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The problem with health insurance

Ironica (124657) writes | more than 10 years ago

User Journal 4

Not that this has anything to do with technology, but whatever.

Not that this has anything to do with technology, but whatever.

So the health insurance thing has been nagging me a bit lately, as I walk 1.5 miles to connect from the Santa Monica bus to the LA Department of Transportation DASH service, which are both unaffected by the transit strike, and also as I pay 20% more for the same products at Gelson's that I would normally buy from Von's. Whose responsibility is it to make sure that people get good health care? Why is the cost of health insurance skyrocketing? What can be done to stabilize the situation?

Well, it's obvious that health care is in several ways a market failure. It's an industry with a very distorted demand curve, because the demand for health, for *life*, is extremely inelastic. People will pay what it costs, to the extent that they have the money. This means that the price at which total revenue starts to decrease due to drop in demand is much higher than for other types of goods.

Further distorting the demand curve is the disconnect between prices and consumers created by the insurance industry. I was on a particular medication for a year and a half before I learned that the $10 I paid every other month for my bottle was less than 1/50th of the cost to my provider. I found this out entirely by accident; one day, a computer glitch left me without coverage, and I happened to go refill my perscription that day. When I got to the counter and they said "That'll be $558" I nearly had a heart attack.

If I had had to pay for that medication out of pocket, would I still have gone on it? It's hard to say. At the time I started on it, I probably could have afforded it, if I lived in a cheaper apartment and cut other expenses. Would I have stayed on it as long? I don't know. But what is certain is that the price never entered into my decision as a consumer, because I didn't have to pay for it.

So as we gain new technologies that allow us to live longer, healthier lives, and to survive or completely avoid an increasing array of diseases (my kids will be vaccinated against chicken pox... seems like they're missing out on a rite of passage), the insurance system leaves those who are covered feeling entitled to the best medical care money can buy... so long as it's not *their* money. So why is this?

We come to our second big problem... the value of life. Though civil courts every day put dollar figures on the lives of children and parents and community leaders and gang members, we all admit that life, generally speaking, is priceless. When I insure a house, two things go into calculating the premium: risk, and value. A $1 million house in the same environment as a $500k house will have a higher premium, because it will cost more to replace. A $500k house in a wildfire zone will cost more to insure than the same house in a boring urban area.

But when it comes to insuring our health, only risk can be taken into account, because there is no replacement for health. If we could value lives in the same manner as other goods, we might take into account the number of years the person can normally expect to live, the amount of education and natural talent they have, the number of people who depend on them, and so on. This would mean that my mother, a retired 60-year-old breast-cancer survivor and former smoker (38 years), with only one 29-year-old daughter, is less "valuable" than myself, a relatively healthy youngish person who will, if all goes well, have a master's degree and a heck of a career in transportation planning, along with a very young child in the next year or so. Yet it costs *more* to insure people who, in the most callous sense, are "less valuable," because the very things that make one valuable lower their risk of disease.

There is no simple resolution to the issue, as far as I can tell. We will not suddenly start "valuing" people's lives differently, nor will individuals stop demanding the best health care available at a price they can afford. But we can recognize that health care *is* a market failure, and regulate prices in new ways. Perscription drugs are a good place to start. It's true that it costs a great deal of money to develop these drugs, and there is a certain amount of risk involved. But how much of the resulting price does it take to repay that investment, with appropriate interest? Drug companies should be accountable for their pricing. Part of the FDA screening process should include an accounting of what the company's costs to develop the drug were, and a pricing system based on expected demand, production costs, initial investment, and appropriate profit should be devised. Sure, they should make money, even good money. But there should be a limit to how much they can make. The market won't limit it naturally, so this limit has to be imposed.

This model could potentially be extended to doctor's fees, lab tests, and many other areas, but in all cases would require careful analysis to ensure that the prices still yield quality coverage with low potential for fraud.

It's not enough to say that people should have access to good health care. Something has to be done to actually ensure that access. While 60,000 low-income children are wait-listed for health insurance in Florida, 700 retired MTA mechanics hold the entire transit system hostage with a strike that doesn't affect them, so that they can retain their practically free health coverage. The cheapest and potentially most rewarding people to keep healthy are left by the wayside over those who are the most expensive and offer the lowest return on investment. It's clear that something has failed, and we need to fix this soon.

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4 comments

Problem being ... (1)

jdiggans (61449) | more than 10 years ago | (#7439861)

... that the 'fix' seems to be one of two things, neither of which will happen any time soon.

a) Healthcare is inefficient. Those who can afford 'excessive' care often receive it ... meds they don't particularly need or that only make marginal improvements to quality of life but yet cost a fortune. Engaging in a frank, honest dialogue on a national level about genuine, effective quality of care issues and allowing only care that is truly 'necessary' by whatever system of measurement society decides upon would go a long way towards allowing our infrastructure to offer even the most basic levels of care to those who today cannot afford such things.

b) While we derive a great deal of comfort from the idea that we're all equal, our economic system still follows Darwin. The time may come when we'll need to pick one; I'm betting universal equality isn't going to win out. Openly discussing disparity in health care alongside- and as a factor of- more general quality of life measures would also solve the problem. Should an impoverished single mother on welfare expect the same level of care as a CEO cheerfully ensconced in his mansion? Perhaps not ...

