Monday, October 12, 2009

No bail-outs for health insurers

Have you heard the one about excessive healthcare spending not making us any healthier? Or about how the per capita amount spent buys little for your average person? (That's $7,100 per person in 2007.)

These statistical analyses are often presented by economists, usually within the context of curtailing or restraining healthcare spending. Hands are wrung. Tears are shed. We are implored to curtail healthcare spending before: the economy is bankrupted, before we all become downwardly mobile, before, well, you fill in the blank.

I'm not suggesting that there's nothing to worry about. I'm just questioning the analytical framework in which these concerns are raised. Because, as you probably know, the economists often blame the sick and disabled and elderly for consuming more than their fair share of healthcare dollars. As Robert Samuelson says today in the Washington Post, "To be sure, extra health care enhances our well-being. Some care extends life and improves quality of life. But the connections between being healthy and more health spending are loose. The health of most people reflects personal habits and luck. They get few benefits from high spending. The healthiest 50 percent of Americans account for just 3 percent of annual spending . . . the sickest 15 percent represent nearly 75 percent."

I've got to say, I think Mr. Samuelson is trying to make me feel awfully guilty for having a disabled child. After all, the sick are sick because, well, they're just unlucky and probably have bad personal habits. Why should the rest of us have to pay for their problems? We don't get any benefit.

Versions of this economic comedy routine have been everywhere lately. This allows people such as Senator Kyl to state with conviction that men shouldn't have to pay for women's obstetric care. It's just damn unlucky that women get pregnant and sex is certainly a bad personal habit to have.

Let me put this in another context. Why do we spend so much per capita on healthcare and get so little individual benefit from it? Do I need to play Mr. Rogers here? It's a beautiful day in the neighborhood . . . OK children, who's at the door? Why, it's Mr. Smith from down the street! Do you know what Mr. Smith does? He sells insurance policies. Boys and girls, do you know what an insurance policy is?

Um, an insurance policy is a shared risk pool. You buy a policy in the event that something catastrophic might happen to you and you might like to replace or repair your home, your car, your health, your individual pieces of expensive personal policy. I have an insurance policy on my engagement ring. In the event that it is lost, damaged, or stolen, I can repair or replace it--provided I have up to date coverage for the adjusted value of the ring. I've been paying a small amount of money annually for this policy. I have not yet lost my ring or had it stolen. Yet I continue to pay this premium. I am not complaining that I am not getting anything for my money. My insurer does not come to my house to clean my ring, for example. Yet I do not consider this unfair.

In most states, auto insurance is compulsory, which means that everyone must purchase a policy that, at least, covers damage to another person's vehicle in the event of an accident. You do not have to cover your own vehicle in Maryland, for example, if you'd like to have a low-cost policy and don't mind not being able to afford to buy another car. The last time I had an accident was in 1999. Yet I continue to pay for a policy that will help me replace my car, or the value of my car, which is currently not a lot. Gosh. You'd think for all the money I've spent on this auto policy that I would get something for it. Someone should detail my car. Or at least vacuum it periodically for me. After all, I'm spending money and getting nothing for it.

Is my car insurance company putting my premiums in a personal savings account for me, so that when I have an accident, I can withdraw the money? No, they're paying it out for other people's accidents. How unfair!

That's why we spend $7,100 per capita on healthcare and most people don't get any benefit from it. They're buying protection against the risk they'll get sick in the future.

But the business model for health insurance has become quite different than that of home or car or engagement ring insurance. If I were an economist, I might start using the word, unsustainable, to describe that business model. It has become very popular for employers to offer health insurance packages that make front-end medical care unbelievably cheap. Most people with health insurance can see their doctor for anything from suspected strep throat to a stubbed toe for about $10-15. That's not what it costs to see a doctor. Who pays for the rest? The insurance company. And all of us through higher premiums. Free antibiotics, anyone? I'm buying!

