The Answer Guy Online

Providing information to unwitting victims on a "don't-need-to-know" basis since 1974.

Saturday, June 26, 2004

Girl, You Have No Faith In Medicine

I sat on this post for months and months, partly because small pieces of it were cribbed from ideas found on comment threads to blogs I was reading a lot back then (no time these days) and I couldn’t possibly attribute them properly, partly because I was never happy with its overall tone, and partly because while still tinkering with this post (but well after I had essentially the entire thing written) I worked on a case involving the health insurance industry. There’s obviously nothing in here that reflects confidential information, but I figured I would inform readers that my opinions on this topic were the same before, during, and after this work.

As if I needed further confirmation that something is awry about the way we deal with health care in this nation, one of my close friends has recently had a bout with a brain tumor, and may or may not be on the hook for an astronomical bill.


When it comes to health insurance, yes, I’m unfashionably socialist.

For starters, I’ve always thought that the idea of basing insurance coverage around employment was inherently silly, especially in a 21st Century where everyone is constantly changing jobs. Furthermore, it strikes me as a kind of tax on job creation and accelerates the idea of a “permanent temporary work force” that hasn’t a clue where it’s next paycheck might be coming from. And of course more and more employers, if they can get away with it, aren’t providing health coverage at all.

But I think the problem is bigger than that.

The original social purpose of insurance – any kind of insurance - was to spread risks across the general population. Those who sold insurance generally made a profit doing so, since rates were presumably set in such a way as to recoup costs, plus opportunity costs.

Somewhere along the line, it occurred to someone that while one could make a profit spreading risk, one could make even more profit by appearing to spread risk while in fact avoiding risk. The more knowledge one gained of potential risks, the greater the opportunity of an insurer to avoid risks themselves. Actuarial science is by and large based on risk avoidance.

This fact reflects a system that is not so much immoral as it is amoral. Insurance companies do not exist to make the world a better place – they exist to make money, and if the investment dollars of those who own insurance firms could make more money doing something else, they would.

Now when it comes to, say, auto insurance, I’m not going to lose much sleep over this. If your record as a driver is bad enough that you can’t afford insurance, society is arguably better off if you’re forced to take the bus.

Health insurance is a different matter.

Despite efforts by well-funded think tanks to pontificate otherwise, some things are not commodifiable. Health is not a commodity, mostly because it is not, strictly speaking, excludable. If your city or town has people that for whatever reason leave their diseases untreated, you could get them too. Virsues, bacteria, and protozoa do not truly know geographic or economic boundaries, particularly as our globe grows smaller by the hour.

We have found - for better and for worse - risk factors for the health of many of our citizens. For some people, health care is so expensive that no rational profit maximizer would ever insure them. We can argue over whether at least some of those people brought such conditions upon themselves, but once you start down that path, it’s difficult to stop. Furthermore, the fact is that there are plenty of people who are in such a position through no fault of their own. Think babies born with severe birth defects, or the children of Love Canal. Consider people with MS or some other degenerative disease.

For those in expensive groups to get "coverage," either an insurance company has to charge a prohibitively high premium or someone has to lump them in with lower cost people. The simple fact is, for these people risk pooling is the only reasonable solution, unless we’re going to have them go without coverage.

Now there are and have been societies that make their own cost-benefit analysis and conclude that they are better off cutting simply some people loose entirely, for the presumptive good of society. None of them, however, is anywhere near the most affluent society the earth has ever known.

And another thing – scientific knowledge about the human genome is getting more sophisticated every year. Imagine what the insurance companies will do when and if they get that kind of power to avoid risk. Imagine how many more people will be left out in the cold, due completely to the DNA with which they were born. It is still the stuff of nightmarish science fiction – today.

Well, what about a halfway measure, you ask?

A mixture of markets and a public sector risk pool won’t work either. What is a market actor going to do? If the market actor has the ability and know-how to do so, the actor is going to cherry pick - to serve only the low-risk and high-profit people. And since the insurance industry will only get better at risk avoidance with time, their cherry picking will become ever more exact. Which is going to leave the public sector with only the high-risk population. Which in turn will leave us with the same situation we find ourselves in at the present time.

Medicare, which generally services people that the insurance industry would consider high-cost, has been able to succeed - to a point - for three reasons.
1. It’s been able to take advantage of group purchasing in bulk, the same principle that allows Costco to charge lower prices to its customers who by large quantities of stuff.
2. It has a politically powerful seniors’ lobby behind it, which makes it difficult for government to walk away from providing Medicare even if it were so inclined.
3. The care it has provided has not generally been quite what the private sector can furnish to those willing to pay for it themselves.

Contrast this with Medicaid. Its constituency is often not only generally high cost but politically disenfranchised. It’s always targeted for deep cuts, and providers are frequently abandoning the program.

And for the rest of us, including many poor people who are too “rich” to qualify for Medicaid, there’s generally no system at all.

Eventually even Medicare becomes problematic. Ironically, it is the most cost-efficiently managed health program in this country, giving the lie to the claims that the government would destroy healthcare if allowed.

The ironic thing about it is that the costs aren’t likely to go up much, if at all. We do give out free health care, as it happens – in the emergency room, by which time the uninsured patient’s condition has likely degenerated to the point where he or she requires much more expense than if whatever condition he or she might have had were detected earlier. So the uninsured patient gets the bill, often for an astronomical sum of money, which the hospital generally has to eat. Meanwhile, the patient is walking around with a debt he or she could never hope to pay, which has other social costs.

Simply put, the market will fail to provide for our common health, just like a market would fail to provide for our common defense. A unified system can be reasonably efficient, equitable, and humane.

I’m not sure what this makes me in today’s political landscape and marketplace. A relic of a time when we all felt as if we were in the same boat, perhaps.

Would there be sacrifices? Of course – no decision is without sacrifice. (Although they are not as great as some may at first think.) But seriously, perhaps the nation that spends the most in the world on its health care while having by many metrics the unhealthiest population in the industrialized world ought to be doing something different with health care.


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