More on Insurance and Healthcare Reform

September 19th, 2009 | Healthcare Reform

A family member who would, no doubt, prefer to go unnamed, e-mailed me a link today to a rather clever Flash presentation titled Healthcare Explained on the Back of a Napkin. http://www.buzzfeed.com/gustavoa/health-care-explained-on-the-back-of-a-napkin-4bf/  Since I recognize that much of the public's assessment of what is wrong with the healthcare system is based upon the disinformation of politicians, uninformed views of newscasters and their copy editors, and the Blogosphere, I offer here edited portions of my response. Sadly, I am not clever enough to draw stick figures and put them in a Flash Presentation.

Four sources of "problems" with healthare spending not covered in the clever Napkin assessment: 1) Technology and its Manufacturers and Users; 2) Hospitals – most powerful healthcare lobby in DC – get disproportionate share of funds and high executive salaries in nonprofit/tax-exempt sector (recent GAO and IRS studies and lots of attention from Senator Grassley); 3) Big Pharma – second most powerful healthcare lobby in DC – producing new drugs, many of which have only marginally more (or even less) efficacy than the ones they replace; 4) Medicare, which is the key underlying structural reason for the high cost of healthcare in the US (ultimate cost-shifter and politicization of healthcare technology and coverage decisions). The Health Insurance lobby I would rate behind Hospitals and Big Pharma and the AMA (physicians) is dead last. Thus, the Napkin assessment of the importance of the Doctor in healthcare decisions is grossly overstated.

The real problem is not health insurance, but the whether or not "insurance" is allowed to work like "insurance." The idea behind insurance is spreading risk of adverse events over a sufficiently large population of insureds such that the cost of adverse events to any one individual is borne collectively – same thing we see with hurricanes and flood insurance.  Taking the profit out of health insurance will not change the actuarial dynamics of risk-spreading.  Without profit, however, there will be no capital raised in the private sector to invest in health insurance companies and it will end up in the hands of the government by default – just like Medicare, GM, AIG and all the Banks. This is the underlying intent of many of the so-called Reform proposals and a recipe for disaster.

There are arguably a lot of 'bad' insurance companies out there – whether it be perception or reality – and defining what must be covered and for how long would fix some of those problems.  BUT, the greater the exposure, the greater the cost. And, the sicker the populations being insured, the greater the cost. That is about all the Napkins got right – the cost has to go somewhere.

And, I am reminded of one of my favorite quotes from a Physician/Surgeon/Professor at the University of Chicago where I lectured back in 1998 in the Graduate Program in Health Care Management: "The Plural of Anecdote is not Data." We all do well to remember this when we listen to stories from politicians or view admittedly clever Flash programs..

Let me add one of my own: "One man's problem is another man's livelihood."

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