September 16, 2006
Beginning of the Road
By Dane Sorensen
While waiting for my wife to come out of surgery I thought it would be a good time to reflect on health care. Since 1976, when we were married we have had health insurance. It has covered anywhere from 80% to 100% of the medical services we have needed. That has included everything from having babies to major surgery. On September 1, we temporarily joined the uninsured. According to the latest survey, 15.9% of all Americans are uninsured. That is over 46 million people who are playing Russian roulette with their health and life. This no insurance situation was not planned and is the result of delays in switching policies. When we leave this unlucky group our new medical insurance will be a pretty slim package that only kicks in after a $10,000 deductible.
As many self-employed people realize, health insurance is the biggest growing cost. Health care seems to be immune to the Federal Reserve's low inflation program. While over the last decade the overall inflation rate has been between 2 and 3 percent, health care has been steeply climbing at 8 to 20 percent a year. Factor in the additional escalation caused by age based rates and you have some serious price increases.
Our last contract offer from Blue Cross for our old insurance showed an increase for next year of $470.00 a month. It brought us to a cost of $1600.00 a month for the two of us. Our three children were shed from our plan 2 years ago because of high prices. We entrusted their health to the $900 a year college insurance program. Under that plan my kids were fully covered if there was a full moon and they trusted the college nurse to do brain surgery.
Our new policy will not be as useful as the college plans for my kids, as they occasionally got free medicine from the campus nurse. Basically, we will end up paying for our entire medical costs most of the time. Unless one of us has a major medical event, we will not see one penny back on our insurance payments. We could have opted for a more common $5000 deductible, but after working the numbers it was better to go with the higher. That is assuming we religiously put a decent amount of money into a savings account to be used when that medical event happens. Our plan is to put $300.00 a month into a savings account. A government approved Health Savings Account is an option for the more affluent.
How did our country get into this mess of skyrocketing health costs? Why do many prescription drugs cost 80% less in Mexico from the prices you pay in Ely? Why does a typical surgical procedure covered by insurance cost five to ten times more than a comparable amount of elective or cosmetic surgery? Why is Blue Cross of Minnesota sitting on 1.3 billion dollars in reserves when the state only requires 1/10 of that? Why is it that many insurance companies have art collections valued at millions of dollars and maintain an in-house curator? Why do they (medical and insurance organizations) always have the newest & fanciest buildings?
I have seen articles explaining why health insurance costs are out of control, but none, in my opinion, really answer the problem. Probably because they were written by advocates of socialized medicine. As a free market Republican, I realize socialized medicine would result in poorer health care. However, this claim is becoming harder to prove considering our country is falling behind in keeping the general population healthy. Countries like Canada, United Kingdom, France and Germany now rate better at keeping their people healthy. This change is probably due to the fact that fewer people in the USA now have health insurance. When the uninsured do enter the system it is usually for critical situations that have gotten out of control. In the last five years the percent of companies offering health insurance to their employees has fallen by about 1% a year. Only 59% of Americans have insurance that is tied to their employment. Insurance companies now admit that their increased sales are coming from higher insurance rates and not from selling more policies. Although it is claimed 86% of all Americans have health insurance, there are no figures showing how good those policies are. After all, when my new insurance policy finally starts later this month I will be considered covered, even though I am going from no deductible to $10,000. Most people have seen their co-pays for doctor visits and drugs go up and the list of exclusions increase. The average employee's contribution to company-provided health insurance has increased by 143 % since 2000. Fifty percent of all bankruptcies involve large medical bills. It is my gut feeling that the number of people covered by good insurance (like what I had to give up) is probably less than 25% in this country. Which is great for the hospitals and clinics that can now charge the full price to the uninsured and to the underinsured while their deductible hangs over them.
The insurance companies are not completely to blame for this crisis. They are taking advantage of it, but they are not the sole cause. We can blame the lawyers for the get rich lottery style lawsuits that are responsible for high malpractice insurance rates. The average increase in 2003 for medical liability insurance rose 18% and in the end we pay for that.
Another factor is the pharmaceutical industry has been taken over by marketing and the quest for long term profits. The Pharmaceuticals realized it was much smarter to develop new medicines that manage illnesses rather than cure them. That is why there is so little research being done for new antibiotics. You can't make much money giving someone a pill that will make them well in ten days, far better to make a medicine they have to take until the day they die. Drug companies have been accused of tweaking drug formulas so they can continue to have patent protection and fat profits. The inflation on drugs is not based on market conditions it is caused by the fact they realize Americans will pay through the nose for drugs.
I feel the Insurance Industry is to blame for distorting most prices for health care. Their ability to dictate discounted prices that the clinics and hospitals must accept is countered by the medical establishment raising prices to where the insurance companies are paying what the establishment really wants. It is a game. When was the last time you saw a clinic or hospital go out of business? Furthermore, if the insurance companies cared for us high deductible policy owners they would allow us to also have these discounted rates while we pay off our deductible.
What I find highly unethical is this two-tiered pricing system, where uninsured or underinsured people pay 20 to 40% more than these cash bloated insurance companies do. If Ely Blomenson charged me $1000 for a broken arm because I was black and $650 to whites, there would be no question that this type of pricing was against the law. It is not by race, but by economic class that this pricing discrimination is being practiced. I do not believe in price fixing, but when it comes to health where a person has no choice but to seek medical attention, everyone should be charged the same price. If I were king for a day I would end this heinous and blatant discrimination. I have been critical of this practice long before we decided to switch to a high deductible. The result of a same price scheme would be fairness to the growing number of under-insured. It would force the insurance companies to demand more efficient health care.
It would be an interesting experiment if one of the states in this country would ban price discrimination. It would be an even better experiment if a state would not allow everyday medical problems to be covered by any insurance. My feeling is that if we had to pay to be cured for earaches, minor infections, rashes, etc. the price charged by the medical establishment would plummet. Real market pressure would come to bear. The burden of having expensive billing experts employed by both the clinic and the insurance companies would disappear. Furthermore, the legal and market rules that allow Mexico to have low drug costs should be adapted by this country.
In this age of conspiracy theories, it would be very easy to push the idea that the medical establishments and the insurance companies are working to pile up as much cash as possible before this nation is forced to socialize health care. Please remember, that doctors are not part of this plot. They lost control 20 to 30 years ago when they sold their independent clinics and doctor owned hospitals to the mega-medical conglomerates. Giants like St. Mary's or Fairview control most of this state and they have turned doctors and nurses into factory workers. What is amazing is that most of these conglomerates are non-profits - just like Blue Cross. If you think the CEO of Blue Cross or St. Mary's lives in a three-bedroom bungalow, you are sadly mistaken.
Health Insurance is basically a protection racket. Until we level the pricing field and reinstate a market system like Mexico we will continue to see 8-20% increases until the system collapses.