Wednesday, June 24, 2009

RTRP Health Care: What’s Wrong With Our Health Care System, Access

The second group of problems with our health care system are related to access to health insurance. You’ve all heard about the 46 million uninsured? How about the ever increasing burden of health care premiums. Those are access issues.

Is Access Really A Problem?

While it is certainly questionable whether or not the government should be involved in expanding health care coverage or trying to make it less expensive, there does seem to be significant support for addressing such concerns. When asked by Gallup to rank their concerns with the current system, Amercians cited "access" and "cost" as their top two concerns. Not surprisingly, liberals cited lack of "access" by a 2-1 margin over “cost” as their primary concern. More surprisingly, however, conservatives and moderates ranked “access” and “cost” equally.

And indeed, lack of access to health insurance does have societal costs. According to the American Enterprise Institute, 27% of the nation’s 1.2 million yearly bankruptcies are caused primarily by medical debts (between 36% and 55% (depending on the source) involve at least some medical debts). Moreover, hospitals provided $35 billion worth of “uncompensated” care in 2008, though 80% of this was ultimately compensated by the government.

Presumably, expanding access to insurance could solve these problems.

The 46 Million Uninsured

The most obvious issue with regard to access are the “46 million uninsured Americans.” No doubt you’ve heard this figure repeatedly. And while it is true that in 2007, 46 million people (15% of the population) were indeed without health insurance for at least part of the year, it will probably not surprise you that this number is not what it appears.

Of these 46 million, 17.5 million lived in households with incomes above $50,000 and are considered able to afford insurance. Another 11.5 million are eligible for public assistance, but have failed to avail themselves of that assistance. Thus, the actual number of uninsured persons who are in fact unable to become insured because of lack of income are only 17 million.

Moreover, another 9.7 million of these uninsured are non-citizens, whose health care expenses should be paid for by their country of origin. If they are removed, the total number of persons who cannot obtain insurance due to lack of income is really 7.3 million.

The Uninsurable

Another 5 million of those without insurance are considered uninsurable because of pre-existing conditions.

The Costs Of Becoming Insured

The side of the “access” problem is the ever increasing cost of health insurance. Health insurance premiums are increasing at twice the rate of inflation.

Currently, 59.3% of Americans receive their health insurance coverage through an employer. The annual premium for private insurance is $4,700 per single person and $12,700 for family of four. Another $2,500 per person, was spent in 2007 out of pocket on medical expenses.

Compared to the median household income of $50,233 (according to 2007 Census Bureau figures), these costs are significant. Moreover, this insurance is susceptible to being lost during employment changes.

Another 27.8% of Americans receive their health insurance coverage directly from the government (Medicaid (39.6 million), Medicare (41.4 million), Tricare, etc.). However, these programs are massively expensive. In 2007, the federal and state governments spent a whopping $11,093 per enrollee in Medicare and Medicaid. That is 2.4 times what private insurance paid.


Thus, effective reform must do the following:

1. Dramatically reduce the costs of Medicare/Medicaid.
2. Maintain or reduce the costs of private insurance.
3. Provide insurance coverage to the 17 million who cannot afford it, and the 5 million who are considered uninsurable.
4. Provide insurance for the 9.7 million aliens through their home governments.
5. Eliminate the problem that job loss can lead to loss of insurance.


Writer X said...

It seems that the Obama administration is subtly trying to convince people that bad health insurance coverage (the public option) is better than no insurance at all. Maybe that's why the program resonates so well with liberals, especially when they cite lack of access over cost as a major concern. A clunker car is better than no car at all?

When it comes to health insurance, I want the Cadillac.

JG said...

Speaking as one of those 5 million uninsurable (conventionally; having a husband who works in Big Insurance and knows the loopholes is a real asset) I have to say I in NO WAY want the government to regulate who and what can and cannot be insured. We are currently fighting that in OK. There is a group fighting to require insurance providers to cover a specific condition, which right now, apparently, isn't fully covered (such as long-term treatment, etc.) While I sympathize (obviously!) there's no rationale for these people - lots of whom are otherwise very conservative - to want the state to require insurance. That's socialism. Part of the reason our insurance situation is so bad is because OK doesn't allow for out-of-state coverage, so it's as though they have created a monopoly for the local insurance companies. They don't have to be all that competitive.

