A Modest Healthcare Proposal

Insurance

I have seen a number of posts over the last few days about Obamacare and the personal mandate, basically since the enrollment period opened.  People bitching that they are forced to buy insurance against their will.  Saying that being required to buy something is un-American.

Not only is this attitude wrong, but it screws over the hard-working people who want to do the right thing and not be a burden on society.

Here's the thing, unless you are independently wealthy and able to cover your medical bills out of pocket, the rest of America has to subsidize your refusal to pay for insurance.  OUR medical bills go up because you can't pay.  You declare bankruptcy, and then every single one of your creditors has to eat the bills that you have run up.  These bills don't just go away because you can't pay them.  Therefore, everyone needs to buy insurance so that they can get treated and the bills don't devolve on the rest of us.

This is how insurance works: the risk pool gets spread around.  Healthy people subsidize the sick, and the cost evens out.  This is actually how a free-market survives in any area, the risk gets spread around so that no single person or entity has to bear the full weight of risk.  This is the economics that underpin the stock market, by the way.  A large group of investors each buys a segment of a company, so that no single person holds all of the risk.  Also, the individual buys stock in many different companies, so that if one tanks, all of their eggs aren't in one basket.

But back to insurance.  A health care insurance system full of sick people will go bankrupt, quickly.  This is the motive behind raising the Medicare Eligibility, to completely bankrupt the system.  You see, Medicare depends on the relatively healthy 65 to 70 year olds, so that the older, sicker people can be treated.  If you raise the age for Medicare, you shrink the pool of healthy people subsidizing the sick, and the system fails because the outflow is less than the inflow.  It is simple economics.

But, I hear you say, it isn't fair that healthy people have to subsidize the sick.  I'm sorry, but that's how it works.  In that case, it isn't fair that people who don't have a house fire have to pay out for the people who do.  It also isn't fair that a person with a perfect driving record has to pay for someone who gets into accidents.  But, that is how the system works.  Further, in this country, in order to drive, you have to buy auto insurance.  If you don't, in most states, you face immense fines and probable jail time.  So even the argument that you can't be forced to buy insurance is already false. 

For decades, people have been forced to buy insurance.   If you want to drive, you must have auto insurance, at least liability.  If you don't, you can't buy a car, get a car licensed or anything else like that.  If you don't buy homeowners insurance, you can't get a mortgage.  The entire system is built on spreading risk through insurance.

And health insurance is no different.  The number of people who have no insurance is the major reason why health care in America is the most expensive in the world.  It isn't malpractice suits, it isn't even corporate profits, it is the fact that vast numbers of people who walk into a hospital can't pay.

For example. my childhood best friend John didn't have health insurance.  Even though he had a good job, it wasn't a great job.  He could pay his rent, and eat and even have a bit of fun, but health insurance was not possible.  He couldn't afford it.  One day, he got a back ache that wouldn't go away.  After suffering for a few weeks, the pain go so intense, he went to the ER.  It turns out he had very late stage cancer.  He died a week later. 

However, this isn't about how he could have been saved if he had insurance.   I have no idea on that.  This is about the fact that for one week in the hospital in intensive care, he racked up about $150,000.00 in debts.  The hospital's bill collectors then went after John's mother as his next of kin.  They filed lawsuits against her, tried to garnish her wages, and ultimately forced her into bankruptcy.  I understand that they should not be able to do this, and it was probably illegal.  But because she also couldn't afford a lawyer, she would up in that situation.

Regardless, someone had to eat the $150,000.00 bill John left behind.

And that was all of the people who went to that hospital after John died.  His unpaid bill was amortized across the rest of the hospital billings.  Each person who went there had to pay a small amount of John 's unpaid bill.  No one ever say it, because there isn't a line item for that, but they still saw cost increases in their bills, because the hospital wasn't going to eat that cost.

And that isn't because they were being cruel or mean or anything else, it is because there are hundreds and thousands of "John's" in American hospitals every day.  Now we could debate the appropriateness of a "for profit" health care system that must make money to satisfy the investors, but really this is the system we are stuck with.  (And if you think the screaming about Obamacare is bad, just imagine what would happen if the government nationalized the entire medical profession.)

