The Battle in Health Care

I’ve been watching the battle going on around Health Care in our government with dismay. Excuse my analogy, but it’s been amazing to me how our elected officials seem to be so focused on treating symptoms but not the disease itself.

I have read a draft of the House bill and a summary of the Senate and decided to share some preliminary thoughts about the proposals and the general discussions we all hear from the media and the internet.

The discussions around the healthcare industry have centered on leveraging a universal insurance model to provide accessibility. Some discussions, including the ones in Congress have gone further by looking to mandate health insurance, similar to regulations around having car insurance.

What is far more important is to manage the rising cost of healthcare while providing consistency in the quality across the entire country. The cost of health care consumes 16% of the total US GDP, which is dramatically higher than 15 years ago. The disturbing projection is that health care will consume at least 25% of the US GDP within the next 15 years. This means that health care costs will rise over 50% faster than the cost of living over 15 years. This is clearly not sustainable.

On the legislative side, the current thinking has specifics on raising money through taxes to provide insurance for people who don't have it; however it lacks anything specific on how to manage the rate of change in health costs. The taxes are a graduated surtax on people with high income.

This is good to cover expenses this year; however it assumes that the income levels of the taxed people will rise in direct proportion to the rise in health care costs. Given the disproportional rate of increase in health care costs, without having specific measures to manage costs, this system will break in less than 10 years.

To counter the rise of insurance premiums, Congress is looking at sweeping reform in the health insurance industry. One proposal is to put a cap on the cost of insurance premiums. Remember that health insurance is basically a pool of money that is paid into by the buyer and taken out of by people who require coverage. So if the cost of care rises, the premiums need to rise proportionately. If it doesn’t, the pool of money disappears.

The theory is that the insurance industry will pay less to doctors and hospitals. This would lead to doctors and hospitals to be creative about controlling costs. That’s the theory.

Another area being discussed is a government led insurance program. This program would compete with private insurance companies. This may sound like a good idea however this goes against the essence of a capitalistic society.

Historically the federal government has failed miserably at the execution of these types of programs. An alternative would be a public/private partnership with operations run by the private sector and oversight by the government. A better plan would to a public/private partnership on health care delivery.

I’ll be discussing more on this topic in my next blogs, including how costs can be managed.