Okay, taking a breath and backing off :)

AndrewPrice said...

Writer X, it is interesting to me that the two biggest misconceptions about the health care system are also the ones that are driving this debate:

1. We don't spend enough. Liberals believe this in vast numbers. But as I said in the first article in the series, we spend more than anyone else in the world, by any messure.

2. 47 million people can't get health care. That's a big number -- sounds like a crisis. But the reality, as we point out here, is that the real number is closer to 17 million (or fewer if you exclude foreigners). And those people do have access to care, just not regular care or insurance. That makes this a very different problem. But even more important, people don't seem to get the obvious fact that a huge portion of that 47 million simply don't want health insurance. How else do you explain the people who could get public assistance, but don't?

Yet, these two "facts" are driving this debate.

AndrewPrice said...

JG, I think you have put your finger on a huge part of the problem -- that the regulatory system has created mini-monopolies.

And even worse, those monopolies have become tools for social policy... tinkering with society.

I will be very interested to hear your take on our solution (not to mention the entire series).

BevfromNYC said...

A question - Is it access to medical care or access to insurance that is the problem.

JG - My partial solution and I have stated this before - Insurance should not be covering "wellness" programs. Insurance should be covering "catastrophic" injury and long term treatment and care. Less people have catastrophic injuries, cancers, or need long term treatment. Individuals should pay out of pocket for "wellness" exams and initial diagnosing testing. [Or include optional supplemental insurance to cover "wellness" programs.] Insurance should kick in when there is actually an illness or long term medical problem that is not planned.

The system we have now, if compared to homeowners insurance, pays to change the light bulbs and check the HVAC yearly, but doesn't pay if the house burns down or the roof caves in.

AndrewPrice said...


You have just put your finger on the solution to the whole health care crisis -- I think you will be quite pleased with our proposal. :-)

On the issue of whether the problem is access or access to insurance, it's a bit of both.

Federal law requires hospitals to provide emergency care to anyone who shows up. Thus, to a degree everyone has access already.

And indeed, many poor people and illegal aliens use emergency rooms as their primary form of health care. These are the $36 billion a year in uncompensated care costs.

However, emergency care does not extend to preventative care or things like cancer treatment or other needed but non-emergency procedures. For example, you couldn't get a preventative angioplasty through an ER, but if you were having heart failure they would need to treat you to at least stabalize you.

Thus, what is really being talked about is finding a way to get people access to insurance, which will allow them to get non-emergency care.

The thinking is that this will (1) improve "the nation's health", (2) reduce the costs of care overall through curing diseases earlier, while they are cheaper and easier to address, and (3) reduce the $35 billion in care provided each year that is never paid for.

Tennessee Jed said...

Andrew - I also read (possibly at Heritage Foundation) that there is a relatively significant percentage of people who are counted that are merely temporarily uninsured. This really makes the problem more manageable.

There are probably a lot of good ideas. Any subsidized coverage needs to be very basic. I don't know if it is done or not, but why couldn't drug manufacturers who spend vast amounts on R&D be paid royalties by the generic manufacturers so that the capital expense of development be spread over a larger base. Some tort reform would probably help as well

Anonymous said...

Another reason that the cost of private individual health insurance can be unaffordable is the pre-existing illness exception that is either non-existent or minor in large groups. I see government-sanctioned (i.e. tax-deductible)but privately funded non-employment related groups as part of the solution. Churches and private charities could be heavily involved in such groups. The best health and disability coverage I have ever owned (literally saved my practice after my automobile accident and lengthy hospitalization) was through Aid Association for Lutherans, a church-related insurance fund.

AndrewPrice said...


Some portion of the uninsured are only temporarily uninsured. But I hesitate to provide that number because it's not clear which part of the uninsured fall into that category -- thus the information is not useful at this point.

On drugs. . . drug costs account for only 10% of total medical costs, so drug costs aren't really the problem, though our solution should reduce them - as will be explained.

And on the issue of royalties, drug makers get patents, which give them a 20 year monopoly to make back their investment (though the practical period is closer to 12 years). After that, generics can start making the same drugs without paying a royalty.