So in the end, in order to make health care remotely affordable, and to be able to allow everyone who has pre-existing health problems to get health care, everyone has to buy it.  You see, health care is a utility.  We don't think of it that way, but it is.  Just like fresh water, it is a service everyone needs.  You can opt out of it, but if you do, then you are forced to figure out some other way to get it.  Water is the most apt utility to compare it to, because, while people can live without electricity, cable or phone, everyone has to have water.  You either get it from a well, a truck or a city line, but you have to get it somehow.  The same goes for health insurance.

If you are sick, you have a few options, you go to the doctor, you treat yourself or you die.  Not a lot of options here.  Therefore, in order for the entire medical system to work, everyone has to pay for it.  Back to the utility analogy, in some parts of the south, you have to pre-pay for the fire department.  If you don't, they will literally stand on the edge of your property and watch the building burn.

And in this idea, heath care should be treated the same.

If you cannot bear the thought of being forced to buy insurance, and you can't afford your treatment, I have a deal for you.  Don't get medical treatment.  No matter how bad your illness is, or how seriously you are hurt, don't go to the doctor, don't go to the hospital, just deal with it on your own.  If you die, then, I'm sorry, you have to die.

You want a completely free market in health care, then you can have it.  You are fee to not buy health insurance, but in return, you either pay at point of service, or you will be allowed to die. 

The choice is yours.

Put Down That M.B.A. Before you Actually Hurt Someone With It

Experts

For a political party that markets itself as being the side with the expertise on economic issues, the Republicans are exhibiting a shocking ignorance on how the market sets prices.

Case in point, Republican governors across the country are retuning to the concept of Nullification in regards to the Medicaid expansion in the Affordable Care Act.  They are flat out refusing to participate the law, claiming that they are not going to expand health care for their poorest citizens.  This not only deprives literally millions of people adequate health care it becomes a de facto tax on the rest of us.

On a side note, the concept of Nullification was used by many of these same states to try to continue Jim Crowe era segregation.  A policy that was once used to block African-Americans from sharing in basic American rights, like voting for a president, is now being threatened against this country's first black President to eviscerate his greatest policy achievement.  I guess things never actually change.

But to return to the point, not participating in this aspect of health care reform displays either complete ignorance or utter disregard that is so amoral that we might as well term it evil.  I would hope that it is the first, but I fear that it is the second.

Let me explain.

Medicaid, like Medicare and private insurance covers the cost of health care, both preventative and incident related.  In fact, since many health care plans prior to the A.C.A did not cover preventive care under their private plans, Medicaid had some advantages of regular insurance.  In short, it means that people who are sick can get treatment early in their illness, before a minor incident becomes a medical crisis.  It also means that people can get regular care that might prevent a serious medical condition from developing or progressing.

Without health care coverage, this is what happens: simple illnesses become severe; medical conditions that could be dealt with by lifestyle changes or simple treatments become debilitating crises.  The cost in this lost productivity is staggering.  A person who, through illness can no longer continue in their job creates costs that ripple through the business.  Similarly, a person who continues to work sick is less productive, and if the illness is contagious, spreads that illness to coworkers and customers, causing a ripple of lost productivity.

From a simple cost/benefit ratio, health care is the far cheaper solution.

Some of you may say, Medicaid is for indigent people, and if they just got a job, they could afford health care.  I have heard many Republican Congressional members say that it's their own fault that they don't have health care, and if they took personal responsibility for their lives, they wouldn't need to depend on the system.  Basically, if they don't have health care, it's their own fault and it's all on them.

And this is another aspect of failure to understand economic reality.  Due to a couple of chronic, but not life threatening, medical conditions, I am what is considered a high risk individual when it comes to health insurance.  As a result, my insurance runs close to $12,000.00  per year, and I'm glad to have it, because many people in my position don't have the ability to purchase insurance at any price, because of those pre-existing conditions.  And so you know, this cost is just for me, no one else is insured by my plan. 

