The Ultimate Oxymoron: “Affordable” Health Care Insurance

The problem is one of expectation.  For some reason when it comes to car or home owner’s insurance, we know that if we want “full replacement cost” coverage, we’re going to have to pay for it.  If we want the $1,000,000 life insurance policy, we know the premium will be probably be about four times higher than the $250,000 policy.  If we smoke or have heart disease, we know we are going to pay even more for that life policy than if we don’t have those preexisting conditions. We go out of our way to pay for an auto accident out of pocket because we don’t want our rates to go up. But when it comes to health care the average American doesn’t want to pay for it. We somehow want (expect!) an open-ended benefit, with every possible diagnostic service, medication, or procedure covered when the day comes that we are not in perfect health, but don’t want to pay anywhere near the full premium for that coverage, neither when we are healthy (especially not when we are healthy) nor when we are ill.

That open-ended benefit is hugely costly.  Health care has grown to roughly 17% of the US Gross Domestic Product (GDP), a whopping $2.5 Trillion out of a $14.7 Trillion GDP.  How did it grow so big?  The answer is: medical research! – we have way more health care options today than we have ever had when health care was “affordable” because doctors and researchers have been diligently working to heal better and prolong life. Smallpox has been eliminated.  Polio is next (thanks Rotary International).

In the last 100 years medicine has gone from aspirin, sutures, and bandages to organ transplants, artificial joints, and medications that prevent certain death (think HIV cocktails).  Today only a few cancers have survival rates less than 50%, and if you survive the first heart attack, then stints, angioplasty, by-pass surgery, and medications extend life almost to equal those without any heart disease at all.  Medical equipment can watch the brain think and peer inside a beating heart.  More advancements (with associated increasing costs for those advancements) are occurring every day.

A hundred years ago, every doctor had to say “there’s nothing more that I can do” on an almost daily basis.  Today, there’s always something more the doctor can do, and every patient and their family seems to want it done, and they want all the costs covered by their health care insurance (no deductables or co-pays, please).

And medicine is so good today that there is an expectation of success every time a patient sees the doctor or goes into the hospital, and when the patient finally dies (and every patient in the history of the world has eventually died, no exceptions) the first thoughts are “the doctor screwed” up and it’s time to sue for malpractice instead of “it was time to let them go.”

The resulting costs are staggering.  Averaged over every person in the USA, the cost of health care is almost $8000 per person, per year.  ($32,000/year for a family of four).

The premium to provide this benefit is easily calculated (based upon current health care costs and usage).  Since the stated goal of the “Affordable Care Act” is Universal Health Care, with every person covered by health care insurance, with all pre-existing conditions covered and no cap on lifetime benefits, then every person in the nation is in the same risk category (by definition and legislation) and therefore all premiums should be the same, without regard to age, health, or healthiness of lifestyle.  This spreads the risk (and the associated cost of that risk) fairly across the entire population.   The cost per person is each person’s share of national health care costs – $8000 per person.  Also, since the administration of even the most efficient insurance program, even mutual programs, can only return about 80% of premiums paid to the benefit of the insured (less if it is administered by a government entity), then each man, woman, and child owes a premium of about $10,000 per year ($40,000 year for a family of 4) to cover the insurance benefit they desire – 100% coverage of everything they want from the medical community, with no pre-existing conditions, no exceptions for conditions covered, no deductables, and no co-pays. (This number will go up as health care usage increases).

This bill is being paid today by a combination of individual contributions (premiums, deductables, and minimally by co-pays), employer contributions, tax revenues, and government borrowing (deficit spending).  Fifty-percent of the bill is being paid by “other people” (government entities from tax revenues and borrowing) today, and yet the premiums for the health care benefit that is “expected” is still “unaffordable.”  What this really means is that every patient wants the same care options that Bill Gates or Warren Buffet can afford when they finally get ill (and everyone finally gets ill), but would prefer to use their money to pay for other things in their life while they are healthy.  And, quite frankly, few can afford to pay for an open-ended benefit for themselves, let alone making the “contributions” in taxes to pay for the open-ended benefit for the others who make minimal contributions to government income tax revenues or their own health care.

There are those that say we should attack the cost of health care because it “costs too much in America.” This sounds good, but is another specious argument, even if there is some work we can do here.  Even if we lowered the cost per person for just currently-available health care by as much as 10% (a HUGE reduction), the cost per person is still $9000/person/year.  And this would still not account for the costs for providing the daily new developments in medicine nor the increase in health care usage resulting from universal access.

I would love for someone to tell me where my math is wrong by more than 10%, and then also tell me (and the Congress) how to make an entitlement of 100% health care coverage affordable in a country where we already have an entitlement-driven budget deficit of $1.5 Trillion (about $4400 needed additionally from every man, woman and child next year and every year to balance the current spending rate – much of which already includes health care).

I hear the cries of the morally anguished  saying we shouldn’t ration health care, that we should do all we can to both save peoples lives and make their lives better.  These progressive arguments, as plaintive and attractive sounding as they are, are really specious.   Just as there are not enough resources in the world to solve world hunger, there are not enough resources (no matter the tax rate we impose on the “rich,”) to provide every person with all the options that modern medicine can provide.  The “haves” will always have more options than the “have nots.”  Sort of like death and taxes: not right, maybe shouldn’t be that way, but just IS.

We are going to have to limit the entitlement.  The choices, to me, look to be between defined limits on all entitlement programs, including national health care, and national bankruptcy.

The person who can cogently explain another solution to this dilemma, including balancing the budgets involved, gets my vote, for sure.