October 14, 2009

Post 600: Some thoughts on Health Care

I'm going out on a limb to run a few thoughts up the proverbial flagpole on the whole Health Care issue. These are in no particular order -- just consider them theses for thought, rather than a list of credenda:

It isn't really about health care (the provision of medical services), it is about health insurance (handling the costs of health care), and who should manage it.

The best health care in the world is no good to you if you can't afford it.

There is no "joint ownership of the means of production" because health care isn't a product, but a service. Insurance is also a service, though it has been more efficiently monetized.

Health insurance, by its nature, is also "socialized" in that it is a cost-sharing mechanism in which people pool resources through "premiums" so that there is a spread of cost. Whether the money is going to the government or to an insurer is not really relevant, except to the extent that administrative costs or profit come into the picture. The difference between insurance premiums and taxes lies largely in their relative lack of proportionality to the capacity to pay.

Since almost everyone either gets sick or injured at some point in life, a system to share the cost of health care is logical.

In insurance, a portion of the "premium" is eaten up by the system -- in administration or profit (on top of any administrative costs or profit to those actually providing the service of health care). Money that could go to patient-care is actually going to insurer-care. This actually adds to the total cost of health-care, and the burden on all who are insured, rather than lessening it.

As I note, these are just some thoughts that have been rumbling about my mind for the last few days. Frankly I don't see what all the horror about socialized medical care is about, except as a kind of "religious" issue for those opposed to anything "pink."

Tobias Stanislas Haller BSG


Fr Craig said...

TH - within the context of what America has now, you are correct. I think the leap that we need to make is that health care is a 'human right.' Insurance is about providing for unexpected large costs. Fact is, as you note, we almost all will have large costs (especially near death) - thus these things aren't unexpected, neither are sick kids, high blood pressure, etc. Our free market friends are simply wrong that medical services can become competitive, and how does an ignorant lay person know how to shop for technical services/drugs? universal coverage, combined with serious preventive care and education will reduce our total spending as a % of GDP. As a society, I think we need to decide that this - health care - is another 'cost of doing business,' like the military, highways, police, etc. While I think the current (apparent) bill is a big step forward, it still rewards the profit making insurance companies, most of whom pay their CEO' s multi-million dollar salaries...

Erika Baker said...

Isn’t the real question what happens to the money raised? The main difference is between schemes where most of the profits have to be distributed among shareholders in the form of dividends, and schemes where most of the profits are handed back in the form of improved healthcare and access to treatment for those who could otherwise not afford it. It has very little to do with capitalism and socialism per se.

In Britain we have a dual system of a National Health Service and private insurers and you either go to an NHS hospital or a private one.
In Germany, for example, there is no state system but the Government subsidises the basic compulsory insurance needed by everyone. Private insurance then adds layers of additional luxury, speed of treatment in non emergencies etc. but tends to use the same hospitals and doctors, thus ploughing profits back into the same hospitals that are also used by those with basic insurance.

It’s not who runs the system that is important, but what kind of system is being run.

Post 600? Congratulations!!

klady said...

I agree that the socialism scare is irrational but I’m not sure if it’s accurate or helpful to characterize private insurance as shared risk-taking with a profit layer in administration. First, insurance historically has been all about profit, based on playing the odds based on calculated risk – looking back to cargo insurance and the kinds of ventures still existing in the Lloyd’s of London market. In the U.S. there were some movements around the turn of the 20th century such as the Grange, which created more socialized insurance designed to serve the people who contributed the premiums, and around that time a number of states passed legislation designed to prohibit outright gambling (for example, requiring that the person or entity purchasing insurance has an “insurable interest” in property so they are not gambling on the destruction of someone else’s property – same thing with life insurance, whereas once anyone could insure anyone else’s life, including slaveowners insuring slaves, laws were passed limiting who could purchase life insurance).

