A consumer’s perspective on health insurance cost vs health care value.
Once upon a time in America there were Industrial and Gilded Ages. Wealthy men organized the means of production and the labor to run it. Jobs were offered that provided wages and a place to live near the factories and mills. The owner of the factory would have a store on site, in the company town, where all residents would buy all food and other items needed for their households. This was the Company Store.
Wages were paid as vouchers for goods at the Company Store. Workers could not afford to leave or change jobs because they couldn’t save wages and would always be indebted to the company store. As the song by Merle Travis, sung by Tennessee Earnie Ford, says “I owe my soul to the company store.”
Health insurance in America has become a modern version of the Company Store.
A little history of health care costs
We live in an age when medical miracles become medical knowledge. Prior to the early 20th century, when medical science really began to outpace superstition, going to the doctor was truly a leap of faith. Most medicine, including giving birth, was practiced at home. If a doctor was involved, they came to you.
Around the 1920s and 30s, hospitals started to see an advantage to making patients comfortable (and taking control of sanitary conditions). Hospital stays were on an increase until the Depression when people could not afford to go to the hospital. In 1929 in Dallas, Texas teachers contracted with Baylor Hospital for the first medical expense coverage. Hospitals realized they needed a way to cover operating costs, so Baylor had the bright idea of charging 50 cents a month to their nurses for covering any future hospital stay. The idea took off and became the foundation of the Blue Cross Insurance Company.
During WWII employers used this model to attract workers, in general women, to factories. Thus was born “fringe benefits.”
In 1943 employers had a new tax break — no tax on employer-based health care. Health insurance was instantly a way for employers to offer tax-free benefits to attract the best employees. Once employers had a budget for health benefits, insurance companies had a ready pool of customers.
From the 1940s to today the fringe benefits have become expected benefits packages. The result of this system is that employees have lost the connection to what those benefits really cost. The presumption is that health insurance will pay for your health care, when in fact there is an ever-changing array of medical goods and services that are partially covered or not covered at all. There is a burdensome out-of-pocket schedule that means you still can pay thousands of dollars before the coverage REALLY covers your health care costs.
Over time, the health insurance your employer offers becomes what you are used to and any change you make is a really big decision. There is COBRA, but that is expensive and has a time limit. The insurance company becomes a deciding factor in keeping or changing jobs. You can’t just leave them and you don’t even work for them. Now that is a sweet deal for the insurance company. You might stay at your job because changing insurance is hard.
A big argument for employer-based health insurance is volume. This is phrased as “pooling risk.” As I see it the entire country is the real volume buyer of health care — every hospital has a portal, most doctors have an affiliation with a hospital.
Logically an insurance company would base risk on their entire clientele and buy /negotiate with service providers based on that large pool. Charging a larger company less than a smaller company is a false value. To say that I as an individual am a higher risk and thus should be charged more by an insurance company is a rationalization of a fraudulent claim.
The risk of a sick or hospitalized employee at a 1000-person firm vs a 10-person firm is exactly the same. Different risks of on-the-job Workers Comp are paid for by Workers Comp Insurance and are not relevant to health care needed in daily life. The only reason to have the sliding scale for charges is to shave off a portion of the money for stake holders. This makes your health care someone else’s profit, not a doctor or nurse or physician’s assistant, a stockholder whose only interest in you is money that you can make for them.
We all share the exact same average risks — luck of the draw on genetics, accidents, contagious disease. The costs of medical goods and services are actual but they have been buried in arguments about risk. About 5% of the population uses 50% of the money spent on medical expenses1. All of those individuals are spread throughout the population, they don’t all work for company A, B, C, nor are they only the self-employed.
The only thing that health insurance companies consistently manage in volume is PAPERWORK. There is a truth to an employer of 1000 vs 10 being able to have volume paperwork savings. But not medical risk.
It is valuable to have management of money and goods and services. But that is not insurance. Insurance is for your car — you might or might not have an accident. Managing costs of medical expenses is the help we all need — we will all need medical care at some point even if it is only for vaccinations. In general everyone will go to a doctor and or hospital at some point in their lives. Most of us are born and/or die in a hospital. This is resource management NOT insurance.
The Medicare system is by definition a system that is in place ready to manage volume paperwork required to organize budgeted revenue, medical costs and reimbursements.
According to the CDC website (link: Health Expenditures Data):
- Total national health expenditures as a percent of Gross Domestic Product: 17.9% (2016).
According to the Trading Economics website:
- GDP for 2016 18.62 trillion dollars.
That is 3.33 trillion dollars spent on health care in 2016.
Why are we giving any of this to insurance companies when it is essentially profiteering from our health status?
There are many details to address no matter what happens to healthcare in the USA and this is my point-of-view as one consumer, one individual, one citizen — who votes. In any of these rolls, I only claim my perspective.
As citizens of one big, diverse United States of America we each can learn to make better use of dollars for health care and vote. My hope is that the choice we make covers the most people regardless of their income and employer. If you are concerned with government efficiency and waste, take action to learn about our government’s agencies. Be informed.
Medicare for All is the most direct way to make every dollar count for our health, not corporate wealth.
1Why more than half of America’s healthcare spending goes to five percent of patients
Jun 15, 2017