March 27, 2017

A Simple Fix to the Healthcare Crisis in America

Both sides in the health care debate have vested interests in screwing the pooch, so to speak, and little interest in solving the problem. Neither side ever asks, "What is the problem?"

The problem is simple to understand -- medical costs are too expensive in America. Fortunately, the solution is just as simple -- outlaw insurance.

Insurance -- whether traditional corporate insurance or state-controlled single payer -- acts as a subsidy on the health care marketplace. Like all subsidies, over time, it drives costs upward. This is because subsidies hide the true costs of goods and services (in this instance, for a short time) and people don't realize they're getting jobbed.

In the case of medical insurance, the "care providers" and the insurance companies collude to drive-up costs. Insurance companies negotiate with doctors, labs, and the pharmaceutical industry to set prices for things like doctor visits, blood tests, and medicine. And they often agree to pay more than they are worth because they know they can soak the patient via his premiums. And since the insurance industry works via percentages, the more money they shell out to doctors, the more they can charge for premiums and the more premiums are, the bigger the profit. (Ten percent of $10 is $1, ten percent of $100 is $10.)

Most people who have insurance consider the service they're getting to be "free", because they've already payed for it, via insurance premiums and see the doctors fees, etc. as the responsibility of the insurance company. In many cases they feel that the more expensive the treatment the better for them because they're now getting more from the insurance company than they paid in. But you never get more than you paid-in, because insurance is a for-profit business model and they have carefully calculated "actuarial tables" that are designed to ensure that (on average anyway) you will always pay more in premiums, co-pays, and deductibles than they will ever pay out.

A government-controlled single-payer system has the same disadvantage as above, the only difference being that the premiums are paid via our taxes, so the instinct to think that medical goods and services are free is even more pronounced. It has an even more sinister disadvantage, and that is that the government becomes the final arbiter of what care you can receive and when you can receive it. It hands-over far too much responsibility, and thus power, to the state.

By outlawing insurance we force doctors (and labs and pharmacies, etc.) back onto the free market. Basically returning to the 1950s (before corporate insurance became the norm and most people paid out of pocket) when medical treatment was inexpensive and upfront. Doctors had set prices for most services (visits, shots, etc.) and people knew up-front what they would be paying. If all the market will bear is two chickens and potato for a doctor visit, then that is all the doctor will be able to charge.

With this system, doctors will make much less money, but, generally speaking, they'll still be the richest guy in town.

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