The Rating System
This article is written from a Democratic point of view.
Author Political Spectrum
Economic Viewpoint: 68% Left
Social Viewpoint: 62% Libertarian
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Once again, it comes down to the issue of cooperation. Basically non-existent in our political environment, the parties rarely work something out.
The private medical industry is serving a market that does not behave with normal elasticity. What does that mean? It means that the laws of supply and demand don’t work the same way they do in a normal marketplace.
People don’t say to themselves, “Gee, medical care is really cheap right now, I think I will get sick.”
Conversely, people don’t say, “Gee, medical care is really expensive right now, I won’t get sick.”
Also, people don’t say while they are in the ambulance being rushed to the hospital, “Take me to the cheaper emergency room in another town.”
There are, in the US, a large number of people who cannot afford to use medical care at all. So they show up at the ER when a baby has a high temperature instead of calling a pediatrician. For many Americans, the first doctor who treats their failing heart is an ER doctor because that person cannot afford to pay doctors in clinics. The ER has to help, by law, and then gets stiffed by people who can’t pay.
Those examples are breaking what a marketplace is supposed to be about. There is no elasticity. People get sick when they get sick.
By the way, I remember my one ride in an ambulance as “I hope I get there before I die. I hope I get there before I die. I hope I …” I didn’t know where there was and didn’t care.
Another interesting facet of the medical marketplace is that science has created treatments that are very expensive. These very expensive, life-saving treatments are uncommon and less than 1% of Americans can afford to pay for.
This is why, in other countries, the governments have stepped in and either completely nationalized health care, or made a single payer system in which everyone pays for everyone’s health care. Healthy people balance the unhealthy. People who can pay balance those who can’t. Costs are balanced out and their excellent health care systems cost less than half per patient than US health care and yet they provide the expensive treatments at higher success rates than in the US.
Want the highest survival rate from heart surgery? Better to have a heart attack in Australia, mate. Want a better chance of survival of colon cancer? Europe is a good place but Mexico is fine too. Mexico is a top health tourism place.
Why does the United States spend double per patient for worse outcomes than other countries with really good health care?
The most important thing to remember about health care in any country is, that at any given moment there is a lot of money floating around in the system. Health care is big business anywhere and wouldn’t it be nice if that money could just run through the hands of a few select financial institutions if it is going to be in the health care system anyway?
Think of it as an interest-bearing checking account which, at any moment in time, has trillions of dollars in it. Understanding this is all you need to know as to why the US health care system has private insurance.
By the way, this isn’t just any trillion dollar, interest-bearing, checking account. The investment of that trillion dollars in the financial world is managed by people who squeeze every last penny out of it. Of course, it’s not really an interest-bearing checking account we are talking about here; it’s really a hedge fund.
Internally, the insurance industry refers to the hedge fund as float on premiums. It is the job of health insurance companies to make sure that the balance in their hedge fund is constant and predictable such that the investment bank can maximize profit from the fund. That is the one and the only job of an insurance company, any insurance company. The longer the float, the more money that can be earned on it.
Since the one and only job of any health care company is to maximize float, your health care insurance company is focused on that like a laser. The idea that insurance companies are motivated to cut costs is a howler of a lie. Higher premiums equal more float! Yes, just the opposite is true of cost-cutting. Anything to get the premiums up is welcome. Anything to slow down the outflows from the hedge fund to pay doctors is welcome. What the health industry wants, therefore, are high premiums that are distributed to doctors as slowly as possible.
This brings us to how doctors are paid. In order to maximize the time of money floating in their hedge fund, insurance companies pay doctors for procedures. They pay for cancer treatment, they pay for vasectomies, they pay for heart treatments. They don’t want to pay for preventative care because actuaries have determined that shortens the time money is in the float. Insurance companies would rather pay big payments less very often.
A person with a preexisting condition statistically shortens the float. That’s why private insurance would prefer not to have to give them insurance.
Unfortunately, with all of the financial industry benefitting from private insurance premiums, it will be an uphill battle changing the fiasco that is U.S. health care.
I will point out, though, that other countries’ governments seem to be able to make health care work, whether it is socialized or single payer. Some countries do health care spectacularly well. Japan has excellent health care for a large population with a single payer system that serves private doctors. Canada has a single payer system which was rated low, not low like the United States but fairly low because of long wait times for a doctor. Now, Canada has completely turned that around and now rates very high in the WHO rankings. Waiting for a doctor in Canada is no longer an issue. So yes, it can be done.
It’s just that U.S. politicians can’t do it.