Day 13-The case for universal health care

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 “We’re going to have insurance for everybody.” People covered under the law “can expect to have great health care. It will be in a much simplified form. Much less expensive and much better.” President Trump, Washington Post, January 15, 2017.

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From the Money and Banking Blog

It really doesn’t matter how you measure U.S. health care outlays, you will come away with the same conclusion: the U.S. system is extremely inefficient compared to that of other countries. Today, for example, health expenditures account for more than 17% of U.S. GDP. This is more than twice the average of the share in the 42 other countries shown in the figure, and more than 40 percent higher than the next highest (which happens to be Sweden at 12%). 

it is worth looking at how people in the United States currently pay for their health care. In 2015, employer-provided plans covered 45% of the population, while insurance purchased directly by individuals accounted for an additional 13%. Next comes the government: the combination of Medicare (13%), Medicaid (16%) and the military (4%), sums to 33%. As others have noted, the number of uninsured has fallen significantly in the last few years as roughly 20 million people have obtained coverage either through the expansion of Medicaid or by purchasing policies through the exchanges created by the Affordable Care Act (ACA). Even so, roughly 9 percent of the population—nearly 30 million people—remains uninsured.

The conclusion is clear: in addition to being expensive and ineffective, the U.S. health care system is far from universal. For a country that prides itself at being at the cutting-edge technologically, this is both tragic and unnecessary. We look forward to seeing how the Congressional Budget Office will score the current proposals being considered by the Congress, but the criticism from governors and providers suggests that it will leave many more people uninsured—the opposite of President Trump’s stated goal.

According to the Money and Banking blog- the health insurance industry is plagued by 2 main issues- Adverse Selection and Moral Hazard

Adverse Selection

If, as everyone seems to agree, we want anyone to be able to purchase health insurance regardless of whether they have preexisting health conditions, then setting a price at the average cost per person will lead only the less healthy to buy insurance. Raising the premium as the health status of the covered pool deteriorates (relative to the population norm) just leads to the infamous “death spiral” for private health insurance. In short, if the healthy do not participate, health insurance cannot be provided affordably. (As an aside, this is the logic behind the common view of experts that any system that requires insurers to cover everyone at a common premium—regardless of their health status—must be paired with compelling incentives for everyone to enroll.)

Moral Hazard

  1. Being unable to truly shop around for the best deals

the standard problem that insurance makes people behave differently. Here, absent properly structured co-pays and deductibles, the insured will tend to overconsume health care, again driving up the costs. But it is also difficult for people to make informed choices about health care. When services are complex and bundled, the supplier can impose charges in ways that patients have difficulty anticipating or understanding, limiting their ability to compare cost and quality. More office visits and more procedures drive up prices.

To understand the severity of the information problem in health care, compare the challenge of purchasing a new car with that of replacing a hip. These are both expensive and complex. When it comes to the car, you have lots of different models with dozens of options—all-in-all, hundreds of choices. But at least you can easily find information about safety, performance and reliability. Then, once you narrow your choices, you can take a test drive.

With the operation, there are likely hundreds of options as well. You may be able to pick from among a number of hospitals, select from scores of surgeons using a variety of procedures, and choose from implants made by dozens of companies. Insurance company data reveals that these decisions have clear financial consequences. For example, in the Boston area, the cost of a hip replacement can vary from $18,000 to $74,000. So your decisions matter both for your well-being and for your wallet. But how are you going to decide? Can you really get the information you need to make an informed choice? Will you be able to judge if an extra $10,000 or $20,000 is worth it? A test drive is out of the question (especially when you’re hobbling around), and if you are insured, you are unlikely to pay the higher cost directly.

2. Free Riding- We actually benefit from a healthier nation

Because many illnesses are contagious, we all benefit when others are vaccinated or treated promptly. But, people usually don’t consider the benefit to other people in deciding whether to seek care. What this means is that society has strong incentive to subsidize fundamental care for those who can least afford it.

So what is a solution?

we propose building on the success of Medicare—one of the most popular federal programs. More specifically, we propose gradually lowering the age at which people are eligible for Medicare, while tracking cost and performance, and using the government’s role as insurer to promote competition among providers (much as private insurers try to do). It shouldn’t take too long to see if we can shrink the gap between where we are today and those countries at the cost/efficiency frontier.

Not only could a Medicare expansion reduce cost, improve effectiveness, and broaden access, but making the covered population younger and healthier should render the program more sustainable. As a side benefit, reducing the burden on employers of providing health care likely would make the U.S. economy more dynamic. First, by reducing the marginal cost of adding a worker, it promotes employment. Second, because the fixed cost of providing insurance imposes a greater burden on small firms, a Medicare expansion levels the playing field.

According to Dr. Behzad Mohit and Dr. Clayton Christensen (Article)

Developed countries (such as the U.K., Italy, France, Iceland, Denmark, Canada, etc.) all have universal care through socialized, government-run programs. Their quality of care is far superior (ours was rated 37th among industrialized countries by the World Health Organization in 2000, and we are worse off now) and their cost per person is less than half of ours. The proposed, non-profit, privately run single-payer agency would be many times more efficient because it is not socialized medicine and it avoids the inefficiency of large bureaucratic government management.

