What If No One Had Health Insurance
Conventional wisdom tells us that the problem with the healthcare system in America is that too many people lack private insurance coverage. Approximately 59% of the population is covered by an employer sponsored health insurance plan, and another 9% purchase their own private coverage. The remainder of the insured population receives government provided healthcare in the form of Medicare, Medicaid or SCHIP. That leaves nearly 15% of the entire U.S. population with no health insurance coverage of any sort.
The most common proposals to reform the system include legislation that would require employers to provide coverage, expanding eligibility for existing government programs, or the creation of a government run single-payer system. All of these proposals are based on the idea that routine health care expenses are somehow different from any other item in our family budgets. Where did this notion come from? Maybe the question we should be asking ourselves is not how can we increase the number of people with insurance, but what would happen instead if no one had health insurance?
By definition, insurance is intended to compensate for catastrophic losses that we could not otherwise afford to bear. It makes perfect sense to insure ourselves against the potentially devastating financial impact of a major illness or injury. Unfortunately, what we call health insurance in this country has been transformed through legislation and consumer activism into something that no longer meets the traditional definition. We are insuring ourselves against runny noses and sniffles. What we really have today is a system of non-refundable prepaid medical care. With the exception of certain cell-phone plans, there is no other product or service that we purchase on a prepaid basis, so why should medical care be any different?
The average annual cost for an individual policy is rapidly approaching $5000.00, while families pay nearly $13,000.00 for healthcare coverage. The reality is that the overwhelming majority of us pay for substantially more medical care than we actually consume, so why do we pay for it in advance? Even more curious is why we continue to pay so much more every year for services that most of us do not use. Health insurance costs have increased 27% from 2004 to 2008, and a whopping 119% since 1999.
One of the major problems with the current system is that employees are woefully ignorant of the true cost of their health benefits. While companies have passed an increasing share of the premium cost onto their workers in recent years, the bulk of the burden is still borne by the employers. On average, employees only pay 16% of the total premium cost for a single policy, and 27% of the cost for a family policy. That means employers are paying nearly $9500.00 toward the cost of a family policy, and in many cases the employee is never aware of the contribution. The reason that wage growth is stagnant is that healthcare benefits represent an ever increasing portion of total employee compensation. Most workers never consider the fact that their cash compensation would be substantially higher if their employers did not cover the cost of health insurance premiums.
Prepayment is not the only peculiar aspect of our current system. What other product or service do we ever buy without knowing the price in advance? We would never fill our grocery carts or purchase any other product without a clearly marked price, yet those of us with insurance never inquire about the cost of routine medical procedures. There would be far fewer unnecessary tests performed, and far more generic drugs prescribed if there was a logical connection between the price we pay and the medical services we receive. That connection is completely broken under our current system.
While policymakers remain focused on the idea of providing private insurance coverage for everyone, there is another idea that is worthy of consideration. Perhaps the answer is to dismantle the current system of prepaid care and return to a traditional fee for service model for routine medical services. Under this scenario, everyone would be required to have insurance against catastrophic illness or injury, but the cost of such a policy would be quite small in comparison to the current all-inclusive prepaid plans. By reestablishing the connection between the price we pay and the services we receive, we would all become more rational consumers of healthcare services.
Skeptics will claim that the cost of routine care is simply too high to be borne out of pocket by the average family, but the average family with private insurance is already paying nearly $13,000.00 in annual premiums. Costs would fall rapidly when rational consumers force medical service providers to compete on price, and when the providers are no longer responsible for the huge administrative burden associated with processing billions of insurance claims. Prescription drug prices would fall dramatically for the same reasons. The most effective way to control healthcare costs is by restoring a more direct relationship between consumers and healthcare providers.
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Let me both agree and disagree with this idea. I’ve been on both sides of this issue. Fifteen years working in the health insurance industry, two years managing medical practices, and three more working for the big Kahuna health care system here in town.
Personally, I would LOVE to have the $2800 I spend to insure my family for a year, plus the $10,000 or so that my employer kicks in. Part of that I would use to buy a low cost, high deductible plan that would cover catastrophic illness or injuries. I’d go into it knowing full well that I may be several thousand dollars a year out of my pocket to pay for medical care, but I would pay for it with pre-tax dollars by contributing to a healthcare FSA.
If that were an available option today, I would probably opt out of my employer’s health insurance plan. Today, if I opt out, sure, I get the $2800 but my employer keeps the other $10K.
It would be a tremendous burden off the system to remove insurance companies from the equation. No more negotiations between provider and payor, no more policy holders disgrutled with their insurance. It sounds great.
But here’s the problem: I might pay my bills, but many, many people wouldn’t. Medical providers are lucky if they collect 10% from self-pay patients. I realize, that most self-pay patients today are not in that situation by choice. If everyone were self-pay, you would have a larger proportion who would be willing and able to pay their bills, so that 10% rate would rise.
