Wednesday, August 5, 2009

socialized medicine vs private insurance

In the debate over socializing health care, there are two fairly credible arguments from my point of view.

One is that this is the US of A and we can do anything, therefore, we can produce a workable government run health care system even though no other country in the world has.

The problem with this argument is that even in this country, you can’t repeal the basic laws of human nature. In this case there is and can be no free lunch. Utopia cannot be achieved where men (and women) are involved. I appreciate this line of thought, but think that it doesn’t mesh with reality.

The other is that our current system is out of control, insurance companies make arbitrary decisions on individual’s health care, and a government run system would be no different; just more efficient. The people making this argument suggest that government can run the system for 3% when the insurance companies get 30%.

This line of thinking takes more deconstructing.

In the short run, I suspect that the proponents of socialized medicine would be proven right. That we, as individuals, wouldn’t notice much of a difference between what we have now and what a socialized system would provide. After all, most people who have insurance just go when they want and rarely ever pay what it really costs to see a doctor. A socialized system would be much the same, initially.

But what would happen when the government finds out that it costs more than they thought? And by the way, this always happens with everything that the government gets involved with. Medicare was supposed to cost $15 billion in year 25, but it ended up exceeding $100 billion.

Soon enough, the government would have to find a way to reduce the cost of the system. They can do it in two ways:
1. Lower the reimbursement rates paid to doctors, pharmacists and other health care providers. This is most likely as it’s what states already do every time there is a budget pinch; just ask the docs and pharmacists in Colorado about reimbursement rates.
2. Reduce the number of services offered to patients. Want cancer treatment for liver cancer – too bad the probability of success is too low we won’t cover it.

Either of these options produces the same results for you and me. We will eventually find ourselves searching for a doctor that will see us or we will be searching for a provider that has set up shop outside of the government system, either here or in another country. This is the experience in Canada and the UK. We’re fools to think it will be different here.

People really want our existing system reformed, but they know that what the Democrats are offering isn’t reform. It’s more of the same, but worse.

If we have to choose between the public option and what we have now, status quo is better, not the best, but better.

What we really need is to introduce true market principles into this area.
1. catastrophic coverage only, with a cap
2. multiple state purchase options for consumers of insurance
3. some more tort reform
4. immigration reform – too many free-loaders

Basically copy what works well in the auto and life insurance models. Both are much more affordable. We don’t buy auto insurance to cover oil changes and new tires. We buy liability and coverage to replace the car if it’s totaled and we buy it as individuals with a real risk analysis based primarily on our claims history.

We have to empower the market to drive costs down and quality up – it works every time it’s tried.

I realize that I have oversimplified some of the arguments but I’m convinced that I’m accurate. This is a complicated subject and it deserves more than a blog post worth of discussion.

Fortunately, as a nation, we are able to have that discussion and the people are participating. Really participating and thinking deeply about this. They are figuring out that while what they have needs to be improved, what Obama, Pelosi and Reed are offering isn’t an improvement.

Hopefully my side can offer some leadership in alternatives and not make a compromise that leads us the long way around the hill to where Obama and Co want to go in the first place.


  1. I agree the national health care program will likely cost much more than projected. As an entrepreneur it 'always' costs more than you plan even when you estimate higher leaving a large margin for extra expense.

    At the point that the new system comes to grips with the cost issue decisions will be made to correct the problem. One likely group who will suffer are the elderly. Priorities will be made on what type of healthcare is necessary or productive. Decisions will be made for us as to who or what services will be useful for the outcome of society.

    I like the comparison to car insurance. Although car insurance is often a farce, something we need but seldom use. Healthcare is another story...there is regular maintenance to our bodies and well checks can pay off. Equally so can proper exercise and healthy eating habits. National healthcare for the sole purpose of covering some of the more serious situations may be a better plan. Even so that cost would be outstanding in this country.

    I am surprised the healthcare reform would even suggest national healthcare to illegal aliens.

    Jolene Jones

  2. "We don’t buy auto insurance to cover oil changes and new tires." Well said. I'm stealing this whole concept. I hope you don't mind.

    That's one of my biggest gripes with the "government health care" I currently have. If my wife has an issue and needs to see a doctor, she gets sent to the ER, no matter how small the problem is. An urgent care clinic would be faster, cheaper, and solve the problem just as well, but the ER is covered and UC is not.

    The primary problem with health care, however is a step beyond this problem. It's the fact that malpractice and certain cultural opinions on health care drive doctors to attempt to reduce risk to 0%. As we all know, after an 80% solution, reducing risk beyond that gets more and more expensive. Yet the deep pockets of insurance companies enable them to press through it. Do we really think the bottomless pockets of government health care would be any worse?

    I haven't developed this wholly yet, but as an aviator who manages life-and-death risk on a fairly common basis, I know that risk management and mitigation applies, and isn't being properly applied.