Health Care and GPS

Why can’t we get from here to there?  Today we have access to GPS to guide us anywhere we wish to go.  Just walking around dodging people glued to their smartphones is indicative there is hardly anyone without GPS.  All you need to do is tell your phone where you want to go and it gives you turn by turn directions.  There’s just one rub, you must have a destination. Even something as wonderful as GPS is useless without a clear end point. This the failure of our present health care plans, whether it’s the ACA or the new Republican  AHCA.  Where exactly do you want to go? Is it universal coverage? We have that already.  The Emergency Medical Treatment and Active Labor Act in 1986 established anyone showing up at an emergency room needing medical care must receive it whether or not they could pay. From that point on we’ve had universal care, just the most expensive and least effective system possible.  Treating a cold at an emergency room is incredibly expensive, but waiting for something to become an emergency situation can be far worse. Without government total reimbursement, we have providers shifting costs to those who actually have insurance.  Up goes everyone’s premiums. This unfunded mandate has resulted in cost distortions without improving the overall access to health care. The first thing then, we have agree we have universal care but we have to make it effective care on a cost-effective basis. Emergency rooms just aren’t going to turn people away and someone will pay.

So how do we do we get to the right  Universal Coverage ? Some favor the Government solution. We’ll call it the Washington resolution.  Government either is the provider of all health care or  the sole payer for services. In the first instance think of the VA. Providers all work for the Government in buildings owned and equipped by government. In the second providers are paid for services by the government at prices it determines. Think medicare. Both are top down operations ,with Elites getting together to decide what’s offered at what price. History has taught us, no matter how smart the people running things are they rarely get it right. If this wasn’t true the Soviet Union would’ve won the cold war. Instead it crashed. Without market pricing to regulate supply, we can’t obtain market clearing prices. Too little capacity and we have shortages leading to long waits. Too much and we empty spaces and under utilized  resources. We in Phoenix are well aware of just how deadly long waiting times can be with the VA horrors.  The right to health care is meaningless unless it is given in a timely, professional and up to date fashion. The people who died waiting at the VA had “affordable”coverage.”  Didn’t do them much good.  Venezuelans have “coverage” but no medicine. Equal suffering doesn’t equate with actual care and we shouldn’t confuse the terms. Medicare and Medicaid offer “coverage” to an ever-increasing number of people, at the same time an ever decreasing number of people are offering to service them. Now we want to add more people? What could possibly go wrong?  Yet, those advocating the top down Government solution such as Bernie Sanders roar, “Medicare for all.” Never mind Medicare will exhaust its reserves in 2028 or sooner if we have a solid recession or two in the meantime. However, with all its problems the Government solution is popular the world over. Most of our NATO allies have gone this route. Europeans since World War II have really taken to entitlements no matter how uneconomic.  Maybe that’s why they can’t spend even 2% of their GDP for their own defense. It isn’t only other countries, our current President, a longtime single payer admirer, just lauded Australia’s Government centered system. It’s easy to see why. Initially it’s  simple to understand and use. You need medical care, just give them your medicare card. You paid something in and you’re entitled to care. Well maybe you didn’t and aren’t. According to Politifact in 2014:

While Americans have indeed “paid in” to Medicare, the amount that today’s beneficiaries have paid in only covers a fraction of their expected costs. The taxes paid by today’s typical beneficiaries will cover just 13 percent to 41 percent of what those beneficiaries can expect to get from Medicare during their lifetime. The rest of what has been “paid in” for their care has come from younger Americans.

How can this be? Again Politifact gives us the answer:

The fact that taxes paid by active workers are supporting today’s generation of retirees is a big reason why some policymakers are concerned about the program’s long-term solvency. In 1950, the average American lived for 68 years and retirees were supported by 16 active workers. Now, the average life expectancy is 78 and just three workers support every retiree.

This was bad enough but since these 2014 stats two workers for every retiree is now in sight. As Margaret Thatcher said of socialism “you eventually run out of other people’s money.”

This is always the negative with Government entitlements. If you don’t believe it google Greece.  Wait a little longer google Italy and France. Then the USA? Well, we can hope that young people continue not to vote. The older recipients will.

