“I TOLD YA I WAS SICK”

10/13/09

For a guy who is largely agnostic on what seems to be the pressing issue of the day, health care, I have written extensively on the topic. See, inter alia, my posts of 9/23/09, 9/17/09, 9/11/09, 8/29/09, and 8/26/09. The passing of what has come to be called the Baucus bill out of the Senate Finance Committee has provided an opportunity to further ruminate, and opine, on what promises to be the political issue, or at least the domestic policy issue, of the year.

First, as usual, the cognoscenti have mischaracterized the entire debate and the average citizen has followed along, like the lemming s/he is increasingly proving to be. This entire debate is not about “health care reform.” No one, or at least no one rational, is proposing reforming health care per se. It would be hard to argue that our health care system is not the best in the world or is in need of much reform, and certainly not in need of reform from the politicians. Our health care system, properly understood, is a story of ongoing, day to day, seemingly never ending “reform,” but that reform emerges from the minds of the doctors, nurses, research scientists, etc., who seem to be constantly coming up with new and better ways of making or keeping us well. What this debate concerns in not heath care reform, but health insurance reform, or finding ways to provide the citizenry with financial access to the best health care system in the world. This is more than splitting hairs; genuine reform, and genuine progress, is greatly facilitated when we clarify the subject of discussion.

Second, a measure of my agnosticism on health insurance reform is melting away as I think about the specific legislation that is emerging and compare that legislation to what is truly needed in this country.

There are two fundamental flaws in our current delivery of health insurance in this country. The first is that it is tied to one’s work. One gets one’s health insurance through his or her employer. If one works for a company, or for a government agency, that provides health insurance, one has an easy time getting insurance, if not necessarily an easy time paying for it. (Those who get insurance through their employers and whine about the costs of that insurance, though, should try purchasing an individual policy and seeing what health insurance really costs.) Employers have to spend outrageous amounts of time and money delivering health care insurance to their employees on the idiotic assumption that every company is somehow ideally equipped to perform the services of an HMO or other health care provider. Not only is the expertise often lacking in most companies, but time and effort that could be focused on making one’s enterprise, and our nation’s industry, more competitive is spent dealing with insurance claims of employees. This approach is an absurd relic of World War II price controls that has been enshrined by an equally moronic tax treatment of health care benefits that effectively drops the responsibility for health insurance in employers’ laps.

Any effective and meaningful approach to health insurance reform should break that curious intertwining of one’s employment to one’s health insurance. Neither the House nor the Senate bill do that; instead, the House bill uses mandates and the Senate bill uses financial penalties to further ossify the iron tie between employment and health insurance.

The second fundamental, and even more salient, flaw in our health insurance system is the disconnect between the user of the service and the payer for the service. When one pays little or nothing for any given good or service, one will demand more of that good or service. To try to change this immutable law of economics is as pointless as trying to repeal the laws of physics. It is this artificially inflated demand for health care, the definition of and the “necessity” for which increases with the generosity of employer provided health insurance policies, that has made health insurance the Pac-man of both private and public budgets.

Thus, any effective health insurance reform should tie the user of health care services to payment for that service. This can be done through meaningful deductibles and co-pays. The definitions of “meaningful” could be tied to one’s income, but out of pocket costs have to be sufficiently high to stem the gross overuse of the “health care” system wrought by the “What the heck, it’s not my money; give me the very best” mentality that prevails under our current health insurance set-up. Americans are very good shoppers; we can make meaningful reductions in overall health care costs, and probably improve the quality of health care, if we could provide the incentives necessary to get Americans to apply those considerable shopping skills to their health care purchases. Unfortunately, neither the House nor the Senate bill does anything to increase deductibles and co-pays. Instead, we witness Nancy Pelosi traipsing around the country providing endless lists of procedures for which there will be no deductibles. Such an approach will exacerbate the largest problem of our health insurance system and expedite the bankruptcy of our once great nation.

Third, anyone who thinks that we can substantially increase health insurance coverage without higher taxes is badly misinformed or transparently disingenuous. All this talk of no tax increases or no costs to the average taxpayer is just silly. Insuring everybody is an expensive proposition no matter how it’s done. Someone has to be honest about this; taxes are going to go up if we want to provide health insurance for everyone. Then people can make a logical, reasoned cost/benefit analysis of health insurance reform, deciding whether universal, or near universal, coverage is worth the additional tax burden. To pretend that somehow health care reform can be conjured up with pixie dust, or through making “the rich,” “the insurance industry,” or “health care providers” pick up the tab is specious and spurious, the work of mountebanks and charlatans. Given that Washington is filled with mountebanks and charlatans, this should come as no surprise.

The current “health care proposals” fail on all three of the aforementioned counts: They tie health insurance more closely to one’s employment, they further isolate the user of the service from the financial consequences of his or her health care decisions, and they hide the costs of the entire undertaking, thus making a legitimate cost/benefit analysis impossible. The current proposals thus exacerbate the problems of our current health insurance system and will, if enacted, press down the accelerator on our joy ride to financial doom.