Tuesday, December 8, 2009

The Buck Stops Here

I'm done beating around the bush. The reason health care is so expensive is because of our government subsidized employer based insurance. This is the root of the problem and must be attacked if we wish to see any real change.

Some history first: during WWII, wages across America were frozen, forcing businesses to get creative in luring the best talent. Many opted to offer health care insurance in lieu of a higher salary, and people for the most part liked it. Soon, a great number of people were insured through their job, and the government, seeing the people cared for, cemented the system into our society with a tax exemption on insurance premiums for those who got insurance through their job.

This system worked for a while, and many Americans were able to get health care when they needed it. However, the problems of such a system soon became apparent.

Due to a lack of incentive to find a less expensive doctor (hey, insurance is paying the bill so who cares?), price inflation in the health sector exploded. Now, costs are prohibitive to anyone who doesn't have insurance. So uninsured should just buy insurance, right?

Strangely, the government tax exemption applies only to insurance through an employer, not individual policies. So those people who don't get insurance through work are at an immediate disadvantage.

Further, the employer based system has segmented the market and created small, disconnected risk pools that exclude individual policy holders. This means individual policy holders, in addition to paying taxes on their premiums, must also pay a higher premium from the beginning.

The problem only goes deeper from there. Our current insurance model is severely disjointed; insurers may only compete in one state, and in many cases, this has created state monopolies. In NC, for instance, Blue Cross/Blue Shield owns 73% of the health insurance market. Insurers like BC/BS can use their monopoly position to squeeze hospitals for lower prices. Hospitals then pass this cost to the smaller insurers, hurting their ability to compete. Hospitals also pass the cost to the uninsured, making already expensive care even more unaffordable.

Liberals will often tell you that to bring costs down we must give people preventative care, that we can stave off expensive procedures with preventative measures. While partly true, this only treats a symptom of a very sick system where costs are still out of control

Don't get me wrong, preventative care is important, but the best preventative care anyone can do is to get exercise and not smoke. If we allow the market to work (and it does work, just look at the rapid decrease in prices of procedures not covered by insurance), then going to the doctor and getting medicine when you're sick will be cheap for everyone, or better yet, you can get a checkup before you get sick.

We cannot continue this game of "pass the buck" forever. Middle class Americans pass the buck to insurance companies who pass it to health care providers who pass it to small insurers, or to uninsured Americans. And now Americans, via the government, are trying to pass it to wealthier Americans through higher taxes. But we all know what happens when you try to pass the buck to the rich and powerful: they pass it right back to you and me.

So how about we stop thinking about ways to bandaid our horribly broken system and instead reform it from the beginning, where it all started: employer based insurance.

After that, we need only allow nation wide competition, you know, what we have for virtually every other business, and it seems to be working.

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