Tuesday, December 6, 2016

Affordable Health Care, Not Affordable Health Insurance, Is The Problem

In reforming our expensive health care system, politicians and health care experts overly emphasize health insurance. Our fundamental problem is health care costs and not health insurance costs.

Health Insurance Is Reimbursement

Health insurance is a way to reimburse us for our health care costs. Total health insurance premiums plus out of pocket medical costs for the US population can never be less than the total health related costs for the same population. If it were, some medical service providers would go unpaid.

Competition in the health insurance arena does not increase competition among health care providers and will not lower the costs of providing health care.

Our politicians can hide some of the premiums of health insurance by using tax dollars and deficit financing borrowed funds for part of the premiums, but the total health care cost we pay is not lowered. Expecting changes in the laws regulating health insurers to lower health care costs are equivalent to expecting changes in automobile insurance to lower the price of a new car.

US Health Expenditures In 2015

The data from The Center For Medicare & Medicaid Services below shows that, on average, an individual's health insurance premium should be around $10,000, or about $40,000 per year for a family of four.

From The Center For Medicare & Medicaid Services, Research, Statistics, Data and Systems, National Health Expenditure Data, Historical, Highlights:
National Health Expenditures 2015 Highlights

In 2015, U.S. health care spending increased 5.8 percent to reach $3.2 trillion, or $9,990 per person.
Increasing Competition

Increasing competition among health care insurers or other changes in the laws governing these insurers will not lower the amount the US spends on health care.

The US needs to lower the barriers to entry of health care providers to increase their numbers. The US also needs to remove barriers to competition among health care providers so as to lower the unit costs of health care and to increase the efficiency and the productivity of health care providers. We also need to enable individuals with less than a full medical degree to provide some of our routine medical diagnosis and care.

Increases in the number of health care providers and increases in their productivity are the only ways that the US will be able lower health related costs and make health care affordable for the average American.

Unfortunately, the Affordable Care Act failed to follow sound economic principles for lowering medical costs. Hopefully, future changes to our health laws will increase the number of health providers, make it easier to become a health provider, and foster greater competition among providers. With more providers and more competition among them, our health care and our health insurance will become affordable.