The Scam of Universal Health Insurance
Lots of talk in recent months about universal health insurance a.k.a socialized health care, especially from politicians that love to dazzle us all with “affordable health insurance for everyone”, and “once everyone buys in costs must go down”. Well, talk is cheap, and most of the politicians never took economics 101. Let’s consider the problem more in depth.
First, everyone loves to blame the insurance companies for our health system’s faults. It’s a lot of fun blaming them – because they are an easy target. Well, health insurance companies are just like any other insurance company – they are a co-op for health services with the premise that people join it voluntarily, and the total costs (i.e. medical expenses) will be covered by the premiums paid by the members with some sort of profit margin. Now, everyone loves to blame the insurance companies for making huge profits. Is that really the case? Most insurance companies are publicly traded corporations – that means their books are wide open for everyone to review. Can anyone show me even one health insurance company that make outrageous profits? If insurance companies were that profitable – everyone would be investing in them. That clearly isn’t the case.
To understand the health care problem we need to look at the root cause. Health insurance isn’t the root cause -they are just a symptom of the disease. long ago, when health insurance became popular, the health insurance companies did the right thing for their customers – they negotiated rates with doctors with the idea that a large customer base would enable them to have leverage. This is at the core of free market. Since doctors found themselves in a spot they didn’t like, they changed the way they did business. Since “fair rates” are negotiated on the health provider’s cost, the doctors started increasing their costs in order to maintain the level of profitability they wanted. They started building modern clinics, with all the services and amenities of a 5-star hotel (or malls), and they started increasing their staffing levels. As an example, when I go to see my doctor, I walk in, to be greeted by the clinic’s receptionist (5-10 person team) for the initial check-in. After the administrative check-in is complete, I walk over to the doctor’s office only to be greeted by the doctor’s two receptionists. After being checked-in by the doctor’s receptionists, I wait to be called. I am called in by the doctor’s nurse #1 – she takes me to the exam room. Then nurse #2 comes in to take my vitals. It is only after I go through at least 4 support personnel that I get to see the doctor. These folks are just the people I interact with. I can’t even start to count the number of back office support people which I never see.
The direct result of all of this – is that we have to pay for the doctor’s entire team. Since the doctors managed to build a small empire around them, their profitibility level is maintained at the levels they originaly wanted them. Doctors will tell us that this support staff is need to be able to see a patient every 10-15 minutes, but doctors forget the law of diminishing returns, and their current staffing levels are way past the point of diminishing returns – but they don’t care as long as their financial objectives are met.
Another interesting observation related to this is the fact that politicians love to talk about how our collective buying power will create economies of scale, and how free market will help us make better choices. First, we can never achieve economies of scale when it comes to medical services – if you don’t understand why, open your Economics 101 book. This industry does not have the ability to create economies of scale. Now, to address free market; when was the last time any of us was able to compare prices when going to get medical services? One of the requirements for free market to work is the prerequisite that people have knowledge and choice. To demonstrate this point, call up 3 local doctors, and tell them that your knee hurts and ask how much it would cost to see them. Let me know what you find out. Doctor’s intentionally keep their costs a closely guarded secret – so we have no choice and the proposed socialized health care system will not address this.
Now, if we go to socialized health care let’s consider what will happen. We will all be obligated to have health insurance – right? Perfect (for doctors)! We will hand our collective rear ends to the health providers because now, we will be a captive audience – another concept politicians don’t understand. If everyone has to come to you for services – what incentive do you have to reduce your costs? Since health care is an oligopoly we know the outcome would not be a competitive market place. Economists have known that for a long time – why can’t politicians understand that?
In addition, we all know that you can’t make something from nothing – right? If everyone must have health insurance, someone must pay for it. So let’s make the government pay for it – right? Who funds the government? We do – what a revelation! The outcome would be that those that don’t want to pay for it – won’t be paying anyway, and those of us that have been paying for it – will pay more. So now we will have a situation in which we increase the burden of our social leaches on the those of us who are productive members of society. Since when is social justice defined as burdening the socially responsible and rewarding the social leaches?
Some of our beloved politicians like to point to how great socialized health care works so abroad. What they don’t tell you that other countries had to nationalize the medical profession – yes, doctors and their staffs are government employees! Do you think doctors here will agree to become government employees? Do you think the medical industry will agree to be nationalized?
Another thing politicians don’t tell us about the allegedly successful forign socialized health care is the fact that those systems are consistently overloaded. Need outpatient surgery? Get in line! And the line could be lone, very long. Need emergency surgery? Get in line as well. Is there a chance you won’t make it while you wait in line – tough, you still need to wait in line. Before you fall for the socialized health trap – talk to someone that needed health care in a country that has such a system to get a first hand account on how it really works.
Last but not least, socialized systems are inheretly flawed. They are flawed because by equalizing everyone – they supress basic human nature to exceed and succeed. There is a reason why people from all over the world flock to the United States for medical care – we have the best doctors. Why do we have the best doctors? Because they have the incentive to succeed. Turn them into government employees, and watch our medical system decline to the mediocrity of other countries.
The health care issue is a difficult one, and no magic bullets exist to fix the problem. Fixing the system can only be done by tackling all aspects of the problem. The aspects include medical health providers cost structure, liability insurance (I didn’t address this topic), health insurance, and last but not least – us. Don’t fall for politicians that promise you free health care by taxing someone else – for that someone will be you!
Tags: health insurance, socialized health care, taxes, universal health care