In either case, things are going to get messy. The only 'good' part I see in any of this is that it is our generation that will get a front-row seat and the opportunity to participate in what may turn out to be our country's next Great Debate.
-j

Re:Problem being ... (1)

Ironica (124657) | more than 10 years ago | (#7440401)

Should an impoverished single mother on welfare expect the same level of care as a CEO cheerfully ensconced in his mansion? Perhaps not ...

There are, I think, two questions meshed together in this statement:

- Can an impoverished single mother on welfare expect the same level of care as a CEO...?

- Should society value the care of an impoverished single mother on welfare at the same level as a CEO...?

The first is, currently, "definitely not," at least under the American system (as well as the systems of most of the world). But for the second, that is the question of what we value about life. If that CEO can pay for his own medical care, should any of society be expected to subsidize him? On the other hand, if we *don't* deliver a good quality of care to that mother, what are the eventual costs to society? A less healthy mother will be less productive, meaning that any job she can get will garner her less money and do her employer less good. She will be less able to provide care for her child, who will then spend more time in subsidized after-school care or simply "on the street." Chances are, her health outcomes are closely related to those of her child, so the long-term expenses of taking care of that person for the next 60-80 years are going to be much higher than if we did the job right in the first place.

But yes, getting people to actually talk about the issues in any holistic manner is a daunting task. Mostly I'm just throwing this stuff out there as a holding-pattern for these thoughts, in case I think of something I can do with them some day. I welcome the feedback, though.

Re:Problem being ... (1)

Bronster (13157) | more than 10 years ago | (#7441704)

I live in Australia, where we actually have national health cover (and I use it - though I paid about 40% of the full cost for my last appointment with a doctor, and similar for the blood test he wanted to perform).

Still, Australia is trying to go the American way - throw away our national health care system (which works reasonably well, despite the inevitable slimeballs who are attracted anywhere that money is flowing). On my salary, I'm actually _losing_ money to not have private health insurance, because the taxes on not having private health insurance are higher than the costs of a policy which is approved by the Government.

The issue of holistic treatment is on I've had long discussions about fairly recently - friends have a son who is severely autistic - so much so that he has no chance of fitting in to society without treatment. There is only one treatment which has shown success in clinical trials (I forget the details - it was a few months ago that we stayed with them) - but it costs more in the short term, and the Government in their state (ACT) are not interested in paying. Luckily they have a benefactor (one of the grandparents) willing to pay for the treatment, because it costs more than twice their income - and that's before tax! The treatment involves 40 hours of one-on-one teaching with trained staff - so you can imagine it's not cheap.

Even in other states of Australia the situation is better - I believe the Western Australian Government pays the full costs, and some other Governments will pay half.

The problem is that there's no incentive for politicians to create long term solutions, because they won't be around for long enough to see the results - just for long enough to be blamed for the costs.

Anyway - this is about to degenerate into a discussion of politics and the failings of the democratic system - so I'll just throw out a teaser if anyone is interested in continuing to discuss the subject - the posibility of Government by Jury Duty. Randomly select however many people you need from the population for 'Government Duty'. Don't replace them all at once, but provide some overlap for handing over portfolios, and replace a percentage of the house each year.

The difficult problem is making terms long enough that people get an understanding of their role and make real contributions, but short enough that they aren't useless for anything else by the time they leave.

You'd also want to make it more difficult to get out of than Jury Duty, or you'd only get people who want the job, and they should on no account be allowed to do it (or whatever Douglas Adams said). More specifically, you want to stop _everyone_ in the Government people people who are there for the power, which is close to the current situation in most democracies today.

Re:Problem being ... (1)

Ironica (124657) | more than 10 years ago | (#7447177)

Yes, that's exactly what I've said! Ancient civilizations in Central and South America used a system like this... they called it "tribute," but what it was was that everyone took a turn running things for a while. The Spaniards came along, forced them to have elections... and it took a while for the conquerors to catch on that they were "electing" the people whose turn it was anyway.

In societies too large to give *everyone* a turn, appointment by random lottery seems like a good idea. You'd have a few jerks who would abuse it, at first... but then, when their time was up and they got their comeuppance from the next person, people would learn pretty quickly that they were all in it together.

Also, I've heard of that therapy for Autism... a friend of mine is actually a licensed therapist for it. She says it has about a 47% success rate, but that's better than the 0% offered by anything else. It has to start early, though, and continue for about four years straight (typical is ages 3-7). Good luck to your friends and their son!
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