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Health Care

November 28th, 2009 · No Comments · Economics, Health Care

Over the next month…we hope and expect…the Senate will debate health care. That is, they will try to pass the reform of health care and health insurance and a whole new system of health care delivery for Americans. They will debate the so-called Obama plan, the health care plan of the Democratic Party. There is no health plan to speak of from the obstructionist, neoconservative Republican Party.

The economic philosophy behind the Reid-Kennedy-Dodd-Waxman-Miller-Pelosi-Obama Plan is quite traditional and classical. It is simply to say that competitive efficiencies are not possible in the current American market conditions. Not necessarily because of the attitude of the health insurance industry or some partial economic advantages gained by doctors or hospitals or pharmaceutical industries. The reason is a structural problem in our free enterprise society that contradicts the way the health system works.

Kenneth Arrow, the Nobel Laureate from Stanford, many years ago laid out the actual market conditions and situation. The fee-for-service model with profit that we use here in the United States is imperfect as it pertains to full economic equilibrium.

In its economic transactions, health insurance is uncertain. It is possible to write a policy that will give reasonable certainty to the individual. But then the insurer will have much greater risk, probably unacceptable risk. It is possible for the policy to be written with certainty for the insurer, but the insured will have few guarantees. It is a contradictory situation. The reason that health care insurance is so complicated is not merely the uncertainty of frequency of claims, but the breadth and scope of each of those occasions.

Dr. Arrow’s study proved conclusively that a for-profit health insurance system cannot be implemented with economic efficiency. The reasons are–and they are multiple–that the nature of the transactions calls for decisions independent of economic efficiency. They are medical decisions that require and, in fact, demand medical efficiency, which may be the exact opposite of economic efficiency.

Furthermore, the high-usage model which makes virtually all other industries efficient, does not work here. In this case, personal safety, pain and potential death are included in the equation. The decisions must always defer to what must be done properly to ameliorate those effects regardless of costs. Those are the controlling factors. So economic efficiencies are not sustainable or predictable from an insurance standpoint in health insurance.

In summary, health insurance is not predicable enough to be made both efficient for the patient and profitable for the company. Second, the greater the need, the less profitable is the patient as a customer of the insurer. So the insurance model is mortally flawed as a for-profit business.

This is very significant when it addresses our current situation. In the rest of the advanced world, governments have adapted to new rules of social acceptability. In other words, for example, it is no longer acceptable to work children in the marketplace. The modern socially-oriented economies have gone beyond that step and advanced it to the point of deciding what to do with all classes of children up to and into adulthood. The paths are clearly defined. And so it is with medicine, welfare, military or public service, housing, education, and so on.

We have adapted somewhat, but we had a newer, more diverse and much larger industrial base after WWII. While we established greater civil rights and created Medicaid and Medicare and some other social services, we retained our spirit of individuality to a greater degree than the Europeans.

In 2000, we took a different path entirely. We decided, with the election of Ronald Reagan, that we would rely even more on personal initiative and private, business-based solutions to solve many of our social problems. The idea was that if each situation can be treated as a market, then market principles could be brought to bear. Because markets theoretically tend towards efficiency, the most efficient solutions would be found, and with equilibrium, the most equitable solutions would inure to all parties without the need for social engineering.

The problem was of course that we already had imperfect markets and an imperfect governmental system to monitor those markets. Consequently, in most cases, we only achieved partial equilibrium and therefore not total efficiency. In other words we achieved inefficiency. As the systems played out, the inefficiency of private systems skewed more and more away from those who were able to actually control the markets, with the results of the inefficiency falling on the economics of the poor. That, plus our flawed political system, led to a basic plutocracy, which is where we are today.

Part of the failure of the system was the flawed-from-the-start idea that health insurance would be a good business. As Dr. Arrow pointed out, the larger and more expansive the private health care system, the more it must attract a wider universe of users. As it attracts the heavier users, who paradoxically are the least attractive (and totally unpredictable) customers, the system becomes flawed. It must raise prices beyond true market levels and control expansion by targeting only those customers with the least, not greatest, need. As some economists have pointed out, it is really not a business model at all, but a moneymaking scheme that has been harnessed into a system to look like a true business model.

