Our U.S. health Care System is Broken

The condition of our health care system can be described simply:
 I am a retired person of 70 and my wife is in her mid 60s. We are blessed with excellent health, having long since made the lifestyle changes that result in that health. We had four routine office visits last year for various respiratory ailments during the holidays, costing approximately $150 - $175 each. My Medicare and Medicare Advantage paid for most of the office visit costs. My wife paid for hers out of pocket, since her insurance did not cover office visits.
 So, based on last year and the prior three years, I would place our average medical expenses at about $1,000 - $1,500 per year. What did we actually pay last year? About $7800! And that rises by $1800 for a total of $9600 this year (2015). Let me write that out: Nine thousand six hundred dollars for medical expenses. By "medical expenses" I mean insurance. My Medicare plus Medicare Advantage is a little over $200 per month, and has substantial coverage. My wife’s "insurance" is now $600 per month and pays for nothing, since it has a $6,000 deductible. In 2012, the same plan - or at least the plan with the same name - cost $275 per month and paid for 2 office visits and an eye exam per year, in addition to prescription drugs after a relatively small deductible.
 If that ain't broke, I don't know what is!

The new uninsured. Plus, the insurers are in trouble.
 As I have noted above, my wife's insurance pays for nothing, since it has a $6,000 deductible. No office visits. No pharmaceuticals. No eye exams. It DID pay for a flu shot, however. So at $600/month, that was a $5,400 flu shot!
 If I were younger than 65 we would be paying $14,400 this year for insurance premiums but would be receiving no insurance. So, as my wife has pointed out, the ACA has not eliminated the uninsured groups of people; it has simply re-arranged them! Now the uninsured are a large part of the middle class and a significant part of retired folks.
 Further, despite the massive rise in insurance premiums, the insurance companies themselves are in trouble, at least here in the Pacific Northwest. Our insurer was one of the biggest in this area, and handled Alaska, Washington, and Oregon, and was entering California. Now it has pulled out of California, pulled out of Washington, has just been kicked out of Alaska, and its very survival in Oregon is in question.
 Why is that? Apparently CMS, the federal government agency implementing the Affordable Care Act, is unable to pay the full amounts owed to insurance companies participating in the ACA market. In the case of our insurer, the shortfall is estimated to be approximately $170 million for coverage provided in 2014 and 2015.
 It remains to be seen whether I will be forced to switch to another provider in Oregon. But if I were an Alaskan, I would be in worse shape. In 2015, Aetna, State Farm, and Assurant Health all stopped offering individual health insurance plans in Alaska. The state has booted out Moda. This leaves Alaskans with only one insurer: Premera Blue Cross Blue Shield. And that insurer lost money in both 2014 and 2015. In addition: Folks in both Oregon and Alaska have seen huge increases in their health insurance rates over the past two years. In Alaska, Premera’s rate increases averaged 37.2 percent in 2015 and 38.7 percent in 2016, And in Oregon, those increases were 27.4 percent and 39 percent.
 So I would call this broken!

Health Care and Health Insurance Background
 Why is the U.S. health care system employer-based? That goes back to World War II. President Roosevelt instituted Wage and Price Controls to hold down the cost of war equipment. But this quickly had the same effect as any other government control of business. Companies needed some way to attract better workers, so the easiest way was to provide "perks". Health insurance was the biggest perk they could offer. In 1943, the IRS officially sanctioned it by declaring that employees did not have to pay tax on health insurance premiums.
 Although employer-based health insurance was almost non-existent before the war, by the 1950s 45% of the population had this form of insurance and by the 1970s, 75% had it.

What's Wrong With Our Health Care System
 Employer-based health care worked in the 1940s, when health care and drugs were relatively cheap. It worked when the principal insurance underwriter was the (then) non-profit Blue Cross/Blue Shield. And it also worked when U.S. industry was mainly large corporations like Alcoa, Dupont, U.S. Steel, Standard Oil, and the like (because this provided large "insurance pools"). But, based on my own experience and from what I have been reading, I would say it does NOT work now.
 To get an idea of what is wrong with the American health care system, consider the original Insurance Model. Insurance was originally based on the concept that everybody pays in a small, managable amount, and that pool of money (the "Insurance Pool") pays for the catastrophic ocurrence that some of them have (the "Insurable Event"). What's an Insurable Event?

It's something that is unlikely to happen.

It's usually something that comes without warning.

And it's something that the insuree never wants to happen.

It might be tempting to look at other countries to see how they handle health insurance, and that's a great idea. But we have a fine example of that right here in our own country. What is that example?