If you find you have a small ding in your car door, do you go running to file a claim with your car insurer? No. If your front porch steps have a cracked board, do you rush to the phone to tell your homeowner's claims department? No. Why not? You should get something for your policy! Oh, right, it's because your rates will go up. Don't like the fact your rates are going up despite not filing claims? You find another insurer.

My point? Oh, yes. If we've all decided we want to use an insurance system to distribute healthcare, then we need to decide that it follow the basic business model of any insurance policy--risk management. Which means that healthcare is just for the seriously ill and disabled. Just for those pesky catastrophes. If you're generally healthy and you want to see a doctor for a minor illness, you pay out of pocket. And if you don't like that, then don't buy a health insurance policy. But, if you have a serious medical problem, you aren't entitled to any medical care if you don't have insurance. Not even emergency room care. That's the way "health care spending" can be reduced using an insurance model for the distribution of benefits. It's the only way an insurance system can keep premiums lower than they are now.

And, oh, right, if you don't like what it costs to buy a health insurance policy, tough luck, because you don't have much choice. Most people can't find another insurer without finding another job, and, even then, you don't get to pick the carrier.

We've gotten used to the idea, in this country, that insurance can do two things at once: cover front-end medical care at almost no cost, and provide catastrophic care for serious illnesses. Well, evidently, it can't. It certainly can't do that and make a profit.

Does it sound cruel and unfair to restrict medical care only to people with serious medical problems? And to deny any care at all to people without insurance? It does to me. Which is why we should figure out how to appropriately distribute care to the generally healthy, and, also, the sick, the disabled, and the elderly. Say, a public option? It's in the public interest to ensure that workers and retirees remain healthy--fewer sick days, fewer days off to take care of children and aging parents, and so on. Unless we'd all prefer to live in Dickens' London.

While we all dither and argue about whether people who bought insurance policies to cover their medical care should they develop serious medical problems should actually receive that care, the health insurance industry is riding a speculative bubble in order to wring as many profits out of the stock market as it can before the industry collapses. That's one of the reasons that premiums are high and sick people aren't getting the care they need.

Sound familiar? It should, because spec bubbles are a feature of the American stock market. Some of the ensuing busts are minor, and some are catastrophic to the economy. The health insurance industry has gone unregulated for ever and ever. Consumer protections? Bah, humbug, Tiny Tim didn't have them. The industry isn't even subject to anti-trust laws, which means the individual insurers can collude to fix prices and develop mutual exclusions to deny coverage and care--so that none of us can go anywhere else to get a better deal on a policy. And so they can divide the huge pile of cash in a somewhat even manner, like pirates.

It didn't help consumers to hand over $2 trillion in taxpayer dollars to the banks. Loans have not been made and credit rates are rising. Financial institutions rode bad business models right into the ground to make high profits for share holders and top executives. Now their excuse is they need to use your tax money to fix their business model by raising costs to you.

If we adopt the Baucus bill as a model, we will simply pay out hundreds of millions of tax dollars to subsidize and, in fact, bail out an industry that is running a bad business model straight into the ground. That industry will then use your tax money to stabilize their business at a much higher cost to you.

Do not let the government bail out the health insurance industry. Let the government, using your tax dollars, stabilize health care for millions of people in this country by creating a robust public option (and, gosh, I hate the word robust, so you must know I'm serious). And then let's see what any remaining role there is for the health insurance industry.


Dale said...

Brava. Absolutely. I refuse to use the word "insurance" any more without double quotes, in reference to health care. Whatever these strange beasts may be, they're not insurance companies.

I see no way forward without getting rid of them. These "insurance" companies have to go, period. The least troublesome way to do it is to establish a public option. In the face of real market competition, they would simply fold and go under, and they obviously know that, given their desperate responses.

Elizabeth said...

Did you submit this to a newspaper, even the one that you've recently unsubscribed from?

Your writing is so clear and this essay is so excellent -- I wish that the content didn't make me so freaking mad.