Sunday, July 16, 2006

Healthcare solution or just not thought out?

On July 12, 2006 the Journal Gazette printed an editorial by DEAN L. FRANTZ of New Haven. Dean supports Tom Hayhurst because he has a plan to fix one of the nation’s major issues: the health care crisis. Dean sets up the problem:

Unless you are Bill Gates, you are just one serious illness away from bankruptcy. Most of the medically bankrupt were average Americans who happened to get sick.

"what is Congress doing while our health care problem rages? Debating irrelevant issues and dumping $6-billion a month in a useless war."

"Why is America the only major industrialized nation that does not provide health care for all its citizens?"

Ok Dean, I agree Healthcare is a big problem, but you have not identified the root cause only a symptom. I do not know one politician who does not support affordable healthcare. This is just a two-second sound bite that is totally meaningless without any substance at all. As for $6 billion a day, we are talking $72 Billion a year. What would $72 billion buy in terms of healthcare in the US per person? There are just over 290 million in the US. Because less than about 100 of us are even remotely like Bill Gates spreading this among every American would provide $248.28 each. My family doctor charges $70 per visit. This $248.28 would pay for the first three visits for each of my children. This would help, but my kids are fairly healthy and over the past year have not yet had to go to the doctor. So let us use it to pay catastrophic coverage. Let us define catastrophic at $50,000. We could cover 100% of 1.44 million individuals . But for those who have less than $50,000 it provides no coverage. They could still be wiped out financially. So let us lower it to $10,000. We could pay the first $10,000 of bills for 7.2 million and they would be responsible for the rest. But wait this would still wipe people out financially.

Before a person goes off asking why America does not provide healthcare for all its citizens and other industrialized nations do, they should find out what problems those other industrialized nations have restrictions. For example, in Canada they have to wait for some treatments. Canada does not cover many treatments at all that the state of Indiana requires insurance companies do. Other countries are also finding it more difficult to pay for their national health care. In England where gasoline is well over $6 per gallon a large portion of the tax is used to subsidize healthcare. In simple terms these other industrialized nations have created a payment system that their citizens pay for through a host of different taxes.

One solution would be to tax every American an extra $2,000 a year to cover national healthcare. A family of four would send this new government agency the first $8,000 they make every year. This would provide every American with healthcare. Many would bulk at paying this tax, but it could be disguised by adding a $1 tax to every gallon of gas, increasing the FICA tax from 15.3% to 25%. In other words take the money out before you have chance to spend it. These other industrialized countries have less disposable income while Americans have more.

Another solution is insurance. Basically insurance is shared risk. It works best when the risk of an occurrence is rare, but the cost if it should occur is great. Let us look at home owners insurance where a home let’s say costs $200K. 1,000 people combine together to collectively promise to help pay to rebuild anyone in the group’s home if it should burn. Let us also say the chance of fire is 1% every year. For 1,000 people to collectively pay to rebuild a $200K home requires each to contribute $200 yearly. If the rate of fires were to increase the contribution from each would have to increase. Like wise if the rate of fires were to decrease, the contribution rate would likewise drop. In addition to cover the cost of contents at 50% would add another $100. Adding storm damage, loss/temporary living expenses and theft would increase the risk to the insurer more adding to the cost of the coverage.

Health insurance works the same way. The cost of Health insurance is based on the potential of having to pay a claim. The more claims, the higher the cost. Insurance companies calculate the risk of having to pay covered claim and set the premium high enough to cover these claims. If they do not, then they go out of business and leave you with the remaining unpaid bill.

In the state of Indiana, a significant amount of health insurance cost is due solely to the state requiring specific coverage for what I consider non-medical coverage, mental health to name one.

The cost of healthcare for any person is the sum total of all costs for their insurance premiums, deductible, co-pay and government subsidization (taxes). These combined must equal the total charge of the medical bill. If they do not, the healthcare provider looses.

