Monday, January 11, 2010

The Healthcare Payment System

      It seems to be the popular opinion that the U.S. medical system is broken. Try as I might, I can’t seem to find anything wrong with it. We have the most advanced equipment – ultrasound and MRI machines, PET and CT scanners, x-ray machines, monitors, ventilators, etc. – the finest medical schools, and world-renowned doctors. But the medical payment system is in sad shape.
      Medical insurance companies have two functions which are opposed to each other: 1.) pay medical bills for insured customers, and 2.) pay high salaries to executives and return maximum dividends to shareholders. Both functions are supposed to be paid out of premiums.
      The question arises: Why is function two necessary in order in order to perform function one? The simple answer: It’s not.
      If I perform a service under the assumption that I will be reimbursed, I don’t care who writes the check as long as I can cash it, and I am sure my doctor doesn’t care who pays his bill as long as someone does. What is magical about having it paid by an insurance company?
      Suppose it were paid by a central, non-profit agency, such as the government; an agency that pays neither seven figure salaries nor dividends. Quite a few more people could be covered for the same total premium, which would be paid to the government in the form of taxes (the dreaded T word). And as with all systems, some adjustments would be necessary.
      But no one would die because they couldn’t afford to go the doctor. I know – free clinics are available. Yes, if you happen to live in a city. Good luck finding a free clinic in a rural area.
      But wait a minute – wouldn’t that mean that the government would control my medical treatment? Well, most likely it would be controlled by doctors, actuaries and accountants who work for the government instead of insurance companies; the same professionals who now control your treatment.
      But that would be socialism. OK – let’s cut out all socialism. Let Blackwater take over the armed forces. All highway planning and construction would be done by the myriad of private highway construction companies. Social Security would be eliminated. The list goes on.
      Yes, but government run programs such as the post office and social security are both losers. First, the post office is not run by the government – it is a separate organization, and we have probably the most efficient and least expensive mail delivery system in the world. And Social Security may require tinkering and adjusting, but ask the recipients how they feel about giving it up.
      Suppose everyone got free medical care – we do not have enough doctors to handle all those patients. True, at least temporarily, but this is a problem which can be solved. Incentives, e.g. low or no interest loans for medical students, and subsidies for moving to low density areas come to mind, and I am sure there are others. Besides, it is an economic principle that if a demand exists, supply will eventually expand to fill it.
      What about all those people who work for health insurance companies – they would add to the already lengthy list of unemployed persons. Not really; except for the ones who devote their time to extracting huge salaries and calculating dividends, the rest could continue performing their current functions, only they would work for the government.
      As I said up front, this is the simple answer. But politics and greed can take the simplest problem and reduce it to its most complex form. If this doesn’t work, I am sure there is something that will, if we try hard enough.

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