There are a lot of variables that go into the cost of medical malpractice premiums. One variable that is often overlooked is geography. The cost of premiums can vary tremendously...
Two core foundations of the American psyche are freedom of choice and personal responsibility. These tenets create conflict when applied to health care and this conflict is at the heart of the health care political debate. Freedom of choice means not having to purchase individually mandated insurance. Personal responsibility means not having to pay for the health care of people who don’t want to work or who have diseases that they brought on themselves.
We really have 3 choices for health care: (1) let people buy insurance if they want to and can afford to, (2) require everyone to buy insurance, or (3) have a single payer system. Most Americans equate the idea of a single payer system with socialized medicine: anti-free choice, anti-free trade, and government meddling in private citizens’ affairs. But the reality is that we have had an enormous single payer health care system for 52 years – it is called Medicare. We have a lot of other single payer heath care systems: the Veteran’s Administration, the federal Children’s Health Insurance Program (CHIP), the military health system, Medicaid, etc. And when you add all of these up, 46% of U.S. health care is already being paid by the government and managed by the government. So, we currently have government health insurance so that everyone under age 18 and over age 65 is covered. Therefore, the political debate about health insurance is really just about health insurance for those Americans age 18 through 64.
It turns out that this age group does not really cost too much to take care of. Health care in the U.S. is the most expensive in the world and it costs us an average of $9,523 per person per year. But data from the National Health Expenditure Accounts from 2013 shows that the average annual health care expenditure for people age 18-65 is only $6,170. The highest expense is in infants < 1 and in the elderly over 65, who are all already covered by single payer health care systems (CHIP and Medicare). In other words, we are all arguing about those people who have the lowest health care costs.
Most people between 18 and 65 are not covered by CHIP or Medicare. Although some are covered by Medicaid, the Veteran’s Administration, or the military health system, most end up being covered by commercial insurance companies (or not being covered at all). One of the often-overlooked provisions of the 2010 Affordable Care Act (“Obamacare”) is that it limited administrative costs of insurance companies participating in the health care exchanges, that is the commercial insurance policies created by the Affordable Care Act, to no more than 15% of the annual premiums. This was a huge blow to the commercial insurance companies that normally have a 15-25% administrative expense. Administrative expenses of private commercial insurance is 2.5 times higher than government programs. The intent was to streamline commercial insurance but the consequence was that the profit margins of these plans were reduced to the point that in many parts of the country, insurance companies found that the exchanges simply were not profitable using the conventional insurance industry management style. Insurance companies such as Anthem, Cigna, Aetna, Humana, and Molina are for-profit, publicly traded corporations and their shareholders demand that they run a profit and return a large portion of that profit back to the shareholders.
But no matter what a person’s age, different people consume health care at different rates. Data from the National Institutes of Health Care Management indicate that 1% of Americans account for more than 20% of all annual health care spending and 5% of Americans account for half of health care spending. The graph at the right shows the cumulative distribution of personal health care spending in 2009. The whole idea of insurance is to protect yourself in case you unexpectedly find yourself in that 5% of people who have astronomical health care costs. With gambling, you put your money into a bet in hopes of winning; with insurance, you put your money in a premium to keep from losing.
Not surprisingly, most of those people in the 5% of Americans with the highest health care expenditures are the elderly. The next graph shows the age distribution of low versus high spending groups in 2009, also from the National Institutes of Health Care Management. Only 4% of Americans in the lowest 50th percentile of health care expenditures are over age 65 years old. However, 38% of Americans in the highest 5th percentile of health expenditures are over 65 years old and 40% of the highest 1 percentile are over 65.
So, what happens when a person has a catastrophic illness with huge health care costs? In our hospital, we have Long Length of Stay Committee that meets weekly to discuss patients who we can’t move out of the hospital for one reason or another. Many of these patients fit into that catastrophic illness category – either they don’t have health insurance or they have it but they’ve used up all of their benefits. What we end up doing is helping them sell off their house, sell all of their property, and liquidate all of their investments to pay their health bills. Once they have sold everything and are now sufficiently poor, we help them sign up for Medicaid (which they are not eligible for until they have no other assets). Medicaid is a government managed single payer health care system for the poor. It turns out that a lot of those people who are between 18 to 65 and have the highest health care costs are too sick to work and end up on Medicaid because they have no income and end up being poor.
What all of this means is that the health care debate that has been raging furiously for at least the last 7 U.S. presidential elections is a lot of squabbling over the least important demographic in health care – relatively healthy Americans between the ages of 18 and 65.
The Democrats want affordable health care access to all Americans. The Republicans want to avoid high taxes, stifling health care costs to employers, and mandates requiring citizens to purchase a service. Both parties want lower cost care, lower cost medications, lower administrative costs, and higher quality.
To me, it looks like the only realistic compromise that gets everyone what they want is a single payer system funded by payroll taxes.
May 11, 2017