Insurance companies serve a very important function in our society. The purpose of insurance is to share risk. Risk is the amount of economic loss that someone is willing to assume in an activity. For instance, a bank would not loan money for the purpose of buying a house, unless the house was protected against losses such as fire, wind and other perils. That protection is provided by a Homeowner’s policy.
A loan to purchase an automobile would not be available unless the car was insured for losses by theft or collision. That protection is provided by an auto policy.
Health insurance is a policy that shares the risk of losses caused by injuries or illness. A share of the risk is assumed by the individual through a deductible or co-pay. In-other-words, if someone visits the doctor, that individual may be required to pay the first $15 or $20 of the visit. The health insurance company assumes the risk of the remainder of the cost.
That shared risk comes about through an exchange of ‘consideration’. Consideration is value. The insured pays a premium in exchange for the promise of the insurance company to pay certain costs associated with the insured’s health care. Which brings us to the controversy surrounding the government’s efforts to institute what some call universal health care.
No matter what side of the argument you are on, in favor or against universal health care, one issue has been settled. President Obama stated publicly that it is impossible to insure the ‘uninsured’ without additional costs. So, the idea that this will be a ‘deficit neutral’ policy has been debunked by the administration itself. Either taxes go up to pay for the program, or health care will have to be rationed to keep costs neutral, or bring them down.
In response to the public out-cry about a government health care program, the administration has called the insurance companies villains. After all, insurance companies exclude preexisting conditions for some period of time when an individual enrolls (however that is not always the case with group policies), and insurance companies are making a ‘profit’.
PreExsiting Conditions
Think about the concept of risk and preexisting conditions. An individual has a home that has been damaged by fire. Would a homeowner’s insurance company now write a policy that would cover the repairs to home caused by the preexisting fire? Of course not! That is not shared risk, that is bad business.
An individual has a preexisting health condition, say diabetes. Purchasing a policy that would exclude the treatment for diabetes for a limited period of time (usually two years), now results in a shared risk. The health insurance company will cover the person for other perils, and if that individual pays the premiums over time, that exclusion regarding the preexisting condition is then dropped.
Is it possible for the government to insure everyone in the United States and force insurance companies to provide policies without regard to preexisting conditions? It is possible, but not without driving the cost of health-care way up. After all, the money to pay the doctors and hospitals have to come from somewhere and President Obama stated that ‘We are out of money’. Since the government doesn’t earn money, its only source of revenue is taxes.
Profit
Insurance companies are being cast as the bad guy since companies make a profit. Which do you prefer, companies that are well run that make a profit, or a company like General Motors that required billions of dollars of taxpayer money to bail the company out? A profit is what allows companies to expand services and provide jobs. Companies that fail to make a profit, go out-of-business.
The government not only fails to make a profit, as a well run business entity should, it runs at a deficit. The latest example is Cash for Clunkers. Not only was taxpayer money used to subsidize auto sales, now car dealers are complaining that the government is not sending the checks for the Clunkers that were promised. It appears that many buyers will have lost their old cars and now face repossession of the new cars purchased since the money for the program did not actually exist.
This does not bode well for a government run health care system.
Tort Reform
Doctors and hospitals must practice defensive medicine. People will sue for anything. Tort lawyers use a ’shot-gun’ approach when filing a malpractice lawsuit. All doctors, nurses, technicians and hospitals involved in a case are named as a defendant, whether that party had any actual responsibility for the claimed injury and damage.
We need a loser pay system, which provides that anyone who brings a lawsuit and loses, is required to pay the other side’s attorney fees and expenses. That would do away with most frivolous lawsuits and bring the costs of health care down.
Big Government Solution
Government should be required to live within its means. It does not, and the government, not insurance companies, is the villain in this scenario.
The founding fathers did not foresee a large, powerful centralized government. That is what was the war of independence against England was all about. The US Constitution delegated specific powers to the Federal Government, and it does not specify taking over any private sector industry.
