Posted on | March 27, 2012 | 3 Comments
Let me try to put the primary issue in context.
Everyone should have access to health care, and access to health care requires people be able to pay for health care. The determination is made that the best way to be sure that you have the ability to pay for health care is to purchase health insurance.
So, everyone should have health care, says our elected leaders. So, how do we do it?
Well, if someone doesn’t have health insurance, or can’t pay, we should require hospitals and doctors to provide the care – at least that’s the thinking. But that costs the doctors and hospitals money. If they can’t make money, then they go out of business and no one gets health care. So, perhaps what we do is let people buy health insurance only when they need health care (evil corporations shouldn’t hold your current ailments against you even though it increases their costs and risks), so pass a law saying you can’t be denied coverage because of pre-existing conditions.
But if you only buy insurance when you need it, then you haven’t been paying into the system previously, and thus the economic model for insurance can’t work, as insurance relies on having enough people pay into the insurance pool who never actually use as much of the cash as they put in, thereby subsidizing those who paid-in but pull out more.
But we’ve declared we don’t like uninsured people who can’t pay, because hospitals are still required to provide a level of treatment, and because those folks can’t afford long term care, they die early. We don’t like that.
So, the government decides everybody should be able to pay and should have insurance, and we will subsidize those who can’t afford it. This raises the demand for insurance, and insurance naturally raises the demand for health services. If you have pre-paid for a service, less a minor buy-in of a co-pay or, for larger issues, a deductible, you are more likely to be sure to consume those services – without regard to price. Thus, demand increases without regard to price (the economists say this demand is inelastic). When demand increases, price increases as supply tries hard to catch up.
Similarly, when demand for insurance increases, price for insurance increases. When government officials determine that everyone should buy a product, they know they are increases demand and that causes price to go up, so now we have to limit the price of what’s now demanded. Limiting the price turns the provision of insurance into a losing proposition – insurance companies would go out of business and then only the rich can pay for health care (though, demand would drop too, thereby lowering cost, but no one seems to think about that). So, to fix the problem government created by increasing demand, it needs to subsidize the insurance system by forcing low-risk people – those for whom it makes less economic sense – to buy insurance.
In short, government regulation creates an economic problem, which government tries to correct by forcing the purchase of a product. The result of which may keep insurance prices down, but will do nothing for prices of actual health care, which will increase as demand increases. But then government will fix that by either capping the prices of certain types of care, or by reducing demand by denying (or allowing or requiring insurance companies not to pay for) certain procedures. These would be your “cost control” or “death panels” (example, you here it today, should Dick Cheney not have been able to get a heart transplant because of his advanced age?).
1. Everyone should have health care.
2. Everyone should be able to pay for it or there won’t be health care.
3. Insurance is a good way to pay.
4. Everyone should have health insurance, even if they are already sick and a higher risk – but not at a higher price that accounts for the higher risk.
5. Health insurance costs too much as demand increases, so cap it and define the benefits so that everyone can afford it.
6. Capping the price means there’s not enough money to pay for all these health services.
7. Make low risk people purchase insurance when they normally wouldn’t so there’s more money in the pool to redistribute to the others.
8. Health care demand increases, because more people have pre-paid for services by buying insurance.
9. Increased demand for health care causes prices to rise.
10. Limit the demand and lower the cost by prohibiting the purchase of certain services in certain cases with that health insurance. (If you are rich, you can probably buy a longer life with your own money.)
11. Go to the Supreme Court and tell them that requiring people to buy insurance is a necessary and proper use of Congress’ power to regulate commerce because, otherwise, it’s other regulations of commerce will destroy the insurance industry.
12. Lose in the Supreme Court, run for re-election arguing that we tried to help, but the Supreme Court won’t let the government force you to buy insurance from private companies, but they’ll probably let us force you to pay the government to provide health care directly.
13. Single Payer.