Fixing health insurance

None of the proposals being hammered out will fix the fundamental problems we have with our health insurance system.  None of them deal with the fundamental flaws in our system.  Sadly, few people are even aware of those problems, and that includes our elected representatives.  Let me lay them out for you…

  1. We want to insure every sniffle and hangnail. Insurance always adds to the overall cost.  We should not be insuring things that happen frequently but don’t cost much.  When we do, the total cost we pay is higher than if we just paid for the care directly.  The reason we need insurance is that sometimes the cost cannot be borne without outside help.  So buying insurance to cover catastrophic care makes sense.  The disease that generates $500,000 of costs does not happen very often.  But when it does, it is devastating without some deep pockets to help.
  2. We have no plan for avoiding adverse selection.  When the only people who want to pay for insurance are sick people, we set up a classic no-win situation for the insurance companies.  They have no choice but to turn some people down.  But if we had a mechanism to put everybody in the risk pool, we eliminate that problem altogether.  We could do that by government fiat.  We just tell everybody to buy insurance, or pay a tax.  And make the tax really stiff.  Then we tell the companies they will no longer be allowed to turn anybody down.  Take it or leave it.
  3. We tie insurance to employment and prohibit the purchase of any policy not specifically approved by the state in which we live. What absurdity!  There is absolutely nothing to gain by this practice except perhaps carving out extra-sweet policies for certain classes of employees and giving it to them free of premium sharing and free of tax.  If you have one of those sweet deals now, and a new law took it away, the same new law could allow employers to fully compensate you by just increasing your salary.
  4. We have removed and insulated patients from cost-benefit considerations. When was the last time you asked what a particular treatment cost?  We normally don’t ask, because we have no skin in the game.  We need to reincentivize patients to make care decisions that are both medically effective and cost effective.
  5. We have robbed patients of the right to make their own end-of-life or catastrophic care decisions.  I do not care whether it’s an insurance company or the government who’s able to decide whether I can have access to a particular treatment protocol.  That should be up to me and my family and my doctor.  The problem is that insurance companies interests and mine are mutually exclusive.  And it will not matter whether it’s an insurance company or a government agency making the decision.  Neither of them will care about what’s important to me.  They’ll only care about limiting their cost exposure.

So if that’s what’s wrong, how do we fix it?

We start by carving the population into two groups – those above the poverty level, and those below it.  For the latter, we use the Medicaid (welfare) system as we do now, but we make a few important changes designed to encourage people to become partners in controlling both the cost of care and the lifestyles that lead to higher incidence of illness.

For the latter, we pass laws that do the following:

  • Allow the purchase of insurance across state lines.
  • Provide a new tax for those who do not purchase insurance.
  • Eliminate the ability of insurance companies to decline or cancel anyone’s coverage.
  • Establish approved policy design formats, all of which insure against catastrophic costs, but omit nickel and dime expenses.
  • Incorporate provisions that give patients incentive to make cost-effective care decisions.
  • Allow everyone to establish a healthcare savings account, which would be funded entirely by the reduction in premiums.  Routine care would be paid for out of these accounts.
  • Tell employers they no longer need to be concerned about providing insurance.  Indeed, encourage them to discontinue the practice (backed by penalties if they fail to do so).

So everyone has some prescribed coverage, either the Medicaid plan or a plan you shop for and buy on your own, without need to go through your employer to do it.  Those who balk pay a stiff tax penalty.  No government plan.  What does it do for our economy?  Well, for starters, it will cost the federal government exactly zero.  Medicaid is covering poverty-stricken people now.  This would just make the care better and eventually cost less.  State governments would be able to lay off a bunch of insurance company employees who weren’t doing anything for the economy anyway.  So state budgets are improved.

Some people reading this will object.  Most of the ones who do will be people already covered by one of those sweet deals.  But let me say before you object, that I don’t want to make you worse off.  I want your employer give you the extra money in your paycheck.  So if you choose to use it to buy an extra-sweet policy, you’ll be able to do that.

Or you could just spend the money!

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