But even among those with insurance, providers end up writing off balances at an incredible rate. Copays, deductibles, coinsurance. Amounts after insurance payment that are supposed to be the patient’s responsibilty. That gets written off, too. $10 here, $25 there, that providers know they will never collect.
So eliminating insurance would shift a tremendous collections burden to the provider side because they no longer have at least that share of their income that comes from the insurance payors. In the long run, you’d probably see reductions in health care costs, but in the short term it would cause a whole lot of pain for medical providers.
Jeff St,
There is no doubt that collection of payments is a major problem, and it will continue to be no matter what reforms we put in place. One of the problems with self-pay customers is that they are charged exorbitant rates far above what insurers pay for the same services. It should come as no surprise when you charge the highest prices to the people with the least money that they will have a hard time paying their bills.
I think one of the big problems with insured patients is that we have simply been conditioned to think of medical bills as something that we are not responsible for paying. If we returned to a fee-for-service model, people would eventually come to think of medical care as another item in the family budget.
As far as the $10,000.00 is concerned, my bet is that many employers would be happy to put that in your pocket if you agree to drop your family coverage.
The idea is fine except for the old part. We all should prepay our health care as we all get old. And the old, when they need the healthcare system the most, don’t tend to have all the money they need for it. (Of course we could all just die earlier. That would make the most economic sense.)
So prepaying for healthcare is actually quite a good idea. It’s also a good idea to deal with this issue as a community, not as an individual or a family.
There is a presumed “if you don’t live in my house or have a good job, f*ck you” assumption in this article, that just doesn’t make for good public policy.
There are lots and lots and lots of problems with public health care systems, but no public health care system is worse.
Mark,
I didn’t really flesh this article out to include all of my thoughts because I knew it was the kind of proposal that would never be taken seriously. One of my basic assumptions is that programs like Medicare and Medicaid would continue to be necessary to provide for the poor and the elderly, or at least for the elderly who are not capable of paying their own way.
This idea is in the minds of many. There are many, actually probably VERY MANY countries which are without “insurance” as we know it of all forms and kinds. Specifically, China has no health insurance system. If you get sick, you get the scope of medical attention you can pay for and if you cannot pay, you get nothing. The quality of treatment in China is not a shining example of what I would like to see in the US however
Bubba,
China is not really a valid comparison based solely in the difference in our standards of living. In the United States, there is no reason that the cost of a routine visit to the doctor should be beyond the means of anyone not living in poverty.
I am not trying to make any comparison of any thing. I AM simply saying there are places where insurance does not exist and in those places “cost” are really not an issue. BTW, a “routine visit to the doctor” is not what health care insurance is all about anyhow and I would further submit almost anyone can afford a routine visit to the doctor.
Bubba,
Chris is rather accurate in the observation that those with insurance are using it for everything, including those ‘routine visits’. It’s such an embedded part of our society that it’s become part of the process of going to an appointment: sign in, whip out the insurance card to make sure information is up to date, see your doctor and pay the miniscule co-pay. We’re accustomed to it… and, for most people, they believe that’s why they have the insurance. Certainly, it’s not what is intended, but it is the perspective most people have.
On the other hand, people at lower financial levels do not have the fiscal means to provide for a simple checkup visit. If it weren’t for Federal and State programs, I would have a difficult time paying for the multiple visits (doctor, optometrist, dentist, etc.) my two sons need as part of their ‘routine visits’. By difficult, I should elaborate by saying, I would be incapable of paying for all of them out of pocket, even with a payment plan… and I’m in the higher end of the poverty bracket. Honestly, I would prefer to have a more competitve insurance market where I can choose the plans I need and be able to afford them, instead of having to utilize the tax dollars of others to subsidize medical care.
Actually, I do not essentially disagree with the original observation. Maybe the question I present is that we have too much “insurance”…either in reality or expectation. Everyone would like to have the opportunity to select and affordable plan but in reality the only thing that makes any plan affordable is to increase the level of exclusions in one way or another. Flip it over and look at it from the insurance company’s view. How can you write coverage for a premium of $X.00 a year and provide payments of $X+1.00? And where is the medical community in this question also. How about that DR with the So. Roa. mansion and the million dollar place at the lake/mountains and the stable full of high end imports. Strikes me the group holding this country “hostage” in addition to the oil rich camel jockeys are the greedy medical practitioners.
The most effective way to control healthcare costs is by restoring a more direct relationship between consumers and healthcare providers- It’s really true.