It is time to call it as it is. Profit in health care is the problem. It must go. The private, non-profit, single agency financed by people and managed privately is the answer.

 

Ten Ways Universal Healthcare Will Improve the Economy

(I stole this from another blog, but it was basically what I was going to write)

 

1. It will make the Big 3 American automobile manufacturers — and other manufacturers — more competitive. Depending whose figures you like to use, healthcare costs add between $1000 and $1500 to the price of every new American car. Toyota has also found health insurance costs to be unreasonable, and is trying to do something about it that is beneficial to employees. But when all is said and done, the fact that the heads of the Big 3 are not demanding Universal Healthcare is an issue about which shareholders should scream holy hell. Although the figures for the automotive industry are the most readily available, it must be noted that other manufacturers have similar issues. Reducing the cost of manufacturing products in the United States will make our manufacturing companies more competitive at home and in the world markets.

2. Universal Healthcare gives employers greater control over the cost of providing benefits. As the CEO of GM has pointed out, healthcare costs are rising 14-18% annually, a number which exceeds inflation and GDP growth combined and doubled. It is difficult to control costs when certain expenses grow that rapidly. Some companies have tried to work around this company by slashing coverage, or by making employees pay a greater share of their coverage. This is nothing more than a band-aid on a gaping wound. Such practices put off the day when costs actually have to be controlled, and insurance companies told “no.” And of course, this “solution” creates resentful employees.

3. Universal Healthcare evens the playing field for employers competing for labor. Many job seekers have to do some internal calculus to the effect of “Company A pays more but has Insurance X, but Company B pays less and has Blue Cross. Which is a better deal?” Many job seekers can’t take a chance on a small company that can’t afford to provide “good” benefits due to health concerns. This brings us to….

4. Universal Healthcare will stimulate the growth of small business and create jobs. There is no way to know how many businesses have never been started because the potential entrepreneurs couldn’t get insurance for their families. Universal healthcare will encourage people to be in business for themselves, and make it easier for them to hire people to help make their dream a reality.

5. Universal Healthcare will improve worker productivity. How? By giving workers the means to treat small problems before they become big problems, and by providing better access to preventative care. When workers spend a day out of the office, sure they aren’t doing anything, but how does that compare to the slow pace that worker might take if they came in sick for a week? And they’ll do even less if they have to spend a week in the hospital. Strangely enough, that means….

6. Universal Healthcare will allow more efficient spending of healthcare dollars. If Jane Average can have her infection treated in the doctor’s office, that’s a lot cheaper than treating her raging infection with complications in the emergency room. If Joe Average can get his high blood pressure under control before he has a heart attack, it will save both time and money in the long run. And that is to completely discount the effect of reducing crowding in the emergency room!

7. Universal Healthcare will insure a better educated and healthier workforce for the coming generation. One of the great tragedies of employer-provided health insurance is that children don’t have employers. Sure, many employers that provide health insurance will provide it for employee’s kids, but usually for an extra fee. As a result, there are millions of American children with no healthcare insurance, and parents who pray they don’t get sick. These kids are less likely to get preventative care, less likely to have chronic conditions treated, and more likely to miss school. Someday, these kids will grow up. Even if there is not enough support among politicians to get Universal Health, the very very least we can do as a society is provide a MediKids program that would cover all minor children (and in an ideal world, college students).

8. Universal Healthcare will help prevent chronic illness from becoming disabling illness. It is sad but true that certain illnesses, if not treated promptly and properly, will result in permanent disability.Diabetes is a prime example. Untreated and uncontrolled, it can result in blindness, limbs which must be amputated, kidney disease, strokes, and a host of other terrible problems. And since chronic conditions by definition can go on for years and years, many people find themselves in a position where an insurance company will decline to cover their single biggest health problem as a “pre-existing condition.” This is of course a business decision, not a moral or ethical decision. It is also disgusting.

9. Universal Healthcare will prevent medical debt from forcing people into bankruptcy. You may recall a couple of years ago when Congress was trying to force through a bankruptcy reform bill, then-new research found that medical debt can often lead to bankruptcy. People who cannot afford to pay their bills are not generally out making lots of consumer purchases. Consumer spending is of course the largest single part of the GDP.

10. Universal Healthcare will facilitate early detection and prevention of epidemics and pandemics. The United States Government is concerned enough about the risk of a flu pandemic that they have set up a website called PandemicFlu.gov. They’ve even had the CDC figure out the economic impact of a flu pandemic. Oh, and don’t forget the possibility of an outbreak of some of the old, traditional diseases like measles. Like other illnesses, the sooner we as a population realize there is a problem the quicker it can be contained. In this case, time may be money, but more importantly it is lives.

In the end, I believe it comes down to 2 things

  1. Do we believe it is a right of all Americans to have access to affordable health care?
  2. Do we believe the rights for corporations to maximize profits is more important than the rights of individuals to have care?

#1

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#2

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My feelings on the issue

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