductible health insurance, and individual responsibility for medical choices may help. When prices are set by the direct interaction between buyer and seller, instead of by collective bargaining with an insurer (or government), maybe things will improve. Only time will tell if these efforts are too little, too late. But the insurance companies and politicians are not the only problems here. Frankly, I'm disgusted by the fancy doctors' offices that are run like mercenary flesh mills; at the same time some doctors complain about not having any funds, we pay $100-$200 for a five minutes of face time while they detail out their offices with the latest equipment (or buy a new building every few years). I'm quite impressed by a local doctor who has kept his office clean and neat, but with obviously-modest equipment.

One of the increasing societal problems is the preponderance of people unwilling to carry their own weight. Rather than doing the most and best they can do for themselves and others, they do as little as possible -- just enough to get by -- and expect others to make up the difference. They desire their neighbors to behave in specified ways, provide for their various needs and wants, and assure them of a life without discomort or fear. This requires giving up a majority of personal capital and liberties. Such trends never end well.

Our country is not founded upon the belief that we are entitled to perfect health, to an education, a comfortable retirement, to a particular job or even to the respect of our neighbors (via governmental taxation or regulation). It doesn't guarantee to provide life, liberty and happiness; it recognizes that we each have the God-given freedom to seek these, but obligates no one else to provide those goods for us at their expense.

It is reasonable -- charitable, actually -- to establish a "safety net" of sorts for those people who are unable to care for themselves. But the general trend is to gradually increase taxation on everyone until no one can care for themselves unless they are extremely wealthy. As I've noted in another paper, the poorest among us are presently taxed at nearly a 50% rate. If you make six figures a year, you can make this work. If you make $1500 per month, it is impossible. Some then argue that it is unfair for the wealthy to have options not available to the less wealthy, and pass laws restricting or penalizing private transactions for education, retirement and health care. This isn't hypothetical -- it is already the state of affairs when it comes to education, healthcare and retirement!

Things gradually get worse as the bureaucracies providing the services become more and more disconnected from and unaccountable to the people receiving and ultimately paying for the services. Prices spiral out of control while fewer people are adequately served and intermediary agencies absorb the funds. Then the same people who created the problem by their policies complain that the "free" market is failing those in need, that they need more money, more control, and the complete industry needs to be turned over to the government who will ration services out as the politicians think is best.

I love my country, but the problems in health care will only be compounded by turning its management over to the most notoriously ineffecient, unaccountable and expensive bureaucracy around -- the United States Federal Government. This is one case where the cure would be worse than the disease.


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