Even as we speed towards the complete destruction that is Obamacare (aka ‘the Affordable Health Care for America Act‘), we are lied to repeatedly by various folks saying that this is the best (and really, only) solution to the rapidly rising costs of healthcare.
The REAL solution to the spiraling costs of healthcare is, by contrast, pretty darn simple:
–Pay cash for the health-related services which you can afford, and only use insurance to cover the items which you cannot readily afford–
I know that this flies in the face of our current experience, since we are now accustomed to presenting our insurance card for everyday doctor visits, checkups and even pharmaceuticals. But the primary reason that this “insurance” is so expensive is that it covers these uses at all…
I sold for and led insurance sales teams for over 17 years, so please allow me a touch of credit here. Insurance isn’t rocket science: quite the opposite, actually. It exists to pool resources, so that when one unaffordable event occurs, the cost is spread among the insurance pool’s contributors. Your house insurance works this way, as does your auto insurance. Life insurance is slightly different, since it involves a guaranteed event (you will die, after all), but it also adjusts the premium according to your age, health and other factors. All of these products are designed to make the unaffordable, affordable.
Only health insurance has become less about paying for the unaffordable or unforeseen, and more about shifting ALL “event” payments from you to a third-party.
Forbes.com covered this in an article several years back:
The fundamental cause of this problem is the fact that only 10 percent of Americans with health insurance buy it for themselves. Due to an artifact of World War II-era wage controls, if employers take money out of your paycheck and use it to buy health insurance for you, you don’t pay income or payroll taxes on those funds. However, if you decide to buy insurance for yourself, you have to do so with after-tax dollars.
Stanford Nobelist Kenneth Arrow famously described third-party insurance as one of the principal flaws in America’s health-care market. That is to say, because patients don’t pay for their health care directly, they’re insensitive to the cost and value of that care. But the 155 million Americans with employer-sponsored insurance in fact have fourth-party insurance. Not only do they not directly pay for their care, but they don’t directly pay for their third-party insurance.
These third-party and fourth-party payments are why our healthcare costs have risen so dramatically: we’re paying for coverage which is totally divorced from what we actually need. By way of comparison, picture an auto insurance plan which paid for your gasoline, windshield wipers, or your oil changes. Would you imagine that such coverage would be substantially higher than what you’re currently paying? Of course it would, and it’d be MUCH higher than what would normally be your out-of-pocket expenses, since the insurance company also needs to include their expenses for administration (and profit, too) in their coverage costs.
Add in the reality of hospitals padding their insurance bills to make up for the folks who don’t/won’t/can’t pay, and you have the situation which we have today.
But let’s take a gander at what an alternative would look like. I cancelled our pharmaceutical insurance many years ago, and began shopping around for the best price on a medicine which I’ve taken daily for over 26 years. By finally locating a workable generic formula from a specific pharmacy, the cost of that drug fell from almost $90 per month…to $47 every THREE months.
When I had insurance paying the bill, it didn’t matter to me what the actual cost of the drug was, or if such a generic existed. All I had to pay was my co-pay, regardless. But when I had to foot the whole bill, it’s amazing how much the actual cost suddenly mattered.
This is why we search for a $.05/gallon savings on gas, but don’t give a second thought to the exorbitant price of our health care.
Facilities like the one in the video below are quickly becoming an attractive alternative to traditional hospitals, and could signal a renaissance in American medicine. We’d better hope so, at least, since we can ill afford the alleged solutions in the ironically named “Affordable” Health Care Act.