The problem with this is hospitals treat all, which means those without insurance or ability to pay, get treated and those costs get shifted to others. Insurance companies fight back by reducing the risk the insured's bill will not be paid. Healthcare providers knowing there is less chance of not getting paid by those with insurance will negotiate a reduction in fees. This means that those without insurance who have a higher chance of not paying their bill will be charged a higher fee.

Hayhurst will push Congress to provide affordable health care for all Americans” this is very admirable, but what is the plan? Dean states Tom’s plan is:

requiring the federal government to negotiate the lowest cost medications for the 41-million seniors on Medicare who are often forced to choose between food and their prescription medications.

This appears to be cover just seniors only, no one else. What about the rest of the country? Even if the drug companies provided these Rx drugs free of cost, it would save just $50 billion this year. We saw how far $72 billion goes. Besides that the worker is paying 2.9% or about $1,000 per year of their wages towards a senior’s healthcare bill. Why not stop this and let the worker use it to fund their healthcare for their family?

Because advertising of prescription medications only adds to the cost of health care, Hayhurst would end that immediately.

What about all the tens of thousands who earn their living in advertisement? They print material, lease buildings, and consume material and energy. The number affected from banning prescription ads is enormous. But this is waste and we should eliminate waste. Why not ban all advertisement?

  • The price of a car could fall tremendously.
  • Grocery store adds in papers would save paper and reduce garbage.
  • The post office would no longer deliver junk mail advertisement reducing garbage even more.
  • People would have to learn about products through trial and error as well as word of mouth. This would improve personal communication skills, a good thing.
Think of all the waste there is in advertising. Simply eliminate it and our problem is solved. Wait, what about all the people who work in advertising, they will be out of job. But hey, we solved the healthcare crisis let someone else now solve the problem dealing with the newly unemployed.

The problem with healthcare is serious. To solve the problem, one needs to look at how this problem developed. To do this does not require a lot of work. Was healthcare a big problem in 1960, no? Doctor’s made house calls. We had X-ray machines and guess what, little else. The thermometer was a glass cylinder with mercury inside. Penicillin was the do it all drug. When someone broke a bone, they set bone and that was it. There were no implants for replacing hips or knees. For those with liver problems there was dialysis. Basically speaking if you came down with a serious illness like cancer, you died shortly there after minimizing hospital stays and treatments. In simple terms death was healthcare’s way of keeping the cost low.

Then someone decided to study a different way of looking at the body instead of using x-rays. They came up with a CT scan. This reduced radiation, created better and more finely detailed images with better resolution. The problem was these machines cost $1 million versus $25K for an x-ray machine. These machines made it possible to see other illnesses and treatments were developed for them. This increased use of these machines and help pay for them at the same time. Every time we were able to determine a cause, a treatment was developed. In simple terms we cheated death by fixing our health care problems.

But cheating death has a price. Doctors want to be paid for seven intense years of college, years as an intern and the cost of all that equipment they use to help you cheat death is not cheap. Is it unfathomable that with college costing $25K a year that a doctor could have $200K in loans when they graduate? Companies risking billions on finding new treatments want a return for this risk. Healthcare is expensive.

Then there is the cost of healthcare because of improvements in other products. Prior to the interstate highway, travel by car was limited. But when our roads improved, Americans began to drive more. As Americans drove more, there were more accidents. How much of our nations healthcare bill is related to automobile accidents?

Then there the single largest contributor to the problem, Medicare. Medicare does not reimburse doctors 100% of their costs. To make up for this, doctors charge the rest of us more. This is called cost shifting.

If you want affordable healthcare there are ways you can help minimize your costs:
  • Eat healthier foods
  • Exercise
  • Don’t take risks such as playing sports where injuries can occur
  • Don’t travel in a car, walk
  • Wear a seat belt
  • Use a helmet when riding any type of bike
  • Don’t smoke
  • Don’t drink alcohol
  • Don’t go to the doctor at the first sniffle or running nose.

