When President Trump was elected, one of his promises was to repeal ObamaCare. A promise I fully believe needs to happen. But I also realize that whatever replaces it is going to be something that will not address the real issue. That is what we pay for care. Whatever Washington puts forth will simply not lower prices. Why? because they are not looking at the root problem. Instead congress and the president are focusing on insurance premiums.
Here is why it will not work.
Healthcare does not participate in the free market where prices are set by consumers.
What many people do not understand is that prices for goods and services are set by the consumer. Not by production or labor costs. In regards to health care, as customers, we’ve separated ourselves by using a third-party payer to pay our bills for us. We have no idea or even care what the price for a doctors visit really is. Or for an MRI, or an other medical service except. The only concern is copays and deductibles. This leaves healthcare providers free to charge whatever they want. They have no incentive to keep costs down and don’t have to compete for your business on an individual basis.
In steps insurance. The purpose of insurance is to purchase protection from something bad happening to you. Premiums are based on how likely you are to use your insurance and the potential cost to honor your coverage. For example auto insurance. Your premium is based on the model of your car, and how good a driver you are. Auto insurance companies know what the odds are of you getting into an accident. Chances are you may never use your car insurance. Personally I’ve used my car insurance five times in the last 30 years. So the car insurance industry has done well by me. None of my accidents have ever amounted to more than a year or two’s worth of premiums. And two of those accidents were not my fault. Consequently my premiums are pretty low compared to what others have told me.
Health care insurance as we use it today, is totally different. It’s not based on risk. We now expect to have insurance pay for our routine care. The insurance company have to deal with thousands of doctors and hospitals. To negotiate prices on our behalf would take an army of staff. So they too have no real incentive to control prices, only their expenses.
One solution being touted by liberals is to eliminate the insurance company and have government act as a single payer. The feeling is that government can set prices and therefore lower costs. That simply does not work. Price controls have failed in every attempt. It either causes shortages or lowers quality.
So what does work?
Well, time after time, free markets have proven that prices go down and quality improves when left alone. The customer becomes the regulator. Look around you. There are thousands of examples. Recently there has been a resurgence of free market thinking among doctors. Many are beginning to shed their reliance on insurance as the payer, and are opting for direct payment by the patients. Known as Direct Primary Care, they are able to offer care at dramatically lower prices. Doctors no longer have to hire people to handle complicated billing systems that use thousands of medical codes. They no longer spend hours with burdensome regulations to determine if their patient is covered for the type of care they need. Instead they get to spend more time with their patients.
That’s not to say insurance still doesn’t have a role in our health care. It provides a valuable product when it comes to catastrophic illnesses like cancer or heart surgery. Premiums will be more realistically set based on risk, for example family history or lifestyle.
Where do we start?
In my mind a good place to start is stop using insurance for our primary payer. Encourage family practitioners to adopt Direct Primary Care. Lets also eliminate mandates that insurance needs to cover X, Y & Z in our plans. And let them tailor plans based on individual wants. People need to take responsibility of their health and become good consumers by shopping around for care. I think that would go a long way to solving our health care crisis.