Thursday, April 26, 2012

What's the deal with healthcare?

Everyone seems to have their own favorite boogeyman when it comes to who to blame for the never-ending increases in healthcare costs.  

Has anyone considered the possibility that the existence of health insurance could, in itself, be a factor in the exponential rise in healthcare costs? No, I'm not crazy, hear me out.

Many people are under the misapprehension that services provided by the government are "free".  It's unfortunate that some politicians, of both parties, have played a role in the ill-education of the public on this issue.  It's even more unfortunate that when something is perceived as "free", people will often use more of it than they need.  While healthcare isn't quite the same as other commodities, the point isn't totally invalid. While perceiving healthcare as free won't automatically lead to people using more of the expensive procedures, it could and does lead to people over-utilizing and burdening the system for routine matters. The most obvious example is that of someone bringing their child into the ER with nothing more serious that a cough or cold. Or the weekend athlete taking up a cot being "treated" for a minor sprain (wrap it, ice it, and take aspirin or ibuprofen for the pain).

The reason people over use and abuse the system in this way is the disconnect between the provider and the consumer; between the perceived cost to the patient and the actual cost of providing the service. Health insurance, in an attempt to make care more affordable and available has caused many to lack an appropriate appreciation of just how expensive it is to provide the care they seek. Government-mandated coverages (both state and federal) have greatly aggravated the problem (would you believe that elective cosmetic surgeries, ED drugs, fertility treatments and abortions are deemed "medically necessary" and that insurance companies are required to provide coverage?).

The point of all this is simply that the root of the problem is two-fold. On the one hand, you have government(s) mandating that politically popular procedures  be covered; on the other, you have providers who are told that, because of the mandates, payment is guaranteed. Can anyone tell me where the incentive to ever control the rise in costs is going to come from? I can't see it.  As long as the end users are sheltered from the true costs of their health care, and as long as the providers are guaranteed payment through insurance, there won't be much downward pressure on costs.Of course, as costs rise, the typical response of government will be to mandate that even more procedures be covered by insurance.

This will ultimately end in one of two ways, I think:  1) We will end up with a  two tier medical system where there is one level for the masses and another level of care available to those who are able to pay or  2) A top down government-run monopoly funded by broad-based taxes, a central authority with the power to decide what procedures are appropriate, which procedures will be allowed and who qualifies for treatment. The very rich will also be able to side-step this system, regardless of the promise of "equal treatment for all".

If we are ever going to get a handle on healthcare costs, we'll have to do 2 basic things:  Eliminate all government mandated coverages except for Catastrophic Care, and reintroduce the direct financial relationship between the patient and the provider for everything else.

That's why I love the idea of HSA's (Health Savings Accounts). What would make them perfect (aside from being available everywhere) would be for them to allow for the funds to be used as an enhancement to existing retirement accounts. For example: the use of the funds would be restricted to medical expenses and co-pays until age 72(+/-), at which point they would be available for whatever need exists.

This would be a very attractive selling point for seniors looking to buttress their retirement savings and also for young people who don't see the need to "waste" their money on health insurance. If they are told the money will still be there for their use later in life, I think they'd be much more inclined to participate in healthcare decisions.

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