The 6 Pack Economist

The debate on health insurance reform has been pretty heated lately.  Much of it has been centered on a public option or no public option.  I don’t like the public option.  If this is not your first time reading my blog this should be no surprise.  But I do believe that government has a role in the nation’s health insurance or health care. 

In the following blog post I hope to address what is good about the current system. Explain what is bad about the current system. Finally I will explain my plan to change it without resorting to a public option.

In the United States if you have a good health insurance plan you get the best care in the world. If you need to see your personal doctor you can generally walk in that day.  Perhaps you need to see a specialist well maybe that will take a week. Perhaps you need a MRI, which takes a week at the most.  In comparison all of these tasks in many of the socialized medicine world would take much longer.  Statistics are readily available on the web from Canada’s and Britain’s own healthcare websites.

Canada: http://www.hc-sc.gc.ca/hcs-sss/qual/acces/wait-attente/index-eng.php

Some more: http://www.hrsrh.on.ca/PortalEn/tabid/859/Default.aspx

Britain: http://www.performance.doh.gov.uk/rtt/index.htm

and in english: http://www.guardian.co.uk/uk/2007/jun/07/politics.health

And England meets its goal: http://news.bbc.co.uk/2/hi/health/7966404.stm

So in the United States when you have good Health Insurance you are taken care of pretty well.  But the problems come in those who don’t have health insurance or those people that are impossible to insure.  The costs associated with these individuals are the problem.  It is not the profits that the insurance companies make that are causing the rising cost of insurance.  Even if the profits were paid back to the individuals most would be minimal reductions in premiums at best. 

Now let us talk about one solution to this problem.  We should take what works and keep that.  This is the traditional private insurance model, where premiums are pooled and costs taken from these pools.  Next we try to address the two primary reasons why the market is broken.  Those without insurance not paying for care and those that have such horrible health problems they are impossible to insure for premium that those individuals can afford. 

This is the point that government can step in.  The government can begin a plan as the catastrophic insurer, essentially taking over the costs of those who are too expensive to insure.  They would not do this directly but indirectly through the first party insurance company.  This is done on an individual basis, where the premiums paid by the individuals have been less than one third the cost of treatment over the past five years.  In other words, if an individual pays $3000 in premiums but their treatment is costing $10000 the government would pick up $1000(The numbers I chose are for simplicity and should be adjusted in any real world situation).  This solves a major problem which is the person who uses far more health resources then they have paid. They are still costing the insurance company more money then the premiums, but because it will only take two other people’s premiums to break even on this, rates will not have to be increased.

The second point at which the government can step in is regulating that all people in the country must purchase health insurance.  Those without health insurance will be penalized much like those without car insurance are today.  If you don’t have health insurance you will be reported to the proper authorities.  Maybe some type of subsidy can be provided but the market should be allowed to function.  And much like car insurance was very expensive it too will come down in price once competition and cost savings are implemented.

Now let us move on to what the private health insurance companies will have to give up.  Health Insurance companies must cover all non-cosmetic procedures, either pre-existing or not.  All people must be able to be covered and the difference between the highest premium and the lowest premium may not exceed a certain amount (or some other price capping mechanism, although the government stepping in as the catastrophic coverer should help with this).  This will eliminate those that can not buy insurance and everyone will be able to afford some type of insurance.  It may hurt for some but they will be able to purchase the insurance needed.

Some other miscellaneous things I would like to add to the debate. 

• Some form of tort reform is needed.  Loser pays is a nice option.  Also a cap on non-gross-negligence problems.  Nicking a blood vessel while doing all that is humanly possible, although tragic for those involved, should not award an ownership stake in the hospital, but cutting off the wrong leg should result in a hefty cash settlement.
• Keep the “health saving accounts” alive.  Allow people to put away a certain amount of money tax free that could go to health care related expenses.
• Move some medical school interns out of the hospital and into the doctor’s office.  These students could be cheaper alternatives for the run of the mill doctors visits.  A real doctor must be present in the office but let’s be honest how many times did the visit to the doctor’s office result in a prescription for an anti-biotic and some bed rest.  These could also be nurses with some additional training.  Or think of it as Doctor-Lite.
• Allow for both employer and self employed to purchase plans with pre-tax dollars. 
• Allow for people to form groups that can purchase insurance as a block and not as individuals
• Remove the State Restrictions from insurance sales.  Even this means the implementation of Federal Minimum Standards.  States could still come in to offer non-binding approvals.
• Finally an easy to read rating system would be very helpful.  Much of the problem of health insurance purchase it that there is too much lawyer speak and not enough easy to understand language. 

