I have only the faintest idea of my annual insurance premiums, because they have always been paid by my — or, as is the case now, my husband's — employer. Everything is covered from routine care such as mammograms to minor flus to major catastrophes. I can pick any doctor from a wide range of participating physicians. They can order the most sophisticated diagnostic tests to scope out every possible cause of my symptoms with little to zero cost to me. I can easily get referrals to the best area — and even out-of-area — specialists when needed. Co-pays for doctor's visits and prescription drugs have increased in recent years, but remain manageable. If I develop a chronic problem requiring expensive, prolonged care, I'm covered after an initial deducible that is trivial compared to the total cost of treatment. So long as I have this coverage, I have little worry about being financially wiped out by any future health problem.
Yes, I know, ultimately my husband and I pay for these benefits through reduced wages. But, frankly, the health care security we get in exchange seems like a more than worthwhile trade-off, especially since, having grown up in India and lived as a graduate student in this country, I know what it feels like not to have any.
However, the number of Americans with such generous coverage is diminishing and about 15 percent have no insurance at all. The main reason is that health insurance premiums have been climbing anywhere from 8 to 12 percent annually. Every 1 percent increase in premiums pushes 150,000 people into the ranks of the uninsured. One reason for rising premiums, of course, is that insured people like me consume health care without any regard to prices, and that prices others out of the health insurance marketplace. Governor Arnold Schwarzenegger's recent proposal to impose thousands of dollars in fine on California residents who don't buy health insurance has it exactly backward. It is supposedly meant to prevent the uninsured from passing on the cost of their uncompensated care to others in the form of higher premiums and taxes. But uncompensated care, about 3 percent of total health care spending, is less than what retailers nation-wide lose to shop-lifting and employee-theft every year, according to the Pacific Research Institute. If anything, it is the over-insured who are jacking up prices for the un- and under-insured, not the other way around.
President Bush's plan in his state of union speech at least addresses the right end of the problem. Instead of penalizing uninsured individuals, it will give them an incentive to purchase insurance by letting them deduct their cost of coverage from their taxes, just as employers currently do. In essence, it will make insurance cheaper for the uninsured.
But if the golden age of U.S. health care where consumers like me can engage in unrestrained consumption has to draw to an end, what should replace it? Schwarzenegger's universal coverage by fiat that grafts a socialized approach to the private health care market is not the answer because it won't be cheap and it won't be universal.
It won't be cheap because it involves more subsidies to more health care consumers. At the same time, it will place de facto price controls on insurance companies under new rules requiring them to use "community rating" to set insurance premiums. That means that instead of being able to price insurance policies based on the health profile of an individual, health care underwriters will have to offer everyone the same price. Furthermore, companies will be forbidden to refuse coverage to anyone because of new "guaranteed issue" rules. Mandates on consumers to buy coverage coupled with more onerous regulations on the insurance industry will mean more demand, fewer insurance suppliers and less differentiation of the insurance product — a perfect recipe for inflation. All of this will make the goal of universal coverage less — not more — achievable.
But if such half-baked measures won't end the upward spiral of health care prices and make health coverage more affordable, what will? There are only two options: A fully socialized, single-payer system as in Canada and many European countries. Or a consumer-driven one in which employers and government (Medicare/Medicaid), instead of purchasing health care for people under their care, would give them a fixed amount to buy it themselves.
The two contributors to Reason Roundtable make the case for the latter. Manhattan Institute senior fellow David Gratzer, a physician and author of The Cure: How Capitalism Can Save American Health Care, explains the problems with socialized medicine and the obstacles on the path to a consumer-driven system. The default option that countries with socialized medicine fall back on when confronted with rising costs is rationing care by queue. "Canadians are resigned to wait for practically any diagnostic test or surgical procedure," he notes. "According to the government's own statistics, 1.2 million Canadians are actively looking for a family doctor but can't find one."
But if Canada and socialized systems are embracing rationing by queue, Greg Scandlen, President of Consumers for Health Care Choices, maintains that our current third-part system of payment is moving toward rationing by insurance company bureaucrats. "Insurance companies have become way too interested in what is happening between the patient and the doctor," he laments. "They have become voyeurs, peeping Toms, peering into one of the most intimate relationships in a patient's life."
Consumer-driven care will let patients "ration" or control their own care without interference from government or private bureaucrats. If my children and grand-children can't have what I have, then, this, it would seem, is the next best alternative.