A Healthcare Proposal

Healthcare reform. It’s all the rage—except for the fascinating revolt of the middle class playing out in Iran. But I digress.

It’s easy to digress when you’re talking about healthcare, because it’s hard to understand, miserable to confront, and there are so many vested interests filling the airwaves with misinformation, you can almost feel the magnetic radiation bouncing off your skin.

But I’m going to attempt to identify some of the main problems and propose one or two possible solutions.

First, what are the problems? The conservative pundits would have you believe that we have a wonderful field of competition out there—one of the most common statistics I’ve heard George Will, Michael Steele, Lindsey Graham and others on the right cite is that there are “1300 competing providers of health care” out there—as though the sheer number proves 1) competition exists, and 2) that it’s working.

Neither proposition is true. Anyone who has ever had any sort of medical procedure beyond an annual check-up and has received a bill knows that the care they got wasn’t worth what they’ve been charged. Not that the care is bad, but--$500 for 1 hour in a hospital room? $2,000 for a simple ER visit with an xray? There is a hidden cost that is being surcharged to all persons who receive healthcare, especially hospital care, which is directly related to those who cannot afford to pay their bills—usually, the uninsured. This cost is passed on to others who can pay or have insurance. This is not the market in action. This is some kind of strange dance between insurance companies and hospitals and other healthcare providers. And we get caught in the middle. And oh, by the way, insurance companies reap a healthy profit. (At least they did operating in their own industry. Once they started speculating in exotic financial vehicles (insuring credit swaps, e.g.), they started losing money.)

So, regardless of whether we have some sort of faux competition among health insurance companies, the market itself is not currently working. Not existent, actually, because we have this weighty anchor pulling us down, inflating our costs threefold or more.

What’s more, we have moved to a strange confused view of health insurance versus health care. Insurance is a contract for money payable upon the occurrence of certain events. Perhaps one of the purest examples of insurance is auto insurance. You don’t think you will get in an accident (your fault or otherwise) but you better have insurance to cover the risk that you will, otherwise you will end up with a large sum out of pocket. In fact, states require auto insurance, because too many people were causing accidents and did not have the means to reimburse the damages of the person they injured—medical bills or automobile repairs.

Compare this to health insurance. You have a plan that has certain benefits. You pay a premium, as with auto insurance, but certain in-network procedures and certain medications are completely “free,” while others aren’t. Certain coded procedures are allowable, while others are not. These days, you’re not really buying insurance, but a health plan with insurance-like features (like a total pay-out limit). And, because it’s insurance and not a health plan, meaning you have to make a claim against the contract you’re paying for and the insurance company has the right and does carefully scrutinize the treatment (and carefully crafts the language of its policies to limit payouts), it’s a crappy health plan.

The current state of things, then, is that (1) we have a broken market for healthcare “insurance” (or healthcare plans) with (2) a hidden and uncontrollable variable linked to the uninsured, and (3) plans that are full of holes and inevitably create an antagonistic process between the claimant (the patient) and the insurance company. Meanwhile, hospitals, and to a lesser extent doctors, are caught in the middle.

How do we fix this morass? Here are some ideas, none of which are mutually exclusive:

1. Government mandate for healthcare insurance. We all hate government mandates, right? Here’s one that would instantly fix a lot of problems: Require all persons in this country to obtain catastrophic health care insurance. That’s right, I’m asking for this invasion in our lives, but for our own good. Much like the requirement for liability insurance for automobiles (which is required in almost every state in the union), the cost protection we all gain from not having to subsidize someone’s $1 million treatment far outweighs the impairment of our liberty. Catastrophic health care insurance is pretty self-explanatory: it insures against high-cost medical events. Essentially, it is very high deductible health insurance. The mandate I would be looking for is something on the order of requiring all persons to obtain a health insurance plan with a $25,000 (or less) annual deductible. It should be very cheap, because a person rarely spends more than that amount in a year. Proviso—I’m not sure where the number should be exactly; we might be a little high or a little low here. But I think an optimal number could be reached. Also, we will still have to have Medicare, because as people age, the cost of even a catastrophic health care insurance policy becomes prohibitive; this is not a unifying healthcare reform effort in the sense that all pieces line up under this one piece of legislation.

A corollary to this idea is that either the government would have to offer insurance alongside competitors to “uninsurable” people; e.g., people like my mother who have had breast cancer or some other kind of disease, probably as an extension of Medicare. Or, the government would have to impose on the insurance industry a requirement that such persons cannot have preexisting conditions held against them. The insurance industry has actually offered this carrot to prevent the current overhaul of healthcare that we’re seeing.