What this means is, if I had a minimum wage job, almost my entire paycheck would go to health insurance, taxes and F.I.C.A.  I would only have about $3,000.00 per year to cover everything else; namely rent and food.  I challenge anyone in this country to live on $250.00 a month for all of their expenses.  Fortunately, I have a mother who is willing to pay for my health insurance, otherwise, I wouldn't have it. 

Some of this hopefully will change under ObamaCare, but for now, this is my reality; I am a 40 year old man, who makes a good living, and still has to get financial help from my mother because of the cost of insurance.

The Medicaid provision covers this gap, by opening up the program to all people under 65 who have incomes of less than 133% of the federal poverty line.  There are many people across the country working in minimum wage jobs, and without this government program, they will have no access to health care at all.

But this is not even where the worst failures to understand economics lie for the Republicans. 

For that, we have to go back to the idea of how profit works in a market economy.  In business, income must exceed expenditures. In other words, you need to bring in more money than you spend on things like your building, the cost of the wages of your employees, utilities, supplies and anything else that costs you money.  When outflow exceeds income, you are either going to go bankrupt, or you are suddenly a charity, whether or not that was your intent.  This should be something that most people understand.

Now, when people come in and take your services without paying, they add to your overhead, instead of adding to your profit, they help move you to bankruptcy.  You can also make a case that they are stealing from you, as many Republicans and health care C.E.O.'s have decided to do.  Because they view sick people who happen to also been poor as criminals, they are now stationing debt collectorsin Emergency Rooms to make sure that incoming patients show them the money first.  If they can't, they are sent elsewhere or they literally get dumped on the street corner.

However patient dumping, even though it is done by many hospitals, is actually illegal.  This means that most emergency medical care facilities treat even people who cannot pay.  Publicly funded hospitals, like Denver Health, who have to treat anyone who walks through the Emergency Room door become the medical provider of last resort.  Since most of the working poor cannot afford health insurance, and prior to the A.C.A., they did not qualify for Medicaid, they only way they could get medical treatment was in the emergency room.  Typically, because of this, they were far sicker, and far more expensive to treat, than they would have been with access to preventative and maintenance health care.

This is where the worst failure of the Republican understanding of economics comes into play.

The poor people, for whom the E.R. is their primary care provider, cost a lot of money to treat.  Far more, typically, that it would cost in a regular doctor's office, and for medical conditions that are better suited to the office than the hospital.  This is because a trained E.R. staff, and the facility itself are vastly more expensive than a traditional primary care doctor's office.

To understand how much an E.R. visit costs, just for a simple routine emergency, a few years ago, I cut the tip of my nose open on a car door at 11:30 at night.  Since it was deep, and I knew I needed stitches, I had to go to the hospital.  Five stitches, two hours and three thousand dollars later, my nose was back in one piece.  If I had not had insurance, I would have had to come up with all that money, instead of the $250.00 deductible.  If I could not, the hospital would have had to eat it, since, unlike my nose, you can't get blood from a turnip.

And this is where the problem comes from.  When poor people use the E.R., that costs the hospital a lot of money.  (I will agree the costs are inflated, but that is not what I'm addressing here)  Since they are poor, and cannot pay the thousands of dollars the hospital visit costs them, ultimately the bill never gets paid, and the hospital is out that money.  Sure they might pursue debt collection, but the poor person really has nothing to lose, and declares bankruptcy, and so, the debt remains unpaid.

But not really, because, unlike thirty years ago, most hospitals are no longer charities, they are for profit companies.  Even the charitable ones are expected to break even; long gone are the days when the church collection plate funded the local hospital.  This means that the money to cover the unpaid bill has to come from somewhere.

And guess where that is.

Right, your hospital bill and mine.  Everyone with insurance who goes to the hospital subsidizes the unpaid medical care that the poor receive.  In fact, the uninsured add approximately $1000.00 to every insured family's premium according to Families USA.  Since this sort of thing was judged a tax by the Supreme Court, I guess that you could say every insured person pays a $1000.00 tax through their insurance premium to cover the medical bills of the uninsured.

 Therefore, the people who can afford to be, and actually are responsible subsidize those who cannot afford medical insurance through a privatized taxation scheme, and the rest of the people get off scot free.