If you're talking about requiring that a royalty be paid, that would probably just increase the cost of drugs in the long term -- unless you planned to take away the monopoly period (which the left does advocate). But if you planned to do this, how do you set the royalty rate? Basically, you'd need the government to decide what constitutes a "fair profit". That's not a good idea.

Tennessee Jed said...

Andrew - Congressional Budget Office estimates that 45% of the 17.5 million making over $50K are only without insurance for four and a half months. My point is, I think, same as yours; e.g. the over 40 million thrown about by Democrats is greatly over inflated.

AndrewPrice said...


You're right -- there is a lot of politics in this. To me, in a way, the 17.5 million need to be excluded period, because they aren't "unable to get insurance."

What I can't find an answer to, is how many of the remaining group are only temporarily without insurance? Thus, I did not try to pair the other 17/7.3 million down further.

patti said...

i pay good money for my healthcare and i expect a return oninvestment. while we rarely have needed it in the past, this year we joined the ranks of the inpatient experienced. let me tell you that the system SUCKS as it is now, but even though it has been an enormous pain to figure out the basics called "medical code", i can't even fathom what it would have been like if we had obama care. i shudder to think.

i will pay more for more. i don't want anything that barry thinks is good care.

AndrewPrice said...

Patti, I agree on all points -- the system is horrible, but we desparately need to avoid the whole single payer thing Obama is planning. I tried that route as a military dependent and let me tell you, it stinks.

P.S. I hope you're feeling better?! :-)

USArtguy said...

I would add another group into that over inflated 46 million uninsured... people who just choose not to have any (health) insurance. While I don't have a number, I can use myself as an example. When I started out in my profession at the age of 21, I looked at what the costs were vs my paltry salary. I considered my excellent health, that I was single and didn't participate in wreckless behavior. I decided the need for cash in hand starting out in life was more important than paying ahead for what may never occur. I did that about the first four or five years. Some may think that was foolish, but the point is I took the risk and willingly chose not to have insurance. A choice I heard Obama hopes to eliminate. (And, as it turned out, I never had a need for health insurance those years.)

USS Ben USN (Ret) said...

Excellent series of posts you have going here, Andrew! Bravo zulu!
Also, many thought-provoking and informative comments.

In your conclusion, you mention:
"1. Dramatically reduce the costs of Medicare/Medicaid."

While I think it's possible to trim a lot of bureauRATic excess from Medicare/Medicaid (and Tricare), there are additional major problems to consider with these programs that's related to costs as a result of these programs.
I'll name some just off the top of my head, being very familiar (unfortunately) with Tricare.

1. These are very badly managed programs, which is why fraud, waste and abuse runs rampant in them.

I joined the Navy in 1979, and FWA (fraud, waste and abuse) was a major problem. Morale under the Carter years also sucked, big time, so it wasn't like many really cared, not to mention there wasn't any way to combat this even though many Sailors and Marines had lots of great ideas on how to cut down dramatically on FWA. The bureaucracy refused to listen.

It wasn't until President Reagan took office that morale increased greatly, along with a major upgrade to the Navy in order to effectively wage our cold war with the USSR.
Along with Reagan (who virtually everyone in the military loved) came some tools anyone, from the brand new Seaman Recruit to Master Chief to Junior Officer to Admiral or General could use:

A FWA hotline. We could even call anonymously if we wanted. Now this wasn't just window dressing or a "feel good" program that did nothing. It got results. Sailors or Marines who came up with ways to save money, and/or stop FWA also got rewarded. As an added bonus, this program had teeth which cut clean through the red tape that prevented good ideas from being aborted.

This program did more to stop FWA than all the oversight commitees, blue ribbon panels, presidential commissions, or even watchdog groups could ever dream of because it rewarded excellence.

Like the old Carter bureaucracy, Medicare, Medicaid, Tricare, etc., are inflexible and ignore any good ideas doctors, other healthcare professionals or patients may have that can stop FWA, or ways to become more effective and efficient (this doesn't mean all bureaucrats are bad btw, so no offense to those that do try their best to make this system work better from the inside).