I want to end with one more observation.  The reason that such strides have been made in health care in the recent decades have been made is because of the money that can be made in the field. From the creation of the next Jack-Pot drug to a new surgical technique that revolutionizes the industry, most of these advances came about from people working long hours to become the leader in a particular market to make lots of money. 

When they came for cigarettes,  I did not speak up
When they came for porn, I did not speak up
When they came for my beer, I was freaking too drunk to speak anyway.

There is nothing like slaughtering the golden goose.  Oregon wants to raise the tax on a barrel of beer by  about 1900% or something like 2.50 a barrel to upwards of 50.00 a barrel.  If you don’t know a barrel of beer is about 31 gallons or two kegs.  In Pennsylvania a keg will run you about 60 bucks for something descent.  So if this was happening in Pennsylvania it would be an additional 25 bucks or almost a 50% surcharge in the price of keg of beer.  You can decide if you think that this is too much, but for me I think it is just a money grab.

You know that I could not preach about something after this but here goes.  Taxes should never have to increase if they are based on a percentage of something.  By something I mean income, stamps, tea, or beer.  In other words if taxes are taken as a percentage of the cost of something then they will automatically adjust with inflation. 

Unfortunately taxes are taken by a group of people who are not held accountable.  Go over budget and the next year you get more money.  Do poorly with the money you have, just ask for more.  Achieve goals and do it for less then you thought, then you lose your budget to someone who did poorly.  This is why taxes never really go down. 

What really sucks is that for you in Oregon, crying in your beer will cost you a lot more.  Oh and they want to raise the taxes on your cigarettes too.

P.J. O’Rourke said “When the legislature controls what is bought and sold the first thing that is bought and sold is legislators”.  Well as it turns he was wrong.  Who knew that is was the legislators who would be doing the buying of the businesses?

 I am going to explain how this could work out for the better before I tell you how it will actually work.  The government buys large amounts preferred stocks and can start guiding the bank on the right path. The banks will be required to hold the top executives responsible and start making good solid lending decisions.  The economy would start to pick up and they banks would be profitable.  The banks are able to return a dividend and the stock price goes up.  The economy now on its way to recovery the government can now sell its share of the company and use that money toward paying down the deficit (hopefully no new spending, but this is the positive part of the piece so let us assume that).   

 Unfortunately the preceding paragraph has as much to do with reality as my dreams of winning the lottery, moving to the Caribbean with a sail boat and being known as the drunken American sailor.  What will happen is this; the government will start off making good decisions for the bank.  Much like the preceding scenario where lending is restored and top executives can’t pillage the banks coffers; these actions will get the economy moving.  Once people have moved on to a new dog and pony show the rats will show up. 

 The return of the rats will mean business as usual.  These banks will be used as leverage between legislators to get pet projects financed in the legislators’ respective districts and to get deals for their own private homes.  Employment from the mailroom to the boardroom will become a patronage bonanza.  The legislators unwilling to give up control of this grand candy machine will not, I repeat will not sell their preferred shares. 

 The banks being essentially a department of the DMV will stop making smart business moves; instead they will devolve into a fat tub of immovable flesh. The banks will be so dependent on government money they will no longer be able to function on their own.  The patronage jobs and pet projects will have bloated the bank’s own accounting records so much that legitimate loans will be squeezed out.  They will know their master and their master is some legislator who will be voted into office again and again not because of his actions destroying a bank, which will be too hard to explain in a sound bite campaign, but because of his stance on some other issue that the legislators will not change anyway.

 The only thing left to do at this point is to get a large loan from a non-nationalized bank and then use that money to give to a legislator’s campaign.  Then the legislator can get you a big paying job at the bank.  While at the bank you can make a bid to buy the bank you got your original loan from and then lose the paperwork for your loan in the merger.

 Toast your next good beer to taking advantage of government corruption.