Two weeks ago we smashed the side view mirror on our car and had to take it to the shop. We paid $250 for a replacement.
This week I went to my dermatologist to see if I had developed any more skin cancers (red hair and all that). The doctor took a biopsy on one spot and sent if off to the lab. If it's malignant, I'll have to go back and have a bigger chunk of my cheek removed. The cost of all this? Zero.
This simple comparison illustrates why healthcare "reform," as Congress has just adopted it, will probably bankrupt the country.
As far as auto insurance is concerned, we have it like almost everyone else. It covers major damage. A year ago I was in a fender-bender. The insurance paid a small portion of the repairs. Several years ago, we bought my son a car and -- typically -- he nearly totaled it within a week. The insurance company paid an astounding $8,000 in repairs but our premiums tripled and we spent several years paying the penalty. That's what "underwriting" is about. After one accident you get moved into a higher risk category. It's what you might call a "pre-existing condition."
At the auto shop, the mechanics have high school backgrounds with two or three years of on-the-job training and use basic hydraulic lifts and wrenches. I pay them $250 for parts and an hour of labor. At the doctor's office, the person who serves me has done four years of medical school plus another three or four years of hospital residency and uses sophisticated equipment. The lab that does the biopsy will have the latest technology. Yet because I have a part-time job with a major employer, I receive union "health benefits" that pay for everything. I would be happy to pay $80-100 for my visits to the dermatologist. After all, I pay a plumber $50 just to come to my house and look at my leaking sink. But because politicians like Nancy Pelosi have convinced people that even a $20 co-payment is an "insurance company rip-off," I get my medical services for free.
Not that I am unaware of the dangers of falling out of this system and going uninsured. A few years ago I didn't have coverage and was paying $500 apiece for these minor office procedures.
As John Goodman and Robert Musgrave wrote in their brilliant analysis, Patient Power (written in 1994 and still the best critique around), what we are calling "health insurance" is not insurance at all. It is prepaid medical benefits. Insurance is a way of pooling the risk for major expenses -- the kind you incur when you have an auto accident or suffer a serious illness. Prepaid benefit plans try to cover all medical expenses, no matter how small.
No insurance company could possibly provide auto insurance that paid the bills every time you changed a tire. The premiums would be impossibly expensive and people would abuse the system, running to the auto shop every time they felt they needed new windshield wipers or suffered a dent in their bumper. Likewise, no insurance company offers policies with 100 percent coverage of all medical bills. The premiums would be impossibly expensive and people would run to the doctor every time they had a sniffle or suffered a cut finger.
Instead, prepaid benefits plans were pioneered by the major corporations and their labor unions, plus federal, state and local governments and their labor unions, which are now the majority of union members and one of the principle players in this melodrama. Taking advantage of an IRS ruling that health and retirement benefits could not be taxed as income, major corporations and governments began funneling tax-free dollars to their employees as "greater take-home pay." Instead of income, employees got first-dollar coverage of all medical bills with no co-payments and no deductibles. In other words, medical care was "free." And of course people began to treat it that way. Writing in 1994, Goodman and Musgrave argued that it was all these people flooding into the system with cost-free health benefits that was driving up medical prices.
What corporations, governments and their unions had created was a mini-welfare state. We all know what happens to welfare states. When General Motors went under this year, it was lamenting that every car that came off the line had $1,500 in employee and retiree health benefits on board. When President Clinton tried to "reform" healthcare in the 1990s, one of the central initiatives was that the bloated healthcare commitments made by major corporations would be off-loaded onto the government.
Practically every state and local government in the country has the same unfunded employee pension and health benefits threatening them with bankruptcy. Medicaid is working the same way and now consumes 25 percent of state budgets. And of course the granddaddy of all is Medicare, which now has unfunded liabilities of $90 trillion over the next seventy years and will only be payable if the dollar loses about 80 percent of its value.
So what has Congress decided to do in order to "reform" this system? Instead of getting a grip benefits and substituting a policy of health insurance, the Democrats have decided to extend the same unrealistic benefits to everybody.
Last week in the Wall Street Journal -- where the run-of-the-paper is just as much a cheerleader for the Democrats as the New York Times -- a story ran under the headline, "Consumers Would See Benefits Soon After Enactment." (This was a sidebar to the story, "Pelosi Bids for a Place in House History.") The Journal informed us that once Obamacare passed, three big changes would materialize within six months:
• Insurers wouldn't be allowed to cancel policies just because a person became sick or to place lifetime caps on care.
• New insurance plans would have to pay full cost of certain preventive care and exempt such care from deductibles.
• Children could stay on their parents' insurance policies until their 26th birthday.
The last may help the insurance companies since young people are generally healthier -- except that people probably won't sign up until their children get sick. The first two items, however, are a recipe for insurance company disaster. The first will encourage people to wait until they're sick before buying insurance. The second will encourage extraordinary overuse. No longer do you have to be sick to visit the doctor. You can just go for "preventive" reasons. Preventive care increases overall costs in the system. Once in awhile an individual may catch a disease in an early stage, but hundred others will be checked with no impact. Preventative services are not that costly and would be best paid for by individuals. Universal preventive care will send insurance company costs soaring.
So will the companies will be allowed to raise their rates? Not a chance. While one foot of Obamacare is on the gas pedal, the other is on the brake, putting federal price controls on insurance company premiums. The results will be insurance company bankruptcies. At that point we'll have to have a "public option." There will be no one left selling health insurance.
The only way to avoid this road to bankruptcy for the entire country is to restore individual responsibility in the system. Let the insurance companies go back to selling insurance instead of forcing them to provide prepaid benefits. Allow everyone $3,000 tax-free savings account to pay for their basic medical costs. Then let them buy so-called "catastrophic insurance" -- which is really just ordinary insurance - to cover serious medical expenses. Premiums will be affordable and you won't have to clog the Congressional Record with rules telling insurance companies what to do. Such a system is already at work. It's called "health savings accounts." HSA's work very well in Indiana, where the government gives its employees the $3,000 but still saves money over providing open-ended "benefits."
We've just thrown ourselves into a deep recession through an ill-advised federal effort give everyone a home. Maybe if the Republicans take over next November, we can repeal yesterday's suicide pact and create something that provides near-universal coverage without tearing the medical economy to shreds. Otherwise, be prepared to see the country reeling down the road to bankruptcy.
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