Health Care Blues

Look, I keep saying this out loud to people, and it never registers. So maybe if I blog it, someone will hear.

High health care costs are a direct result of the insurance industry.

Think about it. What if some surgeon/hospital/pharmacy tried to charge a certain amount for a procedure/admittance/medicine and no one could afford to pay? What do you think that would do to the cost? This is not rocket science. If no one could pay $25,000 for a procedure, or $325 dollars a week for a prescription, then market forces would drive the price down. Period.

However, insurance artificially inflates the buying power of the consumer, and removes the consumer one place from the actual purchase. This is a presription for rising cost.

Think about it: What would happen to the price of apples if you gave everyone in the nation an 'apple coupon' worth five dollars towards the purchase of apples? Every Economics student knows that price is fixed not only by demand, but by consumer wealth. If everyone in the nation holds an 'apple coupon' worth five dollars, the price of apples will go up. Dramatically. Costs go up until the market self-corrects. As long as every American keeps getting an 'apple coupon' worth five dollars, the price of apples will probably stablize at just over five dollars. It becomes something we could not afford without the coupon. Now let's say we take away the coupon from 10% of the people. They would be unable to afford apples at their inflated cost.

The point? Insurance is that 'apple coupon,' We pay in every month... more and more each year... so that we can afford possible medical expences beyond our normal means. Think about the crippling costs of health care without insurance. Its everyone's nightmare, we know those costs would break us financially. So we shoulder ever increasing health insurance premiums.

We seem to miss the point that if none of us could afford it, then it wouldn't cost that much! Basic Economics. Only the fact that we have insurance makes it possible for them to charge that much.

Its true. Its actually rather simple.

But you have to ask, how can the insurance companies pay inflated costs, yet turn a profit? The math is simple. If you can draw funds from a large group of people, as long as you keep the ratio of healthy to sick as high as possible, you will turn a massive profit. This gives the insurance companies a mathematical imperative to insure more healthy people than sick. You tell me what that does to the sick consumer... But that's a whole different blog. Also remember that high health care costs are good for insurance companies. The more unaffordable costs are, the more necessary they are.

The solution? I really don't know. But at least knowing the problem should help us to think about things. My opinion is that mandating insurance is not the answer. It will only entrench the problem. I have some ideas, but you'll have to wait until the second installment of this series.

Do you have any ideas? I'd love to hear them.