On another side note, this is the reason for the mandate; it limits the people who are trying to game the system by not buying health insurance when they can afford to.  If you want to talk about freeloaders, those are the real ones.  The poor are not the slackers here.

So how does this demonstrate that the Republicans are either incompetent or evil?

By not expanding Medicaid as set forth in the A.C.A., the Republicans are shifting the cost of medical care for the poor from the government to private citizens through the de facto tax of inflated medical costs.  And yes, I do realize that Medicaid is funded through a genuine tax.  However, that share of income tax that funds Medicaid averages out to about $85.00 per person per year, which is significantly less than the $1,000.00 per year people pay in increased insurance premiums due to the uninsured poor.  Admittedly, this is the average tax burden increase for the middle class, the rich pay much more, sometimes a few thousand dollars per person at the high end of the income scale.  That is what progressive taxation means, the more you make, the larger your share of the tax burden, because those tax rates impose far less on impact on the wealthy.

Since the Medicaid expansion is almost entirely subsidized by the federal government, and will be funded at least 90% even once everything is in place, these states are sacrificing the poor on the altar of conservative ideology that in no way reflects how the market really works. 

So either the Republicans do not realize that it is actually better for the overall economic health of the middle class and of the country to fund medical care for the poor through the Medicaid system, or they are deliberately making medical care more expensive for a middle class already stretched too thin. 

It's up to you to decide which is the correct interpretation.

The Health of Nations

Mandates

A Ipsos poll was recently released stating that 56% of all Americans are opposed to the Health Care Reform, but, paradoxically, most people strongly favor the provisions of that law.  In fact, the majority of people like everything except the individual mandate: they like the coverage for pre-existing conditions; the exchanges; the prescription drug relief; the ability to keep children on their parent's health care plan until age 26; even 72% of people like requiring companies with more than 50 employees provide health insurance.

And yet, 61% of all people oppose the mandate.

This is yet another case of people in this country wanting their cake and still being able to eat it as well.  It is a chronic problem in this nation; people who want all of the benefits, without having to share any of the pain.  We want tax cuts, but don't want any hits to services.  We demand cheap goods, but we don't like sending manufacturing to China.  We hate the deficit, but refuse to take any meaningful action to fix it.

The problem is, with the health care bill, the mandate is not severable.  I'm not talking about legally, the Supreme Court may find that they can chop out that one part and leave the rest intact.  What I'm talking about is the economic reality that the mandate makes everything else possible.

Let me explain.  For this example, I'll use the pre-existing condition ban, which is actually one of the most popular and necessary aspects of the law.  The harsh reality is that people with a pre-existing condition are going to cost the insurance company more than a healthy person.  They are ill, and that illness will require medical treatment, which in turn will cost money.  In fact, it will cost more money than they pay in through their premiums; if it didn't the people wouldn't need or want insurance coverage.

So in the end, these people cost the company money, but that's the way insurance works.  It is essentially a gamble that the company will take in more money than it pays out.  But unlike a casino, they have to pay out on policies, they are not allowed to do what casinos do and limit payouts to a percentage of what they take in.  Therefore, when there is a disaster, companies are on the hook for far more than people have paid in.  With health insurance, the idea is that the healthy people who don't need medical care fund the sick.  This is how the financial equation balances out.

But without the mandate, insurance companies will see a flood of medically needy people signing up and will, by law, not be able to turn them away.  In the end, there will not be enough low cost customers to cover the expenses of the high cost people.  Many of the other provisions will also add to this, but not necessarily as drastically as the ban on pre-existing conditions.

So in the end, without the mandate, there is no way to fund the rest of the law.  With a "free market," for profit insurance industry, the companies need the massive influx of healthy people to balance the costs out and remain profitable.  Without that income, health insurance companies will collapse under the immense weight of being required to insure people who are medically expensive, while not being given the ability to force healthy people into the system.

If they sever the mandate and leave the rest untouched, this will collapse the insurance companies and Congress will have to act, either to strike the rest of the law, or create some new mechanism to make it work.  If they strike the entire law down, health care costs will continue to soar, more people will not get treated, and again Congress will have to act.

