Friday, March 26, 2010


About the Health Care Bill

The recently enacted reforms in our national health care system may have to be changed. Experience and time may show us that the specific model we have chosen, in which private insurers provide insurance to the people against medical costs associated with serious illnesses, can not be made to work in the way we think it ought to. The Republicans have sworn to repeal it as soon as they achieve the necessary majorities in the two houses of the federal congress. I doubt that they will be able to repeal the system completely. They may be able to make some needed modifications.

Let me describe what I believe most Americans would regard as an ideal health insurance system without regard to idelology. An ideal insurance system would provide insurance to everyone. In that way, the cost of medical treatments would be shared by the whole population, in the same way as the cost of serious damage to houses due to fires, earthquakes, floods, storms, malicious damage, and other causes is shared by the entire population of home insurers. If everyone is medically insured, and if the insurance providers are honest, the cost of insurance per person insured should be reasonable and affordable. A special subsidy would be needed for the poor to enable them to buy insurance policies. Otherwise, the population of the insured would not be complete and the insurers would not be able to provide the lowest possible premiums.

In setting up an "ideal" system it would be necessary to provide an incentive for the insurers to keep premium costs as low as possible. Many Americans and many economists believe that competition among individual insurers would provide such an incentive. Thus, one model of an ideal health insurance system would contain these two elements: (1) Everyone is insured and helps pay for the total cost of medical care. (2) Insurance providers compete honestly and do not form cartels (monopolies) to jack the price of insurance up to increase profits for the cartels. These two elements are essential components of universal insurance plans submitted by Republicans in various States and in the federal congress several years ago.

Another model is a single, non-profit insurance provider who provides health insurance to the entire population. Individuals would not pay premiums to this provider; rather, the provider would be paid out of government revenues (taxes). Everybody would be covered. The non-profit insurer would be regulated by a government commission to make sure it treated all persons fairly and did not siphon money off to a few favored persons. This model is used in Canada and many other foreign countries.

There is another element that is required for either model to work well. The medical providers themselves must be policed to make sure they do not overcharge for services they provide, or charge for services they do not provide. In fact, medical providers must be encouraged, if not forced, to practice good medicine in a manner shown to be economical. It has been shown that an economical manner of providing good medical care is clinical practice. In clinical practice doctors of many specialties work for one firm and are paid a salary. A good example is the Mayo Clinic in Minnesota or Kaiser Permanente here in California. Clinical practice delivers good health care at a lower cost than traditional fee-for-service practice, in which each doctor is an independent provider and has a strong incentive to provide services that are not needed and, in some cases, charge for services not actually provided.

To summarize, the three criteria for a good medical care and insurance system are as follows:
  1. Everyone is covered.
  2. Insurers (or a single insurer) do not cheat, either because of competition or because of close observation and regulation by an honest commission.
  3. Medical providers operate in a manner to provide maximum medical care at minimum cost.

I have not read the laws that establish the "reformed" system of medical care. I doubt that even after reading them - more than a thousand pages of text - I would be able to conclude that the "reformed" system employs the three criteria above. We will have to see how well the new system works and be prepared to make changes in it.


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