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Stones & Bones / volume 10 number 10, October 2008 DOSE OF REALITY Human life is risky. It is subject to risk of death or disability due to natural or accidental causes and to diseases, the treatment of which may involve huge expenditures. When a family member dies or becomes temporarily disabled, there may be loss of income to the household that may go beyond hardship, and the very survival of the dependants might even be at stake. The magnitude of the risk a family faces may be lessened by the actions of the family and the lifestyle it chooses, but the risk always remains, and it contains the element of unpredictability as to who will need health care, when they will need it, and how much it will cost. A fundamental characteristic of health care is its great variability: the cost of health care needed by most members of society is minimal, but for some members it is very high, well beyond what they can afford to pay. Humans are inclined toward a collective approach to the problem high-cost individuals face in paying for their health care, and so we have health insurance. The concept of health insurance is to spread the cost of health care incurred by individuals over a segment of the population called a risk pool. To be most effective, the risk pool must be very large, ideally consisting of the entire population, and the financial contribution to the pool by its members must be determined not by need but rather by ability to pay. That is the insurance model employed by virtually all modern industrialized nations. They consider it an obligation of government to provide each citizen some necessary level of health care, akin to the government’s responsibility to provide each with some specified level of education. A few governments, such as that in the United Kingdom, provide the health care directly by means of government-owned and -operated health care facilities. Most others, Canada being an example, collect money from the population and distribute it to private health care providers and hospitals. In the United States we have some public delivery and insurance programs such as the Veterans Administration health care delivery system and Medicare and Medicaid insurance programs, but we also rely heavily upon health insurance provided by for-profit private industry. In his new book Do Not Resuscitate: Why The Health Insurance Industry Is Dying, And How We Must Replace It Dr. John Geyman details how the for-profit health insurance industry developed out of nonprofit insurance associations during the 1940s and then grew during the next half-century to become a major enterprise through which a large portion of the public’s health care expenditure passed. By the year 2005, more than 1,300 insurers were selling insurance to employers and individuals, plus also operating as intermediaries and carriers to administrate the flow of Medicare and Medicaid funds. In these combined roles, the for-profit industry was handling the money used to pay for the health care received by more than 250 million (out of 300 million) Americans. So why, as Dr. Geyman states, is the health insurance industry now dying? His answer is that it is killing itself off by adopting a lifestyle not conducive to its own wellbeing or that of the American public. The problem is that the industry has abandoned the basic goal of insurance, which is to spread risk over the population it serves. Instead of spreading risk, the industry has focused on the avoidance of risk for itself, coupled with a transfer of that risk to the public. In the process, it is destroying its own reason for being. The industry uses two primary mechanisms to avoid risk to itself: “underwriting” and “experience rating.” Underwriting is the term used to describe the process of evaluating potential enrollees for the likelihood of needing health care and then placing them in risk pools to which it charges enrollees premiums based on the expected level of risk. Experience rating is the process of charging premiums based on the claims made by enrollees, jacking up the rates for those who make large claims or refusing to continue to insure them. The execution of underwriting and experience rating requires the establishment of multiple risk pools, the more the merrier. Carried to its extreme, that would require the establishment of 300 million risk pools, one pool for each American insured. This approach is, of course, in direct violation of the basic concept of insurance, but that is exactly the direction the industry is moving, and why it is killing itself off. The administrative expense of underwriting and experience rating is high, and that, coupled with rising industry profits, drives up insurance costs to the point where the public can no longer afford the insurance. In his book Dr. Geyman notes that if the current trends in salaries and health insurance costs continue, then by 2025 the cost of health insurance premiums will consume the entire income of the average family. Nothing is left over for food, housing, and other necessities. Employers are already feeling the pinch, and that is why in seeking to maintain competiveness in the world market they are shunting increasing portions of the cost of both health insurance and health care to their employees. The insurance companies are trying to stay competitive by, as Dr. Geyman says, “flooding the market with low-premium-high-deductible plans that undercut prices at the expense of quality.” He notes that they should be competing by offering better quality, and since they are not, they are plunging themselves into a death spiral. The consequence for the public is declining quality of health care and loss of financial security. We cannot continue along this road, Dr. Geyman rightly states, “We have spent too much money and lost too many lives over many years to delay health care reform any longer. The time for real change has arrived. We can no longer afford to prop up an obsolete private insurance industry which provides less value all the time at greater cost. We need universal coverage that means something for all Americans at affordable cost—now.” Neil Davis is a retired geophysicist and author of several fiction and nonfiction books. His most recent book is Mired in the Health Care Morass. More on health care issues can be found at his blog, http://healthcaremorass.blogspot.com. Neil can be contacted at neildavs@mosquitonet.com. | ||
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