I know that it is easy to blame the group and personal health insurance companies for the obscene prices they charge for medical insurance. However, I think that this is mostly inappropriate. When gas prices are high we often see ignorant people blaming their local gas station. Unlike Ed’s Service Station down the street insurance companies are often huge companies making big profits, so it is easier to feel that they are in control of their destinies and prices. Insurance companies do make tremendous profits, but they do so because of tremendous volume. The amount they make per policy is small and eliminating that profit will have little or no impact on this problem.
Good Health Insurance Companies Pay About 80% in Claims
A good insurance company will spend about 80 cents of every dollar they bring in to pay for their policyholders’ health care expenses. This 80% does not include the costs of their buildings, employees, advertising, postage or anything else. (By the way, finding out what that percentage is can help you avoid buying from a bad company. A company like Mega Health and Life can pay as little as 55% in states where the average is 80%.) If we assume that the insurance companies made a 10% profit (it is usually a lot less) after paying for their necessary expenses and decided to work for free, health insurance prices would drop by 10%. Would that solve our healthcare crisis?
I, for one don’t think so. Unless the cost of health care expenses drops we can’t do much to reduce the cost of insurance that covers those expenses. All we can do is argue about who has to pay for it.
Here are some of the reasons that medical care is so expensive:
- Doctors expect and deserve to be paid well.
- Medical science keeps coming up with ways to extend our lives.
- We are a less healthy people who get sick more at every age.
Doctors and many other people associated with health care are well paid. If we want to continue to have so many of our brightest students decide to study medicine, we will need to continue to make the profession attractive. That probably means that we need to pay them well.
Extending life means increasing the cost of health care. A generation ago many of the fifty-year-old men who would now get angioplasty would simply have had one heart attack and died. If they made it to the hospital, there would have been one hospital bill for the insurance company to pay. Today that fifty year-old gets angioplasty. He may have another costly medical event before he turns sixty and maybe one or two more before he finally dies. These extra expenses drive the cost of health insurance upwards. I don’t want to reverse the clock. Raise your hand if you want to trade lives for lower medical insurance expenses.
We are now a more sedentary, heavier, lousier-food-eating people who use our healthcare system more than our parents did at our age, whatever that age is. This raises the cost of medical care and by extension the cost of health insuance.
What can we do?
We can argue all we want about who picks up the check every time we go to a restaurant, but if everybody orders steak and lobster at every dinner, the bill will always be higher than it could be.
- Be more aggressive about reducing smoking
- Enforce seat belt laws
- Create an unhealthy foods tax
- Be innovative
There has been more than enough research to prove that smoking is bad for us. I understand that if you force addicted people to stop cold-turkey that you will have a crisis on your hands. However, being aggressive about stopping kids from smoking in the first place will not have the same negative impact. If you simply made a law that said anyone who is now 18 or even 14 can smoke for the rest of their lives, but that anyone who is younger on the date of the law’s passage can never smoke you would solve many of the problems associated with banning cigarettes.
First, you eliminate the problems we had with prohibition where otherwise law-abiding alcohol addicted people felt a greater need to feed their addiction than to obey the law. Also there was a tremendous increase in female drinking during prohibition. Perhaps women felt more comfortable drinking in a speak easy than in a restaurant where there minister might pop in. This law was the beginning of organized crime as we know it. We are still paying for the impact of this law.
Secondly, you allow the tobacco companies and tobacco farmers to gradually reduce the number of employees they have. People will naturally retire and quit and this unforced rate of employee reduction might be similar to the reduction in the purchase of tobacco products.
If you want to reduce the cost of health care, safety legislation of all kinds should be enforced and new legislation should be created.
We already tax alcohol and tobacco more than other products. Perhaps we should also tax Big Macs and french fries as well.
Finland has reduced salt intake and thereby experienced a tremendous reduction in morbidity. Can we copy them? Can we find new and innovative ways to increase the health of our population?
Health Care Costs: The Bottom Line
We won’t significantly reduce the cost of health insurance until we reduce the cost of health care. Just like the local gas station can’t keep his prices down when a barrel of oil doubles or quadruples in price, insurance companies can’t drop their prices when their costs are skyrocketing.