Friday, May 10, 2013
Health Care: Radiance's Reform
As Glenn McGee points out in Case 45, we need to change the way we look at healthcare. However, this book was published back in 1995. What he framed as a warning of future comings is now on our doorstep. The first thing he brings to light is that fact that the baby boomers were getting ready to hit retirement age, conveniently enough 2013 is the year the very first of the baby boomers have reached the statutory retirement age (67.) Having held control of most of the lawmaking bodies in the country since around that time, there has been very little done that is going to ease the financial burden the Medicare system places on us as tax payers and members of an ever changing economy.
A little bit of a rundown of things I recall from “problems with government finance” here at MTSU supplemented with personal knowledge and a bit of internet searching about healthcare spending at the federal level. The first thing I want to do is clear up a very popular misconception that is (at least seemingly) primarily responsible for the lack of change over the years. When you get a paycheck and your taxes and social security is taken out, that is not going into a pot to pay healthcare and social security when you are old, it is paying for those things right now. The feeling like they have been paying in and now it is the time to cash in, is one of the big reasons a lot of people do not want to make changes or eliminate social security and the Medicare programs they feel like it is owed to them. I bring this up to establish the fact that if we are ever to change this pattern, something both McGee and I believe is necessary, a generation has to come into political power knowing that they have to choose to make it harder on themselves so that it can be more fair in the future instead of knowingly burdening our children with our care.
I also want to bring up something I have made a seemingly obvious observation, something everyone seems to thing but no one says. Many (if not most) people I see working in the healthcare field are not happy with their healthcare. Insurance is a nightmare; Medicare, Medicaid, Tenncare (and similar programs), private insurance, it’s all the same. The same meaning extremely difficult to worth with and often times at least one person involved feels violated. Before I get any farther I should mention that I have fallen in with the professors I have heard speak about Insurance, and that is that they are extremely inefficient from an economic standpoint, that inefficiency is a huge part of the problem inspiring me to choose this as my topic. Economically all insurances work the same, lots of people put money into a big pot and when people need it they draw from the pot to help pay for their healthcare costs. A pretty simple concept, the only difference I know of in that fundamental concept is with federally funded aid the government is putting money into the pot instead of just the participants.
Now for those maddening inefficiencies, I’ll start with the biggest. Insurance companies are businesses. They have to pay their workers, pay their executives, advertise, make themselves look good so they can survive in the corporate world, and so forth. All of that eventually comes from your premiums, deductibles, and copays. Without numbers to go on, my next guesses of wasteful inefficacies are Doctors prescribing haphazardly (I’ll elaborate on that further momentarily) and zero dollar copays. Now, zero dollar copays sound nice right? Walk into the pharmacy smile and sign your name and they hand you medicine and you’re done. Well, Economics has a little problem with that especially when combined with the next part. When there is no cost at all, people pay less attention. They just grab whatever you hand them and take them (hopefully right, and hopefully they work,) this is not just a guess or economic theory, I see people do this on a daily basis. Doctors make this problem far bigger by not always being very selective with the drugs they prescribe. They fall prey to seductive drug reps and their baskets of coupons, free samples, and promises that the coupon will make it cheaper than the generic.
Spoiler Alert: 95% of the time, the generic is cheaper. Those coupons are just traps.
Or they prescribe a similar drug that is extremely expensive, when the cheaper drug would do just fine (more seduction by drug reps.) When you don’t have to pay the difference between the $200 pill and the $20 pill, people rarely care though. Do this a few dozen times a day in each pharmacy all over the country and suddenly that $180 is a staggeringly huge difference. Of course, vigilant and caring pharmacy workers try to mitigate this problem when they can, but they don’t always have the time or motivation.
The final problem I can point out before we can ponder about a solution is a problem in economics, if not THE primary problem. The problem(s) are called Free Riders. Without refereeing either word in the title itself, the best way I can describe the free rider problem is through a scenario.
Let’s say we have a happy little hippy/socialistic commune. In this commune there is no currency, everyone works to produce food and when the food is harvested everyone partakes of it freely. In a very small commune where everyone always know what each other is doing, it works pretty fine. But let’s say ours is just big enough that is a little default to keep exact track of everyone all the time. Without fail, one or two people will slip under the radar and start partaking of food without helping produce it. Those people are free riders.
Now back to our insurances. In insurances we can have free riders play out in a few different ways. One is by having people never put in a penny, and draw out (the most straightforward way of free riding) and one could classify many zero co-pay government funded insurances as all free riders. The other (and less recognized way) is to have people not participate (and pay into) insurances until they need coverage, then suddenly try and get in.
. Both are problems that will stop us from creating an economically sound system (or at least getting as close as we can).
So let’s list the problems we have so far.
1. Upcoming tidal wave of retiring baby boomers.
2. Social/cultural resistance to change
3. Insurance companies are businesses
a. Doctor’s prescribing issues
b. Zero-copay waste
Now for the fun part, where I start suggesting solutions and you all either agree or get increasingly uncomfortable/angry. First of all, I am in favor of all or nothing solutions and hopefully some of them will make sense.
The first problem I’ll address in problem 3, and to fix that we must make sure that our new program is either NOT a business at all or is heavily regulated. This can be accomplished by making it a nonprofit organization and gaining work from professionals like doctors, pharmacists, lawyers, accountants, and economists by making their time a tax deductible donation, something many of those people want. This could also be achieved by establishing set pay rates for ALL employees, including all high ranking ones that are hard to change beyond planned cost of life increases. Problem 3 down.
The next solution solves a few things at once, but would be really hard to sell to the public and companies. Once the program is established and running, abolish all other government and private insurance companies as well as mandate enrollment. This is where the ethics and economics get a little twisted. Competition is shut down (to get rid of the businesses) and enrollment is mandated (to eliminate the second kind of free riders,) although this would certainly enrage many it solves the economic problems created by their desire for fair healthcare. Now everyone is paying into and pulling from the same pot, which would allow the accountants and economists analyze the flow in and out and make policies based on it. As well as make the government input into the pot far easier to see and keep track of. Problem 5 down as well as hopefully 4a due to the inclusion of both doctors and pharmacists.
4b has elegantly simple economic solution, put a small co-pay on everything. A one to 3 dollar copay would likely help more than most people would initially think. Practically I know it works, when a Tenncare patient shows up and sees a $3 copay, everything comes to a screeching stop that usually ends with them having to leave and get money and often with them not getting it.
The only true solution to problem one however may be what McGee suggests in case 45 that retirement may be a thing of the past, when working ment hard labor and the elderly literally could not do any work. With many jobs that are far far less physically demanding many people can work to a far older age, and therefore still contribute to society and kick in at least a bit for their healthcare. My proposed system may not take away this possible necessity completely, but reducing the inefficiencies we may be able to reduce the cost of healthcare to a level where many more people can afford to pay in for far longer.
My proposals may not be perfect, but hey I'm just now getting my degree. If it were that easy to solve it surely would have by now. But hopefully they would get us on the right tract, and with time and professional input we could perfect the system or at least not collapse economically trying to support a huge population of retirees.