Healthcare Basics

Healthcare does have some complexities, but there are some basic fundamentals that the industry is founded upon, which unfortunately get clouded up in the news media, and sadly by politicians.

Insurance Pool

The most important concept to healthcare insurance is the Insurance Pool. It’s so obvious that people miss it—but this is vital if we’re serious about keeping costs low.
It’s a simple concept: vast numbers of healthy people pay into a system for the few who become sick and the handful who become catastrophically sick. We all hope that we won’t need it, but it’s there if we do.
If there are high numbers of sick people with high medical costs, then the average cost per member, per month (PMPM) will be high, which forces high premium costs;  and if the PMPM costs are low then we can have low premiums. The only way to accomplish low PMPM is to have large numbers of healthy people and to lower costs for those who become sick.

Multiple Pools

There is a misconception where people, especially politicians and editorial columnists, want to break out different insurances pools for various “good ideas” that they dream up—it’s not a good idea. Here are a couple examples that sound good, but are not:

• Let’s offer a 3-tier pricing system based on how healthy you are; discounted rates for really healthy people, average rates for most people, and a higher rate for those who have high medical costs.
• Let’s offer big discounts to large groups of insurance; e.g. large unions, companies, coops, state employee, etc.
  If you do this, it’s called Diluting the Pool, which rapidly drives up the costs for those who are sick or don’t belong to a large union or group.

Let’s take the first example. The healthy people will enjoy cheaper premiums, but the sick people would not be able to afford the premiums that it would require to support their huge PMPM costs.

Anyone who wants to break up separate tier structures just doesn’t understand the simple premise for insurance: we all pay a small premium to pay for the few people who are sick—it’s something that we pay and hope that we don’t need, but we’re happy that it’s there if we need it.

The healthy pay for sick, and there’s no way around that, other than kick sick people to the curb to die because you want cheaper health premiums, or magically for someone else to pay the bill.

What about the person who says, “I represent XYZ union, with 20,000 members, we want a deep discount.” The insurance company has a pool of a million people or more! Competition drives each insurance company to charge the cheapest rate that they can for everyone or they will go out of business. If they give too many discounts to large groups then they will have to offset those revenue losses by charging more for the unfortunate individuals who don’t belong to a large group—in essence the individuals will be subsidizing the large union’s premiums. That doesn’t sound fair.

What Does This Mean

The best, fairest way, is for each insurance company to keep their PMPM costs down for one large insurance pool. It also means that we need to lower our PMPM costs, and that’s accomplished through the following:

• Increase competition by allowing insurance companies to easily do business nationally
• Work with the states to create more uniformed laws in the healthcare industry, especially with tort reform
• Streamline electronic medical records into a single format
• And SUCCESSFULLY come up with prevention concepts that work—we save money and people live better live when we prevent sickness in the first place

Public Option

There was a lot of fear regarding a Public Option because there was talk that the federal government could, over time, do things that started to put insurance companies out of business. And these fears were very real because the government could easily charge lower prices, subsidized by the taxpayers, who then simply put the insurance industry out of business.

Droves of people realized this fear and spoke up during the town hall meetings and so the likelihood of the public option is quite low. The only real risk of the public option now is for one of the more radically liberal Democrats to try and sneak it into the bill at the last minute—we’ll have to wait and see.

Mandatory Insurance

We do have uninsured people in this county and that is a very real and serious problem for taxpayers because they are paying the bill for them every time they go into the ER with no ability to pay. We can’t sweep this under the carpet, but that doesn’t mean that the solution is a public option. What it means is that we need to get these people affordably insured so that the costs are known, not hidden and nearly impossible to track.

Because of these reason I whole heartedly believe that we need all citizens to have some form of affordable insurance—because we’re paying for it anyway, let’s make it official so that we can figure this thing out and manage it correctly. However, having said this, I am a conservative person and I only favor a mandatory insurance option under the following conditions:

• There is not a public option—no triggers, nothing. Our government has proved to us in the last few months that they are power crazed lunatics and I don’t want them having a trigger for a public option, especially if insurance is mandatory.
• There are different quality tiers of insurance, low-cost, mid-cost, premium-cost and luxury plans available for people to choose from based upon their financial choices.
• The taxpayers supplements the low-cost insurance to the poor.

