Sisyphus Understands

There are a lot of reasons that health care needs to be reformed. Cost is the biggest one, of course - if you have to pay for health insurance yourself, it can be incredibly expensive. But having the government provide the health insurance? It may not be as big a hit on your wallet (since everyone in the country is helping to pay your premiums), but there's the old saying that you get what you pay for.

Let me give you some examples. As a servicemember in the Armed Forces, I am covered under TriCare, the uniformed services health plan. If I (or my family) need healthcare anywhere off post, TriCare is our insurance plan. It costs nothing, except co-pays, and any provider who takes Medicare or Medicaid has to accept TriCare by law. Sounds great, doesn't it? Until you get to the coverage itself.

First example - a couple years back, my doctor sent me to get a blood test, to determine if I had an allergy to a specific substance. Since his office doesn't have its own lab (like most general practitioners), he sent me to an outside lab service. One appointment, 15 minutes, blood drawn and sent off. A few weeks later, I receive my statement of benefits for the visit from TriCare: they covered the test, the shipping of the sample to where the test was done - but not the drawing of the blood! this, incidentally, was the most expensive part of the whole procedure. I called them up and asked about this, figuring it must be a mistake, only to be informed that the blood draw was an "incidental procedure" not required for the test, so it was not covered. One may ask, how do you test blood if you don't get it out of the patient first? Well, I did exactly that and was told it wasn't their problem. When I suggested that they should advise their clients to simply slit their wrists and bleed in the bottle (emergency room visits being covered 100%), they were not amused.

Second example - pregnancy visits. Anyone who has had a baby in the last ten years or so knows that doctors now rely on ultrasounds for a great deal of information that could previously only be gained through invasive testing, a significant benfit for both mother an child. However, TriCare being run by a bureaucracy, the rules for coverage get rewritten only under extreme duress. The coverage policy for ultrasounds, it seems, dates from sometime back in the late 80s or early 90s, when they were still new and relatively cumbersome. So instead of the 3 to 4 regular ultrasounds that most ObGyn's recommend for a normal pregnancy, TriCare only covers ultrasounds for pregnancies considered "high risk." On top of that, if they do authorize the ultrasounds, TriCare uses what is called "global coverage." That is to say, TriCare will not take claims from doctors and labs for the pregnancy piecemeal - all expenses must be submitted on a single claim, after the baby is born. You see the problem here already - no doctor can bill that way, since a specialist like an ObGyn must refer patients out for different tests, and the hospital where the baby is delivered is a separate entity altogether. TriCare's answer? Have the ObGyn collect all the bills from the other doctors and facilities, submit it all on his/her claim, and then the ObGyn pays the other bills from the settlement. Feel free to laugh now.

So, still think its a good idea to hand your healthcare over to the people that run this system? There's a reason that the program is nicknamed "Try To Get Care."

There is a lot of talk right now about the so called "public option" that the President wants in the health care reform bill. The administration claims that this will not supplant private health insurance, but simply provide an alternative for those who cannot afford private coverage. Let's test this with a thought experiment.

Let's say that there is an industry that manufactures widgets. The companies that make the widgets get the components (gizmos) from a group of suppliers scattered all over the country. Since gizmos are very difficult to make, the suppliers have to spend years learning how to manufacture them, and the gizmos are correspondingly fairly expensive, which in turn makes the widgets made from the gizmos expensive.

Enter the government, who decides that widgets are vitally important to America, and that everyone needs them. Since not everyone can afford them, or in some cases simply don't want them because of the expense, they are going to build widgets too, and provide them for a lower price to the people who can't afford the free market widgets.

Sounds OK so far, right? But wait, there's a catch. Because, you see, the government can make laws, and one of the laws they have made is that they only have to pay 30% of the actual cost of a gizmo when they buy one. So what happens? Since the gizmo makers have to sell to the government (another law), and they can't make enough money to cover their own costs on government sales, they pass the cost on to their private customers, driving up the cost of private widgets. Meanwhile, the government is selling their widgets for 50% of what the private manufacturers can (since the government doesn't have to make a profit).

What happens? Well, a whole bunch of people decide to buy their widgets from the government, even if they could afford the private ones - why pay 50% more? Widget manufacturers start to go out of business, and their customers end up buying government widgets. Its a domino effect - in a relatively short time, there are no private widget manufacturers anymore (have we mentioned the rise in unemployment because of this?). Now, because they can't charge extra for private gizmos, the gizmo makers start to fail. Soon, there is a shortage of gizmos, and the government has to create a waiting list for widgets, based on their criteria of who needs, or can benefit, the most from a widget.

