The purpose of this blog is to get readers to think about the complex (or perhaps simple) issues I write about.

The primary topics will revolve around politics and society as a whole, but a mixture of sports opinion may be thrown in from time to time.

Wednesday, March 28, 2012

Freedom & Liberty: My Answer to our Health Care Dilemma Part 1

Freedom and Liberty are indeed the answer to most questions posed when government action has been taken or  is being threatened, and there is no market more in need of the two concepts than our health care marketplace. To understand why we need freedom and liberty in our health care market you need to understand how our current health care market works (for people under 65).

The current system involves three parties. A doctor, you, and a health insurance provider. The primary means of receiving care in this system means that you purchase a health insurance plan-which you pay a monthly premium for either entirely by yourself, or partly, through your employer. This, and only this is where you have freedom and liberty to choose in the entire process, with much more of the equation still to be written.

After you receive your health insurance card, your participation in the system has practically ended. Sure, based on your insurance plan, you may pay a fee for general services to a doctors office called a "co-pay" after you've checked-in to your doctors office (during this process is where they pull your medical files and most importantly, your insurance coverage) but after that, you have little involvement in the marketplace of your own care. You've been called, you've had your physical, you've had your blood drawn, you've got a Sponge-Bob band-aid on your tiny puncture wound because you think it's ironic (you're a hipster in this hypothetical) and you're walking out of the office. The overweight lady that handles billing and the under-whelmingly attractive receptionist greet you again with the same smile they greeted your entrance with, but this time it's accompanied by a, "see you next time."

So you've been in an out of your doctors office, you've been examined, poked, prodded, whatever. You're now in your car without a thought about who paid for all of it, and if you're under the assumption that your co-pay covered your physical, you need to take a lap.

What happened after you left was that your file was handed to billing who contacts your insurance company and submits a claim to them for compensation for your physical and your blood work, but the catch is, a nominal value for those services provided to you aren't assigned by the doctor that gave you care. Instead, the insurance company pays the amount it has assigned to all of the separate procedures you just had done, so the doctors office is compensated based on the value assigned to the services they provide without you ever having to think twice about the transaction.

If this seems like a system that works without enormous problems, think if buying food went something like this. You're a grocer, and a new system has been implemented for buying groceries where people are paying an insurance company to cover their grocery expenses. So you buy everything in the store from its producer for a cost specified by the producer and you must sit and watch as customers come in, you scan their grocery insurance card into your automated system, they pay a small fee to access the food, take what they need, scanning every item they take for you to inventory, sack up their groceries, and leave the store.

As the grocer, you must then submit an itemized list of the total of every item customers bought over the course of the month to each person's grocery insurance company. The insurance company compensates you the amount they've determined is fair market value (determined on a yearly basis) for each product you've sold that month. After you've received your compensation, you notice that the amount you've been compensated from the insurance companies doesn't allow you to purchase the same amount of each food item you bought last month, because the producers of the food are charging more because of the effects of the free market on their ability to produce the food you need. And since the insurance company has set a maximum price that you, as the grocer can bill them for lets say, a dozen apples, as soon as the real market value of an apple eclipses the price they set for an apple (even adjusting for prospective seasonal inflation) you have a choice to make. You can buy fewer apples from the same producer you've been working with for years, you can buy apples from a producer who you can't trust who sells apples for cheaper, or you can buy the same amount of apples, from the same producer you've always used, and try to compensate for the money lost on apples by buying less of a seasonally less-popular grocery item.

Of course, this is a slippery slope, as eventually you'll run out of the item you've cut back on, or potentially you'll run out of both, thus necessitating you to buy more, and increasing your net loss. Yet this is the position the current system puts our health care providers in daily.

Admittedly, a three-party grocery market sounds incredibly stupid, but when talking about health care reform, people seem apprehensive about taking a giant leap backwards and calling the entire system into question.

There are a lot of factors at play as to why this is the case, primary because of the amount of powerful factions who exert incredible influence over those who actually have the power to implement the changes necessary, but also partly because we refuse to address underlying problems in the delivery of our health care in general.

Under our current system, the cost and subsequent delivery of health care to those who need it is a closed market between a provider, the patient, and a compensatory agent. If a health care system were in place that took liberty and freedom into consideration, the patient wouldn't be paying an entity that had no discernible interest in your desired health care outcome other than to make sure they've paid your doctor what they happen to allow the doctor to charge them for the services you required.

Instead, if freedom and liberty were a top-line consideration health care reform, a market based system in which doctors provided services which had a monetary value that their patients are willing to pay. And of course, being a free market, doctors would actually have to compete for your business, a novel concept!

Sure you might be seeing advertisements for doctors offices, that might get a little annoying, but knowing that you're saving thousands of dollars a year enables you to politely change the channel without giving the ads a negative thought.

I googled "actual cost of an MRI scan" and turned up zilch. I didn't get a concrete answer. What did I get? I got a bunch of question forums where people had asked a similar question and answers were all the same, citing state HHS statistics as far as the cost to you if you do not have insurance, i.e. the "out-of-pocket" costs, and the costs billed to insurance companies by 1.) Hospitals and 2.) General  Care Clinics. It was a bit of a fool's errand I admit, because just like most health care procedures, an actual value simply does not exist because of the way we get our health care.

Conversely, my wife has a congenital heart condition which requires a yearly MRI as a preventative procedure, among other procedures that would bankrupt us if we didn't have health insurance. The final cost to us from her three trips to KUMED? About $250. However, KUMED billed Blue Cross Blue Shield over 10 times that amount for the care she received.

If we had a plan like the one I will outline tomorrow, her yearly visit to KUMED for her preventative heart care might cost us $500, but I wouldn't be in head-pounding-against-the-wall fit when I see what the supposed "actual cost" of our visit was, because I know we would have paid for her care, and her care alone. And who knows, if we had a health care system where everyone paid for only the health care they were consuming, down the line, $500 might become less than the $250 we normally pay because of the competition entering the marketplace.

Free markets equate to free decision making, and personal responsibility, i.e. individualism is typically much cheaper than bargaining for a plan that covers 90% of the health care you will never consume in order to suit the collective whole. 

More on all this tomorrow. Stay tuned...

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