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How Health Insurance Ruins Everything

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How Health Insurance Ruins Everything

How Health Insurance Ruins Everything
May 09
14:32 2018

Over the years, I have befriended an eclectic variety of people who fall all over the political and social spectrum. In doing so, I have learned there are a few certainties in life: We all pretty much want the same things, and we all disagree wholeheartedly on how to achieve these goals. In other words, we can’t seem to agree on what means justify the end.

I find this is particularly true regarding health care. According to Newsweek, an in-depth analysis of the health care system by the Commonwealth Fund found that, of the 11 developed countries in the world, America came in last. The study used 72 markers to help them determine the results, including access, efficiency, and cost.

But how could this be? For what has long been hailed as the greatest country in the world, you would think our health care would be one to admire, not exonerate. But the reality is we are a sick country crippled by medical debt. And, while many factors have gotten us to this terrible state of affairs, there is a prime culprit for our current healthcare travesty.

Insurance companies.

It is hard to imagine, but for centuries before the birth of healthcare insurance, people rarely went to hospitals. Hospitals were viewed as institutions you went either to give birth or to die – neither of which is great P.R.

Ailments like “the cold” were usually treated at home. Someone would hail a doctor (presumably by frantically riding into the night on a horse, as is depicted in almost any old-timey movie), and the doctor would make a house visit. These visits were billed pretty reasonably. If a doctor’s prices were deemed too steep, a family would find another doctor whose prices were more reasonable. Or, if the cheaper doctor provided less quality service, a family might choose to stick with the better doctor because his price range reflected his services. (Ahhhhhh, the free market. Don’t you just LOVE it?)

Before the 1920’s, hospitals were barely making ends meet. People were heavily utilizing at-home practitioner services. With advances in medicine and education, hospitals had a huge overhead and an inability to pay the bills. They were understaffed and underfunded. Enter Justin Ford Kimball, creator of what we now know as Blue Cross Insurance. Kimball realized that if a small, monthly payment plan was implemented, the average person could afford to go to a hospital. For the low price of 50 cents a month, people were afforded a variety of medical services. Hospitals loved it. Citizens loved it. It was a win-win!

But, over time, the implementation of health insurance proved to be an absolute nightmare. Why? Because their interventions destroyed the natural ebbs-and-flows of a free marketplace. Supply and demand were no longer a direct cause and effect, and anybody that understands economics knows that a marketplace cannot be corrected if there isn’t a linear and direct line between supply and demand.

As Jacques Vorhees describes in his analysis Shooting Old Yeller: Why It’s Time To End Health Insurance, “Price is critical in a functioning marketplace because it constantly sends signals (messages) to consumers and producers. It’s what keeps supply and demand balanced. And most importantly, it’s what enables competition, which keeps prices low. If price is removed from the marketplace, all hell breaks loose.”

What insurance companies did was create a middle-man to intercept negotiations and prices. Disguised as a way to help keep costs low (which, in all fairness, was probably what Kimball intended when he came up with the brainchild), the implementation instead allowed doctors and hospitals to increase their prices by exorbitant amounts.

Think about it: if you owned a clothing store and sold a pair of shorts directly to a customer, you probably would decide on a price range that factored in wholesale cost, rent for retail space, employment overhead, and competitors. However, the key deciding factor of price point would be largely determined by what the customer could afford. If the customer could go down the street to another clothing store and find similar shorts for the same price, you probably wouldn’t make a sale. Thus, you have to maintain a competitive price point. Otherwise, your store won’t stay in business.

But what if you didn’t have to bill the customer directly? What if there was a third party that had nauseating amounts of disposable income? You could bill the third party and charge whatever you wanted because you knew they would pay it.

The same concept is what has created such a problem with American healthcare. In the old days, the doctor would come to your house and charge a fee. If the fee was too high, you would find another provider, which incentivized doctors to charge fair and realistic prices. Such is the natural cause-and-effect of capitalism that doesn’t have a third party to mess with the mechanism.

Once the market switched to one in which people felt pressure to buy insurance, doctors, health practitioners, and hospitals were suddenly able to charge whatever they wanted. This, in turn, created stricter prerequisites for insurance companies to agree to pay (i.e., not covering pre-existing health conditions). While morally reprehensible, it makes perfect sense from a business stance.

Suddenly, health insurance companies started enforcing higher premiums, deductibles, and copays (along with a long list of restrictions) to justify insuring a huge portion of the American population. As a result, Americans stopped paying for health insurance and, subsequently, going to doctors. This has resulted in a lot more emergency visits and high-risk procedures due to untreated conditions that might have been prevented had people scheduled yearly exams, physicals, and tests. (Really, we’re not much different than a car. When you don’t keep up on maintenance, worse and more expensive problems come up in the long run).

