Most of the world believes that the United States has a free-enterprise system of health care provision. This is not true. The market is severely controlled on both the supply side and the demand side. For supply, governments heavily subsidize incumbent industries and systems while punishing alternatives. On the demand side, government policy favors employer-provided medical insurance while working to make everything else unaffordable.
This country desperately needs dramatic reform of medical insurance—a huge and pronounced freeing of the market—but we are getting only small marginal changes at best. This will not address a growing crisis, one that is hard to characterize because it is so complicated and everyone’s experiences are so different.
Those with employer-provided health care live behind a veil of unknowing. It feels like a benefit, but it actually comes out of salary. The total price per year for one individual is $28,000. That comes out of your paycheck. And that’s without actually using any services. The expense alone explains why the job market is so throttled.
Once you use the medical system for something beyond a wellness checkup, deductibles can be quite high, such that you end up paying $2,000 before insurance kicks in. They will also fight you on every claim, and that’s when the action starts. You can find yourself in a paperwork battle that lasts months.
Still, the psychological benefit of having medical insurance is huge. Once the fear of sickness grips you—and the system tries to instill this in you—you feel somehow cared for by your employer. Even if you hate your job. This is why so many employees stick around and don’t even think about moving to another position. This provides a partial explanation of workforce unhappiness.
The penalties of leaving this system are large. If you are terminated, you can take advantage of short-term limited-duration health insurance (STLDI, one of many such complicated acronyms in this crazy sector). It’s actually the only plan that is free of Affordable Care Act (ACA) mandates, and hence premiums are very low, less than half the usual amount. And they offer exactly what most people want, which is minimum catastrophic services when you need them.
Our masters and commanders in Washington hate and fear STLDI for this very reason. They fear that it could easily outcompete other services, which people would then flee. For this reason, Washington keeps arguing about how long people can stay on them. Ideally, we could buy these forever. In reality, legislation keeps toggling between a few months and a few years. That tells you all you need to know about what’s really going on.
The entire system is set up to benefit industry, not you.
For example, if you go to the exchanges in your state and see the premiums and deductibles you pay for you and your family, you won’t believe your eyes. Not only is the total cost likely to be higher than your mortgage, but it will likely be the biggest ticket item in your household budget, larger than all of your debt service and taxes. And you are paying not for medical services but simply for access to medical services when you need them. After you use them, you are likely on the hook to pay as much as $10,000 before your insurance even kicks in.
The whole system is an absurdity, especially when you consider the origin of employer-provided health care, which is the system industry wants you in. It began in World War II as a workaround to wage and salary caps put in place by the government to control inflation. Only the biggest corporations could afford to do this. In the 1950s, they lobbied to gain tax advantages for the scheme, and it was eventually mandated for all companies with more than 50 employees. That’s a sure way to boost big business by raising costs for competitors.
The system has only gotten worse. It’s so bad now that what we call insurance isn’t even that. When you buy car insurance, your driving record matters. When you buy life insurance, your health matters. Your home insurance premiums are determined by the risk of fire or flood. But with health insurance, the actuaries are not allowed even to consider your health at all. How does that even make sense? It does not, and this accounts, in part, for why prices are so high. No one has any incentive linked to medical insurance premiums to get healthy. Exercise, eat right, lose weight, and nothing changes. You pay just as much after as before.
And the defined benefits packages you must purchase are laughable. The wrongly named Affordable Care Act mandates 10 major areas (Essential Health Benefits, or EHBs) that must be covered: ambulatory patient services; emergency services; hospitalization; maternity and newborn care; mental health and substance use disorder services, including behavioral health treatment; prescription drugs; rehabilitative and habilitative services and devices; laboratory services; preventive and wellness services and chronic disease management; and pediatric services, including oral and vision care.
What is this about? It’s about funneling money to the industries that offer all this stuff. This is all absurd. All we really need is catastrophic coverage for when things go really wrong. The rest can take care of itself. If you need to see a shrink, it should be up to you to be insured for that or not.
The worst offenders are the “wellness services,” that is, preventive care. Studies show they do not work. There is no empirical evidence that those who use them are healthier than those who do not. They are really just sales funnels for pharmaceutical products and expensive diagnostics. It’s as ridiculous as a restaurant making you pay for hunger tests: Everyone would easily know what is really going on with such a scam. But even now, there is simply no way in the United States to purchase health insurance without buying it. Not even the catastrophic plans available for people younger than the age of 30 allow it. That tells you all you need to know.
As for the schemes that allow businesses to offer choice to employees, there is a catch in those, too. Right now, employers can put willing employees into an Individual Coverage Health Reimbursement Arrangement (ICHRA). Get this: The employees who choose this option have no choice but to go to the ACA exchanges to buy their health insurance. As a result, their coverage will be expensive, which is why so few people are covered by ICHRA plans.
Bottom line, we need five crucial reforms: 1) universal health savings accounts, no exceptions, 2) insurers that can offer true catastrophic plans, 3) premiums that reflect actual risk as determined by actuaries, 4) elimination of the employer mandate, and 5) permission for any kind of medical service should be insurable. This would put power back in the hands of people and take control out of industry, which is what we need.
What I just wrote is not really controversial. Everyone knows that these reforms would cause premiums to plunge, demand on system resources to hit rock bottom, and health to dramatically increase because the financial incentive to shape up and live better would be there because real insurance causes behavioral change. That Republicans have not made dramatic steps toward this goal is a grave tragedy.
There is still time to avoid complete bankruptcy, which is where this crazy, cockamamie, mixed-up, deeply messy system is headed today.
