The Problem with Healthcare

I recently read an editorial entitled, “Business Should Support Single Payer Health Care,” penned by a member of my native New York State Assembly. In his comments he stated, “Cost is the issue that compels me to support the single payer solution.” This Assemblyman went on to write such inaccurate, incomplete, sophomoric, and distorted reasoning that I found it hard to believe he would be so wrong in his conclusions. It then occurred to me that, if this “educated” representative could believe his own misconceptions, perhaps others hold the same view. Therefore, an article on the topic could be timely, as so many are at odds, both locally and nationally, over what to do about healthcare.

I believe the matter of healthcare includes two primary issues: quality and cost; or put in a mathematical context, quality divided by cost equals value. Q/C=V. Decrease the Q without a decrease in the C and the V goes down. Decrease the C without a decrease in the Q, and the V goes up. Bottom line: everyone wants the highest value they can get for anything they purchase.

Before the recent death of the “incurably ill” British baby, Charlie Gard, his parents were earnestly seeking to be allowed to go against the British nationalized medical community’s wishes in order to bring their child to the United States for treatment. Similarly, many Canadians come south of their border in order to seek treatment from American medical providers. As such, the quality of our medical system is universally seen as being among the highest in the world. I do not think anyone wants to see that quality decreased.

However, what about the cost of healthcare? When Vermont passed a law to become a single payer system in 2011, that state ultimately scrapped the idea as being too expensive to be workable. In November of 2016, Colorado voters overwhelmingly rejected a single payer system when it was estimated that the cost to run such a healthcare arrangement would be 140% of the entire state budget! Again, there was no promise of an improvement in the quality, only a dramatic increase in the cost, which equals a substantial decrease in the value. I have often times read, as I did from my misguided Assemblyman, that “under the private insurance model, single payer offers lower insurance premiums because it, like Medicare, spends only 2 percent on administrative costs.” Yet, anyone who has needed to work with Medicare would never give high marks to the value that it provides. No, in order to improve the value there must be a better way.

One of the best lessons a free economy has taught the world, is that when products and services are presented without government interference, an incentive is offered for those providers who give the highest value. Historically, those who disrupt current technology have always been rewarded when they succeeded at providing a higher value for transportation, lighting, communication, etc. For the government to delude itself into believing it can do a better job at these, you would be hard-pressed to find trains, utilities or telecommunication “companies” that are competing effectively with private industry without government subsidy (tax payer support); consider Amtrak as an example of a company that receives taxpayer subsidy to remain competitive.

If the government is serious about reducing costs to consumers without decreasing the quality of the healthcare system, there are several things that can be done. For starters, remove the federal prohibition that prevents consumers from purchasing health insurance across state lines. If I am able to purchase my health insurance from a Pennsylvania-licensed insurance company, this would incentivize them to offer a better value than the insurers I am limited to within New York. Why isn’t this currently allowed? Not only does the Federal government prevent it, but states are allowed to place coverage mandates on their citizens which are a result of their own political outcomes. The last time I checked in New York, we have 62 health coverage mandates, and our state governor refuses to allow us to even establish a commission in order to consider the cost of these mandates before they are legislated into law. It is estimated that 16% of our premiums pay for coverage that most citizens would neither want nor likely need, but for which we have no say.

Healthcare is a large tax source for state and federal governments. If lawmakers would like to see our cost go down without a correlating reduction in the quality, they could begin by reducing the taxes insurance companies are charged. Dollar-for-dollar, these taxes are passed along to consumers. Many of these taxes were originally proposed to go toward health-related expenses such as hospital cost for caring for the indigent, yet many states keep these taxes, in large part, to use toward their general fund.

In conclusion, there are things that could be done in order to reduce our cost without reducing our quality and thereby increasing our value. A single payer system is conspicuously not one of them.

Brian H. Merriam, CPCU, ARM, AAI
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