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One economic point brought to the forefront in the universal health care debate is something economists have talked about for decades, but one that only recently Americans are beginning to understand fully. Namely, efficiency in health care is a good thing, but if it's applied to private health insurance company business models -- i.e. insuring only healthy people or the healthiest citizens -- the logical consequence of it is, obviously, a larger and larger pool of excluded, less-healthy citizens and/or people who need more care and whose health care costs are higher.
Leaving the rest for federal, state governments
The irony, some call it the absurdity, of what occurs next should not be lost on investors or taxpayers: after supporting a system that excludes less-healthy citizens, the system then wonders why health care costs are higher when these citizens access health care services via Medicaid, and via the emergency rooms in the nation's hospitals.
The answer is, of course, the organization paying for health care for this group of citizens, often the federal government and state governments, will incur higher health care costs per person -- and will be less-efficient than the private health insurance companies: the reason those private companies are efficient is that they excluded those who would make them less-efficient in the first place: the less-healthy.
Here's an analogy: the above is like taking players from two Major League Baseball teams, say the Los Angeles Dodgers and the Philadelphia Phillies, combining them with the best players from college baseball, then allowing me to pick only the Dodger and Phillies players out of a hat. You get the college players, before the selected teams play each other. To be sure, you'll have some good college players, but chances are you're going to lose to my team almost every time.
For the above reason, under the current rules, one can't expect a federal or state health insurance operation to be more efficient than the private sector insurers: the private insurers have already cherry-picked the lowest-cost citizens.
To correct the above, to make the federal/state plans more-efficient, you'd have to require the private companies to insure more of the higher-cost citizens. Or you'll have to give up the unfair and unreasonable complaint that the federal/state system is less efficient.
Of course, some economic conservatives will counter that another way to address the inefficiency problem is simply to not provide medical care to the higher-cost citizens. But as I've argued before, that option is not only not credible, it's barbaric: a just, compassionate, affluent, and advanced democracy doesn't treat its citizens that way.
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Financial Editor Joseph Lazzaro is writing a book on the U.S. presidency and the U.S. economy.
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Reader Comments (Page 1 of 1)
8-14-2009 @ 7:22PM
A. Marshall said...
I pay now, $565 a month for my health insurance ($5,000 deductible). Make my insurance company insure people with problems and I will pay over $1,000 a month for the same policy. If the govt. wants to have medical coverage for these people, then let the govt. pay for it. Why make people that are already paying high premiums, pay more...this is cost shifting or just another way to tax the working people more, to pay for those who do not work,(Oh, by the way, I make much less than $250,000, that Obama promised wouldn't pay more taxes),........how long can this go on???? Obama said he wouldn't raise your taxes, he didn't say he wouldn't raise your health insurance premium......What a Joke!
8-14-2009 @ 7:52PM
traineeinvestor said...
What it comes down to are four choices:
1. force insurance companies to insure everyone at the same rates: healthy people end up paying more to cover the unhealthy ones
2. government programmes for the unhealthy: the taxpayers foot the bill
3. make the unhealthy pay for their own insurance: this will be expensive for those deemed unhealthy
4. no coverage for those who are deemed too unhealthy to get private insurance at affordable rates: as said, this is not really an option for a society which wants to provide a miniumum standard of care and support for its poorest citizens.
A combination of #3 for those who can afford it and #4 for those who can't is (very obviously) the fairest approach.
8-14-2009 @ 9:17PM
ct said...
A. Marshall,
You must have missed the part were the article said you are already paying for those people. The joke is that Costa Rica has better health care and a longer life expectancy. YOU ARE PAYING NOW! How's that $5,000 deductible? Personally I'll take government care and then enjoy the money back in my check. And my employer will give me money to not get insurance through them.
Every industrialized country in the world has universal care. Oh, and they all live longer and are happier than us. Check it out.
8-14-2009 @ 11:47PM
Irish said...
traineeinvestor: I don't wish ill on you, but one day, you'll either be at the wrong place at the wrong time and be inflicted with a lifetime injury (and no treatment if your # 4 comes to fruition) or be stricken down by a serious illness that will require treatment (in which case you won't be able to afford when you lose your job). Its people like you that have lost all compassion for other human beings that has taken this country to its knees.
8-15-2009 @ 5:05AM
Ethan said...
A lack of universal healthcare is a abscess on any economy, I can understand why you wouldn't want to pay other's insurance in part, but if somebody's cough turns into bronchitis and they could have got simple treatment to begin with, you're losing part of your workforce and it'll swing back to you in a much worse way, jobless benefit.
8-15-2009 @ 7:08AM
Ron Ogle said...
This is not an advanced democracy this is a representative republic this is where libs make their mistake.Why doesn't the government take over car insurance then we could wait till after the accident and get coverage!
8-15-2009 @ 1:07PM
R. C. Jackman said...
I am an insurance company. The government has decreed that I shall supply a certain minimal level of care, a basic plan. Some of my customers want and can afford additional care, supplemental plans. For customers with no preconditions, I can give them a good low cost plan. For customers with preconditions, I have to charge more. For a mix of customers with unknown preconditions, I can charge an intermediate rate. But it would help if there were something like the FDIC that would insure me against customers who might seek to game the system.
8-16-2009 @ 9:25AM
Kurt said...
Ron Ogle, what's the difference between an advanced democracy and a representative republic? Nothing. There is no philosophical or legal difference between those "two" things.
I think what you mean is that this government is not controlled by its electorate. It's controlled by its elected officials, who are controlled by unelected special interest groups. What you mean is business should control government, not votes. That's disgusting, and un-American.
8-17-2009 @ 3:04AM
gkeyboard said...
Private police departments?, Privately run, not just supported, military? LIFE, liberty, and the persuit.....
8-20-2009 @ 3:30PM
Lawrence Kennon said...
There is one factor in your equation that I do not see you addressing. Some people are unhealthy because they have chosen unsafe or unhealthy lifestyles. For example they may be smokers, heavy drinkers, Big Mac gluttons, or serial-anonymous-sex addicts with a nasty case of AIDS. It is not inherently fair to require those who practice responsible lifestyles to pick up the tab for those who have lived irresponsibly.
Of course all unhealthy people do not fit in the category of being individually irresponsible. I personally would be a lot more open to helping those who have problems through no fault of their own. It is not "barbaric" to make many people pick up a large part of the tab for their own bad behavior.