BUD BREWER
One Man's Opinion
HEALTHCARE, WHAT’S THE PROBLEM?
October 2,2009: To universalize or not to universalize health care, that is the question Congress is trying to solve. But the main problem with health care as we practice it here in the USA is not whether it is privately insured by independent companies or by a department of the U.S. Government, it is that there is a disconnect between the consumer of health care services and the provider of such services. In few if any market driven businesses is the buyer and provider of a product or services disconnected like they are in health care. When you go into a retail outlet and look at the various items of merchandise they offer, you make judgments whether to spend $10, $50, or $100 on a product by what value you place on possessing it or using it for yourself or family. When you enter a contract with a painter, carpenter or engineer for services to an asset you have, you make that same judgment as to the value you believe is offered based on a variety of alternatives and considerations that are personal. By this process the prices for goods and services we deal in are set by agreement between the buyer and seller, or as we refer to it, a free market transaction. The problem with health care is that the provider and the consumer have become disconnected with regard to the price/value considerations relative to the transaction. Living with medical solutions to all problems is not necessary but it is a mighty nice convenience. Medical researchers make decisions whether or not to progress toward modifying, improving or changing a solution or medical process, not with the guideline as to whether or not enough consumers, such as you and I, will part with some of our wealth or future income to make the development economic but only whether or not it works. This has come about by the ingenuity of the “find a need and fill it” crowd who, years ago, developed the business of laying off, sharing or transferring the risk or cost of our need to purchase what ever it takes to solve a problem. We call these entities insurance companies and in exchange for paying them a relatively token amount of a potential large dollar risk (something we call a premium), they make our lives less hazardous, and they save us from having to build up enormous personal emergency reserves to assure that we won’t suffer extraordinary loss of wealth or health as a result of not being able to correct a problem. As beneficial a service as this seems to be on its face, many people believe that the companies engaged in insuring us against such risk are exploitive of their consumer policy holders and the providers of health services in general. Few people know insurance companies operate on the basis of probabilities or long term expectations and set prices for coverage that takes into account potential rates of loss for the universe that they are covering. Many critics of the profitability experienced by insurance companies are probably unaware that their underwriting of risks typically generates a loss. That is they lose more money paying claims than they collect in premiums. So how do they make money? They collect cash from premiums paid by the insured for future potential losses or future health care expenses and invest in interest bearing securities, usually in dollar safe or thought to be safe fixed income bonds, commercial paper, mortgages, or any other income producing obligation. The risk they assume notwithstanding, is that of assuring the payment of claims and they get very nervous when a major disaster like hurricanes, fires, health pandemics, etc., threatens their net cash flows and may require a potential draw against their capital base.
A majority of the public believes that since we pay for protection against the risk of ill health in general through insurance, we can have whatever medical treatment or service that is available in spite of the cost. The uninsured, whether by choice or force, still believe that they should have access to whatever health care or medical procedure is available regardless of its cost. In other words, health services are a right not a commodity. The Obama solution is to embrace this concept but to do so we will have to transfer the risk of the expense therefore to the population as a whole. Since this will not correct the worthiness of a medical service, treatment or application we would otherwise have if we had to make judgments about the value of such services because we had to pay for it ourselves, then we need to be prepared for unbridled costs, fees and limited availability of health services in general. Furthermore we will need to meet the cost of professional health services by the transfer of whatever wealth is necessary to compensate them. Of course if we, as individuals, would have to bear the financial burden of some larger part of the unlimited health services available, the general demand for those particular health services that are marginal would go away. But this is not the case now and not likely to happen. National Health Care requires the moral acceptance in principal that all citizens have a right to unlimited healthcare services in equal quantities. This is where we are likely to be after Obama care is legislated. The Obama Administration and many citizens believe that there should be equal rights to health care and their plan is to create the structure to provide it by increasing availability to the underclass and reducing or rationing its availability to the population in general. Citizens will continue to fund it in amounts relative to their taxable income levels but the health care professionals will function more and more as service providers to the new government department (beaurcratic agency ) generated by the current or substitute legislation.
Unless the voting constituencies decide that they want to keep the present risk transfer system in place and absorb the steady rise in unabated cost of health services generated by an industry that operates outside the free market system of controlling prices, we most certainly will be living under a government operated allocation system that will level the playing field but will bring average quality of health care down for most of us.
One Man’s Opinion- Bud Brewer
Great article Pop, is the comment section working out okay for you?