6 Comments:

At 1:59 PM, Anonymous Jeff Pruitt said...

Bill,

You scoff at Hayhurst's ideas (rather incomplete I agree) and then go on to write out a list of things that every 5th grader learns in school.

People are fat, they don't exercise, they smoke and eat too much junk food. I agree they should strive for a healthier lifestyle but the real question is what do we do now? Making lists that say "eat healthier and exercise" is not even contributing to the discourse...

 
At 8:33 AM, Blogger William Larsen said...

Jeff, you are absolutely right about my list being learned by every 5th grader. My point is we already know the answer and we were taught it in the 5th grade. What do we do now as you point out is the tough question. However, I think we all know what must be done, we just do not like the answer.

As for Dr. Hayhurst, yes he is a doctor, but I do not think doctors are the best people to solve this problem. He appears to be a genuine caring individual, but what we need to remove from this problem is emotion and get down to basics. What would Dr. Hayhurst do differently as a doctor now that he did not do before while practicing? If nothing, then there are no savings to be had and we will make the same mistakes.

Is healthcare a first amendment right such as freedom of speech, religion, press, etc?
Maybe it is more along the lines of education where you get K-12 at public expense, but you pay for anything more?
Maybe healthcare is a "crap-shoot" where if you are lucky, you have no problems (good genes)?
Is it the responsibility of government to level the genetic playing field by paying for healthcare for all?

I believe answering these questions must be done first, before we can even hope to solve the healthcare crisis.

Medicare costs shifts, some would say get rid of it. Why do we spend 2/3 of the Medicare budget on keeping people alive in the last month of life? You can go all through life 0-65 with no insurance, paying for Medicare and then if you live long enough you finally get covered. Why not focus this money on preventative healthcare for those who are young before they get sick? In the long run, this would save money and people would live longer productive lives with less overall healthcare costs. Government does a poor job of prioritizing. This would certainly free up doctors to treat others (supply and demand) and cut costs as doctors try to fill their schedule.

If smoking is clearly the cause of some percentage of healthcare costs, then take this cost divided by the amount of tobacco products sold yearly and place a tax commensurate with it on tobacco? Dedicate this tax to paying those bills associated with tobacco.

Require health insurance similar to automobile insurance. It would be up to the person what amount of coverage they want or afford. If they do not have enough coverage, they lose. Automobile Insurance rates are based on age, sex, driving history and car driven. Maybe health insurance should be based more on age, sex, life style choices and in this way you pay based on your life style? However, this is also a slipper slope.

If a person cannot afford a home, they generally do not buy it, yet we treat healthcare differently. If they cannot afford it, they can still obtain it and pass the buck onto others.

I believe the government was wrong in creating Medicare. It would have done better focusing on preventive medicine for the young first and as this produced results, moved the age higher. I took my daughter to the doctor to get a physical for camp. If I paid at the time of service in cash it was $53.60. If I let them file the insurance or bill me it was $70. I have been a very strong proponent of catastrophic health coverage.

At my first employer I proposed a very high deductible based on individuals being responsible for 100% of all costs up to 3 sigma of the populations median cost of healthcare. They would not file any insurance claims until they reached their deductible. This would save a tremendous amount of money (back in 1989 it was $8 per claim). This would produce a much lower premium with catastrophic coverage. It would put control of spending back in the hands of the individual. Insurance is not free, but many think of it in the same way as an all-you-can-eat buffet, you want your moneys worth. For the majority of us, we have few medical bills, but for others there are staggering bills.

I suggest to all that they add up their entire medical costs. This includes health insurance, deductibles, out of pocket expenses and co-pays. How many total unique visits do you have? Multiply this by $10 for insurance administration plus another $5 for the providers' charge. How much do pay for administration of the basics? If you did not have insurance, would you have gone to the doctors or would you have toughed through the cold?

