Health Care Paradigm

The buzz in the world of politics is health care reform. Different proposals have been shared, proposed legislation has been presented and “town hall” meetings have shown we can’t agree on a solution. Not only can we not find a form of compromise, but we also can’t disagree with some semblance of civility.

The emotions on this issue are so powerful and our nation is so polarized when it comes to finding a solution to this health care mess. Unfortunately, no solution will come to pass until there is some common ground found among our lawmakers. Yet instead of working together to find a solution, our lawmakers are drawing lines in the sand and using rhetoric to attack the flaws of others, completely ignoring the flaws with their own proposals.

I’ve used this Albert Einstein quote before and I will keep using it: “The problems we face today cannot be solved by the minds that created them.” Aside from the dysfunctional working relationship of our lawmakers, the major problem with our current system is that health care does not lend itself to insurance. Yet no one is addressing this issue. Our nation has created a for-profit, behemoth of a health insurance industry and all of the proposals currently on the table refuse to recognize that this needs to change.

Health care is something that every individual needs in some form or another. Of course, some need health care more than others, but the basic fact is that if we want to live, we need to care for our health.

Insurance is an industry that is based on managing risk. You get insurance to protect you from an unlikely event. The way the industry stays profitable is by assessing premiums based on the amount of claims and the cost of the payout. Premiums are established by analyzing that, and of course, including some margin for administration and profits. Obviously, if too many claims are made, the cost of insurance goes up. Sometimes the cost goes up to a level where there is really no value in purchasing a policy. At this point, consumers will usually see no benefit in that insurance and just come up with a better way to manage their risk.

Think of it this way. We need to eat every day. Should we buy food insurance to ensure that there is food on the table tomorrow? Imagine what that would do to the costs of groceries if most of us decided that we need to purchase insurance to have food on the table and then filed claims to purchase our groceries every week. Then compound that by the fact that some people in this pool of grocery shoppers need to eat significantly more than others or have special diets that require very exotic and expensive foods. Before long, we are paying significantly more for our groceries than what they are worth, because we are supporting both a for-profit insurance industry and a group of people who spend more on food than we do. This is pretty much what has happened to the health care industry.

Not only are most of us paying insurance premiums on something that most of use on a regular basis, we are also faced with the dilemma that some health care users are going to have expensive health care needs, some of which for conditions that will require some level of ongoing care. These needs for health care services tend to be exponentially higher than what an average user would spend for health care. Yet these costs need to be spread in the pool of users for health insurance companies to remain profitable.

According to the 2009 Milliman Medical Index, the average family of four spends over $16,000 for direct health care services. Yet the problem with averages is that a few exponential highs can really skew an average cost. If you think about what a typical family needs in a given year, $16,000 is a pretty high figure. What would it cost for 4 checkups and maybe four typical childhood incidents in year, such as a sprained ankle or sore throat that requires a doctor visit and some prescription medication?

It is hard to quantify what is an average health care cost for a healthy family, but it would obviously not be near $16,000/year. According the Henry J. Kaiser Foundation publication, Trends in Health Care Spending:

While discussions about the costs of health care often focus on the average amount spent per person, spending on health services is actually quite skewed. About ten percent of people account for 63% of spending on health services; 21% of health spending is for only 1% of the population.

Each person who buys healthcare is paying for not only their care, but also the care of others. Using my food example, why should I pay for grocery insurance so others can have truffles and Dom Perignon when I am only eating Cheerios and milk? Well, when it comes to health care, those who get the truffles and Dom Perignon often aren’t choosing such an expensive service. I dare say that most would rather not need such levels of treatment. Should I begrudge paying for someone who needs dialysis, an organ transplant or acute cancer treatments for a chance to survive?

We all need health care; so much so, that if we have a health care need, we will seek those services without much regard to costs. Yet the health care industry consists of businesses that have competing needs. They need profit, and to maintain profitability, they need to control their expenses. This creates a dichotomy where the insured wants health care at all costs and your insurer wants to limit payment of claims at all costs. This does not lend itself to a positive consumer/service provider relationship.

In this health care debate, we are talking about all the costs, but are we really addressing the core issue? Yes, finances need to be considered in any debate that discusses the use of public funds, but how do you quantify the value of pain relief, comfort or survival? At what point do we say that a life is not worth the cost?

Unfortunately this brings us to a huge philosophical question. Should health care be an individual responsibility or societal responsibility? It's a tough question that goes beyond black and white and their are infinite shades of gray. "Socialism" is a dirty word being thrown around in this debate, but we use our taxes for national defense, why not for national health? I am not yet sold on the so called "public option," but at the same point, I find the "socialism" rhetoric to be very counterproductive towards us coming to some form of improvement on health care.

No doubt, coming up with a solution that makes sense is going to be tough. I personally do not mind paying into a pool to ensure those who are in need have access to health care, but I obviously have limits into what I can pay. I will add that I have a serious problem being mandated to pay into an industry that gains profit by avoiding the provision of services that may be in the best interests of someone’s health.

The challenges we face with health care are significant. Somehow we have to change our level of thinking to solve this problem we created. Who will take the first step?