Medicare and Medicaid are government health care programs on the verge of collapse. Even President Obama admits Medicare cannot be sustained. No program can be sustained when it runs at a deficit and all government programs run at a deficit.
Universal Health Care will run at a deficit from day one and that is just bad business.
By: Michael Birzon
Posts Tagged ‘Universal Health Care’
Heathcare Differences Between the USA and Germany
January 8th, 2010
In any country, all the citizens worry about their general health. Some countries have the means to take care of their population, while others don’t. There’s even the case where a country has the means to take care of everyone, but chooses not to.
The United States of America, a developed nation, could choose to provide universal health care, but due to politics, doesn’t offer it. The United States has several kinds of privately and publicly funded health insurance plans that provide healthcare services. Examples of health care providers are employment-based, and government-based.
In a 2003 US Census Bureau report, 26.6% of US citizens were covered by government-based health care, 60.4% were covered by employment-based and 15.6% had no insurance what so ever.
In Germany, the health service is highly decentralized. Each of the 16 state in Germany takes responsibility to maintain the maintenance and building of hospitals. The state regulated health insurance providers hold some control over running costs. Germany has a universal multi-payer system with two main types of health insurance: “Compulsory health insurance” (Gesetzlich) and “Private” (Privat).
The United States healthcare is funded by 3 different ways. As a benefit for employees and with continued benefits available to retirees. Another is funded by government programs such as Medicaid and Medicare, for the eligible low-income persons, those over the age of 65, and people with disabilities. The last coming from the private purchase of health insurance, which is usually purchased from more self-employed citizens.
Germany’s health care is funded through employer and employee payroll taxes. Before people reach the retirement age of 65, people must, by law, pay into health insurance plans. Only certain people can get private health insurance. In Germany, the majority of people gets their insurance from state regulated plans and has over 400 options to choose from.
As mentioned with private insurance in Germany, only 3 types of people can quality for private insurance. Self employed people are excluded from the state-regulated plans and so must take private insurance. People that make over roughly US$3,800 a month can choose to get privately funded insurance instead of state regulated. Public employees like Firemen and Police get reimbursed for part of their health costs by the state but have to be privately insured to cover the rest.
The United States average death age is 78 and is places at 29th in the world. Germany’s average death age is 78.95 and is placed 23rd according to 2007 estimates by The World Fact book. Andorra being number 1 with and average death age of 83.52
Being that the United States and Germany have amazing economies, they can still do better when it comes to health care for their citizens.
By: Steven Cancel
Massachusetts’s Universal Health Care Plan
January 7th, 2010
I have been following the new health insurance changes in Massachusetts, and I really hope it is a success.
Massachusetts Plan
In Massachusetts, they have made it mandatory for everyone to have health insurance. As a proponent of universal health care, I like the Massachusetts plan because it:
Spreads the health care burden to all tax payers Encourages disease prevention and screening Provides health insurance to people who could not afford it otherwise
What if you can not afford it?
The Massachusetts plan provides their low income residents with either free or subsidized health coverage. Some people will argue that they should not have to pay for other people’s medical insurance. They do not realize they are already doing that through Medicaid and emergency room funding.
These people also do not realize that it will be less expensive to provide disease prevention and screening now than it would be to pay for disease treatment later.
Some people will argue that they can not afford the coverage even if the government says they can. The truth is that they can not afford to not be covered.
No one expects to develop a debilitating disease, but it happens. Health insurance is like a seat belt. It is something you must have, but hope you never have to use.
But I am healthy
Some people will argue that they are healthy and their money will simply provide health care for sick people. Everyone should have medical insurance. No one knows what the future holds and we should all be prepared even if it has to be forced upon us.
Health insurance is not only for the ill. Having health insurance encourages regular doctor visits for disease screening and disease prevention education.
I am not sure if this plan will work in Massachusetts. Even if it works there, it may not work anywhere else. But I sure hope it does. I am keeping my fingers crossed.
By: Kalvin C. Chinyere, M.D.