Editorial: Healthcare Reform

Proper methodology of administration and payment of healthcare costs has been
a matter of serious debate, particularly since the inauguration of President
Barack Obama. This matter is of greater financial significance to our nation
than any other topic currently up for debate. Fear of change cannot be permitted
to stunt our creativity; neither can unfounded argument be allowed to scare
us into inprudent action.

At the center of the healthcare debate, we face a fundamental ethical question:
Is healthcare a privilege or a right? Before we can effectively discuss how to
pay for and administer healthcare, we must come to an agreement on what our
responsibility is. This is no easy matter since this is deeply personal. It is
conceivable that two people can look into their conscience arrive at wildly
opposite conclusions. That is, one person may justifiably conclude that
society has no obligation to provide healthcare to anyone while another may
think it is the public's responsibility to attempt a cure for every human
ailment. We must attempt to come to some agreement on where our responsibilities
lie.

In reality, the matter is not so simple. A lot of what most of us believe
should be a standard level of health we should help people maintain depends
upon the cost of procedures and drugs required to treat the ailment at hand.
In addition, we may wish to consider the rate of success of the treatment and
expected improvement on one's quality of life. For example, we may view cancer
treatment on a 90 year old man differently than we do a 25 year old man. For
one, a 90 year old man may not live through the treatment. If he does, we must
ask ourselves how much we have really improved his quality of life. How long
will he live to benefit from the treatment?

So far, I have not said anything groundbreaking. Most everyone understands that
we don't perform involved procedures on the elderly when we believe that their
quality of life will be better with no medicine at all.

We will consider issues that have come up in the healthcare debate. In many
ways, this will be a hodgepodge of ideas. It may seem disorganized and lacking
proper document. That's because it is. I am not going to properly document
this essay because some of this is a response to things I've heard said in
Presidential Addresses, and I don't think it matters much to poke at things
said in the past; rather, I will bring up arguments relating to things I've
heard said for the benefit of the reader who will undoubtedly hear debates and
addresses in the future. If these issues don't come up again, perhaps it is
because someone has laid them to rest. If you do hear these issues come up in
the future, carefully consider my argument against what you hear.

Insurance Executives Salaries and the Cost of Healthcare

I have heard President Obama say a time or two that he will work to hold
health insurance executives accountable for their salaries. Thus, he will be
able to reduce administration costs of private health insurers and reduce
overall costs.

This is certainly one way of reducing costs, but I'm afraid we are throwing
our efforts at a $1 per month problem. Healthcare costs have risen at
approximately 12% per year over the past 5-10 years. I haven't any figures to
backup this statement, but I highly doubt that executives salaries have risen
at a rate to cause this level of inflation.

Another thing to consider is the relationship between health insurance
executive's salaries and the salaries of executives in other types of insurance.
Premium rates in life and auto insurance have remained pretty stable in the
past decade. It is reasonable to assume that a CEO salary at an auto insurance
company is comparable to that of CEO at a health insurance company.
Health insurance executives are an easy target for blame. It is easy for a
politician to plant an image in our minds of insurance executives causing most
of our problems. The most likely cause of increased healthcare costs is
increased usage and the increasing popularity of expensive procedures.

Eliminating Waste in the Healthcare System

President Obama says he will eliminate waste in the healthcare system. He cites
this as one reason he will not need to increase taxes in order to support the
public plan he proposes. One must wonder, if he can reduce waste in the system,
can he do it within the confines of our current system to keep Medicare and
Medicaid from going bankcrupt? I still haven't heard a plan for reducing waste.
Instead, we only hear promises of reduced waste under the new plan. Perhaps
reducing healthcare waste under our current system would increase the public's
confidence that the government can efficiently run a healthcare plan.

Contrary to what I've heard in Presidential Addresses, health insurers would
benefit from a decrease in waste in the healthcare system. In fact, this is a
problem health insurers have been working on for some time, and they have not
been able to solve it. If initiatives are taken to eliminate waste, insurers
stand to pay out much less in claims and would increase their profit margin in
the immediate future. Until we see a clear plan from the president, it will
be difficult to believe that the government will do a better job of eliminating
waste than a profit driven market.

Some may argue that the waste the president hopes to eliminate is the
administration costs in insurance companies. It is reasonable to say that
the government will be able to administer its health plan cheaper than the
private sector, but we need to look no further than the Department of Motor
Vehicles to see what kinds of inconvenience lay in store for us under a public
health plan. Private health insurers administrative costs may be high, but the
consumer is getting something for their money.

Healthcare Rationing

I will simply refer you to an excellent article on this subject published in
the New York Times.

http://www.nytimes.com/2009/07/19/magazine/19healthcare-t.html?_r=1&ref=magazine

Mandatory Health Insurance

Before we can discuss whether or not people should be forced to carry health
insurance, we need to consider the fundamental principle of insurance. That is,
health insurance at its roots is a community pool of healthcare resources to be
consumed by society. Health insurance provides a way for a community of people
to spread the risk of financial catastrophe due to accident or illness.

In our society, we are reticent to pay for something without a guarantee of
return. When we pay an insurance premium and see the six months elapse without
receiving care, we see the amount we paid in premium as being wasted. If our
insurance premiums are not viewed as paying into a community pool to provide a
resource for those who need it, we get frustrated with our lack of return on
our premium investment.

Under the health reform bill, all citizens will be required to carry health
insurance. A couple of weeks ago I went to the chiropractor. While I was in
his office, he received a call from someone hoping to sell him health insurance.He told the agent that he had gone without health insurance for 30 years and
was very healthy. He had no need for health insurance.

For as long as this man stays healthy, this presents no problem him or the rest
of society. A difficult ethical question is presented to us in the event that
this man contracts a serious illness. Should society pay for this man to receive
treatment after he has refused to pay into the community pool for so many years?
If so, then why should he make premium payments in the meantime unless he is
compelled by law to do so? The only way we can go on without forcing
participation in an insurance community is if we decide that we are prepared to
allow uninsured people to die without treatment if they contract an illness.

In the example above, the man has the means to pay premiums, he just refuses to
do so because he does not want to participate in a community pool. We have not
considered what to do in the case of someone who does not have the means to pay
insurance premiums. Currently, Medicaid helps those who cannot afford insurance.
Medicaid does not appear to be a sustainable long-term solution. As part of
health reform, those who do not have the means to purchase health insurance
should have a deductible and co-payment levels set to put them on an even playing
field with those who do have health insurance. That is, those who have health
insurance have to meet a deductible before their insurance picks up the tab on
their treatments and drugs. Even after the deductible is met, the insured is
usually required to pay a co-payment upon receiving treatment. Deductible levels
and co-payments are set so that the insured feels some financial impact upon
receiving services. This helps keep usage down. If we allow a group of people
to receive care without having any skin in the game, we will see that their
usage rate will be much higher than if they had to pay some amount to receive
care.

Other Considerations

The fact is that most of us don't have enough skin in the game. We don't think
too hard about the financial impact of receiving services. Most of us are kept
out of the doctor's office only because we have other things to do and don't
believe a visit will help. Usage has been affected greatly by persistent poor
health habits in the individual lives of Americans. Obesity continues to rise
and is linked with many chronic diseases.

Unfortunately (or rather, fortunately), many of the treatments provided at the
doctor's office could be prevented if more people would take responsibility for
their own wellness. We cannot prevent people from getting old and sick, but we
can take steps to improve our own diet and exercises habits to prevent chronic
illness.