Wednesday, September 09, 2009

Healthcare Coverage: Not Explained

I was recently skewered on FaceBook for mocking a meme in which people all post an identical set of obvious statements that appear to demand universal health coverage. The pitchfork-wielding rabble (mostly my own family) objected to the fact that I decried their mindlessly jumping on a bandwagon rather than expressing a considered opinion, and I decided that if I were to maintain my moral high ground, I had better think hard about what I think about health care. And here it is:

I don't know.

The opinions expressed on FaceBook, that no one should die because they can't get healthcare and that no one should be bankrupted trying to pay for medical treatment, are so obvious as to be meaningless. Why don't we just throw in that we shouldn't kill each other, litter is bad and mean people suck? No one bothered to question WHY people can't get healthcare (yes, I know, it's too expensive - we'll get to that) or how it got to be so expensive in the first place. And not one single person I've seen on FaceBook has offered any kind of reasonable solution.

Because they can't.

The reason they can't, in my mind, boils down to the fact that the U.S. has turned health care into an economically irrational system, and fixing it involves changing so many other connected things that it's just too huge. Liberals say that if we just legislate mandatory coverage, that'll fix it. It won't. Conservatives say that if we just give taxpayers more money in the form of tax credits, that'll fix it. It won't.

Econ 101

In a rational economic system, if you purchase a product or service, you pay for it. If you use more of a product or service, you pay more. If I want ice cream, I have several choices of varying quality and cost, but I pay for my own ice cream. If I want more ice cream, I must pay more money to purchase it. I can maximize my intake of ice cream by finding the lowest price available, but I'm still paying for it.

We do a lot to get better prices - we join "membership" stores like Costco that negotiate prices from manufacturers or commission their own lines of products to sell at a discount. We travel to areas of town or even to other countries to purchase goods less expensively. Or, as many of us are learning lately, we just do without. I don't really need ice cream, and if it's a choice between ice cream and actual food, I will put the ice cream back on the shelf and walk out of the store without it.

Statistics and Probability

There's another sector of the economy that's only partly based in rationality. It's the gambling sector (or, if you're actually employed by that sector, you can remove the "bl" and call it the more genteel "gaming"). The rational part is the casino, which has structured all of its games around mathematical realities and stacked the odds in its favor. The irrational part belongs to the thousands of casino customers who wander in and plunk down hard-earned cash on the off chance that they might get some of it back. There are tons of people who can tell you all about their systems for playing blackjack or craps or whatever their game of choice is, but nearly all of them have lost more money in their lifetimes than they have won.

The thing is: insurance is gambling. Insurance is me betting that I'm going to get sick, and my insurance company betting that I'm not.

Go back up two paragraphs and see what I said about the irrationality of gambling. Big business only gambles when it can stack the deck in its favor, and insurance is big, BIG business.

There are two ways that insurance makes money in this gamble: the first is the way they always have - by spreading the risk over large populations. Most people today get insurance from their employers, and most working folk are generally healthy. Healthy enough to work, at least. Here and there you might have someone who becomes terribly ill or who has a spouse with an illness, but when you average that cost out, the insurance company is still ahead. In private insurance (the kind you have to buy when you don't work for a large enough employer), the way they make their money is by stacking the deck - by excluding people who are actually sick.

So, if working-age folks are not the ones who are consuming most of the healthcare, who is? The very old, and the very young. If you've got kids, you know that you have to drag them to the doctor for shots and checkups and injuries and to pull things out of their never ends.

But caring for young children, even those who are critically ill, is nothing compared to caring for the elderly. And the elderly don't work. Medicare was established to take care of the medical expenses of the elderly, but Medicare doesn't pay for everything and doesn't cover at 100%. If you're old and sick, and on a fixed income, you're a fool if you don't have some kind of supplemental policy.

So, what we've learned is that the people who use the most healthcare in this country are NOT the people who pay for it.

One of the outcomes of this disconnect is that we as consumers end up leaving a lot of our medical decisions in the hands of bureaucrats. My husband went to the doctor for a blood test, and ended up having tests that he didn't even need, just because his insurance said he was "entitled" to them. Doctors aren't paying attention to what patients need, they're paying attention to what they're going to get paid for. And they have to, because thanks to our byzantine system of medical billing where every medical procedure generates a ream of paper from the insurance companies, most patients wait 90 days before paying a medical bill, and most doctors are carrying ~40% bad debt.

My husband didn't need those tests, but the doctor didn't tell him that and did them anyway because he could bill for them. And you paid for it.

And that's just medical procedures. You all know about the whole pharmaceutical problem, right? About how pharma companies change their formulas constantly to keep their patents fresh so that generics can't undercut their market share? How about the more simple problem of how many doctors are spending so much time with pharmaceutical reps that it cuts into the time they have to spend on patients? Or the amount of money spent on ads for drugs that no one really needs?

Okay, geniuses - have at it. How do we fix the disconnect between paying and getting? How do we make sure that those who need it can get it, and that those who don't need it aren't given it anyway and charged for it? I want JUST ONE of you FaceBook memers to tell me, given the economic realities, how do we fix it?

Putting platitudes out to your social network may make you popular with other like-minded folk (and herds of sheep do tend to be like-minded), but they solve nothing. Only thinking hard and then taking action solves anything.