2. Another point I'd like to make is that Medicare, medicaid and Tricare rip doctors, hospitals and other healthcare professionals off, much like a thief at a store rips the store off, causing prices to rise to make up for the shortffall.

These programs claim to pay 80% of the cost of healthcare they cover, but that's a lie. They only pay 80% of what they think the healthcare professionals deserve, based on what someone (or some group) says in DC.

Personally, I've never seen Tricare pay anyone 80% of their fee...ever. It's always less, sometimes much less, and sometimes...nothing at all (for too many stupid "reasons" to list to an already long comment, but it's no surprise to anyone who has had to use these programs).

To compound this theft (hey, that's the way I see it) this is done inconsistantly and erratically. With so much paperwork hoops to jump through...again, with so many inconsistancies, that the doctor has to hire people just to deal with these bureaucracies.
Is it no wonder that many doctors refuse to accept Medicare/Tricare if possible?

Yes, I know doctors, hospitals, etc., can write some, perhaps a lot of this off, but we all still pay for it with rising costs (either directly or indirectly).
It's at least one factor among many (technology is a biggie) that cause healthcare costs to rise faster than inflation.

I use the VA now, which, thankfully, is better than Tricare (at least the one I go to), but my wife still has to use Tricare. She has had a lot of horrible experiences with Tricare. The sad thing is, if we get socialized "heathcare", it will be far worse than Medicare/Tricare is, stopping innovation, investment, and ingenuity in it's tracks.

AndrewPrice said...


You're right. If you look at the figures, 17 million people fall into the category of "can afford it, but don't buy it." Another 11.5 million could have gotten public assistance, but chose not to. Thus, at least 28.5 million people could have gotten healthcare, but didn't.

AndrewPrice said...

USS Ben,

Thanks, I'm glad you're enjoying the series. I think it's important to get this information out there with Obama putting on such an amazing amount of political BS right now.

Medicare/Medicaid are a mess for a variety of reasons, and unfortunately, many of the current proposals will only make it worse by putting us all on a Medicare/Medicaid system.

I know that Medicare/Medicaid fraud are a huge problem. As you can see in the article, M/M costs are out of control -- paying $11k per person as compared to $4.7k per person. If you could get M/M down to the cost of regular insurance, you could cut out $6,300 per recipient!! Considering that there are 81 million recipients, that's huge.

You're also right about doctors v. M/M. Many doctors no longer see those patients because it's too much of a hassle and they just get killed profit wise.

The biggest problem with the M/M system, and you put your finger on this with the 80% figure, is that M/M works on the basis of cost-based pricing (that's how we got those $800 toilets years ago). A shift to market-based pricing would do wonders for the system.

Moreover, there is a law that makes providers certify that they are not giving anyone a better rate than they are giving to M/M. Thus, it is impossible to give occasional discounts for fear that M/M will demand that as a permanent rate and will sue you for fraud.

Also, because providers know that M/M will fight to lower the rates, they way overstate those rates from the get-go. They then negotiate different deals with different carriers. In other words, pricing is a total mess.

Finally, I grew up as a military dependent and I know exactly the types of problems you ran/run into -- I've got a whole set of horror stories. Also, my grandparents (on the German side) were doctors in Germany, so I've seen where socialized medicine takes you -- and it ain't pretty.

patti said...

andrew: thanks. the back is mostly untwitched.

i was a military brat and participated in sports, which was cause to see many a military doc due to injuries. when i was 14 i remember telling my folks that the first thing i was going to do as an adult is get "real" health benefits. even at my young age i could see the problem with their style of healthcare. eesh. i never want to go back to that.

USS Ben USN (Ret) said...

Thanks, Andrew, those are good points.
Programs like M/M (or virtually any govt. program) are also tempting targets to anyone planning fraud, as we have seen.

There's a mentality with some folks that it's not really fraud or theft when it's the govt., forgetting or ignoring the fact that we all pay for it.
I look forward to seing your solutions.

When I retired from the Navy I'm happy to say that $800.00 toilets and $100.00 hammers were history.
However, aircraft bolts for example are still very expennsive due to the rigorous testing and standards to ensure the best quality.

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