It's auto insurance.
 The auto insurance system works. It's cheap, yet it pays for any "catastrophic" event, such as accidents of various sorts, even up to the total loss of the car. So why does it work?

Auto insurance has a big Insurance Pool. Why? Because the states require it. It is completely divorced from employment. So everybody's in whether they are employed or not.
And that's why health insurance is so much cheaper for those who are employed in medium to large corporations! The insurance companies get what they need - a large Insurance Pool of people paying in - whether they are low-risk or high-risk. That’s why the insurance issuers want to sign up medium to large companies!!!

Auto insurance pays only for Insurable Events. Auto insurance doesn’t pay tune ups, brake jobs, auto detailing, or other maintainence. That may sound expensive, but if you take care of your car, maintainence is cheap.
Health insurance, on the other hand, is expected to pay for everything.

Indeed, it might be instructive to ask, "what if auto insurance did pay for maintainence?" For example, What if it paid for brake jobs, A/C work, tune ups, and the like? Then you'd get the same problems you have with health insurance:
 There would be the big increase in administrative overhead in handling all the bills.
 There would be increased expenses/hassles because you would have to prove that you needed a brake job.
 But most of all, those who take care of their cars would end up paying more to cover the additional services needed by those who don't. For example, someone who doesn't change their oil regularly will soon be needing an expensive engine overhaul. That cost would have to be bourne by everybody.

In the auto insurance model, drivers pay more if they are careless.
Our health insurance system offers no financial incentive to care for our health. Those who do take care of themselves pay the same amount as those who fill their grocery baskets with white bread, soft drinks, salty prepared foods, and sugar-covered pastries.

Other problems with the U.S. health care system:

It's third-party payership. The employer pays the health care bills, not the individual. Since the money has already been deducted before you get the final paycheck, it is almost as if all your health care is absolutely free. It's not connected with an actual pull-out-your-wallet-and-pay scenario. For example, during my 40-odd year career, at any given time I would have been hard-pressed to tell you what my medical deduction was.

Employee's health insurance deduction is made with pre-taxed money. This makes employer-based insurance a tax subsidy, amounting to over $180 billion in 2004.

The pricing system is totally unlike any other economic transaction. The same procedure is one price if the insurance covers it and another, much higher, price if an individual pays for it themselves. I received an Intraocular Lens Implant in 2010. The procedure was $10,000 total. I was to pay half; my health insurance was to pay the other half. So I paid $5,000. When I got the insurance statement, I found that they paid $1,600. And there are many cases where the consumer doesn't know what the price is at all. It has become commonplace for consumers to be served with a hospital bill that is exorbitant, well beyond anything they might have anticipated.

As an aside:
 The SYMPTOM of the health insurance disease is the high price. The CAUSES of the health insurance diseases are:
 People don't take care of themselves. A large percentage of congestive heart issues and diabetes is lifestyle-generated. Don't believe me? Just look at grocery carts the next time you are in a grocery store.
 The food industry, the agricultural industry, and the livestock industry promotes unhealthful foods that are quick to manufacture and are optimized for maximum shelf life. These are the highly-processed oils, from which the nourishment has been removed. These are the cows, pigs, and chickens raised in crowded conditions and fed antibiotics to compensate. These are all the foods full of preservatives. Further, higher quality and organic foods are priced out of the reach of lower income folks.
 The restaurant industry promotes high fat, high salt, and high sugar foods and excessive portions sizes.
 The big hospitals are bottom-line oriented, and put profits before care. Exorbitant profits at that, some of which are described at the end of this essay.
 The drug industry is bottom-line oriented, seeking to benefit its investors before the end-users of their medicines.

If all the above were addressed, health care would likely be affordable even if we did nothing to improve it. But. . . this is just an aside.
 And as a further aside, in regard to the last four items. . . whatever happened to compassion??

