Friday, May 15, 2009

Health care isn't the problem - health insurance costs are

Some people who say the government "can't do anything efficiently" also now say a public insurance system competes with private insurers unfairly – these fear it will out-compete big business? CEOs earning tens of millions of dollars per year fear free market competition?

The cost control problem is that the idea of controlling health care costs is contrary to earning insurance company profits - what incentive there is only applies to their own costs of operation. When the cost of health services go up the big insurance companies just make a cut of a larger price-tag.

That's why U.S. health care costs have tripled the rate of inflation for three decades. Insurers have no incentive to moderate health care costs, only how much they profit -- so naturally they insure the healthiest, and make it hard to get help with pre-existing and/or expensive conditions.

Sometimes they even countermand medical decisions. Bureaucrats worrying about their bottom line can over-rule a licensed doctor's prescriptions and treatment orders to protect the corporate profits.

There's no real choice when an individual enters the health insurance market. They bundle in with the group at work, which has a very narrow range of choices - and every insurance company makes about the same markup on the same basic services, so the costs (concealed in overly complex plans) aren't all that different.

The government's role in fixing the system for our mutual benefit is to model efficiency - at least until big insurers learn to deliver their services efficiently - to compete.