This leads, ultimately, to four scenarios for health care in this country.  I will address each in turn.

The first is the "you're on your own" scenario.  In this future, people will be on their own for health care; insurance will become a luxury commodity, only able to be affordable for the wealthy.  In this concept, the government will play no role in health care, and will have no way to contain health care costs.

As a consequence, more and more people, especially the medically needy, will be forced to seek health care through the emergency room, which will force hospitals, not insurance companies, to bear the brunt of the costs of their care.  This will ultimately force health care providers into bankruptcy or will force laws to be passed allowing for the denial of care based on ability to pay.

In this future, we are looking at a very real likelihood of healthcare in America resembling that of places like Haiti, the rich get treated, the poor die.

Since that is probably an unacceptable situation in the United States, we will turn to the second option which is health care returns to a charitable enterprise.  For most of the history of our country, religious and quasi-religious institutions administered health care in this country.  You can see this in the names of hospitals, Saint Joseph's, Presbyterian, Lutheran.  They were named for the denominations that ran them. 

Similarly, most health insurance companies were non-profit.  I remember when Blue Cross and Blue Shield were 501 (c) (4) corporations, which means they were classified as social welfare.  They did not change to for profit until the tax reform of 1986 reclassified them, and in 1994, they became for profit institutions.

If health care returned to the hands of non-profits, they would have the backing of charitable donations and foundations.  A still functioning example of this is the Shrine Hospital system, which is funded by Freemasons and Shriners across the country.  Children in these hospitals do not pay a penny for their medical care. 

A health care system administered by charities would not be expected to turn a profit, and since there would be no profit in the system, there would be no incentives to inflate the costs of care.  By removing the profit motive, you would control costs.

However, this is also not a realistic solution.  Non-profits cannot compete in a for profit system; they can't attract the most skilled professionals or afford to keep up with the state of the art technologies.  The system is gamed against them, and the for-profits would not ever let them play on a level field.

The third option would be to keep the Obama health care plan's individual mandate.  While this will not control costs directly, it does create a large enough pool of healthy people to counterbalance the costs of the not healthy patients.  However, if the Supreme Court strikes the individual mandate, in whole or in part, this would require a constitutional amendment to impose.  Getting an amendment through the required number of states is even more unlikely than getting a 2/3's majority in congress, so this idea is dead on arrival.

The final scenario is ultimately the most likely, if the Supreme Court strikes down Obama's health reform.  Eventually the free market will collapse under it's own weight.  We are entering into a healthcare bubble, like the dot com bubble and the housing bubble.  Costs are rising far faster than inflation, and this is unsustainable.  Couple that with the fact that health care will be 20% of GDP by 2017, compared to manufacturing which is barely 15% and declining.  This indicates a high probability of the system popping, like so many of the other bubbles in the last decade.

Once the bubble pops, the government will have to step in.  Remember the banks and the auto industries that were too big to fail.  Health care occupies as much or more of our economy as those sectors, can we really afford to let the health care system go under? 

And once the system begins to unravel, there will likely be only one solution, single payer.  This is how health care is administered in most countries; the government provides the insurance for everyone, spreading out the risk and generating enough revenue to fund the system.

And if you think this is un-American, realize that Medicare is a single payer insurance system, and we love our Medicare.  Medicare works because, even among seniors, most people need minimal health care, and the ones that do are funded by those who don't.  The only real differences are that Medicare has a very low overhead, far lower than any private plan, and it does not have to be profitable.  It only has to cover the expenditures.

Ultimately, if the Obama health care reform bill fails, we will have to consider the single payer system, and since Medicare is already established and functioning, the best way to do it is to open up Medicare to everyone.  This will strengthen Medicare and provide health care for the entire country at a reasonable expenditure.

By killing the Obama plan, ultimately, we will have a single payer system, since it is the only realistic solution.  By fighting the Health Reform Law, we might get an even better system.

As a liberal, I recognize that if we lose the battle, we will ultimately win the war.  It makes me feel better to know that in this decision will be sown the seeds of destruction of the for profit health industry.