Healthcare Reform: Beyond the “Subsidy Mentality,” the “Scarcity Mentality,” and Health Insurance Reform
Health insurance is supposed to make healthcare more accessible by making healthcare affordable to average income individuals and families. Unfortunately, the costs of healthcare and health insurance, along with deductibles and co-pays, have grown to the point an escalating number of businesses and individual cannot even afford health insurance. Legislative efforts like the Patient Protection and Affordable Care Act, a.k.a. Obamacare, and the American Health Care Act, are intended to address this growing problem. While Obamacare favors tax credits and the expansion of medicaid aimed at helping lower-income individuals and families acquire coverage, the American Health Care Act largely seeks to ease the cost of health insurance across the socioeconomic spectrum, which means the greatest tax benefits go to higher income individuals and families.
Both approaches reinforce the “subsidy mentality” feeding the National Debt and government overreach instead of addressing the affordability of healthcare. Where Obamacare was largely designed to address the issue of access to health insurance for those unable to afford or buy insurance, which was theoretically supposed to help contain costs in the long run by giving people access to far cheaper preventative care, and required followup legislation, the American Health Care Act embraces a “scarcity mentality,” which treats healthcare as a non-renewable resource in need of rationing, by reversing the Medicaid expansion and gutting the “essential health benefits” standards provided by Obamacare. Health insurance reform and healthcare reform need to move beyond the subsidy mentality and the scarcity mentality to actually address the issue of healthcare affordability.
Health insurance eases the cost of healthcare by pooling the financial resources of the insured, which enables greater access to healthcare when it is needed. The pooling of resources and increased number of consumers also help fund life-saving and cost-cutting innovation, yet insurance company also help reduce the cost of healthcare by giving the insured the power to negotiate prices. When there are sufficient numbers of health insurance providers and healthcare providers to choose from within a given area, this added leverage, coupled with high standards and proper regulations, give consumers enough choice to generate the competition needed to lower prices. In other words, healthcare is a limited resource, but increased access, innovation, improvements through efficiency, and greater consumer leverage can eventually “stretch the supply” of healthcare to cover any need that arises.
That said, the US healthcare industry relies on two main sources to fund the health insurance industry, which distributes funding to healthcare providers. Because healthcare is very expensive, government offers businesses, which tend to have more financial resources than individuals, tax incentives to pay for the health insurance of their employees. Thanks to the financial might of big business, this approach had the added benefit of forcing insurance providers to compete for large pools of clients. It worked fairly well until the cost of health insurance outstripped the benefit and feasibility of these tax incentives. Obamacare tried to duplicate this approach with the health insurance marketplace. That said, the deep pockets of the taxpayer-funded government has always provided a bulk of the funding for the healthcare industry via Medicare, Medicaid, SCHIP, and TRICARE, as well as billions in other forms of funding, The problem is that even government funding has limits, which are fast approaching.
Consequently, money cannot simply be thrown at the healthcare cost problem. Because the cost of delivering care has also grown with the economy and the advent of new technology, competition, and leverage alone cannot be used to artificially suppress the prices healthcare providers require. At the same time, the strategic use of money, such as the use of expanded medicaid to increase access to healthcare for those who cannot afford it, and competition are part of the solution. Administrating healthcare and fees for service adds costs that can only be justified when enough savings are realized to more than pay for the service and the overall healthcare system is improved. In today's system, healthcare insurance providers add costs by exacting enormous profits while cutting benefits. Health insurance exists to pull reserves of capital together, coordinate care, and allocate funds in a more efficient matter. Anything outside of these functions leads to waste as well as unnecessary denial of care, a.k.a. healthcare rationing for the sake of profits. Healhcare reform needs to focus on honing the role health insurance providers play.
From doctors to bandages, the costs of treating even a healthy person mount very quickly. How resources are utilized can be drastically improved through innovation as well as better management of care. There are areas where private firms can do this better and others were the public sector has the muscle to force change. Affordability is a consequence of supply versus demand that can only be alleviated by decreased demand for services, i.e. cut people off, or increased supply and better utilization of medical resources. Private or public insurance has nothing to do with it. Health insurance providers can play a role in going this. Without the proper legal protection, insurance companies have far too much leverage over consumers and healthcare providers, thereby coming between patient and their doctors. Containing costs and paying for coverage into the future continues to be the maintain concern of the health insurance industry, yet the healthcare system must contain costs while caring for everyone in need, instead of focusing on increasing profits.
Profit does, however, drive innovation and growth when it attracts investments in terms of financial assets, human capital, and the pursuit of novel thinking. Offering satisfactory services to patients and caregivers is one way of using profits to accomplish this goal. Building hospitals and expanding facilities with advanced technology is another. Rewarding the administrators of health insurance plans with large bonuses is not. When the for-profit insurance market solution to cut costs is increased costs to patients and employer sponsors of insurance policies with reduced benefits, their existence only adds to the inefficiency of the system. Consequently, a healthcare system driven by increased profits for bureaucrats, such as insurance providers, cannot lead to greater innovation or improved care. In other words, healthcare reform does not necessarily hinge on preserving the health insurance industry.
It requires improved access to affordable healthcare, which insurance providers can help facilitate, as well as greater legal and economic leverage for healthcare consumers. In the end, legislative acts like banning the use of preconditions, requiring standards for insurance policy, and guaranteeing people have access to the doctors they choose, which is often restricted by the healthcare provider networks insurers develop, will be the ongoing focus of healthcare reform. Despite resistance to change, insurance companies, which will be looking to redesign for-profit schemes in an environment where coverage cannot simply be dropped or inflated, may well eventually push for a basic public option, so they can offer supplementary benefits at a profit. Clearly, such a change will upset the insurance industry and reveal the reliance on government, but it will preserve the private for-profit and non-profit insurance market as well as access to private insurance and care.
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