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Health care: Palo Alto's painful dilemma
Original post made
on Mar 22, 2013
In 2009, Palo Alto's elected leaders and top management responded to the financial walloping of the Great Recession by embarking on a path toward benefit reform. The effort is about to enter its next phase as management and labor unions prepare for tough negotiations over ways to rein in rapidly rising health care costs.
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posted Friday, March 22, 2013, 9:14 AM
Posted by cents and sensibility
a resident of Another Palo Alto neighborhood
on Mar 25, 2013 at 2:40 am
We are sitting here arguing over the crumbs, when the way to make a MUCH bigger pie, so to speak, is staring us in the face from all over the advanced world. One has to wonder how hungry we have to get before we decide to get some sense.
The biggest cut we could make with no harm in fact, it would benefit us is to simply end investor-owned health insurance and restrict healthcare underwriting to non-profit insurance and consumer-beneficial models of insurance (similar to credit unions). This gets to the root of the biggest corrupting incentive in the system overall.
When insurers have to pay investors,
1) ***they profit based on a percentage of the overall healthcare economy***, so, the larger that economy is, the more money they make, i.e., for-profit insurers have no incentive to save us money, in fact their incentive is to have as large a healthcare economy as we can bear (surprise! it always is). The Healthcare Affordability Act doesn't solve this.
2) In order to CONTROL the system the way they need to maximize their profits, for-profit insurance fosters a bureaucracy that costs us on the order of HALF TRILLION DOLLARS ANNUALLY (on the order of the pre-war department of defense), i.e., denials today are mainly the result of a need for control to benefit insurers, not to control costs for the system overall. This administrative burden adds to every healthcare dollar spent and pervades the system, there's no way to "opt out".
3) In their need to CONTROL the system, with lack of any incentive to control the overall cost of the system, insurers often end up hurting the advancement of medicine and underwriting more expensive treatments that they can control over less expensive ones they can't. This favors consolidation of care, which in turn makes bigger healthcare players who don't have to compete and can leverage more money. For example, insurers will favor certain pharmaceutical interventions, where they only have to deal with a few large pharmaceutical companies, over paying for a care service involving thousands of individual providers across the nation, even if the latter is better for patients, and the former is more costly, because they can predict the costs with fewer players better and can more easily negotiate for control. Remember, they aren't out to make the system less expensive, just control it best to maximize extraction of their profits. A previous poster has mentioned the precipitous rise in pharmaceutical costs in the last few years -- it was predictable, as dramatically inflated pharmaceutical prices give insurers a buffer for better control in a situation where it's now even more difficult to maximize their profits.
3) In order for non-profit insurers to compete when for-profits dominate, non-profits have to play the same cherry-picking games that feeds into the overall bureaucracy and administrative costs. Our own system worked far better when our own system was dominated by non-profit insurers, the serious price soaring began when for-profit insurers began to dominate.
Please note: I am NOT advocating single-payer or non-profit healthcare delivery!
Currently, no other first-world nation allows for-profit insurers except the US. None of them pay even close to what we pay for healthcare administration, which in our system is so costly largely due to private for-profit insurers. Every other first-world nation pays less per capita, covers everyone, in many cases get better outcome, and in some cases have MORE privatized systems than ours, more advanced care for most people, and far more perks and freedom in their care now.
Let me repeat that, in some cases, those other systems have MORE privatized systems than ours. I don't understand why some people can't get that you can have healthy, productive efficient non-profit sectors in a thriving, privatized, market-based system. I remember discussing this issue with a neighbor, who kept insisting it wasn't possible to do, then he suggested we should have a system like Germany's -- not realizing that Germany also has all non-profit insurance, too, within a more privatized system than ours.
As T.R. Reid pointed out in this book The Healing of America, Switzerland, with a more privatized system than ours, tried allowing their insurers to profit in healthcare underwriting, and costs began skyrocketing and people going bankrupt. So they held a referendum, stopped the profiteering in health insurance, and solved the skyrocketing costs and bankruptcies.
This is low-hanging fruit that is choking us to death! It's a change that must be made before any other improvements could possibly make a difference, it's the ever-growing elephant in the room that threatens to kill us, yet we cling to it like we can't live without it. When are we going to decide that retaining a certain kind of insurance investment opportunity isn't worth bankrupting our nation? Healthcare is now 20% of our economy! It's painful to think about what will be cut instead.
I realize we can't solve this particular issue by making changes locally -- or can we?...