If we do what I describe in‘National Healthcare Debate 101′to lower costs then having everyone insured is a good thing because everything is above board, we can actually start to manage this better because all of the hidden costs that we are currently paying are now measurably tracked into the legitimate system. Also, a larger insurance pool is always the better management choice.

Illegal Aliens

Taxpayers are paying for illegal aliens when the go to the ER as well—this is especially troubling when children are involved. Do you want to turn away some desperate mother with her sick child just because she’s an illegal alien? Of course not and I don’t either. But it’s still a problem that is easily solved. Open up our immigration to make it faster and easier for immigrants to get work visa’s here. We simply need to require the employers to purchase some very basic, and cheap, major medical coverage for themselves and some low-cost insurance for any minors.

I want to see the illegal part go away! So do what it takes to get these workers in here legally and cheaply! This is not that hard to do—politics is getting in the way and if you look deep you will see that the labor unions are behind this because you can push illegal aliens around and they won’t complain; politicians look the other way on this as well. We need to stop this and figure out how to make it so that it’s easy for young, healthy, hard working immigrants to work here legally. We obviously have the need and a workforce willing to work cheaply, so do what it takes to make it happen legally—this will radically shut down the illegal aspect, and it will incent people to become legal immigrants.

This also solves many border patrol problems because reduces the traffic illegally coming across the border so that the only one’s sneaking over are the people that we really don’t want over here.

Oligopoly

Allowing insurance companies to conduct business more freely across the country is going to pressure some smaller businesses to be bought out as the largest firms evolve into a few behemoth oligopolies. I would like to see Congress provide ways that allow smaller firms to join forces more easily in an effort to try and compete rather than being swallowed up. There are industries that operate more efficiently with oligopolies because the economies of scale work well in their favor. Regarding healthcare insurance, they have similar efficiencies that banking does when they become large because the costs for their technology services can be spread over a large pool of members to cut costs. Because of this we will see many mergers and acquisitions in the industry similar to what we saw in banking when that was deregulated nationally.

Costs

Lastly, I want to talk about quality of insurance. I believe that all US citizens deserve high quality insurance no matter what their income level is—so I do not sub-standard coverage for the poor, or even good insurance, I want everyone to have high quality care. Having said that, if someone can afford premium care or luxury care that exceeds an already high quality coverage, then good for them, that’s the part of the American dream that we all have a chance to chase after.

I say this because many people these days seem to forget that money doesn’t grow on trees—everything has costs, and we don’t have unlimited money, even the government. The government doesn’t spend money that they didn’t tax or borrow! It’s not limitless, and medicine does cost money.

We have a new issue before us that is very difficult to navigate through and I’m very interested in researching and thinking more on the topic. But let me give you a taste for what the debate is:

What if a homeless drug addict staggers into the ER, is dying, and it will cost the American public $100,000 to keep them alive in agony for another 30 days—was that a wise choice? At what point do we simply acknowledge that death is a part of life? When does society say, ‘we will provide you with great coverage, just not Bill Gates or Warren Buffet coverage because we just don’t have the money.’?

I’m very interested in this topic because I am a Christian man, who is prolife, and I greatly value every life that God has created. So I’m not anywhere near the views of liberal extremists who are willing to let people die to save a few bucks on healthcare costs. But I also realize that we have finite resources and $50K spent to buy just 1 extra day of struggling life for someone is tragic when compared with what other good that could have done instead. So where is the line for compassion, for solid affordable healthcare coverage that values all life, yet is reasonably economical?

I ponder these questions because no matter how much we spend on healthcare we can’t cheat the inevitable… death and taxes; so what is compassionate, values life, but is reasonable and not insanely burdensome on those who remain to pay the bills? A very interesting topic that will someday impact us all, more to come on this.

I just want to be fair and honest in life, work to save for retirement, freely worship God, and enjoy the journey along the way with friends and family. And I’m not alone, I think nearly all Americans feel the same way—and so I’m starting this blog to talk about what I find along my journey. Staying with the nautical theme, I’ll call the general items Ship’s Log and my personal editorial journals as the Captain’s Log.

It will be fun. Come along and enjoy the journey with me by visiting often or subscribing to a RSS Feed.

Le bon voyage, retourner encore!

Mark Main