Is Insurance For All The Answer?

Living in an increasing blue city (and perhaps a blue state in the coming election), it is surprising but very refreshing to have a local newspaper with a conservative editorial slant, and columnists like Vin Suprynowicz.

Today’s column makes a clear case for more free-market solutions in healthcare. Please take a minute to read the whole column here.

”For all those who have written in insisting that we need government to pay our medical bills because they're so high, let's keep this simple:
Medical bills are really high because the government promises to pay most of them, the same way government-backed "college loans" have driven up the cost of college, by allowing colleges to charge you whatever you can afford plus whatever the government will loan. “

Mine was perhaps the last generation that could reasonably pay for college without going into a mountain of debt. I was a part-time student, full time employee, and was able to pay as I went, on earnings fairly typical for a high school graduate.

My parent’s generation was perhaps the last that could reasonably cover medical expenses without a mountain of debt.

“If we switched over to "cash only" medicine tomorrow -- no government or even private insurance payments allowed -- what do you suppose would happen to medical costs?”

In my opinion, private health insurance has had a hand in rising medical costs, perhaps more than government programs. I see health insurance as the financial equivalent of antibiotics. Both have a place, but both have the potential to damage our physical and financial health. Misuse of antibiotics has created resistant strains of superbugs. Misuse of health insurance has created charges for medical expenses resistant to reason.

The trend toward lower deductibles and lower out of pocket costs has produced a disconnect between the cost and value received. The cost of the premium becomes a sunk cost in our minds, and doesn’t enter into the calculation of the real price of medical care.

Further, uninsured patients may be billed substantially more than insured patients and the Medicare patients Suprynowicz cites in his column. (Whether they collect is another matter – so the bills to the uninsured are no doubt inflated further so the solvent and/or responsible can cover those who aren’t.)

It is perfectly reasonable for a medical provider to accept less money from an insurance provider, as the risk of non-payment is lower nd the pool of customers is larger. But has it gotten to the point where so many people have insurance that the insurance companies are able to negotiate unreasonably low payments for medical procedures?

Let me offer a personal example. I recently needed surgery. I have insurance. The negotiated rate paid by the insurer was about 20% of the total bill. On the other hand, I knew someone without insurance that went into ER and was hospitalized overnight. His bill was comparable to what the insurance paid for my surgery and corresponding eight-day stay. If that doesn’t illustrate the problems with the current system, I don’t know what does.

I don’t propose that the government eliminate private health insurance. Nor should they interfere with the negotiations between insurers and providers. But I think we should take a second or third look at this blind rush to socially engineer comprehensive insurance for all.

I’ll even be contrarian enough to suggest that employer-based coverage isn’t the panacea conventional wisdom suggests. With smaller employers, it generally restricts individual choice to buy-it-or-not, or if you’re lucky, POS vs. HMO. There is little to no shopping by the individual – unless you consider deciding which spouse has the better option to be “shopping” - therefore, the insurance industry needs to satisfy fewer customers, and those customers aren’t the ultimate consumer.

Genuine free-market based solutions are more likely to lower costs in the long run. Wal-Mart $4 prescriptions. Clinics staffed by nurse practitioners in convenient retail locations. Even the free blood pressure cuffs you see by the pharmacy window in some stores. This is a good trend, bringing some sanity back to medical care – affordable health care for routine matters, with or without insurance. But if government and insurance become more inextricably involved in health care, it won’t continue.