The Real Cost of Health Care Reform

The Real Cost of Health Care

Like many Americans, I’ve followed the debate on health care reform over the past year.   With every plea for its passage, came another moving story of a fellow citizen’s suffering.  At every turn, with every speech, the case for reform was made.  I listened, learned, and became convinced of its necessity.  Now that H.R. 3590 has been signed into law, it’s important to ask how the actual legislation will impact our lives.

One of the reforms was, “You should never go broke from getting sick.”  A noble sentiment to be sure.  Born out of countless uninsured Americans struck by catastrophe.  Only later to be sent the bill.  Oftentimes, many bills.  Piled up on their kitchen table.  And as I watched each shell-shocked person grapple with the magnitude of suddenly owing hundreds of thousands of dollars, holding the balances up to the camera, along with their contempt, I was left to wonder, what impact will health reform have for them?

According to the legislation, insurance companies will be obligated to offer coverage to every citizen.  They can’t drop anyone for simply getting sick.  And there will no longer be lifetime benefit caps that are generally exceeded when serious illness or accidents strike.  So far so good.  But, you may be wondering.  Those bills for the hundreds of thousands of dollars.  Where will they go now?  Or more precisely, to whom?

Not surprisingly, to everyone else.  In spite of generous promises, health care in America is still a business.  And we all know, there is no free lunch.  The question is, how will the market respond?  Will the individual mandate add enough healthy people into your risk pool to mitigate the surge in benefit outlays?  And to what extent can 3rd party insurance exchanges really drive price competition when the cost of the underlying services are rapidly rising?

This last question is the fundamental disconnect.  There is currently no connection between purchaser and price.  If you or your loved one has a brain tumor, you aren’t going to shop around to see who can perform an MRI the cheapest.  If you’re in a car crash, you aren’t in a position to call around and find out which vascular surgeon will save your life the cheapest.  In fact, the opposite is true.  Because we pay a 3rd party an insurance premium, and since it’s not our money we’re spending, we feel entitled to the best, regardless of cost.  The best doctors, the best technology.  And therein lies the rub.

We have the best doctors, the best technology.  However, this disconnect of market forces I believe to be the primary cause in the unsustainable escalation in provider prices.   While this legislation has attempted to apply pressure on insurance companies, it has done little to control the actual underlying costs at the provider level.  And while it is hopeful that moving many uninsured out of expensive emergency care will help, I have a feeling they’ll still find a reason to bill $1,200 for a toothbrush.

This lack of real change is due to a classic political problem.  It’s easy to hand out new benefits, and demonize the system.  But it’s politically untenable to make substantial cuts.  To ask specialists to make less.  Or hospitals to operate on less.  Or big pharma to profit less.  Which is why every other developed country has wisely adopted a nationalized system.  We have to ask ourselves as a country, are we willing to sacrifice some quality to gain long-term sustainability?  Are we willing to consider structuring the market so it incentivizes cures over treatments, or general practice over specialty fields?  Can we get by with a $100,000 MRI machine instead of a $1 million dollar MRI machine?  I think we have to.  Or at least have an honest conversation.

  • I believe if we mandate set reimbursement prices, like Japan and others do, manufacturers will find a way to supply providers with tools, that may not have all the bells and whistles, but will get the job done.
  • If we limit private insurance to secondary supplemental markets, we can cut the profit and overhead out of critical care.
  • And if we choose a government run single-payer system, and make it no-charge and available to all Americans, the risk pool opens up from your company, to the entire country.

Why should an employer even be obligated to provide health insurance?  They don’t provide car insurance.  Due to rising costs, this American “benefit” has led to stagnation in wages.  And should be decoupled.

And while many people can go their entire life without being in a car accident, statistically speaking every single person will die.  And most will face some medical issue that requires treatment in their lifetime.  So if injury, death, and disease are inevitable to the human experience, why do we think an insurance model designed around accident-based risk even makes sense?

Still, I am proud to have voted for our president.  However, when I look at the overall reform the administration selected, I am disappointed.  I wish we would have taken the approach that Taiwan chose.  They gathered a panel of experts to study all of the major health care models around the world.  They selected the pieces that worked, and addressed what didn’t.

After all is said and done, with $1 trillion dollars in new deficit spending, I’m glad the uninsured can now find coverage.  But I’m afraid the real cost of health care reform was this.  With a once in a generation opportunity for transformative change, instead of fixing the fundamental problem in America.  We merely subsidized it.

And unless we’re willing to have a common sense discussion on who will need to sacrifice for the greater good of society in the interest of sustainability, the health care we all want, may not be around when we need it most.

Perhaps one day, our children will get it right.

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