I have a dream (for health insurance reform)

In my fantasy world, we’d all realize that society reaps significant benefits when people look out for each other.  Universal health care insurance is one of the core features of that world.  A system that guarantees adequate health care to everyone provides solace to those who crave security and helps with risk management for those who take the entrepreneurial chances that drive progress for us all.

Health care isn’t free.  No matter what health care system we choose, it behooves us to make that system as inexpensive as possible while still providing quality care.

The most “efficient” system for funding health care is one where you pay for your health care when and if you make use of it.  You’d only pay for the care you need, and you’d pay the provider directly, avoiding all the overhead associated with third-party payments.

That’s fine if you’re healthy.  But what if you need an expensive procedure like heart surgery, or you have a long-term ongoing expense like kidney dialysis?  Few individuals can assume the risk of having to pay cash for something like that.  So we have insurance, which allows us to pool the risk and spread the costs around.  Everyone in the insurance pool pays into the system regularly, whether they need care or not, but their liability is covered in the event medical care is needed.

The most effective insurance pool is one that includes everyone.  Anyone without insurance is unlikely to be able to pay for their care themselves, but we don’t let people die because they can’t pay, so the rest of us end up paying somehow.  If we had universal care everyone would pay in to the system, distributing the costs more evenly.  The people who are currently uninsured probably have less money, so they’d put in less than the rest of us, but whatever they put in is more than they’re paying now.  Maybe you’d pay a little more, maybe not.

Even if you do pay more, for that additional money your risk of losing your health care goes away. Without universal health care, if you lose your income or if you need to change your insurance carrier and you have a pre-existing condition that the new carrier won’t cover, you lose.

Then there’s the morality of helping your neighbor in need.  Maybe you believe that everyone should always fend for themselves.  You may think that “handouts” for the poor, like welfare or free health care for the poor, just help keep them poor.  If you believe that, you probably have the care you need, at least for now.  Be careful though.  Karma can be a bitch.

The most effective way to fund basic health coverage for everyone is by a government-managed single-payer system.

Moving to a government-managed, single payer system won’t change the nature of insurance services.  Insurance does not drive health care investment or improved medical techniques.  It’s the desire to profit from the desire that people have to live longer, healthier lives that drives medical progress.  Insurance is just a way of managing risk.  Insurance programs actually resist paying for new, “unproven” treatments, since they’re often initially more expensive and both public and private insurance systems have an interest in keeping costs down.

There are good reasons why the government can do a better job of managing our health care dollars.

First, you have to discard the idea that a private organization is inherently more efficient than a government organization.  Both types of organizations are made up of people.  On average, people are the same, smart or stupid, hard-working or lazy, friendly or cranky, whether they get checks from Uncle Sam or from Aetna.  There are no management secrets unique to one side or the other.

The main difference between the two types of organizations is their goal.  Managers of a public health insurance plan strive to perpetuate their jobs and those of their political bosses by maximizing the perceived health care benefits for the voting public.  A private insurance company’s primary goal is to generate a profit for the owners of the company.  That may involve providing a service to their policyholders, but only to the extent it helps make money.

You can argue about how effectively either group accomplishes their goal.  You can’t argue that removing profit from the equation will save money.  According to Fortune Magazine, the health insurance companies in the Fortune 500 had a 6.2% profit margin in 2008.  They also pay significantly higher salaries to upper management.  Private insurance overhead and profits eat up 20% and more of health care premiums while overhead for Medicare, a government-run insurance system (with no profit) is closer to 3%.  Eliminate the profit and the high salaries and you can save billions of dollars.

On top of eliminating profit, if you change health insurance to a single-payer system, you further increase the efficiency of the health insurance system.  If one organization processes claims, that eliminates an enormous amount of duplication of effort on the part of the insurance industry.  Providers will only need to deal with one set of claim processing rules, so their job gets easier (and cheaper).  And there’ll only be one set of rules for coverage, making it easier for providers to advise patients and easier for patients to understand the system and make it work for them.

The only downside is that “efficiency” for the most part means “fewer people.”  The health insurance industry employs about 444,000 people.  Many of those people will lose their jobs in a transition to a government-run, single-payer system.  Some of them will be able to find work with the public insurance system, but most won’t.  A sudden switch to a public single-payer system would be traumatic.  That’s why a reform plan that calls for adding a public option to the existing stew makes more sense.  As long as the public option is unfettered by regulations designed to protect existing systems, the elimination of profit gives the public option a natural advantage that will over time increase its market share until we get close enough to a single-payer system to make the final transition relatively smooth.

Private insurance companies can still provide supplemental, “gold-plated”, insurance to those who want it, but that would be a much smaller industry.

Insurance is only one part of our health care costs, but it’s the low-hanging fruit for reform.  Once we get insurance straightened out, then we can look at other pieces of the puzzle, like drug and equipment prices, and fees for hospitals and practitioners.  A single, universal insurance system will have more leverage to manage those costs.  Who knows, maybe along the way, people will even begin to take responsibility for the parts of their health care they can control as individuals.

I want to live in a society where we work collectively to help each other, not one where the haves leave everyone else to fend for themselves while they strive to have even more.  Government is our main tool for collective activity.  Many Americans see the idea that a government program could be more efficient than private industry as sacrilegious.  And no one ever wins a religious argument.  There’s a cultural bias towards individualism that we need to overcome before we can look objectively at health insurance.  But if we succeed in making the discussion about using our wealth as effectively as possible to provide the best health care for everyone, and not about communism, socialism, capitalism, or any other “-ism”, it’s pretty clear that universal, single-payer health insurance is the way to go.

Let’s make the fantasy come true!