14 November 2004

[Politics] Health Insurance

The activists promoting universal health care need to acknowledge the real difficulties surrounding health care costs in America. Until they do, the people are correct in opposing such measures.

Universal access to health care is treated, correctly, as one of the ultimate goods that mankind has created. The incredible increase in average lifespan that results from straightforward and reasonably priced access to health care has revolutionized much of the world.

However, in America we're going backwards -- the percentage of the population covered by health insurance plans is decreasing. Reasonably, many liberal activists are concerned about this and want to ensure everyone in America has access to health care. While that's a good idea, it's not practical until we deal with a couple of our fundamental misconceptions about health care.

1. We can't afford to give everyone what's currently defined as health insurance
The majority of the costs in the health care system are not those associated with what we idealistically view as health care. One-half of all the health care costs an American incurs in their lifetime will occur in the last twelve months of life, as health care workers perform frantic efforts to extend life by a few months or weeks.

Both the public and government leaders "are too accepting of the notion everyone should get all the medical care they like," said Paul B. Ginsburg, president of the Center for Studying Health System Change, a nonprofit policy research group in Washington. "I don't think any country can afford that." [1]

Laurence Baker, an associate professor of health policy and research at Stanford University, said, "Really reducing health care costs will mean reducing what we do for patients." [2]

If we want to ever get to a system that provides universal access, we need to strictly definite what we are willing to provide universal access to. Can we afford to provide everyone multiple bypass surgeries? You might think that's a moral question, but actually it's a straightforward financial question (the answer is, "no"). There are things we should provide universal access to because it's such a societal good (setting the bone in your broken arm); and there are things we should provide universal access to because it's by far the best way to lower overall health care costs (pre-natal care is a great example of this).

2. Some things aren't really well-suited for insurance (or, personal responsibility cannot be legislated away)
As Americans live longer and the baby boomers head for senility, we've discovered far too many conditions massive numbers of older Americans will get at some point in their lives. Prostate cancer, for instance, may very well be in my own future: one in six American men will get prostate cancer at some point in their lives [3]. One in eight American women will develop breast cancer [4].

Traditionally, we treat medical insurance like liability insurance: protection against some extremely unlikely, and catastrophically expensive, events. The reason traditional insurance is economically effective is that it replaces a catastrophic burden on a few randomly selected individuals with a relatively low burden on everyone who is covered for the risk. That way, people don't have to maintain economic reserves (i.e., savings) to deal with, for instance, the costs of their car losing its brakes and destroying an art exhibit in a window.

However, with the rates of incidence and huge costs of certain diseases now, we need to realize medicine should be more like a savings account: if you expect to be covered for breast/prostate cancer, you need to save up a little more than 1/6 the cost of diagnosis and treatment for this disease. It's not a low-incidence disease, and 1/6 the cost of one incidence of these diseases is a lot of money. Yet, who else are you expecting to pay for it? The money has to come from somewhere.

We need to face the fact that if we expect to be covered for this kind of terrible disease when we're older (both prostate and breast cancer incidence rates go up a lot with age), we should be paying into a medical savings account of some kind throughout our working years. It just doesn't make sense to run medical costs the way we do now (pay-as-you-go, with everyone who's in the medical insurance pool in a given year paying all the costs in that pool for that year).

[1] Washington Post http://www.washingtonpost.com/wp-dyn/articles/A55301-2004Sep27.html
[2] San Francisco Chronicle http://www.sfgate.com/cgi-bin/article.cgi?file=/c/a/2004/10/11/MNGII96CVP1.DTL
[3] Prostate Cancer Coalition http://www.pcacoalition.org/education/facts_figures.php
[4] Imaginis http://imaginis.com/breasthealth/statistics.asp

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