But whatever cooperative ventures there once were in insurance, most companies today no more resemble them than Lehman Brothers or Bank of America resembles George Bailey’s Savings and Loan. I recall a talk at an industry function about ten years ago when a CEO of a major insurer told us that their profits no longer came from charging customers premiums but rather on how the companies invested those premiums. Consequently, the culture of the industry had shifted over the years so that there were little incentives or rewards for pleasing customers, since corporate profits depended so little on premiums or customers shopping for better premiums. He claimed he wanted to change that, but I suspect that even with investment income hit by the crash of the financial market, the culture has not changed much since then. The fact that AIG was at the center of the financial crisis, reveals how deeply embedded the insurance industry is in all sorts of other kinds of business – banking, real estate, etc.

The bottomline is that health insurance in the U.S., like other kinds of insurance, is from top to bottom driven by the desire to make profits, in theory to attract shareholders but also to create short-term performance data that supposedly justifies high CEO compensation. Insurers rake in big premiums, sit on the funds as long as they can, and have their employees compete to deny and delay the most claims. Meanwhile, the system works hand in glove with for-profit health care providers and the pharmaceutical industry. Premiums and costs spiral upwards as all charges are based on single events in treatment, which leads to over-utilization of high tech equipment and specialists and less time and compensation for visits with general practitioners. For profit health clinics that invest in the newest equipment and make frequent use of it rake in profits in areas where much of the population is insured whereas public or not-for-profit institutions struggle, especially those located in areas where much of the population is uninsured or underinsured.

The impact of the profit-motive on health care institutions and providers is enormous. (If you haven’t read the New Yorker article comparing health care in two cities in Texas, it is a great illustration of this - http://www.newyorker.com/reporting/2009/06/01/090601fa_fact_gawande). The crisis we are facing is not just about who pays but the kind of care we all get because of how care is paid for influences that care. I’m not sure what is needed, but I fear that whatever we get will not be radical enough to truly cut costs and improve care. At the very least, we need to make health care available to all and not do so by penalizing the middle class and creating even stronger monopolies by existing health insurers and providers. Whether our politicians have both the knowledge and the integrity to do the best for the people as a whole, rather than serve the corporate interests, remains to be seen.

Tobias Stanislas Haller said...

Thanks, klady. Actually I had Bailey's B&L in mind! And I know we are far from that, and that that is part of the problem: insurance is now an industry. What I'm getting at though is the very idea of insurance as anything other than a cost-sharing mechanism is inherently problematical, especially when it comes to matters that concern everyone, like health and life. I find the whole concept of health insurance and life insurance problematical -- about as rational as a lottery in which the stake-holder is not only holding the stakes but takes a significant cut!

I can understand insurance in areas where the risk is small but the costs high: for instance, fire insurance. Few houses burn down, but when they do it is catastrophic. But to build an insurance system that covers basic needs -- I'm thinking of a twice a year trip to the dentist, for instance -- surely drives up the cost of the trip, because part of it is eaten up in the profit to the insurer. Perhaps the only answer is a system with high deductibles for "ordinary" health care (largely preventative) combined with assistance for the poor in this regard, and coverage for the truly catastrophic illnesses. Or flat out socialized medicine, which seems to work fine in any number of places. But the odd combo we've got seems to partake of the worst of socialism and capitalism!

Paul Davison said...

Have you seen Reid's The Healing of America? He says that the first question needs to be do we believe that everyone should have real access to health care. Until we figure that out, it's almost impossible to decide how to fix our mangled mess.

Tobias Stanislas Haller said...

Thanks, Paul, for the reference. I've not seen it; but it is a fundamental question. I fear that many Americans suffer from a kind of Deuteronomic attitude towards poverty -- the poor must be doing something wrong, and poverty is either a natural outcome of their weakness or a divine retribution -- kind of a wacky misapplication of Calvinism. This may lie behind some of the irrational opposition to social programs. How such notions can be seen as in concert with the Gospel escapes me; as does the put-down of "the social Gospel" in such circles. But you've tagged it right -- that attitude is one of the many basic obstacles to reform, as it favors a "them that's got" and pay as you go mentality.

Doorman-Priest said...

You are sounding dangerously SOCIALIST. Apparently this is a BAD thing.