Sunday, July 19, 2009

How congress broke the health care system

I've heard many statistics over and over again about how bad our system is and the ways that people want to fix it, but it took a lot of digging to find out even some of the laws that were used to break it.

1. "Insurance companies often deny claims, even for covered expenses."
ERISA sections 514 and 502. It, and a really bad court decision, prevents people from suing for such denials. You can try to get a federal judge to force them to pay, but if you die during the process, the claim also dies and your family can't sue for wrongful death. There's also no penalty or cost for the insurance company.

2. "Health insurance has practical monopolies in almost every state."
A little know act called the McCarran-Ferguson Act offers protection against anti-trust laws. It also allows every state to set it own standards for insurance and medical practice. This is also the reason that you can buy car insurance in any state, but you must buy health insurance only in your own state.

2. "The free market has failed to control costs."
We don't have one, or very much of one. A free market consists of many buyers freely choosing from many sellers. That would describe about 5% of our current population (about 10% if you count the people who have insurance available, but refuse to get it). The rest get their coverage through their employer or from the government in the form of Medicaid, Medicare, VA, and SCHIP programs. That's not enough to influence the market.

Employer purchased health insurance is a World War II throwback. Because of wage controls, companies were allowed to offer health insurance, tax free, to lure employees from other companies. Buying insurance on your own isn't tax free, which is a huge tax penalty.

3. "Medicare is a popular program."
Why? People get benefits without cost controls, but don't have to pay for it. Medicare is growing uncontrollably, because spending more than it takes in doesn't bankrupt it. At least, not yet.

4. "Public programs have lower overhead"
You'll see a lot of conflicting numbers on this one, because of what you can include in "overhead". Generally, public programs don't include the cost of collecting the money and some administrative costs. Public insurance programs can set their reimbursement rates as they please, pushing the costs onto private insurance. Also, public programs currently cover more people with expensive problems, which means they pay more per person than private insurance, on average. In private programs, taxes and commissions are included. But, in the end, they can't be truly compared.

All private insurance programs have to control costs or they go under, as many have. Public programs can keep growing to unsustainable levels, as they have. I have yet to hear of a public insurance program that hasn't grown far beyond what lawmakers predicted. Until we have a free market private system, and a cost controlled public one, there no realistic way to compare their overhead.

5. "Doctors are overpaid"
Which doctors? Most public and private insurers reimburse doctors based on the RBRVS. A scale of some sort is required to keep doctors from charging any amount that they please. But the scale is biased toward specialists. As a result we have a critical shortage of family doctors, who often work 80 hours or more per week to survive, and a glut of specialists who earn far more in 40 hours or less. A less drasitic nursing shortage is also on the way.

For an alternative, more free market plan see:

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