Choice, Costs, And Healthcare, Ctd.

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A reader writes:

Your reader's response to Mickey's post is a good example of what people don't understand about healthcare costs.  I'm a healthcare research analyst - I can tell you without a doubt that the healthcare that we're buying today is indeed much more "advanced" than what we were buying 5 years ago, and in many cases is beyond what most people would have dreamed of 15 years ago.  I'm amazed on a regular basis by the technological advances people are coming up with. 

A more legitimate question however is whether or not the incredible technology we're purchasing today is worth the extra money it costs, and there is no broad answer for this.

The decision is a very personal and individual one.   Should my 84 year old father get a $100k course of the newest radiation therapy cancer treatment that will essentially cure his cancer, but probably only extend his life expectancy by 1 year due to his advanced age?  If it's my father, my answer is yes I'll gladly pay it.  And, as long as someone else is paying the bill (insurance company, the government) the answer on an individual level is always going to be yes.  But the problem is a lot of people can't actually afford the latest technology to come down the pipeline, and we as a nation can't afford to pay for everyone to have it either (next week the government will announce that Medicare Trust Fund will be insolvent in less than 10 years).

This leads me to a related key problem in the market for insurance - regulations require insurers to essentially offer comprehensive "all or nothing" plans.  If you're an insurance company, good luck trying to go into a neighborhood and offer a watered down plan at a price that people can actually afford - a plan that may not cover the $100k latest and greatest radiation therapy but does pay for the lower-tech radiation therapy that was all the rage 4 years ago that costs 85% less, covers basic care, immunizations, etc, and, more importantly, does it at a price tag that doesn't force lower income families to make a choice between basic health insurance or a winter coat.  Our laws prevent this from taking place b/c it's viewed as undesirable that some people should have health coverage that doesn't allow them access to the new $100k treatment.  We don't allow people to purchase lower quality insurance (lower quality translates to lower tech) than others - so these people wind up with either no insurance or on Medicaid instead.  It's the wacky idea that every single American must have - no matter the cost - the absolute gold standard in healthcare that gets us into trouble.  We may be the richest country in the world, but we simply don't have the resources for that.   

Another little secret that the average voter - especially those who think the gov't could do it cheaper - doesn't comprehend is that a primary reason private healthcare insurance costs as much as it does today is that anyone who buys private insurance is subsidizing a large chunk of the government run programs. You're typical community hospital loses money everytime a Medicaid patient walks through the door.  And Medicaid patients can easily account for 30-50% of a hospitals visits.   So either the hospital bleeds money until it runs out of funding and has to shut it's doors, or it passes the cost of caring for Medicaid and many Medicare patients by charging the private insurance companies higher and higher rates.  The private insurance companies have to pass these costs on to their members by hiking premiums, and raising deductibles and copays (I hate to be in the position of defending insurance companies, but the idea that insurance companies are making windfall profits by raising premiums is a fallacy).  So it's not just taxes that go up every time the gov't expands the eligibility requirements to get Medicaid - private insurance premiums go up to b/c the doctors hospitals have to pay for this new volume some how.    

The problem with your reader's desire to let the government compete with private plans is that the government does not compete - the government makes the rules - it sets (low) prices, often decides what care is "necessary", forces mandatory participation of providers, and subsidizes the costs of the program with taxpayer money.   This would be fantastic for your reader for a couple years - but it does nothing to actually control costs, and a few years from now either hospitals and doctors go out of business or Medicaid rates would have to increase by about 50-60%...which puts us right back into the situation we're in now, except the taxpayers would be paying for 100% of the exploding costs of healthcare.  It's not anything close to a solution.  It's just kicking the can down the road a little further. 

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