Monday, September 07, 2009

Delivering Health

Insurance corporations are not evil. They are not the enemy. The only legitimate job of a health insurance company is to earn a profit. They are thus called "For-Profit" corporations. When they deny someone life-extending health care, they are losing. Profit. They have a mission to deliver money in the form of profit to their stock holders. It is their only mission. Their business plan has nothing in it about being fair, or honorable, or generous. If they were generous they would lose a stockholder lawsuit that demanded more profit and less honor.

No insurance company will ever voluntarily do the right thing for the health of America. They must be compelled to by law, so that their competition has the same size and weight of burden as them, to remove the competitive burden that honor and fairness would be. When the government forced the auto makers to put seat belts in the cars, it did so to all of them. If it had not done so, we would not have belts in every car in America. Auto makers are not in the life saving business.

There does not have to be a public insurance plan in order to make the system fair, but it would make the system cheaper. A public plan would not have to make profit. A public plan would have a public servant for a CEO, and he would not have to make tens of millions of dollars. Chances are that he would not make more than the President, who doesn't earn even one million dollars. If we were going to provide insurance for the poor, the near poor, and everyone else that decided they wanted it, the public option would save the government money. It would cost the insurance companies nothing, because the people in the public option would not ever be their customers in the current system.

The health care market is a similar kind of market to the electricity market. You need it when you need it. You cant wait and buy it when it is cheaper to do so, it can't be stored. You can't shop for it, because you are tied to the provider of the moment. The markets differ because the electricity market is regulated. The electric company has approved rates that it can charge, and the provider makes a little something, but he cannot make whatever the market will bear. But that is not how the health care industry operates. If we paid for electricity like we pay for our health care, we would buy electricity insurance. The electric companies would charge more every year than the insurance companies would pay, and next year the rates would go up to cover some of the difference. It would have nothing to do with what it costs to provide electricity, it would just reflect what the market would bear. The cost of electricity would go up a couple of times faster than the rate of inflation for the rest of the economy. They would claim that it is because of all the new pollution controls that they have to put in, or some other excuse for the increases. The Health Industry always claims its the cost of new wiz-bang technology that the 'customer' demands, or the cost of indigent health care that they have to provide. The actual difference between the two markets, however, is that the electricity industry actually has to prove to the government, in a 'rate case', that their expenses have gone up. they have to show real expenses. They must ASK PERMISSION to raise prices. They get denied. Does it REALLY cost a hospital twenty five dollars for a couple of tylenol? Who do they have to prove it to?

The only entity that can reign in the health care industry is the government. They have the power that the 'market' does not have to make a for-profit company, like an auto maker or electric company, do the right thing. Left to the market, these companies have no power to change their incentives. It is not their fault, it is how they are designed. If you want to see what our health care system will look like about ten years after we take control of the incentives for the system, without taking control of any other aspect of the system, look to Switzerland. They went from our system to their system in 1994. We don't need a public option, but we do need public controls.

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