Until Ronald Reagan’s presidency and the rather blind ideology that has persisted until the great economic collapse of 2008, health care was by and large a non-profit enterprise. As it was not a good business, it fell to the charitable institutions, like the Lutheran Church, the Adventist Church, the Catholic Church, Jewish organizations and the independent non-profit organizations like the Shriners Organization and others to create hospital and care systems. It was not profitable so non-profit groups handled it.

That is why the Republicans submitted a health care plan at the very last minute, the object of which was to delay the Democratic plan. They are obstructive but not stupid. They know that for-profit health care systems will not work in the long run. They are working for the health insurance firms with full knowledge of the inefficiency and the inequality in the health insurance business.

Just as with the tobacco industry and the energy industry, even after the illegal and despicable actions of Bush patrons, ENRON Corporation, the Republicans continue to milk them for campaign contributions by supporting anti-American positions. The Republican health care proposal wasn’t even really a plan. It was simply legislation pandering to their lobbying groups. It was about medical malpractice liability reform and protecting the rights of health insurance firms and not allowing illegal aliens into the system. These are smaller issues, but nonetheless covered already in the Democratic plan.

Take medical liability…less than one-half of one percent of all health care costs are attributable to any kind of medical liability. While medical liability tort awards to plaintiffs have become smaller, and caps of $250,000 have been placed in many states on damages, medical malpractice insurance keeps going up. The doctors blame the wrong people on purpose. They blame the very people that they harm, as if people want misdiagnosis or surgery gone wrong. Doctors blame attorneys because they do not want to rock the boat with their insurers. They worry, just like medical consumers, that they could be dropped by their insurer when they have a serious incident.

Consequently, since physicians are thus so cavalier about something so important, and ignore the facts when they conflict with their own personal financial interests, then should we not worry about several other things relating to the medical profession? How serious are they about their profession, their skills, their treatments and diagnoses? Why aren’t there more American-born doctors? We still import thousands of residents per year to fill our needs…which are not our real needs.

Our real needs would be for another 100,000 family physicians, more even than the deficit that our medical profession has currently created. In the restriction on the supply of doctors, the AMA has the principal guilt. It was venal and it was wrong. We should have expanded the supply of doctors long ago. It was a callous move to keep medical schools with the same number of chairs as 30 years ago while populations have doubled or tripled.

With thousands of applicants for each chair in our medical schools, how is it possible that out of all those students with an A-minus or better in the sciences and higher overall GPAs that we cannot come up with 9,000 more U.S. medical school graduates? Why can we not fill the roughly 9,000 residencies with American graduates rather than the foreign medical school graduates or U.S. graduates who are forced to go to foreign medical schools?

Why does Cuba have more physicians per capita than the United States? Cuba is basically a third-world country. So what are we…a fourth world country? The American Medical Association is responsible. They run everything having to do with medicine in this country. We afford them all the respect, perks, privileges wealth and position in society that we feel is due the highly skilled and educated. So it is fitting that they take the responsibility for this situation that they have caused…namely, the restriction and rationing of medical doctors. Shame on them for their arrogance and avarice.

Let’s be honest. This is not a situation that President Obama created or had anything to do with. He simply recognized the devastation that lack of health care can cause among the weak and powerless in our society. Typical of our “great American enterprise,” only when our personal ox is gored do many of us actually stand up and be counted for our fellow neighbors. The fact is that the doctors, at least, often work 80 hours a week trying to keep us healthy.

Consequently, only when the economic conditions of health insurance became so chaotic that the middle-class and the upper-middle class began to suffer personal disasters, did the public take up the cause and support health care reform. Now that health care reform has been challenged by the huge monopolistic insurance companies, many of the public in the polls at least have backed down. Suddenly, they are not so sure about health care reform if it is going to cost them something, or make life the slightest bit less convenient.

We shouldn’t be attacking government. We voted for them…many of us did…these lying Neocon Obstructionists. We should be attacking our fellow citizens for their greed and stupidity and their sloth and their stupid, racist tea parties. They won’t lift a finger to help their neighbor or their fellow citizen to a better life. Yes, let’s pull a Cheney on them. You’re either for health care reform or you’re a traitor!

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