Thursday, October 29, 2009

I Want You, I Need You, But There Ain't No Way I'm Ever Gonna Fund You

Editor's note: the author is employed by a large for-profit health insurer. This post represents his personal opinion only and should not be construed as the position of his employer.

There is a saying in the health care industry:


Pick two of the above.

This saying is reflects the basic truth of economics. There is no such thing as unlimited supply of a scarce good. Therefore, favorability of one component of quality health care comes at the expense of one or more other components.

It is possible to offer wide physician/hospital networks. It is possible to deliver health care at low costs. It is possible to provide treatment quickly. However, while each of these ends are desirable, working for one constrains the others.

Americans want to be free to choose their physicians. In the 1980's and early 1990's, HMOs used gatekeepers to lower costs. The gatekeeper system basically prevented choice. If you wanted to see a top orthopedic specialist for your bum knee, the gatekeeper often forced you to see a family practice doctor instead. Seeing a generalist as opposed to a specialist saved money. The practice was universally despised. Our market system essentially did away with gatekeepers a decade ago.

The American health care system has made health care universally available. No one is ever turned away at emergency rooms regardless of whether they are citizens or if they have insurance. Those with insurance don't face waits for treatments that don't involve organ transplants (and those wait times are dictated by scarcity of donors as opposed to systemic problems that socialized systems face such as availability of specialists). In socialist Europe and Canada patients wait months and even years for nonessential surgeries that vastly improve quality of life, such as hip replacements. Since no one has tried to take this aspect away from American consumers, it's hard to determine how much they value it.

The final option is price. Americans have benefited from choice and availability, so prices have increased as more people demand more health care. The result is that consumers spend more of their income on health insurance. This has driven many Americans out of the system. Unsurprisingly, many Americans think rising prices represent a crisis and they want government action to lower them.

So now our government is planning to "solve" our health care "crisis," which could be described as prices higher than many people would prefer. Conservatives suggest that this means there will be rationing of health care. Another way of stating that is that if many Americans have their price subsidized, then they will face new restrictions regarding their choice and availability of care. The insurance industry suggests that costs will actually rise as a result of government intervention. Another way of stating that is that some Americans price will be raised to subsidise other Americans (and possibly many Mexicans) and the net effect will be higher overall prices to the economy due to government inefficiency.

One thing is clear, there is no magic formula to maintain choice and availability and lower price. It would be nice if our legislators would honestly speak to which component of health care they would compromise.

No comments:

Post a Comment