Thursday, August 13, 2009

Is health care "infrastructure"?

One of the more hotly contested issues in the current debate over the health care reform is the amount of government control over health care. Obama's plan has been labeled Marxist by his opponents, implying that it is nothing more than an attempt to nationalize health care, a term which conjures images of evil Socialist countries greedily dividing up someone else's profits.

But the government occasionally has legitimate reasons to provide common infrastructure. One example is the US Postal Service. Ben Franklin saw a good communications infrastructure as vital to the growth of the nation, and he was arguably correct. Most people don't think of the US Postal Service as being a "nationalized" institution because there are still ways to compete (FedEx or Mail Boxes Etc.). Competing with a government-run option is entirely possible.

Who said anything about "government run"?

Obama proposed the "public option" as a government-run non-profit option that will encourage competition with private insurers. He didn't say anything about the government taking over all of the health-care industry (a truly Marxist "nationalization"), but the conservative Right has interpreted his plan to mean exactly that.

The Right isn't completely "wrong" either -- it is a reasonable guess based on the history of competition in the insurance industry, which tends to take the form of acquisitions and mergers, leading to a few large fish and no small fish. It is ultimately a numbers game: the biggest numbers win, plain and simple.

Insurance from the individual's viewpoint is simply a way to pay a "guaranteed and known small loss to prevent [the possibility of] a large and possibly devastating loss." The individual doesn't really know when or if something bad will happen to them specifically, but it always pays to be prepared.

From the insurer's viewpoint, this looks a little different. If I were a brand new insurance company and I had only one customer, offering him insurance at competitive rates would be a huge risk on my part. There's only one way I can make this work, and that is to get lots and lots of customers.

Now, lets say I have a lot of customers, but I'm a publicly held company. My shareholders expect profitable quarters. I have only a few ways of making a profit:
  • increase the number of low-risk customers
  • increase premiums
  • decrease coverage (or increase coverage exceptions/pre-existing conditions)
  • put a greater portion of holdings into higher-risk investments (higher risk!)
By removing profit as a motive, Obama's "public option" would not face many of these pressures, so presumably it could provide more service for less money. The downside is that the private for-profit health care industry would be hard pressed to compete without becoming non-profit themselves -- so it is likely that the health care system becomes nationalized gradually over time as people move over to the "public option" even though that wasn't the original intent.

Is this a bad thing?

Getting back to the idea of infrastructure, this is where I'm torn. I hear things like Palin's quip about "death panels" lamenting the idea that the government may be deciding who is fit to live or die -- she raises a completely valid concern but does not mention that private insurers already have such panels and that they are answerable to no one, least of all the customers they serve. The fact is that inevitably any organization involved in managing insurance has to make life and death decisions about providing care coverage. Where is the outrage against existing "death panels" in private companies like those exposed by Michael Moore's documentary Sicko?

"...inevitably any organization involved in managing insurance has to make life and death decisions about providing care coverage."

One major difference between private companies and a national health care system is that the private company gives you no recourse, no voting power, no voice and no choice*. A national health care infrastructure might at least be influenced by voters instead of shareholders. Assuming, of course, you don't mind a little Socialism in your health care. But that's really scary to a lot of Americans...

*Capitalism says you do have a choice, you vote with your dollars -- however, there is a defacto cartel in the insurance industry because once you have a condition you are unable to shop for competitors due to the exclusion of "pre-existing conditions" -- hence, there is little free-market competition to begin with and none when you really need it.

Insurance is already a Socialist construct!

Think about it. Insurance basically takes a fixed amount from everyone who buys into it and tries to allocate it to where people have the most need. This is the essence of a Marxist dynamic and just like its political counterpart, is a reaction to the harsh unregulated realities of real life. Even the most ardent Capitalist has some kind of risk management in the form of insurance -- to not protect your investments is just plain stupid.

The reason that most people don't rebel against the idea of insurance is that (unlike Marxism) it is (or was) completely optional. You don't want to pay, fine... take your chances, or manage your risk some other way. This sounds fine in theory, however, for most people that didn't have insurance, that simply meant taking a free ride on all the rest of us... hospitals still gave them care, those costs were still passed on to insurers and those of us who pay for insurance get the bill in the end.

The only way to make insurance rationally opt-in is to always deny care if you can't pay, even in an emergency... a stance that is so controversial that most health care organizations refuse to consider it.


In the face of all these things, I just don't know what the right answer is. I tend to think that health care could reasonably be considered infrastructure by the government which has a vested interest in keeping its population healthy just as it has an undeniable interest in national security.

It seems unbelievably cruel to say "if you can't pay, you die" -- yet that is the only way a truly capitalist system would work. And I think the insurance industry has far too much invested in the profits of the existing system to turn it over to the government without a fight.

Perhaps this means that the matter is moot, but I like to believe that this debate will at least get people thinking about the costs involved and what kind of system they really want.

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