A plea for changing the focus of the health care debate from worrying about the "uninsured" to recognizing the pernicious effects of too much insurance. by Kate Burch
(libertarian)
Saturday, July 25, 2009
Much of the debate about health care costs completely misses the mark. The focus on the "uninsured" assumes that, without health care insurance, one cannot have health care. This is untrue and illustrates the difficulty that most people have in thinking divergently.
In the days before health care insurance was developed and marketed, people paid for doctor visits and health care procedures out-of-pocket. There was a direct commercial relationship, as well as a personal-professional relationship, between doctor and patient. Doctors, being mostly altruistic, service-oriented individuals, ordinarily charged not more than their patients could bear, setting discounted fees for the poorer patients, sometimes taking payments in kind, and often providing pro bono services. Indeed, aside from a few "Harley Street" types, doctors could not charge more than the traffic would bear, or they would not stay in business.
Beginning in the Middle Ages and gradually eroded as the government-insurance industry complex began its inroads, there was a venerable tradition of religious orders providing hospital care to the poor as a matter of charity. Today, with so much money involved, the religious institutions are being squeezed out, and we have reached the point at which the government is trying to dictate the care given by these institutions, regardless of matters of conscience.
During World War II, wage-and-price controls were set by the Federal government. Employers, needing a way to attract good employees, lined up to purchase a new product: health care insurance, which the insurance industry's lobbyists were able to make available tax-free to employers, as a "benefit" in lieu of wage increases to employees. This manipulation of the tax code created a distortion of the market and represented the beginning of the road to perdition.
In the early days of health care insurance, it really was insurance against catastrophic health events. Premiums were low, and benefits were tapped only for things like hospital-surgical care and other unexpected misfortunes. Ordinary health care expenses, such as yearly check-ups, well-child visits, consultations for illnesses not requiring hospital care, or minor injuries, were paid directly, and they were quite affordable. As an example, my oldest child is 42, and my prenatal visits were $4.00 each when I was carrying him.
Insurance companies, in the interest of growing their business, offered more and more coverage as time went on: dental, optical, office visit, prescription, etc. Eventually, health care insurance ceased being insurance at all, and became instead a third-party-payment mechanism. Every time there is a middleman, costs increase.
Costs also increased because there was no longer a direct financial relationship between doctor and patient. There was often no attention given at all by the patient to the cost of a visit or procedure because all the patient had to worry about was the "copay." Insurance premiums were viewed as a gift from one's employer rather than as an ever enlarging portion of one's pay. When a doctor of a hospital billed a faceless insurance company, rather than the person sitting across the desk, there was no incentive to keep costs affordable. There is a tendency of people to value something more highly when the cost is high. This tendency can be seen in people who buy a $1,500.00 handbag to flaunt their wealth. Similarly,doctors are sometimes viewed as more competent or desirable if their fees are high. This tendency can run rampant if there are no market forces operating to stop it. This normal human foible has been the biggest contributor, in my view, to the outlandish increases in health costs.
The costs of medical equipment, in addition to fees for services, are also outrageously inflated. Here, lack of controlling market forces operate. An example is the still extremely high cost of MRI machines. This, after all, is old technology, and the makers of the machines are still charging about what they did when the development was new and they had to charge more to recoup the costs of bringing the technology to market. Compare this situation to the case of personal computers. Remember when it cost probably a month's pay for most people to buy a PC? Today, computers are in almost every home, and they are quite affordable. The laws of supply and demand really do work, when undistorted by politics.
The real solution to the current "crisis" in health care cost and distribution lies not in more insurance, whether government-sponsored/controlled or private, but in less. Insurance should be true insurance, addressing catastrophic life events. If most people paid for their routine health carecosts out-of-pocket, the costs would come down so fast it would make our collective head spin!
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The views expressed
in this article are those of Kate Burch only and
do not represent the views of Nolan Chart, LLC or its affiliates.
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excellent insights! using insurance for a service needed by all people, all the time is similar to buying insurance to purchase food, ridiculous.
the solution you mention tho, which i agree with, would have to be a concerted effort and that is unlikely. although the way things are going, it may occur by itself!
if the health industry gets its way, the monopolized care continues and nothing is done at all, at some point in the near future very few people will be able to afford the premiums or pay for care. Whether this would lead to a collaspse of prices, collaspse of the industry or complete socialization is difficult to say.
When there is no competition within an industry, the competition is externalized. The industry itself competes as a whole for a greater share of the total economic output. we are beyond that point now.
Posted By: Walt Thiessen
Date: 2009-07-25 09:57:54
Good analysis. The problem becomes even worse when health insurance becomes mandated, because such a policy forcibly increases the amount of dollars allocated for health care, a guaranteed formula for increasing health care prices.
This is a very discerning analysis. You certainly understand the economics of the health care crisis. (Are you sure you're not an economist?) And, yes, it is a crisis. Obamacare will just make it a lot worse.
I am lucky to know Kate Burch personally, and feel shy about expressing an opinion. Still, it is hard to remain silent when a problem is so accurately analyzed . Can it ever happen that health care devolve to the ways that worked so well in the past? I hope so, and hope that everyone that reads Kate's note tells a friend who tells a friend
A big "thumbs up" for you! I've been saying for a couple of years that healthcare was a bubble waiting to pop. But wait, here comes another "bailout". DAMN!
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