In the Aftermath of SCHIP
After SCHIP fades from the news, those who can’t afford health care will remain with us. These are the folks who crowd emergency rooms when an undetected illness erupts into crisis, or who suffer from the sudden emergence of a catastrophic illness. They may pay their emergency room bill, but they can’t afford follow up care. And for a truly catastrophic illness, they will toddle off into bankruptcy.
And note, although these folks are typically grouped into a category named the uninsured, I don’t want to use that term. For it is not insurance that they need, but subsidized access to health care.
The market for individual insurance policies does not provide cheap access to health care, but offers instead a mix of cost sharing that does nothing to help someone to pay for doctor’s office visits. And if you doubt me, please go to the internet and price a policy yourself. Most policies are very expensive, but are even more so if you choose low co-pays and deductibles. You’ll see deductibles from $1000 to $5000 and co-pays of 20% to 30%. And the cost sharing often continues until a person has paid as much at $5,000 – $10,000. So for a person with a chronic illness such as diabetes, they might pay $12,000 in premiums plus $10,000 in cost sharing. Simply unaffordable for a middle class family.*
And then we have the problem that in many states, an insurer can price a policy differently for those with chronic illnesses, or deny coverage outright.
No. Insurance is not the solution.
By the way, to those of you who ask, what about health savings accounts? Yes, once a savings fund is built up, the fund can help a person pay for regular health care – but only if he or she remains healthy. A chronic illness such as diabetes will wipe out any savings in a fairly short time.
And for the working poor especially, the need to pay premiums and also save for a health fund is simply impossible. Even for the middle class, who may also want to save for retirement and put kids through college, the objective of building up a viable health savings fund can be an impossible burden.
Of course, most of us need only a little bit of health care until we hit our 50s. My wife has had no health crises during our marriage and only one pregnancy. But for myself, I need quarterly doctors visits and daily medications.
But how about the market? Here I’ll give my “bona fides.” I have worked in both group and individual insurance, and in claims and underwriting. I watched as corporate executives from a former employer testified before Congress about how managed care would end the cycle of price increases for health insurance. I continued to watch as their dream collapsed. The particular insurer eventually left the market, selling its managed care business to one of the remaining players. I have a number of insurance certifications, including an “FLMI” (Fellow of the Life Management Institute) another certification from the HIAA and two investment licenses. So I’ve been there and seen it all. And the bottom line is that the market hasn’t worked and it won’t. PERIOD.
In our slavery to ideology, we have developed elaborate and unfounded expectations that markets can solve everything. You hear it with regard to education (and I agree that competition might lead to the development of some better ideas). You also hear arguments against the regulation of markets (suggesting that it is not in the interest of a seller to sell bad merchandise). And yet we have the current example of Topps (a purveyor of frozen beef patties) which went out of business after it sold tainted beef – and it bought the tainted beef from a Canadian firm that is also NOW out of business. So if the market worked at all, it worked too late for either those who were sickened or for Topps itself.
Among markets, the health care and health insurance markets are especially peculiar. With most goods and services, prices go down over time. That this has not happened for either health insurance or healthcare suggests that something peculiar is going on that is beyond the experience or expertise of our economists. My industry experimented heavily in the 1980s with managed care. Now they are returning to cost sharing – a mechanism from the 60s and 70s. (A comparison to the automobile industry would be if we were suddenly offered new cars with carburetors and manually cranked windows).
Before I end my criticism of markets, let me point out that the market for private health insurance has always been a specialty market. Such insurance has been sold primarily to small business owners and professionals in private practice. No more than 8 – 10% of all Americans are insured through this market, many fewer in fact than the numbers of uninsured.
So, if the solution is not insurance, then what?
We have two alternatives, the first would be to subsidize affordable health plans priced similarly to SCHIP coverage – and with similarly generous benefits. In 1997, NJ’s SCHIP plan charged a monthly premium of $15 and offered full medical care for a co-pay of $10 to $20. The current plan may have changed, but remains generous and inexpensive. A family can afford a monthly premium of perhaps $100 – $150 for family coverage (adults and children) and co-pays of up to $30. A second alternative would be to build a system of government run clinics to provide basic health AND dental care. For cities and towns that already bear a significant cost for the uninsured, clinic medicine might be cost efficient. In rural areas, subsidized health insurance would be preferable.
Either way, sounds like a plea for socialized medicine, but so what! We already spend a lot and in a very inefficient way. We can either devise the necessary changes, or march headlong to fiscal disaster.
A final example. Many medical problems, from hypertension and heart disease to breast and colon cancer have better outcomes if a patient sees a doctor regularly, both for an annual physical and for the management of chronic illness. Most of us in the middle class know this, and can afford to see our doctor regularly. But for those who are uninsured, and especially for those who live from paycheck to paycheck, such behavior is an unaffordable luxury.
*For those of you who are covered under an employer group health plan, let me say this, you have no idea of how lucky you are.
