Another Argument for Healthcare Reform Debunked

Someone (I suspect someone working for a political party) answered my short missive on healthcare yesterday:

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Leesa your point is valid to a degree, however the debate is not simply that health care costs have increased it is that medical insurance premiums have increased some 119% over the last decade while wages have stagnated or fallen during the same time for the vast majority of Americans. According to the The National Coalition on Health Care www.nchc.org, "Employer-based family insurance costs for a family of four will reach nearly $25,000 per year by 2018 absent health care reform." This is only for those who have employer based medical insurance.

Those without any insurance (which are rising) have only Emergency rooms or go without treatment as options. Of course the oldest and the poorest have Medicaid and Medicare so they are covered.

I appreciate your opinions on this issue, but cost increases are not solely due to advances in medicine and without some restructuring it will eventually bankrupt the country.

Thank you for your blog

Mike - NC

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This brings us to another argument: look at Medicare/Medicaid. They provide healthcare far cheaper than traditional employee-based health insurance.

Hospital systems basically have three kinds of payers:

1. Those with health insurance. Most people with health insurance have one of just a few types in a given location. Some people refer to this as "Big Blue", as Blue Cross/Blue Shield is the biggest payer in many locations.

2. Medicare/Medicaid. These are government-paid claims. For certain locations, Medicaid goes by a different name, if the state subsidizes Federal money. Anyway, people have cards and the government is billed for the care.

3. Self-pay. These people don't have insurance and pay out of pocket. Most of them don't pay out of pocket; they just receive the care, and avoid the bills. These include members of certain religious sects – Amish and Mennonites, for instance, who believe that they should care for one another. The thing is, none of them are invasive radiologists or cardiovascular surgeons.

So hospitals get money from these three sources, and I have heard arguments that Medicare and Medicaid are so good because they are cheaper than health insurance. Well, traditional health insurance helps pay for Medicare/Medicaid and self-pay patients. Hospitals don't turn patients away – and even though most Medicare/Medicaid patients cost the hospital money on overall care, they get enough so that they take the patients.

A boring technical area of healthcare finance is dividing the cost of care into fixed and variable costs (they do this in all sorts of businesses and teach this at business schools). Generally, if your last customer covers variable costs, it makes sense to take the customer. And that's what hospitals do.

Traditional healthcare coverage is paying partially for the fixed costs of the Medicare/Medicaid patients as well as all of the costs of its uncollectables.

I am sorry that Mike did not leave a link to his blog, or I would have explained this to him.

In short, I believe that the healthcare issue is very complex, and we have a bunch of simpletons that have not even read the language of the bill. Even their staffs have not read the various bills.

And think of another thing – part of doing this is to bring the 46 million health insurance. Many of these people have made a choice not to purchase health insurance. They would rather purchase a big screen television than to purchase health insurance, perhaps because they have little assets to guard (yes, when I first got health insurance as a healthy 22-year-old, I almost did not get any because I had no assets). I decided for myself to get health insurance, not because I was altruistic, but because the $25/month (catastrophic only health insurance) guarded against me having to file for bankruptcy.

Tomorrow I will write about something more interesting.