The Failings Of The Free Market In Health Care
At the Colorado Health Insurance Insider, we’ve often written about the “free market” in health care. And we’ve discussed the moral quandary created by the health insurance industry operating in a capitalistic fashion. Bob Laszewski from Health Care Policy and Marketplace Review has written an article about the dramatic failings in the health care industry over the last 15 years since the Clintons tried to inject government control into the system.
Basically, Bob’s point is that the health care industry got handed a diamond in the rough when the Clinton health care plan went down in flames early in Bill’s presidency. Health care was solidly in the realm of private companies and the free market, as nobody was going to want to tackle health care reform again for a good long while. And yet here we are, 15 years later, with all sorts of messes in our health care system. Jay and I write from the perspective of agents in the individual health insurance market in Colorado. In our corner of the industry, there’s really only a free market for the healthiest of applicants. Those with pre-existing conditions can’t get some polices no matter how much they’re willing to pay. A person who has a serious health condition may find themselves “stuck” on their current policy and unable to exercise the free market behavior of shopping around. For some people, Cover Colorado (our high risk pool) might be the only choice they have. And even that can run out, leaving some people truly without an option for health insurance.
Our health care system has worked very well for some people. If your employer pays for your health insurance and offers a low out-of-pocket policy, or if you’re a top executive at a hospital or health insurance company, or if you’re a provider in a high-tech specialty, you’re probably doing pretty well. And of course no system is going to please everyone. But the problem with our system is that over the last 15 years, the number of people it’s worked for has been shrinking. There are nearly 10 million more people in this country without health insurance than there were in 1992 (of course our population has grown in that time too, but the fact remains that there are more people disenfranchised with our health care system now than there were 15 years ago). As more people struggle to afford health care (either directly or through health insurance premiums), the cry for government intervention gets louder. We can assign blame all over the place, but Bob’s right - a relatively unregulated health care industry hasn’t done a very good job of serving the American people well.
I don’t think we need to scrap our health care system. But we need to make it work for more people, and that will probably require some measure of government regulation. Hopefully we’ll get it figured out before another 15 years go by.
Many thanks to Joe Paduda, who hosted the Cavalcade of Risk this week, where I found Bob’s article.
I absolutely don’t understand how you can blame the free market for the failure of the health insurance industry to live up to its promises. Government intervention through over regulation and internal insurance company policies have taken away freedom. The ever present pressure of the insurance companies to make money for its stock holders removes freedom. It’s much easier to blame free markets and capitalism instead of the inherent flaws of the existing system.
Freedom in health care exists. I can bypass the insurance companies all together and pay directly for my own health care. I am free to negotiate payment. I am free to go to any provider I choose. Under most insurance plans I lose control of any money I have paid into the system. I have to have referrals to specialists. I have fewer choices in providers. Insurance is a socialist philosophy - surrendering control of one’s choices and resources. A single payer or universal plan will take all of that away.
You blame regulation for the ever increasing premium costs on one hand and on the other you blame too little. Frankly I am confused by your arguments.
@forHealth: Thanks for your comment, and we’re always glad to get your feedback. You mentioned that
“Freedom in health care exists. I can bypass the insurance companies all together and pay directly for my own health care”
but I’m curious about what the upper dollar limit would be? Most health insurance policies will pay up to several million dollars for a person’s care - and if you switch from one group policy to another, you can effectively reset that limit (not so with individual health insurance, since it would be hard to get approved for a policy with medical underwriting if a person had maxxed out another policy). Some people truly do have enough money to pay for all of their own medical care (people like Warren Buffet and Bill Gates come to mind). But for most of us, a multi-million dollar medical bill would be impossible to self pay.
I don’t mean for my articles to be confusing. I think that health care reform is a very complex topic, and one that is constantly evolving. I feel that in some instances there has been too much government regulation in health care (for example, states that require all health insurance companies to offer policies with no medical underwriting, but with no system in place to keep health insurance premiums in those states from skyrocketing because of the huge claims being paid). On the other hand, there hasn’t been enough regulation on the profit end of the health care system (the whole system, not just health insurance), and that has put upward pressure on prices. It’s not just a matter of more regulation versus less regulation. Instead, I think it’s a case of getting the right regulations in place. And I think that health care is too important to be a fully self-regulated, free market entity. Because if it is, the people without money end up getting the short end of the stick. And while there are lots of things that we can go our whole lives without if we can’t afford them, for most people, health care isn’t one of those things.
@forHealth:
I am confused by your arguments:
“I absolutely don’t understand how you can blame the free market for the failure of the health insurance industry to live up to its promises…. The ever present pressure of the insurance companies to make money for its stock holders removes freedom.”
We may disagree with some regulations (HB 1355 and HB 1389 come to mind), but we do think that the majority of consumer protections in place are necessary.
Also, you have the false sense that you have taken control of your own health care needs. I’ve read your plan. When we speak of health care, we’re not talking about small things like doctors visits or the dentist. We’re talking about managing the risk of catastrophic, unpredictable events. I respect the fact that you have a different philosophy about the role of government than I do. But I don’t think it is acceptable for a government to leave its citizens with the same plan you have:
Another question I have about your plan, you say:
But then you also say:
If a $20,000 hospital bill would bankrupt you, how would you go about paying off a $40,000 credit card bill while also dealing with a serious medical condition?
@forHealth:
I just checked out the risk pool for your state. They have an HSA qualified plan with a $3,000 deductible. Once you meet the deductible, the plan pays 60% (you pay 40%) until you pay another $5,000, then the plan pays 100% with a $1,000,000 lifetime maximum. I don’t know how old you are, but for a 50 year old female, the plan is $377/month.
Jay, that quote does not include underwriting. $377/mo is something I simply can’t afford. My quote from them wasn’t that high, but it became a choice of paying for my mortgage or paying for health insurance. And I would never have had enough money to put into the HSA after paying the monthly premium. There was no point in going forward with it.
And your right. How would I pay a $20,000 credit card bill if I am too ill to work? I don’t know. The point is that it would get me into the door of a hospital. It would be like waiving free money in front of the check-in agent. Maybe you haven’t experienced signing your life away for every hospital visit regardless of its in or out patient. They all want proof of payment.
Forget the credit card… just rob a bank.
America has quickly become a third world country.
@forHealth:
Risk Pool = No underwriting
Also, getting an HSA qualified plan only qualifies you to setup an HSA along with the health insurance plan if you choose to do so. Most of our clients that purchase HSA qualified health insurance plans don’t setup the savings account along with it. An HSA qualified plan is just the smartest way to spend insurance premiums because it fits the definition of insurance.