05
Jul
08

Medical Economics

The subject of health care is not an easy one. I made a recent post here regarding how doctors in Texas are bailing out of Medicare participation. And regular contributor Donna made a comment that highlights another aspect of the dilemma.

Medical care has a cost; a high one, at that. And those costs must be bourne. If we agree that health care is an entitlement, that everyone, regardless of earning, station, or capacity must get, then we have to come to grips with some economic realities.

Since we would be in agreement that everyone gets care, then we would have to figure out a way to increase the funding base. More people would have to “pay up” so that there would be enough funds to cover the costs. The obvious place to get this money would be from a payroll tax. A few problems with this…

  • Nobody likes increased taxes
  • People who paid the taxes but didn’t use health care (the healthy ones) would be angered
  • People who used the services but did not pay the tax would be looked upon as freeloaders
  • People would come up with novel means to avoid their “fair” taxes (dodging taxes in national health care Denmark is a national sport)
  • The bureaucracy required to administer this new social security would divert funds from health care to more government employees
  • Since government would be taking over the whole “insurance” scheme, what to do with all those employees in that industry, their assets and liabilities, the stockholders in those companies…

And other issues would become evident as the program grew. The first, and possibly ickiest would be “can you provide unlimited services for everyone?” And, of course, the answer is no. Actuarial tables would be developed to determine what combination of age, previous conditions, probability of survival, contribution to the system, etc. would result in the dispensing of what care. It would be highly likely that a 93 year old man with a history of health maladies would simply not qualify for that life extending kidney transplant “on the system”. And what if “the system” provided that you or your family could pay extra, privately, to obtain health care beyond what was provided? Wouldn’t that cause the same thing all over again… Care providers opting out of “the system”… So you eliminate an option B situation and condemn that man to death, even if there are ways and means to continue his life. Icky.

And what of the opposite end of the spectrum? The micro-premature? Statistically, they have very little chance of survival and if they do, they are certain to exact a tremendous health care toll. A bad risk, a poor spend. Would a national system provide a “save them at all costs” approach? Probably not. A piece of paper or a clerk in some office deciding that a life is not worth living. Not so much, I have family that is currently beating those odds. Having access to the best that health care can offer (and not the dictated mediocrity) has meant that they live. And I am thankful for this. But I know that these lives would not be here under a national plan. And that brings up another icky ethical dilemma.

Which is better? That all receive the same mediocre standard of care or that some get better care than others simply because they can buy it? Does money become the true litmus test of who lives and who dies… who suffers and who is relieved? My neighbor recently spent over $2,000 to treat his pet cat. There were IV’s and pills and feeding tubes. There were many visits to the vet. The $2,000 he spent on the cat was far more than some folks will spend on their health care in a decade. Did the cat deserve better care than an indigent simply because my neighbor could afford it? And if he is free to spend $2,000 on a cat, should he be able to kick in that same $2,000 for his own care above and beyond “the plan”… and thus starts the whole cycle again.

I have no answers. Just a lot of questions.

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4 Responses to “Medical Economics”


  1. July 5, 2008 at 12:59 pm

    One thing I have not seen adequately addressed is the historic role of insurance (whether private or government) in the ever-increasing cost of medical care. In your previous post you mentioned doctors getting paid with goats, sheep, etc…, suggesting that was a high cost to the patient. You may well be right, but it was what the patient had, so doctors accepted it.

    Then, doctors and hospitals came up with the idea of insurance. They wanted to be guaranteed payment and people liked the idea of paying a fixed amount for medical care, thus insuring its availability. This coincided with the increased status of doctors. Everyone gained, right?

    I guess it’s a case of unintended consequences taking a long time to come about.

    One can’t leave advances in medical out of the equation either. If my son had been injured in the 50s instead of the 80s, he probably would have died.

    In the early 80s, being in an HMO was great. We paid very little out of pocket for most of his care. Now, they’re not so great. They’ve had almost 30 years to figure out more ways to cut costs. And corners.

    I’ve been thinking about this for years. I ran across some notes I made when Hillary care was being discussed and looking at them today, I realize I was extremely naive. The idea I had was that everyone should be guaranteed a certain level of healthcare, for anything over that they must pay. What I could never figure out is where to draw the line.

  2. July 5, 2008 at 5:47 pm

    Donna,
    Insurance wasn’t invented by the doctors and hospitals. It was “invented” by actuarials and number crunchers who figured out what to charge so that a large base would participate: the aggregate paid out in claims would be less than what was taken in as premiums and the insurer would make money. If the claims paid out wound up being too high, the premiums would go up.

    The fallacy that most people swallow in regard to health care “insurance” is that they can “beat the numbers”. If the entity that is funding the health care payouts (insurance or government) cannot take in enough to cover their costs, they go broke or raise rates. In stark terms, consider this: A person has a given malady that has an absolute fixed cost of $1000 per month. They think that “insurance” that costs $150 per month is a reasonable expense. But that means that the insurer is going to lose $850 per month on that policy. It doesn’t matter whether the insurer is a company or the government, that $850 must get subsidized in some way or the plan breaks.

    You cannot get something for nothing. In any “system” there are going to be folks that pay for other’s services, whether that is through higher premiums or taxation. I find it quite disturbing that government is going to force me to take care of somebody else. It’s even more disturbing to think that government gets to decide where that line gets drawn for who gets what. This turns my stomach. Good thing I have Zantac150.

  3. July 5, 2008 at 9:49 pm

    Specifically, the doctors came up with the idea of health insurance. I know that other insurance has much more of a history.

    The unique thing about health insurance was that the purpose was for the providers to get guaranteed payments. It wasn’t a group of patients getting together to share the risk of one of them becoming unhealthy.

    It is quite unfair that one be required to join a group to share risk without being able to choose who he joins with. I see something similar happening with auto insurance since carrying it became a requirement in most states. Not nearly as bad… but still, the “no one will cover me” group is there.

  4. July 6, 2008 at 9:04 am

    Thanks for making the distinction. You are indeed correct about the health care variant of insurance. Unfortunately, the doctors realized that they were not so good with managing insurance schemes and hired bean counters to properly manage the models. It evolved from doctors wanting to make sure they got paid, to accountants making sure enough was taken in for the doctors to get paid, to management teams realizing you couldn’t cover costs by only tapping those using the service. There had to be a “subsidy” somewhere.

    Bringing up car insurance is timely. My oldest now drives solo and we are paying the huge insurance bill (16 in Harris county, Texas means nearly $200 a month). It’s so expensive because the insurance companies have identified the risk and estimated what the payouts will be for the base in a given period. They spread out those costs, including admin, over the insured base. And if I could not afford to pay the bill for my daughter, then she would not be able to legally operate our cars. Is driving a right or a privilege? Is health care a right or a privilege? I do not equate driving to health care, but the concepts are the same. The results are different, though. A teenager would likely state that she’ll “just die” if she cannot drive… and we know this is not the case. But a person may very well die if they cannot get access to quality health care. Quite icky. Just more questions.


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