2. Preventive healthcare. A lot of folks are not going to like this one, but we can tamp down a lot of health care costs by providing for free to every person legally in this country (perhaps even illegally, since illegals go to the hospital, too, and drive up all of our costs) preventive care, including annual checkups, vaccines, and routine procedures. This would cause some cost for the government, but I believe that the savings would be greater. These people would also presumably contribute income rather than being sick, and generate tax revenue. Obviously, this is hard to gauge, but I think it’s a fair risk to benefit us economically, and allows us to feel good about ourselves as a society from a moral perspective, because we are taking care of our own.

3. Bar healthcare providers from discriminating against single payers. A lot of small business owners and independent contractors cannot afford a group policy that offers discounted rates. When we go to the hospital, doctor, etc., we sometimes don’t get the negotiated rate. Prevent healthcare providers from engaging in these practices. It unfairly punishes those people who need the most help and create the most jobs in this country.

These are just a few ideas. But the goal should be to get everyone covered, at least for the big stuff, and to control health care costs by engaging in preventive medicine and restoring true market prices. There are many other approaches, including a full-on national health insurance plan. I leave discussion of that for another day, mainly because I have no idea what it would look like in the United States at this point in time. But there is no doubt—none—that we cannot continue to skate along this increasingly steep slope of skyrocketing health care costs and arbitrary (and occasionally immoral) healthcare treatment.

GM Still Doesn't Get It

30.1 Billion dollars. Billion with a capital "B" because it's a huge frickin' number. And it will be wasted. Like the 9 billion before it. And more billions before that in subsidies, non-tarrif barriers to trade, loans, etc.

GM CEO Fritz Henderson says GM has made mistakes. That GM is now going to be a corporation focused on the customer. And with that statement, I know he doesn't "get it" any more than Rick Wagoner got it as he watched GM steadily lose market share while blaming everything except the root cause. He blamed Japanese policy as protectionist and undercutting US competitiveness. He blamed anti-union policies in southern factories. But what Fritz and Rick have never acknowledged is GM simply builds bad cars.

That's right. GM's cars suck. They are unreliable, shoddily built, made with cheap components, and problem prone. From the Cobalt to the Corvette. Any GM car that makes it past 150,000 miles - nothing for a Japanese-built car - is considered exceptional. And when the car breaks, GM frequently fails to stand behind its cars or its warranties. Five years ago, Hyundai built crap cars just like GM, but they stood behind their warranties, and steadily stole market share from GM. Now they build good cars, and are still stealing marketshare from GM.

Consider my own experience. Since I was a kid, the only car I ever wanted was a Corvette. I even remember the first Corvette I ever saw - a two-tone black and silver "C-3." So, when I had the money, I ordered and bought a 2001 C-5 Corvette, Navy blue with black interior. It was beautiful. When I sold it in 2006, it had less than 30,000 miles on the odometer. In that time, I had all four tire sensors replaced, both window motors replaced, the temperature regulator failed (clogged by the "100,000 mile coolant" that coagulates if a car is not driven daily), the seals around the roof tore and ceased to be waterproof (leaked in the rain), the leather on the drivers' seat wore through and 12 of 16 pushrods were found to be bent. The icing on the cake was the poor fit and finish - I could see wires through the dash...

The story behind the pushrod repair explains why GM finds itself in bankruptcy as of 9 AM this morning. Shortly after the dealer's mechanic told me the source of the noise I heard, I was called in to talk to the GM warranty claims agent. I don't remember her name, but I remember the conversation after I was told GM would not pay for the warranty repair. I asked why not. Here is the conversation:

Agent: "Well, we feel it is obvious you have repeatedly red-lined the engine."
Me: "Excuse me?"
Agent: "We have determined because you caused the problem, it is not our responsibility to cover the repair."

To understand the ridiculousness of this statement, consider this: The Corvette redlines at 7500 rpm. In 6th gear, the car would do 90 mph at 2400 rpm. The car would do 90 mph in 3rd gear at 4500-5000 rpm. To "repeatedly redline the engine" I would have had to "repeatedly" downshift from 6th gear to 3rd gear at something like 130 mph - something I never did.

Here's the rest of the conversation:

Me: "So you are accusing me of abusing my car?"
Agent: "We aren't accusing you of anything. We just feel you have exceeded the terms of your warranty." (huh?)
Me: "Amazing. You realize I am never going to buy another Chevrolet?"
Agent: "I am sorry you feel that way."
Me: "I'm sure you do." click.

What I should have said (I've had a little time to think about this since 2002...): "And you realize I am going to tell everyone I know about this and encourage them to not buy Chevrolets?"

And so I have. In 2002, I knew Chevrolet - and GM with it - was headed for the toilet. And why? Simple. They don't build good cars, and then they fail to stand behind their product.

This is the company that is going to "focus on their customers." Sure. I'll believe it when I see it. And I don't expect to see it. But good luck, Fritz. You'll need it. It's just a shame we will all have to pay for it.