To make up for the rising gap in medical bills that go unpaid by uninsured, poor, and/or illegal patients, health practitioners and institutions continue to raise their prices, and the cycle of chasing money among the three subgroups continues to manifest with no end in sight.

I certainly don’t have a solution. Health care is never easy, and there will always be “winners” and “losers.” What I am fairly certain of is that the extinction of health insurers would certainly create a checks-and-balance system that would force doctors to drop rates to competitive prices because there would be no “financial cushion.” Good doctors offering fair rates would continue to see patients. Bad doctors with unfair prices would meet the fate they deserve under the free market. The American people would stop going broke for basic health care, and you would see a healthier, happier, more productive society. You would also see a boost in the economy because more money would suddenly be available for spending.

And that is why a truly free market almost always benefits all parties involved.

Now, how do we get rid of insurance companies?

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mclain warren

mclain warren

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17 Comments

  1. Hugh
    Hugh May 10, 01:35

    Trying to rein in the largest business in the country, insurance companies, presents a daunting challenge on so many levels. The current system is ridiculously expensive to the average consumer as all of us who pay health insurance premiums know. To satisfy the physicians financial needs the insurance company stockholders needs, the hospitals financial needs adds up to a lot of money. I have worked in healthcare for 48 years and have seen some changes. But one thing that has not changed is the rising cost. Is a one payer ( government backed ) system the answer. Not sure. Do we leave it as is ? Well if no one is happy it must be a good system. It is a cash cow for all of the above. Canada, France, Germany all have good working systems which would work here but too much profit in too many businesses would be lost. I feel it will go broke anyway

    Reply to this comment
  2. FDRII
    FDRII May 10, 12:23

    You’re right about eliminating health insurance companies, but wrong about throwing providers and patients onto the free market. That’s fine for wants like consumer goods, but try hospital shopping when a heart attack strikes at 3 AM. Disease is a danger like fire or crime or foreign invasion. Government protects against those, and should for health as well. With doctors as employees, a government system would have great leverage on pay (and doctors could finally practice healthcare instead of running a business), a single consumer would be able to negotiate with drug and other health goods makers, and just dumping the profit margin would lop 15-18% of costs off the top. Yes, there are the usual worries about government inefficiency, but that’s a management issue, not one of basic concept. Uncle Sam won WW II, didn’t he?

    Reply to this comment
    • czhus
      czhus May 10, 17:50

      Please tell me one thing the government has every taking over that became better and cheaper.

      Reply to this comment
      • FDR II
        FDR II May 11, 12:40

        Sure, Medicare. Overhead is 2%, not 18%. And consumer cost is $100 a month, not $900, with all the really big costs like surgery covered completely.

        Reply to this comment
        • Cat
          Cat July 19, 02:12

          But Medicare doesn’t pay the doctor squat. That’s why it is so hard to find a doctor who will take Medicare.

          Reply to this comment
  3. sidintokyo
    sidintokyo May 10, 12:46

    Universal health coverage with no fee may work for small countries in Europe. The system in Japan provides for insurance companies, but the government is the major competitor. In the US, Medicare could be expanded.

    Reply to this comment
  4. Shana
    Shana May 10, 14:07

    Really,; we already have “gov’t run health care “. It is called the V A. Yep well run!,,or the British system where you belong to the state or the Canadian system that’s broke along with all their MRI’s. & a waiting time of 6 months to see a specialist!,,,,Nahhh

    Reply to this comment
    • FDR II
      FDR II May 11, 12:44

      My sister lives in the UK and she raves about National Health. Long waits are a fiction in almost all cases and they cover everything. She just had a pair of special shoes made under NH. Cost here: $1000. There: 0. In fact, they made her two pairs.

      Reply to this comment
  5. Oscar
    Oscar May 10, 15:33

    Back then there were not nearly as many people as there are now. To attempt to make house calls in 2018 would be almost impossible. Plus the cost for a doctor to attend medical school has grown to be a very expensive undertaking. The equipment needed to give proper care is itself expensive. Knowledge of the human body and it’s ailments have also contributed to the madness. The list goes on!

    Reply to this comment
  6. JudyB
    JudyB May 11, 13:47

    What about dental costs? Wonder how many people are suffering with poor dental health (which impacts overall health) because of exorbitant dentists’ fees. And dental insurance is no bargain, only covers a small portion of costs and isn’t cheap!

    Reply to this comment
    • FDR II
      FDR II July 20, 22:44

      Dental absolutely! The costs for even simple procedures is ridiculous. And dental health is often the gateway to other disease, so widening coverage will save the cost of treating bodily illness. Another massive cost item… hearing aids. I was quoted $5000 with another $3000 needed every three years.

      Reply to this comment
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