Substitute doctors for gizmo makers, insurance companies for widget makers, and you start to see the problem. We already see part of this with Medicare - because Medicare pays only pennies on the dollar for procedures, doctors have to pass on the cost of those patients to those with private insurance, which raises premiums for the everyone else.

A public option, open to those making up to 500% of the poverty level, would accelerate this trend like an ICBM strapped to a Vespa - its OK for the first few milliseconds, but by the time the brain realizes the enormity of this mistake, its already too late to stop.

Medicare, and the problems associated with it, has become a large part of the current debate over public option health insurance as part of the President's health care reform package. The biggest problem that is commonly pointed out is cost - as of 2009 (according to the budget submitted by the current administration), Medicare will cost $425 billion. That's a whole lot of money, especially when you consider that they project taking in only $191 billion in Medicare payroll taxes. In an ideal world, this wouldn't be a problem, since we would have the revenue from everyone's past Medicare taxes tucked away in a vault somewhere to make the payments for those who have already retired and started using Medicare - but we all know what happens to money when you just leave it lying around a politician, don't we? And so the $234 billion difference will have to come from somewhere else, probably borrowed from China.

But isn't there a better way? I think there is, although it would certainly be painful to get through Congress (but then, what isn't). Let's try a thought experiment and see where it takes us.

Being of a libertarian bent, and a reasonably intelligent person, I have always felt that I can make a better decision about how to spend my money than someone in D.C. who has never even met me. So in my thought experiment, the government is going to take the money that I pay in Medicare taxes, and actually put it away (not spend it!) until I need it. Assuming I am employed continuously from age 21 to age 65, which I have been so far, that means that I should accumulate roughly $264,000 when I retire at age 65 (assuming I retire at 65, and assuming tax rates don't change, etc - this is a rough estimate folks, work with me here).

So, the day after I retire, the government hands me a check for $264,000, for me to use for my health care now that I'm retired. At this point I have a couple of options.

#1 - I can put it in a health savings account and only withdraw what I need to cover my medical expenses. This is a viable option for those in good health who are willing to bet that they won't have any catastrophic expenses.

#2 - I can put that money in a savings account, and use it to purchase a health insurance plan of my choice (my preferred option). Assuming I find a plan that I like, and assuming it will cost roughly $1000 a month (again, rough estimate folks - it might cost more in your state, or less), that means I have enough money for roughly 22 years of coverage, possibly a little more with the interest it earns during those years. If I can shop around and find a less expensive plan that meets my needs, so much the better. And given that private insurers would no longer have to try and compete with the government, they just might create plans specifically for seniors, with lower monthly costs (although probably a higher deductible), in order to entice people to sign up.

#3 - I can have one heck of a party.

With either option #1 or #2, the net cost to the government each year? $0. Well, pretty close. You'll still need to pay someone to manage the money, write the checks, etc. But it will be a heck of a lot less than $234 billion, I can tell you that. And of course, with option #3, I'll probably drop dead of a heart attack 2/3 of the way through the party, thus saving everyone a great deal of expense on my future health care.

Now, why will this never happen? It would mean the government has to give up some control, which it is always desperate not to do. It also means that if people don't manage their money wisely, they'll run out. Sadly, too many Americans have come to see Medicare as a bottomless entitlement, kind of like Social Security, and aren't about to let Uncle Sam tell them there's a limit.

Instead, we'll get something like the President talked about the other day - cut the cost of the program by cutting payments to the health care providers. Never mind that they only pay 25-30% of the actual cost of procedures now, and the rest has to be passed on to the private insurers. After all, that will just help run private health insurance out of business even faster. (Sigh)

Over the last few years, I have gradually drifted away from identifying myself as a Republican and slowly found myself aligning more and more with libertarians. Note, however, that is small "l" libertarians, which must be differentiated from the big "L" party.

While I would love it if libertarians were able to muster the unity needed to build a viable third party, I just don't see it happening. For starters, too often those who talk about running as big "L" candidates seem like they are Republicans or Democrats who couldn't get nominated in their own party and needed someone else to boost them. But the biggest problem I see is the very philosophy of the little "l" folks - it just doesn't work for big party politics.

