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Stones & Bones / health care / volume 11 number 9, September 2009 DOSE OF REALITY Health care reform is for real. Like it or not, reform is happening, but perhaps not in the ways we hear much about, and it is occurring in a manner independent of whether Congress passes any health care reform legislation this year. However, any legislation that Congress might pass could modify the pace and direction of the fundamental reform now taking place behind the scenes. The fundamental reform I am referring to is the gradual shift in the way the American public pays for the health care it receives. In this regard it is important to remember that the public always pays, and in fact, it is the only payer of the cost of health care. Many decades ago, the members of the public mostly paid for health care in only one way: by direct payment to health care providers using cash if they could, or chickens and pigs if they could not. Then during World War II especially, the public begin to pay more of its medical bills by funneling money through insurance companies, typically purchased partly by employers with funds considered to be part of the payment for employee work. The trend toward more money passing through the hands of the insurance industry continued until recent years, and has reached the point where perhaps about half the payment for health care is through this industry. The other half continues to be paid directly by members of the public, in insurance deductibles, co-pays, and other out-of-pocket expenses such as for medications, uninsured health care, and health-related travel. To be accounted also in the reckoning is the money the public spends for health care through taxes paid to state and federal government. That money goes to pay for medical research, Medicare, Medicaid, VA health care, and most of the cost of health care for federal workers and retirees. These are shared expenses paid for according to ability to pay as determined by our progressive taxation system. I stress again that the bottom line is that the members of the public are the only real payers for health care. We can talk about employers paying for health care, insurance companies paying and the government paying, but these are merely pipes that the public funnels its health care money through. Certain of these pipes pass the funds to health care providers very efficiently, and others are terribly leaky and therefore wasteful. A major reason for the extreme cost of health care in this country is that much of the money we spend is funneled through the leaky pipe of unregulated for-profit organizations, particularly the for-profit insurance companies. Only about two-thirds of the health care money the public puts in this pipe flows out the other end to health care providers. The rest leaks out in the form of excessive administrative costs, and to advertising, lobbying, and shareholder profits. But now that is changing as the system is being reforming in an underhanded, backdoor fashion. Leading the reform is the for-profit health insurance industry, and by doing so the industry is slowly putting itself out of business. The steps the industry is now taking to retain profitability are forcing the American public to funnel an increasing proportion of its health care expenditure through other, more efficient pipelines, namely direct payments to medical providers and payments to them through government channels. The health insurance industry survives only when it is able to take in substantially more money in premiums than it pays out for health care. In an era of rising costs, the industry can maintain the difference in two ways: by raising premiums and by cutting payouts (what the industry calls losses). During recent years the industry has raised premium rates much faster than the rate of inflation, and the consequences are several. One is that many individual purchasers of insurance are finding that they cannot afford both to eat and pay the premiums, so they drop the insurance. Another consequence is that the increase in premiums being paid by employers is causing them to shift more of the premium cost over to their employees, and the increasing cost to them also is causing the employees to drop that insurance. Still another consequence is that employers are not only shunting a higher share of premium costs off to employees, they are dropping coverage altogether, and forcing the full burden of paying for health care onto the employees. So for these three reasons, more individuals are going without insurance and therefore being put in the position, if they are able, of having to directly pay health care providers for what health care they receive. Also forcing individuals away from increasingly costly health insurance are the steps the industry takes to minimize the payouts. These steps include refusing to insure people with pre-existing conditions, charging higher rates to those expected to need the most health care, and dropping beneficiaries when their claims become higher than the industry likes. The end result of the health insurance industry’s raising of premium rates and attempts to reduce payouts is that the proportion of the population without health insurance is increasing. The money that goes to pay for the health care that the uninsured population receives does not flow through the insurance industry pipeline. This is the backdoor reform now underway. A decreasing proportion of the money being spent on health care is passing through the hands of the for-profit insurance industry. The hundred million or so uninsured and underinsured individuals are paying directly for what health care they get to the extent that they are able. It is not the full cost, and so the balance is being picked up by the American taxpayer. The reform is proceeding in the right direction, and eventually we will reach the point where the full payment for health care is borne by the taxpaying population according to ability to pay. Years from now we will look back on the nonexistent for-profit health insurance industry as an artifact of the past, now about as useful as an appendix or a tailbone. 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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