I’ve been wondering that myself, about how come we never ask the price for a medical procedure so we can compare and shop around maybe? Or even negotiate like customers try to negotiate with my husband when they buy flooring? All I know is I go in there and I’m billed whatever they feel like billing me and I have to hope I have the money when I check out. And it’s not fair because it’s always higher than what the insurance companies pay. So I had to buy insurance that covers nothing. It’ll help in a catastrophe but a chronic serious disease might still bankrupt us. I mostly got it so I’d be charged the insurance companies’ prices. Routine visits are not affordable anymore. It’s $75 just to walk in the door. My husband went for a check-up recently and they did some kind of test on him in the office that took five minutes and that bill was $300 WITH the insurance! Some people work a whole week for three hundred dollars and these are the people who are screwed the most–because they are not eligible for any kind of assistance but can’t afford to pay on their own. Therefore, there are many Americans who just don’t get health care. I’ve been in that boat most of my life. I might be again because I don’t know how much longer we can pay for insurance. We’re in the blue-collar world. I know many people who are suffering with sickness but they can’t afford medical care. Bush said people can go to any emergency room. Yeah, they’ll stabilize you but then you’ll go home to die of your cancer. You won’t get treated and possibly cured.
And you know, I don’t think it’s the doctors’ fault–they have incredible liability insurance bills plus school loans. Doctors aren’t rich anymore. Forget telling your daughters to marry a doctor–tell them to marry a lawyer or a CEO of an insurance or pharmaceutical company! lol
http://www.GreenerPastures–ACityGirlGoesCountry.blogspot.com
Debbie: Take a drive down Franklin and Reserve near “the” hospital. Go up and down the residential streets. Listen carefully. That giant sucking sound is the woosh of money being sucked out of the pockets of commoners by the medical community. Need to take the beemer in for service tomorrow. “NEXT”"!
Bubba,
Blaming physicians for the high cost of health care is tempting but wrong. Except for those few who practice purely elective specialties, individual doctors have absolutely no control over the price they receive for their services. Insurance companies and government agencies determine the reimbursement rates, and the only option the doctors have is to take it or leave it.
“By definition, insurance is intended to compensate for catastrophic losses that we could not otherwise afford to bear.”
Get a better dictionary.
Insurance is a mechanism to pool the cost of unpredictable and unavoidable happenstance. The finger of God if you will.
The point to having health care is actually two fold:
- You speak of catastrophic health issues, if you have regular health checks in many cases the catastrophy can be prevented or moderated to a condsiderable degree. Both in impact on the individual as well as to the total costs of the treatment.
- The second deals with a more abstract concept related to life, liberty, and happiness which our government and social institutions have a fundamental -requirement- to take into consideration. If a person is not healthy then their life and happiness are effected.
Business is nothing but a social institution created to enrich all of society, not just the officers and investors. Despite what many self-interested would suggest.
The old world view of ‘greed is good’ and let the little man catch as catch can is defunct once we accept basic human rights coupled with democratic representation based on the equality of those rights, despite wealth or social standing.
“The second deals with a more abstract concept related to life, liberty, and happiness which our government and social institutions have a fundamental -requirement- to take into consideration.”
Last time I checked, it was the pursuit of happiness.
Chris,
I understand where you are coming, no insurance is an extreme example of solving this so called healthcare crisis. The problem is that many diseases and conditions do not always present with signs or symptoms until late stages. Diabetes is a prime example. Without consistent and proper medical care and high patient compliance, a diabetic may never learn to take better care of themselves. Heart disease and other internal issues are just as bad (and by your most recent post after your son declaring your weight problem, it sounds like your dietary and exercise regime will help reduce your diabetes, and heart disease risk). It can be hard enough to get these patient to return as instructed, let alone getting them in the office. Patient pay individuals only go when a problem either exists long enough that they can no longer take the pain or discomfort, or someone like a spouse or their job or the DMV requires them.
Patient pay is not the route to preventative medical care. Patient pay might work for certain therapy programs, like physical/occupational/speech and help keep costs down. And don’t get started on the biggest insurance scam called Dental. You might as well be patient pay if you need any, and i mean any, work done. Vision insurance generally does very well for the patient especially when half of a family is blind, but can also be just as bad as dental (discount % plans).
I will attempt to follow this up with some Office finance/economics decisions that make insurance difficult for the health-care service industry.
Chris,
I agree with this idea for all of the reasons that you stated. Health care costs would dramatically decrease if patients paid out-of-pocket for most medical care and saved insurance for major illness and injury. Using health insurance for check-ups and colds, etc. is like using auto insurance for oil changes and tune-ups. It doesn’t make financial sense. And, individuals and companies would prosper from not having to pay for high health insurance premiums.
I think many Americans are afraid of this idea because the responsibility shifts to the individual where, in my opinion, it should be. We are ultimately responsible for our own health, after all. Our choices and behavior largely affect our health (which is where adequate education comes in). If Americans want to help the poor and unfortunate with their health care costs, then we can do so voluntarily through a charity. Those receiving charity will be more grateful, and those giving charitably will benefit emotionally instead of feeling resentment.
We are not entitled to health care. Health care is a privilege, not a right. Yes, if there were no insurance for less significant health care needs, doctors would have to deal with the burden of collections. But, so does every business in America.