Price is What You Pay. Value is What You Get.
-Benjamin Graham
Health care reform is an interesting proposition. Claims have been made by fringe elements on both sides that attract press because of their theatrics rather than the merits of their policy proposals. The right claims that the government is out to control health care in order to decide who lives and who dies. The left claims that the current costs of health care will bankrupt the country within ten years. Both claims are better left for entertainment than for actual points by which to educate the public.
Our country will not go bankrupt because of unchanged health care policies, nor does the current health reform proposal seek to kill the elderly and disabled. What is at stake is our ability to continue to grow, innovate, prosper and lead the free world. Excessive health expenditures do not correlate with promoting health, but with substantial inefficiencies. In effect, the argument for reform is as simple as we are paying too much to an industry that is not giving us enough back in return.
The current health reform debate is not about a government takeover of health care. Health reform is about government overhauling how health care providers are paid in order to mitigate waste and promote results. As mentioned below in the 2009 World Health Organization Report on World Health Systems, in 2006 the US government spent more per individual on health care than Canada or the UK. France only spent $63 more per individual than the US government. Additionally, in 2006 US citizens spent $3,643 more per individual on private health expenditures. In the UK, Canada & France, citizens spent $424, $1,158 and $798 more per individual. The current health reform debate is about creating a payment system that eliminates waste and promotes results in that people are made healthy rather than made to line the doctor’s office for regular visits.
The US Department of Health and Human Services estimates that national health expenditures will increase at an average of 6.2% annually from 2008-2018 if our current health care system remains unchanged. If US health care costs rise at a 6.2% annual rate over the next 9 years, Americans will pay $4.61T in 2018 on health care. If US health care costs rise at a rate of 4% annual rate, Americans will still pay an estimated $3.45T in 2018 on health care.
What does it mean for US citizens to leave our health care system in its current state?
According to a study done by two Harvard Medical School staff, Drs. David Himmelstein and Steffie Woolhandler, ‘medical problems caused 62% of all personal bankruptcies filed in the US in 2007…. 78% of those filing for personal bankruptcy had medical insurance at the start of their illness, including 60.3% who had private coverage, not Medicare or Medicaid…. For middle-class Americans, health insurance offers little protection. Most of us have policies with so many loopholes, co-payments, and deductibles that illness can put you in the poorhouse,” said lead author Himmelstein. “Unless you’re Warren Buffett, your family is just one serious illness away from bankruptcy.”
If private health care costs become too expensive, Americans simply will not pay for health care, even if they are not eligible to receive government assistance. The country will not go bankrupt, but the individuals without coverage who get into catastrophic accidents may themselves become insolvent and ultimately their insolvency will be borne by taxpayers.
US citizens will increasingly die at a younger age; the barrier to health coverage in the US will ensure that increasingly more affluent individuals will choose to cut costs by avoiding potentially live-saving treatments due to their expense.
What does it mean for the US economy to leave our health care system in its current state?
Flat or decreasing incomes will result as employers pass health care costs to their employees by lowering salaries or eliminating raises. Less income translates to less consumption, less growth and fewer jobs. In effect, several trillions in wealth will be transferred to the private health industry with little results to show for it compared to other developed countries.
What does it mean for US business to leave our health care system in its current state?
Health care costs are the second largest expenditures for American businesses behind salaries. In essence, proponents of free enterprise who endorse the free market to decide what is best for our health have endorsed a vehicle that has stunted America’s growth. Before the average American business can adequately advertise, re-invest or purchase new equipment, it must first pay for the health expenses of its managers and employees.
The fundamental merit of our free market system is that it provides the greatest vehicle in human history for generating wealth. A free enterprise system praises the merits of individual property ownership and the individual pursuit of profit. However, there are exceptions to the industries that effectively compete in our free market system without systematically limiting its potential; such industries include health care, public safety and our prison systems.
Within the pursuit of profit is the pursuit to maximize price per transaction and transaction volume. Collectively, a free enterprise system is intended to produce a benevolent end by enriching the societies in which free enterprise is implemented. However, even free enterprise is chained to the inherent dualism of nature in that for every good aspect of an idea, there is one that is bad.
In which areas would a free enterprise system be flawed? One flaw is in the laziness of proponents of free enterprise through the acceptance of individual ends without an understanding of either the means or the detrimental collective ends. Another flaw resides in the commoditization of everything that can be packaged and sold as a service or product. The end is worshipped before the consequence is considered.
The Stats:
Health care is commoditized in our free enterprise system. This means that your health has a distinct dollar sign attached. Health commoditization is not necessarily bad, unless it is the actuaries of a corporation which are determining your dollar sign instead of yourself. The implication is that your premium payments do not decide whether you are covered as much as the decisions of the insurance company to cover you. In the US, health care commoditization is not merely a failure, but a disgrace. 46 Million Americans are uninsured. In 2008, national health care expenditures rose to over $8,000 per person. Health insurance premiums cost an average of $12,700 in 2008 for a family of four and $4,700 for single coverage.
According to a 2009 World Health Organization (WHO) report on health systems around the world, in 2006 the average life expectancy for both sexes in the US was 78. Below is a list of the countries within the report with an equal or greater life expectancy of 78: Andorra, Australia, Austria, Belgium, Canada, Chile, Costa Rica, Cuba, Cyprus, Denmark, Finland, France, Germany, Greece, Iceland, Ireland, Israel, Italy, Japan, Kuwait, Luxembourg, Malta, Monaco, Netherlands, New Zealand, Norway, Portugal, Republic of Korea, San Marino, Singapore, Slovenia, Spain, Sweden, Switzerland, UAE and UK.
The 2009 WHO report on health systems around the world also reveals two other interesting statistics worth noting:
2006 government expenditures per individual on health in US $:
United States: $3,076
United Kingdom: $2,908
Canada: $2,759
France: $3,139
2006 total private and government expenditures per individual on health in US $:
United States: $6,719 (#1 in the world)
United Kingdom: $3,332
Canada: $3,917
France: $3,937
The Department of Health and Human Services estimates that in 2008, total health care expenditures in the US represent 16.2% of US gross domestic product (GDP). A quick way to conceptualize this is that if the US is a person earning $100k per year, $16,200 will be spent on health care.
Profits Over Results
The Pay-As-You-Go (PAYG) system in the US can be conceptualized with one question: Do professional golfers get paid more the more strokes they take?
The PAYG system of health care in the US has created unreasonable expectations for doctors’ compensation. The PAYG system rewards transactional volume and price per transaction. A profitable by-product of the commoditization of health care is the seemingly unlimited selection of experts available. In the US, doctors profit by the number of times you visit, the number of referrals made, the number of pills prescribed and the amount charged for visits, referrals and prescriptions. In our current health care system, medical doctors’ economic incentives are misaligned with your health expectations. The PAYG system holds our health at ransom when we exchange results for monthly doctor visits and prescription medications.
Results in America’s healthcare system take a backseat to profit. The covering of symptoms is more profitable than curing the disease, because patients must keep coming back for treatments as long as their disease remains. The only caveat here being terminal illnesses; people are not as reliable in paying their bills when they are dead. Why cure any disease that will not kill an individual when you can cover their symptoms for greater profit?
Conclusion
We need our Congressmen to clearly articulate the actual intentions of the plan instead of political grandstanding with frivolous arguments intended to entertain, not properly inform. Stay involved! Think for yourseves!
