Is Health Care Reform Bad Medicine?

A guest post by James W. Van Buren, vice president-development and chief operating officer at New Enterprise Stone & Lime Co., Inc., New Enterprise, PA 

As an employer of 3,400 people, whose health care plan covers more than 10,000 workers and family members combined at an annual cost of $27 million, I find the national debate on health care extremely frustrating.

Much of the focus has been on squeezing insurers and health care providers and providing a “public option” – insurance coverage subsidized or paid in its entirety from public dollars. The various “solutions” regarding these items fail to address the fundamental problem. 

 

First, it is important to understand that insurance is nothing more than a sophisticated financial “bet.” Insurance companies place odds, by setting a premium, that they will not pay out more than they received.  If they win, they make a profit (or break even, in the case of nonprofit insurers), and in return consumers receive the security of having their medical services paid, even in the case of severe illness or injury.

 

One “solution” is to squeeze the insurance companies because their premiums are so high. But why are premiums so high? At my company, 93 percent of the premiums are paid out in claims, leaving only 7 percent for administration costs and profit. 

 

Squeezing insurers to lower their premiums makes health insurance a bad bet for insurers, and it bangs away at the side of the equation that only amounts to 7 percent of the cost of health care in the first place.

 

Another “solution” is to squeeze the health care industry – doctors, nurses, hospitals, pharmaceutical providers, researchers, etc., who are the recipients of the 93 percent of insurance premiums that are paid out in claims.

 

How much should they get? Can we force them to accept 5 percent less? How about 10 percent less? Should a hospital bill $100 or $90 for a service or procedure, and should a prescription drug cost $135 or $105? While we may be looking at the correct side of the equation, squeezing the health care industry on reimbursements will result in incremental savings at best.

 

Another “solution” is the public option. As the theory goes, health care would cost less if everyone had insurance because people with insurance have better access to healthcare and are therefore healthier. 

 

However, having insurance or access to health care does not equate to health and wellness.  At my company, 84% of our health care costs arise from illnesses that started as unhealthy lifestyle choices.  These are people who already have health care coverage, so what would make me think that universal coverage is the solution?

 

The fundamental problem is that neither the existing health care system, nor the proposed adjustments to it, provides incentives for health and wellness. 

 

Incentives that reward health and wellness could be the biggest part of the answer, and yet that hasn’t found its way into the debate. The best way to drive costs from health care is to not be sick. The best way to not be sick is to make healthy lifestyle choices – eat well, exercise, practice home safety, and don’t use tobacco. 

 

Without those kinds of incentives, those who make healthy choices subsidize those whose behavior is riskier. Why should Jimmie Johnson be able to insure the 48 car for the same price you pay to insure the family minivan?  Why should we subsidize his rate when his behavior has a much higher level of risk?

 

Moreover, the public option, without health and wellness incentives, is akin to subsidizing Jimmie Johnson’s 48 car with tax dollars.

 

If we start to take personal responsibility for our behaviors, we can cut significant dollars from health care costs – a far greater portion than we would save from squeezing insurers and health care providers, or from offering universal health care with no health and wellness incentives. 

 

The debate in Washington needs to change. We control the only cost component that will substantially reduce the total cost of health care. We should be debating health and wellness best practices, and how to incentivize them in the health care system. 

 

If we reverse the decades-long public health declines, we will need fewer health services.  We will create a sustainable health care solution that substantially reduces claim costs and gives insurance companies a reason to change their odds and lower premiums.

Comments

[bestphotoman]

The argument provided is at leaset partially true. I agree that preventative care and wellness SHOULD be a huge part of the equation, and isn't even provided for nor being discussed. Another part of the equation, not mentioned in the article above is tort reform. Medical malpractice insurance is incredibly expensive (and perhaps rightly so in many instances), but if we can do away with many of the frivolous law suits against doctors, and some of the outrageously high judgements against doctors, that too will impact the "bottom line." Don't get me wrong, I think doctors and medical facilities SHOULD be held accountable when appropriate, but many of the judgements are outrageously high for sometime minor incidents, and many of the lawsuits being brought are completely frivolous. In my opinion, without tort reform and incentives for wellness/preventive care, the rest of the health insurance debate is petty at best and won't solve the medical/health problems in this country.