What don't we get about health care in this country?
Our system is fraught with perverse incentives among three parties: the provider, the (insured) "patient" and the payer insurance company. When you, the patient, have a health-related problem or question, and if you have insurance, you go to see the doctor, clinic or hospital. The only incentive to not go is the copay or deductible, or the prospect of paying the whole cost if uninsured. The provider has no incentive to say "no," and every incentive to say "yes" — if you have insurance (or, even better, if you will pay the full "sticker" price in cash). The provider will get paid for your visit, so its bottom-line incentive is to maximize your visits (or refuse to see you if you are uninsured).
Third are the insurance companies, the payers. They get the bill from the provider. Their main incentive is to not pay, or to pay less. This sets up a battle between providers and insurers. The provider might recode a diagnosis or a treatment to get it approved. The patient can appeal a denied bill.
Insurance companies are not in business to lose money. They will raise premiums, raise copays and deductibles, cut coverage, drop out of a market or, worst case, shut down in bankruptcy. No organization can tolerate sustained losses. The Affordable Care Act said that insurers must spend at least 80 percent of their premiums for the delivery of health care. They get to keep 20 percent. Those are good odds in any business. The industry was not even at that level yet when the ACA passed. What a sweet deal. It means that 20 percent of every dollar spent on health care contributes nothing to the health of our society (sure, the insurance companies try to make us think it does). That is a pretty hefty margin that we would not tolerate in many other industries.
Interesting that the only two parties not fighting are the patients and the providers. They are the buyer and the seller in this marketplace! However, add the insurance companies to the mix and we no longer have a bona fide marketplace. It's also interesting that the health care insurance industry or companies have been notably absent from this conversation.
In the U.S., we have made huge investments in our health care infrastructure with the capacity for delivering excellent care. We have modern hospitals with the latest equipment, a great network of clinics and providers, and advances in pharmaceuticals. Health care has been one of the strongest sectors in our economy. We don't want to give it up. Unfortunately, it is accessible mainly in urban areas, and only if you have insurance.
Health care should be a universal right. Education is now a right for every child. We have public schools and mandate that every child must be enrolled. It is in the best interests of society for people to be educated — and healthy. Everyone should have access to at least some minimal level of health care. We criticize other countries' "socialized" medicine as being rationed. Well, ours is, too — on the basis of money. If you can afford it (by having insurance), then you get the service. The insurance companies can't say no (if it is coded right), but they can pay out less — or increase premiums.
Some suggest that everything will be fine if we just have an open market. Yes, greater competition can lead to lower prices, but any introductory economics class tells us that markets work well only if there is complete, free and open access to information — pricing, quality and user ratings of providers. We have anything but in the health care industry. Insurers require providers to charge cash customers the same amount as they bill the insurance company. To stay "in network," a provider must agree to not give discounts to cash patients. Only the insurer gets a discount! This keeps us captive to the insurance companies. Again, the system we have in place is one in which they cannot lose.
The ACA was a Band-Aid that only delayed the inevitable increase in costs. There was no viable mechanism to control costs, made worse by mandating the coverage of pre-existing conditions and older children and by removing the lifetime cap. These were good things to do. Perhaps what we got in the ACA was the best we could do. But much work remains to dig ourselves out of this predicament, and the current proposals before Congress will not get us there. Things would only get worse for us all.
Gordon C. Everest is an emeritus professor in the Carlson School of Management at the University of Minnesota.