September 30, 2013

Essential--And Unasked--Healthcare Questions

Despite all the talk about the Affordable Care Act, two questions essential to the debate go largely unasked and ignored.  They are the following:
  • Who pays for the cost of healthcare?  For example, if someone obtains an emergency hospital service but doesn't pay for it, who covers the cost?  Moreover, when people declare bankruptcy in order to avoid accumulated medical expenses, who pays for that?  Do hospitals eat the difference?  Not really.  The costs become components of the overhead hospitals pass on to paying consumers.  For county-owned hospitals that offer below-cost services, taxpayers cover deficiencies.  In other words, paying consumers not only foot their own healthcare bills, but they cover the costs of non-paying patients, too.  This is an example of what is called the "freeloader" problem in economics and it's a cost that is borne by society, because when it comes to emergency medical services, our morality informs us that we must help first and ask for payment later.  Quite often, however, the freeloaders described here are people who simply couldn't get insurance or lost the coverage they once had.  These situations occur due to job loss or development of pre-existing conditions, which leads me to my second question.
  • Do we want everyone who desires coverage to be able to obtain health insurance, including people with pre-existing conditions?  If that's what you believe, you have no option but to support an individual mandate requiring everyone to be insured.  Do you see why?  The fact is in a situation where everyone can choose if and when they obtain health insurance, rational consumers--and most of us are rational when it comes to money--won't get covered until after being diagnosed with a serious illness!  In other words, we'll avoid the need to make premium payments until we're sick and have reason to file for benefits.  In the insurance world this is known as an extreme case of adverse selection and it's terribly problematic.  In fact, insurance wouldn't work in the situation just described.  That's because premiums would be prohibitively expensive since only high-risk individuals would seek coverage.  
So let me summarize what I've just said: If you want everyone to have access to health insurance, you must support the necessity that everyone be required to obtain coverage.  The alternative is to say it's too bad, but people with pre-existing conditions shouldn't expect the benefit of health insurance.  While heartless, it's a legitimate position, but as I've said above, to the extent that our morality informs us that we must provide emergency treatment to the uninsured, the associated costs are borne by society--namely taxpayers or those who pay for their own healthcare--anyway.  Withholding care and letting people die is also an alternative, but tell that to a baby born with a life-threatening, but reparable, heart condition.  
So what's my point?

If you're opposed to the individual mandate in the Affordable Care Act, you're supporting an environment in which only the healthy get insured.  In such a case, we either let people with pre-existing conditions flounder, or we help them and cover their costs of care by paying higher hospital bills.  Doesn't it make more sense to ask everyone to obtain coverage up front and ask everyone to pay a portion of the cost of care?  It not only makes sense from a societal benefit perspective,  but the law of large numbers allows us to better mange risks as well.

2 comments:

Anonymous said...

Just checking to see if you're still on vacation from the blog. It's been a while. I look forward to when you pick it up again. Grins. -- Dan

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