A market solution is quite different. Let’s call it the New York solution.  If people are faced with a possible hazard they can’t presently financially handle it can be a catastrophe. A ship owner losing a ship at sea. Homeowners seeing their houses burn to the ground. What do you do? You join with others facing similar risk and buy insurance. The simple principle of insurance is protection against a financially destructive loss. However, one doesn’t pay someone else for what you can pay for yourself. Nobody buys insurance to paint their ship or house. (Why talk of Ships and structures That’s where insurance started).  In the big scheme of things only a small percentage of ships sink, structures burn or people get Multiple Sclerosis, but if it happens to you it’s a catastrophe. In each case the responsible person buys insurance against disaster. Insurance providers compete on price and service for your business based on your circumstances. We understand this with Home or Auto insurance. Normal maintenance whether it be a ship, structure or body, you pay for yourself. Left to normal circumstances, health insurance would follow this normal insurance model. This explains the rapidly growing popularity of Health Savings Accounts (HSA). They simply marry a Catastrophic Policy for the really big risks to a savings account to pay for the small stuff. While not  perfect , it’s closer to normal insurance. In the market solution, competition sets the prices whether it’s insurance or maintenance.

There you have it. You head to either Washington (the Government Solution) or New York (the market solution).  You’re in Phoenix and you want to get to reasonable universal care, but instead you enter a combination of both addresses in your GPS.  Totally confused, you get directions landing you in Montana.  In fairness, there actually already was a glitch in the system, employer-provided Health Insurance. This relic left over from World War II has caused a great deal of the distortion in the health insurance market. Because of wage controls employers found they could attract needed workers by offering benefits, primarily health insurance. For large established employers this gave them a tax favored advantage in acquiring needed employees. No wonder they’ve favored this system to this day. This should-be done away with just on the American principle of “a level playing field.”  By preempting the major part of the health insurance market it stunted and marginalized the normal development of individual and other group markets. Forcing people to get new insurance every time their employment situation changed meant greater than normal turnover or churn. Going off one insurance to another is costly to both insurers thus raising premiums. Employer provided  health insurance by definition isn’t portable. Besides decreasing mobility, the really ugly result was for people leaving an employer for any reason with a costly health condition, the dreaded, pre-existing condition, excluded them from obtaining reasonable insurance. With a far greater churn than Auto or Homeowners insurance, this has mightily contributed to the legions excluded from normal health insurance. Our trip was headed north instead of east from the start.

Still, no one seems to realize they’re broken down outside of Butte. The ACA leaves millions of Americans uninsured.  The Republican replacement, AHCA, would prospectively cover even fewer people. Worse, without a massive infusion of cash the ACA will simply collapse. While stating people are buying insurance, it conforms to no known principle of insurance. First it forces insurance companies to insure already sinking ships, the pre-existing conditions, and then forces then to cover what is normal maintenance. (Essential Health Benefits such as doctor visits). This makes  the insurance far too expensive for the healthy, especially the young, so they pay the penalty rather than buying grossly overpriced insurance. Unless Uncle Sam writes big checks to insurers for this non-insurance insurance, it’s simply unsustainable. Did supposedly smart people really  give this much thought? Well, maybe they did with the idea people would be so upset with this, they’d embrace single payer. A really roundabout and expensive way to Washington. Oh my, now even we’re dealing in conspiracy theories.

While touting market savings, the Republican AHCA makes only small gestures toward actually getting to New York. Overall it’s hard to see where it actually is any improvement over the ACA and that’s a really low bar. Buying insurance across state lines and throwing money endlessly into state high risk pools while covering even fewer people won’t get you to the Big  Apple.

So how to we get out of Montana and back on the road to New York? Set up a system where everyone personally has real insurance and a method to pay for maintenance. To do this we have to attack costs where they really reside. Insurance coverage must be seamless from birth, thus ultimately making pre-existing conditions a thing of the past and reducing costly insurance churn  Don’t make insurers cover “sinking ships”  or maintenance items. No matter how necessary toilet paper is in a home (just ask the Venezuelans) nobody thinks it should be provided under your homeowners policy. Open the health market to any reasonable provider no matter where they’re located. Make it possible for the vast majority of provider transactions to be done on a cash basis with no credit risk.. This would lower  provider costs while birthing a critical mass to foster maximum innovation. This is the way you actually cut costs. Unless you do it, you’ll stay lost in Montana. If we do, we can know the price of getting back on the right road to our destination. Those that benefit from our being in Montana will surely object and support the illusion you’re near New York. No one likes to admit they’re wrong but it’s the first step to find the way.  “Dave’s Plan” we’ ve outlined here starting in 2014 gives you an actual road map of how you can get to New York. Just open it. (Dave’s Health Care Plan)

Not only will Dave’s Plan provide health care, it answers, P.J. O’Rourke’s questions on proper policy, “Does this increase the dignity of the individual?  Does this increase the liberty of the individual? Does this  increase the responsibility of the individual?” With personal portable health insurance and enhanced personal savings, Dave’s plan readily meets his criteria.

 

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