Monday, July 27, 2009

How Does That Work Again? (More Thoughts on the Incoherence of Health Reform)

From today's Times, "Reach of Subsidies Is Critical Issue For Health Plan." This is what caught my eye:

The Senate health committee bill says “coverage is defined to be unaffordable if the premium paid by an individual is greater than 12.5 percent” of the person’s adjusted gross income.

The major bills moving through Congress would set annual limits on out-of-pocket spending for co-payments, deductibles and similar charges. The limits would be $5,000 for an individual and $10,000 for a family under the House bill, and $5,800 and $11,600 under the Senate health committee bill.

Premiums are not counted against the limits. Nor are the extra charges that people often must pay when they go to doctors and hospitals outside an insurer’s network. People with insurance are often startled to find that they are responsible for thousands of dollars in such extra charges.

I admit to not having followed all the specifics of the various proposals for health reform before Congress, but is this really what we've come up with in terms of keeping costs for individuals down? The government saying, "hey, you can't charge that much?" A $5,000 annual max for out of pocket co-payments sounds oh-so-reasonable, as does a 12% cap on premiums in relation to your income, but what this amounts to is legislative cost shifting, where the healthy will be forced to subsidize the sick. Businesses always find ways to make money, no matter what government tries to do and that's exactly what will happen with health insurance. The insurance companies won't just eat those losses, they'll find some way to shift the costs on to their other customers.

If you're going to have the healthy subsidize the sick, why not just have the government do it directly. Why rely on these mammoth insurance companies as the middlemen?

The real problem with this entire package of health care reform are the contradictory goals of universal coverage and individual responsibility. Either you have a system where people pay relative to the care they need or you have a system where everyone pays the same, regardless of circumstances, but you can't have both. Imagine three single Americans, A and B, and C. A makes $100,000 a year, B makes $50,000, and C makers $30,000. A has a number of serious medical conditions and his medical costs are $40,000 a year. C's medical costs are $10,000 a year, while the very healthy B is only at $5,000. Fleshing out the numbers, you start to see some of the problems. In a system where the sick subsidize the poor, whether through a single payer system or through legislative mandates, B and C will be forced to subsidize the medical care of C, at one level or another. And when you put it this bluntly, it's hard to see how anyone would favor this sort of a system over one where those who can afford it are responsible for their own care.


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