Timing is Everything
Even a blind squirrel finds a nut now and then. In a widely quoted recent article, John McCain said “The biggest problem with the American health care system is that it costs too much.” And later, “Rising per capita health care costs contribute even more than the demographics of an aging population to the mounting fiscal stress [on Medicaid and Medicare].” Both of these statements have been made by others and are backed by sufficient facts to be widely regarded as true. The biggest driver of healthcare costs is technology--the new and wonderful tests, procedures, or drugs that patients want and doctors prescribe. However, after such an auspicious beginning, McCain goes on to talk about health insurance, not making the connection that health insurance is expensive, because healthcare is expensive. And not realizing that the way to decrease the amount paid for insurance is to decrease the amount spent on care.
Many writers assume that healthcare costs are fixed and not subject to market influences. Today, of course, that is true. There is no effective price competition within that portion of healthcare that insurance pays for.
The article is “widely quoted” because of his stated goal of “Opening up the health insurance market to more vigorous nationwide competition, as we have done over the last decade in banking.” Talk about poor timing! I don’t think anyone today would advocate making the health insurance market look like the financial market. Suppose your health insurance were provided by AIG! [As a charter member of “the Keating five”, McCain should have known better.]
McCain was, of course, talking about his plan to eliminate the ability of states to define what health insurance in their state must include. The coverage would be defined by the feds, and the role of the states would only be paying for it. There is some validity to this argument. Under the present system, a national insurance company must offer a different policy in each state to conform with individual state laws. Mental health is a biggie. The same situation exists with building codes, thus preventing mass produced housing or housing components.
Following the same argument, he would remove health insurance from the workplace and expect individuals to purchase federally defined individual policies. Think about this for a minute: who would you trust to administer your health insurance policy, the federal government, a national insurance company, or your employer? If you have trouble with this question, call Medicare and pretend you have a denied claim you want to discuss. Another disadvantage of removing health insurance from the workplace would be removing incentives for the many health promotion programs offered by employers.
It’s a complex market, but healthcare costs can be reduced. Standard industry tools, such as lean six sigma have been applied with good effect. We need a compelling reason to apply these tools more widely.
Many writers assume that healthcare costs are fixed and not subject to market influences. Today, of course, that is true. There is no effective price competition within that portion of healthcare that insurance pays for.
The article is “widely quoted” because of his stated goal of “Opening up the health insurance market to more vigorous nationwide competition, as we have done over the last decade in banking.” Talk about poor timing! I don’t think anyone today would advocate making the health insurance market look like the financial market. Suppose your health insurance were provided by AIG! [As a charter member of “the Keating five”, McCain should have known better.]
McCain was, of course, talking about his plan to eliminate the ability of states to define what health insurance in their state must include. The coverage would be defined by the feds, and the role of the states would only be paying for it. There is some validity to this argument. Under the present system, a national insurance company must offer a different policy in each state to conform with individual state laws. Mental health is a biggie. The same situation exists with building codes, thus preventing mass produced housing or housing components.
Following the same argument, he would remove health insurance from the workplace and expect individuals to purchase federally defined individual policies. Think about this for a minute: who would you trust to administer your health insurance policy, the federal government, a national insurance company, or your employer? If you have trouble with this question, call Medicare and pretend you have a denied claim you want to discuss. Another disadvantage of removing health insurance from the workplace would be removing incentives for the many health promotion programs offered by employers.
It’s a complex market, but healthcare costs can be reduced. Standard industry tools, such as lean six sigma have been applied with good effect. We need a compelling reason to apply these tools more widely.