Let me explain. No, there is too much - let me sum up. One of the basic tenets of libertarian philosophy is individual freedom, keeping government out of as much as possible and allowing people the liberty to believe, do and say what they like. Obviously, there have to be limits, but they should be as open as possible to allow people maximum freedom without infringing on the freedoms of others.

But there's the rub. If your philosophy is built on letting everyone be and do what they want, how do you ever get a consensus about what your group should be supporting? People who subscribe to libertarianism tend to be individualists with very strongly held views - not much can dissuade them from their belief in the freedoms they hold dear. Personally, I think that's good thing, but it sure does make organizing hard.

Ever try to get even two Type-A personalities to reach an agreement on something they have opposing views on? Now imagine that on a nationwide scale, amongst thousands of people, no two of whom hold exactly the same view...

Let's just say I'm not going to hold my breath on the Libertarian Party posing a serious threat to the Republocrats anytime soon. I'll muddle along and try to support whatever candidate seems closest to my personal libertarian views.

One of the hazards of blogging is trying to be both relevant and current. For example, I've been mulling an idea for the last week or so about what I would do if I were in charge of reforming health insurance - no easy task, since its such a huge segment of the economy, so naturally it was taking me some time.

Well, I finally had the plan roughed out - only to find that the CEO of Whole Foods beat me to it (and probably did it a little better). So rather than reinvent the wheel, I'll just try to make it rounder by expanding on what he wrote.

"Remove the legal obstacles that slow the creation of high-deductible health insurance plans and health savings accounts (HSAs)." I'm very much in favor of this one, as it puts control of health care costs squarely in the hands of the patient, who I believe is the one who should be in control. It has the effect of making patients very much aware of costs and benefits, which means they can make much better decisions about how their health care money should be spent.

Let me give you an example. When my wife and I were expecting our first child, we utilized her employer provided insurance (a very nice plan) to cover our expenses. We pretty much went with whatever the doctors recommended, and got everything done at the most convenient locations and times. No issues.

Fast forward to our current situation. My wife is now unemployed, so we are using my (government provided) health insurance, Tricare. Anyone who has been through a pregnancy in the last 10 years will tell you that you can expect the doctor to schedule two to three ultrasounds in the course of the pregnancy, in order to monitor the baby's development, as well as check for any issues that could affect the delivery (position of the baby, problems with the placenta or umbilical cord, etc.). Well, Tricare doesn't cover ultrasounds, except in "high risk" pregnancies (can anyone say rationing? But that's another topic.) We opted to get the ultrasounds anyway, and pay out of pocket.

Imagine our surprise when we got a bill for $1000 for the first ultrasound! Seems that the hospital where we had been going all along charges quite a bit for that particular exam. Once the shock wore off, we did a little research (which we should have done beforehand), and discovered that the hospital is the MOST expensive place to get an ultrasound. But there is a private diagnostic clinic near us that does the exact same thing (with more modern equipment, too - better images) for only $200.

So think about that - if we were spending $1000 per ultrasound when it was paid for by insurance, no wonder premiums are so high! There was no incentive for us to look at how much the service cost, because we never got the bill. But when we did, it only took a little bit of research on our part to find an alternative provider that actually gives better service for less cost. Market forces at work.

"Repeal all state laws which prevent insurance companies from competing across state lines." Another big one, here. Why should a policy be provided by an insurance company in one state not be valid in another? I can take my car insurance with me when I move - why not my health insurance.

This also ties in with the next point, which is "Repeal government mandates regarding what insurance companies must cover." One of the reason that plans are so much more expensive in certain states is because of the mandatory coverage that has been forced down our throats. For example, New Jersey mandates that any plan offered by a New Jersey employer MUST cover in vitro fertilization. While that's a boon to those who need that service, why should the rest of the people in the state pay for a health service they'll never use? Ideally, health insurance should be customizable the way car insurance is - when I buy my car insurance plan, I get to chose the coverage level and which items are covered, since I know my car and how much its worth to me. Shouldn't I get the same right when it comes to my own body and the maintenance it requires?

If done right (never a guarantee when Congress is involved), this would be a REAL deficit neutral way of reducing health care costs - repealing regulation costs only the paper and ink, while adding it (Congress' preferred method) means creating whole new agencies to manage and enforce those regulations.

Sadly, this is probably far too common sensical for those in Washington to embrace.