Connecting Healthcare Costs and Healthcare Consumers
It's a seemingly simple solution to a nationwide problem: if people do not have health insurance, just require that they buy it.
Yes. It is seemingly simple. That's why most of the Democrat candidates for President, one of the Republicans (Romney), and an ever-growing list of states are considering the idea. It's so simple -- if people don't have something that you want them to have, just force them to buy it. The power of government is a wonderful thing.
Of course, there are a few downsides.
But [Massachusetts] is discovering that making health insurance mandatory is easier said than done. It has spent the past year dealing with questions about how much basic coverage people need, and how much they can be expected to pay. (The poorest residents receive free or subsidized coverage.)
Step 1: Require everyone to buy an expensive, all-inclusive healthcare plan. Step 2: Give government handouts to everyone who can't afford to buy the expensive, all-inclusive plan. People of all income levels will be using services that they don't directly pay for. Worse, many people will be using services that they don't even indirectly pay for. This sounds like a fantastic way to keep prices down.
Who are all of these uninsured anyway? And why don't they want health insurance?
Almost half of the roughly 400,000 uninsured people in Massachusetts are single males, and many young men think "health insurance is for sissies," Mr. Kingsdale said. Because young males are generally healthy, adding them to the pool of insured would most likely reduce the average cost of coverage over all, given that this particular group is not liable to need expensive treatment.
That sounds like an implicit tax on young males. They're being forced to buy insurance just as a way of getting more money into the pool. That money can then be used to be for treatments for all of the chronically ill and elderly in the pool. Why would any young man want to be part of such a scheme?
A low-premium, high-deductible health plan (combined with a Health Savings Account) would be a far better option for these men. Instead of blowing all of their money on premiums, they could be saving it up for the next 10-20 years. When they do need medical care, they could pay for it out of their savings, rather than out of a common pool that other people are forced to pay into.
Indeed, the problem with healthcare isn't that too few people have it. The problem is that the people who do have healthcare are completely insulated from the actual cost of their care. How much did your last checkup cost? Do you have any idea? How about your last prescription? Other than the copay, do you have any idea how much it cost? Was it the most cost-effective prescription possible or would a different drug have been just as effective with a cheaper price tag? Almost no one knows the answers to the questions.
Healthcare costs are widely variable. And more expensive doesn't always mean better.
In a Pennsylvania government survey of the state's 60 hospitals that perform heart bypass surgery, the best-paid hospital received nearly $100,000, on average, for the operation while the least-paid got less than $20,000. At both, patients had comparable lengths of stay and death rates.
Still, the Pennsylvania findings support a growing national consensus that as consumers, insurers and employers pay more for care, they are not necessarily getting better care. Expensive medicine may, in fact, be poor medicine.
"For most consumers, the fact that there is no connection between quality and cost is one of the dirty secrets of medicine," said Peter V. Lee, the chief executive of the Pacific Business Group on Health, a California group of employers that provide health care coverage for workers.
It's not just that there's no connection between quality and cost -- there's no connection between anything and cost. A monthly premium disappears into a black hole. At some point in the future, healthcare services may or may not come floating back through the black hole. No one understands how or why different services are covered by their plan or what the relation is between the cost of their plan and the services delivered by that plan. All they can see is that each year the amount of money thrown into the black hole gets a little bit bigger.
Is it any wonder that people are dissatisfied with American healthcare? Worse yet, none of the reform proposals on the table address this fundamental disconnect. Rather than improving transparency, most of their reform plans simply aim to get more people to throw money into the black hole. That's not thinking different on healthcare, that's just following the same broken formula over and over again. Insanity.
The best way to lower prices, increase transparency, improve quality, and deliver higher quality services for lower prices is to make consumers directly responsible for paying for healthcare. Third party payor setups will never be able to deliver a great service at a low price. As long as the person paying for care and the person receiving care are different, true satisfaction will never be achieved.