So everybody has a plan to fix all this, I'm sure. All the current candidates have a plan for it. So, what the hey; Here's mine:

Jimmie's Health Care Plan

1) Everybody is required to buy health insurance. (But see the exception on "note 2" below). The penalty is as it is under ACA. They buy it directly from private insurance companies. They buy it with the understanding that they will paying for coverage until they are 65. At 65, everybody reverts to Medicare - if they want to. (Covered in #2 below) The premium is established on an state-by-state basis, just like car insurance. After all, states like Oregon and North Dakota are likely to have a lot more laid-back attitude and cleaner air than, say, New York or Texas. Our auto insurance here in Oregon is half of what it was in Texas.
 So, what does all this do?
Well, now we have the biggest "Insurance Pool" of all - the whole country.
Also,employers, relieved of all that administrative overhead, can now go back to doing what they do best. And the money formerly used to provide the "health insurance perk" can now be used to offer higher salaries.
2) Since we already have Medicare, we keep it as is - at least for the start. People sign up for "Medicare Advantage" plans as they do now. From my experience at least, Medicare seems to work fine. By keeping Medicare, this removes the burden of insurance companies needing more in the pre-65 years to cover anticipated extra expenses after 65. Those who don't want Medicare can obtain insurance from private insurers.
 Additional Notes.
Note 1: Insurance goes back to paying only for Insurable Events. It does not pay for office visits or "common" meds. We pay for these things out of pocket. This actually could be accomplished by the simple expedient of a universal deductible, say $750 - $1,000. Think about it: Even at $200 per month premium, that's $2,400 per year. It makes no sense to pay $2400 for a couple of $150 - $200 visits. Further, doctors and insurance companies both are now relieved of administrative costs for all these minor events.
Also, Insurance also does not cover "elective" procedures (liposuction, gastric bypass, plastic surgery, botox). However, for preventative purposes, the plan does pay for one physical every other year (including lab work) and one eye exam on the other year, and pays for immunizations.
Note 2: Further, the "universal pool" is not asked to support those who can't afford health insurance. That is a separate pool, paid for by the removal of the tax subsidy for employer health deductions.
Note 3: If the system will bear it, we provide the incentive for good health by reducing the premium for those with good stats on health exams (E.G.: blood pressure, cholesterol). If this would result in premiums being too high, we provide the incentive for good health by giving a tax credit. What pays for this? The taxes that are now back in the system because we have eliminated the employer-based insurance tax subsidy.
Note 4: Insurance companies will, on a state-by-state basis, negotiate prices for procedures, like they do now for employer-based insurance. The price may be 10% - 20% higher than Medicare's price if necessary, since a common complaint of health care providers is that Medicare reimbursement is not enough. BUT the price is the SAME for individuals, if they pay out of pocket or a percentage of the price. So a blood work-up is, say, $150 - $200 if paid by insurance and $150 - $200 if paid by an individual (not the $500 - $1,000 prices I have seen when checking various sites).

Loose Ends

Medicare's arbitrary restrictions on which providers you can use need to be removed! For example, I found out that I could not use a well-known, very efficient urgent care/wellness facility here in Oregon even if I paid entirely out of pocket, and that I would forfeit my Medicare coverage if I did!!

Something needs to be done about exorbitant hospital and drug charges. This applies for both insurance-handled claims and out-of-pocket visits. No one should get the surprises that are shown in these examples:

$200 for a troponin test, Stamford Hospital. Medicare typically pays $14

$8,000 for a stress test with a radioactive dye. Medicare pays $560

$160 for a CBC. Medicare pays $12

 Total bill: $21,000 for a 4 hour hospital visit. Patient informed that she had "heartburn".

$6,500 for three CT scans. Medicare pays $825

$240 for a troponin test, Bridgeport Hospital. Medicare pays $14

 Total bill: $9400 for a simple fall.

$13,700 for one injection of Rituximab, M.D. Anderson Hospital. Mfr cost: $300. Hospital cost $3500.
(Examples ref: uta.edu/faculty/story/2311/Misc/2013,2,26,MedicalCostsDemandAndGreed.pdf)
 It might be noted that the Health Care sector contributed $152.3 million to the 2012 political candidates and commitees. Big Oil spent less than half of that, at $70 million and even Defense was far less, at $27 million. (Ref: Centers for Responsible Politics)

Something needs to be done about the price we are all paying for lawsuits. In addition to some reduction in premiums, malpractice-tort reforms would likely reduce the incidence of excessive tests. In the first example above, a simpler EKG-based stess test should have sufficed to eliminate possible coronary issues, and would have greatly reduced the expense compared to the nuclear imaging test with the radioactive dye.


Two links for further reading:

Here's a link to the above reference that has the examples of exorbitant hospital charges. It is actually a reprint of a very interesting Time Magazine article, "Bitter Pill: Why Medical Bills Are Killing Us", by Stephen Brill, Feb 20, 2013.

Medical Bills are Killing Us

This link points to a Consumer Reports essay on reducing drug costs. The "healthcarevaluehub" is from Consumers Union, the "policy and advocacy arm" of Consumers Reports.

Reducing Prescription Drug Costs

Copyright © 2016 J.A.