Thanks for your comments. What do you see as potential solutions?

 
At 10:54 AM, Anonymous Jeff Pruitt said...

Bill,

I agree w/ many of your ideas/points

1. Preventative medicine is the key. How do we do this? Make sure children are covered. Good habits start at young ages. I'm open to any idea that addresses this major, major problem.

2. Move towards a single-payer system where all must be covered - i.e. your automobile insurance analogy as well as the state of Mass new plan.

3. Increase taxes on smoking - it's killing millions and costing billions. Simply telling people "it's bad for you" doesn't end the drain on my pocket. I like your idea of making smokers pay for smoke-related illnesses. Add the tobacco companies and farmers to the list of taxees and I think you're on to something.

4. Fair Insurance Premiums
Insurance is about risk mitigation. It's absolutely bogus that I have to pay the same rate as a fat, 60 year old, diabetic smoker. I agree with you about insurance rates being tied to lifestyle choices - I STRONGLY support this kind of policy. If you want people to change their habits then you have to incentivise it. Every type of insurance around does this but health insurance. If you had to pay more for being obese then you might be more motivated to lose weight or lower your cholesterol or anything else that falls into a preventative medicine category.

It's obviously not an easy solution but the status quo is not working and is showing no signs of working. Something needs to be done NOW but nobody on the right since Nixon has even been willing to discuss it. I think difficult issues should be debated and debated regularly. I applauded Clinton for bringing this issue to the forefront during his term - regardless of what you thought of his solution at least he was discussing the problem. I feel the same way about Bush's social security policies. I think they are dreadful BUT I welcome the debate...

 
At 4:16 PM, Blogger William Larsen said...

Jeff, I cannot and would not disagree with anything you wrote. I would only add that if we require all to have health insurance, that it be through private plans and not through the government. I truly believe that many different companies would be putting the "brain" power of many to the task of coming up with the best plan. It would also develop unique plans that would fit the unique diversification of families and individuals instead of one-size fits all.

Automobile insurance works as long as people pay for it. I guess the problem will come into play when we find low-income workers/families who simply cannot afford the premium. I agree 100% that the current mutation of healthcare we have now is not working fairly.

As for debating difficult issues, I look back over 35 years and find that congress likes to use difficult issues more as a political weapon than a sincere quest to solve the problem. Debate is good, but I believe that defining, measuring, analyzing, improving and controlling is the method we should employ. Too many times our representatives implement a program that is poorly defined, they collect little data, have the inability to measure its effectiveness and because of this they implement changes that mutate the problem.

I would like to see every new program that is proposed have a defined set of criteria. A set of measurements that will be used to measure the effectiveness of the program and a set time limit for existence. It must be voted on to be retained otherwise the default is automatic repeal.

I too cannot stand Bush's handling of social security. He infuriates me. As for Clinton and healthcare, I think his method of discussing was more along the lines of Bush and Social Security. Defining the objective before you define the problem rarely works.

Thanks for your input; you have been very helpful and enlightening.

 
At 6:45 PM, Anonymous Jeff Pruitt said...

Ah, metrics in government - why I finally found someone who "gets it". Everything, I repeat, everything can be quantized and it's effectiveness measured. I am a scientist and I'm used to this concept; proposing a new hypothesis w/o anyway to test its validity would not be a sound scientific practice. I do not understand why politicians do not set metrics for their own legislation. If a program isn't working then FIX IT OR ELIMINATE IT. I'm starting to come around to the idea that ALL legislation should have an expiration date so to speak...

 
At 4:11 PM, Anonymous Bob G. said...

Jeff:
Now THERE'S a universal panacea if EVER I saw one!

Expiration date for legislation...

BRILLIANT!

Talk about eliminating WASTE....we could call it the "Legislation By Excremental Increments Act"...LOL.

Most legislation is "crap" anyway, right?

B.G.

 

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