Similar to Dex, I deal with health care financing issues on a daily basis. In fact, I’m currently drafting legislation regulating HMO’s and their finances. I’ve given these issues lots of thought.
Here’s my view of the health care system. Health care for the American people will cost a certain amount each year – say X. This amount is pretty much set in concrete (utilization review et al may have a minor effect, but not much).
So, for the whole of our society, we have to pay $X per year for health care. As I see it, there are two questions.
First, how much is X, and what causes X to increase year by year. In this regard, I haven’t run across too many physicians, hospitals or pharmeceutical companies which are losing money these days. Many (too say the least) are very profitable. Perhaps these entities are entitled to these profits. I don’t know. I can only suggest that profit is a substantial percentage of our hypothetical “X”. If we are interested in reducing X, perhaps profit could be reduced. I know we’ve all heard the sob stories about how hard physicians have it these days. I only wish the ABA was as good a lobby as the AMA…
Second: For any given year, X is a fixed number. The only question is how do we divide X among the members of our society. We have various mechanisms to do this: taxes which fund Medicaid and Medicare programs, insurance premiums which fund the bills paid by health and workers comp insurers, and salaries which fund self-insured employers health costs.
My point is simple – As a society, we have to pay X each year for health costs. How do we allocate this costs among the various sources available?
For instance, in a single payer system, the costs are all allocated to the taxpayers. All of X is paid through taxes. For a middle class taxpayer, this may not be so bad, considering that we currently pay most of X through our health insurance premiums, taxes allocated to Medicaid/Medicare and salary offsets to pay for our employers’ health costs. However, the concern is that a single payer system does not necessarily include a motivation for providers and participants to reduce X. In fact, single payer systems may induce the public to over-utilize the healthcare system, thereby artificially increasing X. This results in arbitrary limits on utilization, including service denials or delays (we’ve all heard the horror stories about folks in other countries limbing around for decades while they wait for a hip replacement.)
So, what’s the alternative? The commercial system, whereby the long term pro rata costs of an individual’s health care are supposedly approximated in his insurance premiums. The problem with this approach is that the commercial insurer is in business to make a profit. How do they acheive this? By reducing the pro-rata cost of health care provided to each premium payer to less than premium paid.
As an aside, I will note at this point, that this is very, very difficult to do – at least in my local market. It is virtually impossible for health insurers to be both competitive and profitable in my market – which helps to insure my continued employment, thankfully.
How do health insurers make a profit off health care? Reduce utilization through close monitoring of providers, shrewd underwriting of health risks (not possible here – we have guaranteed issue), or advantageous contracts with providers. None are easy to acheive without offending a group which is highly influential to the insurer’s future fortunes. This either results in financial problems for the insurers, consumer complaining about unpaid or denied claims or irate physicians.
What to do? How do we equitable divide X among the various elements of our society while still including the free market motivations to minimize costs and inefficiencies?
Hell if I know.
I can only hope there is some happy medium between the two currently available extremes. Since X constitutes a large percentage of our nation’s economy, this is a vital question which we need to resolve. Our society’s demographics radically worsen the situation. We’re an aging population (happily, I’m on the young side of the bell curve, but that’s completely irrelevant). Because a larger and larger percentage of our population is older, X is rapidly increasing. Expensive technological advances only enlarge X.
It’s a difficult problem. I know I’ve offered no solutions in this extended monograph (Gee, I can’t help myself. You offer me the opportunity to hold forth on something I actually know about and I contract a severe case of the verbal trots. Oh well.
DoctorJ, based upon your profile, I should be able to provide you lots of help in your research project, considering I’m about 25 miles from you. I can either provide you with lots of info first hand or hook you up with the right people. Send me an e-mail.
Plunging like stones from a slingshot on Mars.
