July 6, 2010

Healthcare's Unchanged Incentives

Justin Katz

Offering some representative anecdotes from her experience as a doctor, Alieta Eck explains the problem with the Obamacare approach to healthcare reform:

Are these patients or their physicians committing fraud? No. They are simply acting legally to enhance their own well-being, following the incentives set up by the unwieldy system. People with "coverage" do not care what costs they incur, and those who provide services benefit by providing more. As with the oil rig in the Gulf, there is a lot of pressure behind the leak. Adding more pressure — as with the Democrats' idea of saving money by covering everybody — is not the answer. It can only make things worse.

Everybody assumes that bringing healthy people into the insurance fold will help to balance increased usage among the sick, but the incentive, for them, will be the same as for everybody: Use whatever services are conceivably needed. Even if "broadening the pool" does delay the inevitable, Eck sees this as our future...

Once the nation is bankrupt, hospitals have closed, and physicians have found alternate ways to earn a living, real medical needs will not be met. The best medical care in the world will simply cease to exist. Then all Americans, young and old, will feel the pain.

... and offers an alternative approach with which Anchor Rising readers will be readily familiar:

There is a better answer, pointed out by Rep. Ron Paul, M.D. (R-TX):

"We need a system in America where patients pay cash for basic services, and carry insurance only for serious illnesses and accidents. 'Health maintenance' is the responsibility of each of us individually. We cannot continue to collectivize the costs of healthcare and expect things to get better."

Insurance needs to be insurance, and consumers must be required to incorporate cost into their healthcare decisions.

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"Once the nation is bankrupt, hospitals have closed, and physicians have found alternate ways to earn a living"

What about those European countries? They're not bankrupt, they still have hospitals. They still have doctors. Their taxes may be higher than ours, but that doomsday scenario has not played itself out in those other countries.

""We need a system in America where patients pay cash for basic services, and carry insurance only for serious illnesses and accident"

I agree with this completely. If I bump my car into a wall and dent the fender, I either live with it or pay out of pocket to fix it. When my windshield cracked, I paid the $250 out of pocket. I didn't put that on my insurance. It should be the same thing with health insurance. I get a sore throat or a cough, I pay out of pocket or deal with it. If I thought my car insurance company would pay for the dented fender that I caused, with no cost to me? Heck, fix it up!

Posted by: Patrick at July 6, 2010 10:22 AM

This week, I've brought to the emergency room, at taxpayer expense three drunken men, a girl whose heart is racing, maybe because she smoked some crack cocaine, a fifty year old female who thinks her blood pressure is too high( 150/90) a person who thinks he might have a seizure, a girl who thinks she might be allergic to her psych medications because her friend, who just happens to be on the same psych medications told her she was, a number of people who feel weak and the usual assortment of bogus car accident injury claims.

If these people paid even a ten dollar co-pay the abuse would be drastically reduced. They pay noting, the service is cheapened and it gets worse every day.

Posted by: michael at July 6, 2010 10:29 AM

I'd like to see basic preventative and emergency services covered for every citizen by a 'baseline insurance', but it would only cover 85% of the cost of care. Combine that with an arm of the hospital that issues low-interest financing on the other 15% and you would cut out a lot of the fraud or overuse.

I think it's silly that the two choices offered to most of us with jobs are 'ridiculously expensive comprehensive insurance' that makes everything from a doctor's visit to a $250K cancer treatment cost the user only $10, or 'catastrophic insurance' where everything costs the full amount until you hit the annual limit.

Making users responsible for a portion of their cost of care, and providing loans for those who can't pay their portion up-front seems like the responsible thing to do.

Private insurance would supplement these programs and cover parts of that remaining 15% and things like long-term lifestyle medications.

Also, subtle changes to the rate that's covered could be implemented in order to balance people's personal responsibility and 'the greater good', so smokers might only get 65% coverage on cardiovascular and cancer treatments, having to take a bigger loan on what are admittedly 'self-inflicted' medical costs.

I'm still looking for folks to explain why this system is so bad. Hardcore lefties don't like it because they feel that 'comprehensive health care is a human right'. The hardcore right doesn't like it because it does represent more government intrusion, albeit in a way that factors-in personal responsibility and aims to reduce overall costs.

Attaching health care to employment like we do here in the states is a really terrible idea, I've seen way too many good folks lost their insurance, job, and home all at once because of a medical disaster. Right now it's better to quit working and live off the state if you have a serious condition than it is to keep working and try to 'pay your 15%'. Remember that employers will occasionally drop employees who incur massive costs (read: cancer patients) that raise the group rate.

Posted by: mangeek at July 6, 2010 1:16 PM

As I mentioned before, my wife and I had an insurance policy that covered major illness. As the costs mounted we increased the deductible. We started in 1991 with return of premium riders which increased the cost by 40%. We only used about $10000 of the premium thus saved and our return at going on Medicare was about $250000. We paid for doctor visits out of pocket. Key of course is that we stayed healthy.

Posted by: justasking at July 6, 2010 1:28 PM

The irony of these hypochondriacs and over-reactors is that hospitals and emergency rooms are notorious breeding grounds for deadly viruses and bacteria. If you don't have an extremely serious condition like a heart attack or stroke then you are far safer staying home. Patient infection and death by unrelated illnesses is a huge problem according to everything I've read. I try to convince people who sprain their ankle and such to just stay home, but I usually lose that argument because the "I'm HURT! I need a DOCTOR!" mentality is so ingrained in our spoiled dependency culture.

Posted by: Dan at July 6, 2010 3:17 PM

I just brought a guy with abdominal pains to one of the ER's he spoke a little English. When I asked his name he gave me a Guatemalan Identification card. He spent yesterday drinking, now he wants to go to the hospital because he is sick. He has no idea what he is doing is wrong. He's been told that when in America, call 911 if you are sick and they will take you to the hospital and the hospital will treat you-no charge. He has nothing, sends all of his money except living and drinking money to his family back home, where he plans to go when he makes enough money. There is no way the hospital, or the city will be reimbursed, except by billing the state. I'm not sure how that works, but I know Medicaide pays something, not sure how much.

It's not as if this guy had a life threatening illness or injury. There was nothing humane or just about any of this, just blatant abuse of a system because they can.

This is what we are up against now. Wait until Obamacare kicks in, it will be a catastrophe.

Posted by: michael at July 6, 2010 4:26 PM


In Hawaii business are require under state law to provide health care insurance to anyone who works 20 or more hours a week. For those who do not work and are not covered by spouse healthcare insurance plan there is a very generous state supported Medicare sliding scale plan based on ability to pay.

Hawaii is the only state closest to providing universal health care to the total state population for close to 40 years and has one of the highest percentages of health care insured statewide populations in the nation.

Of interesting note in Hawaii just as there is no free school bussing (parents pay separate billing for kids to ride school bus) there are no free rides via EMTs to the emergency rooms. Everyone receives a separate billing for the EMT’s services and transportation to ER whether they are conscious or not.

Cuts down on the 911 calls and excessive use of hospital and medical centers ERs and helps lower the cost of doing business.

This is the health care system Obama grew up in.

Posted by: Ken at July 6, 2010 5:18 PM


The problem with Obamacare is that it papers over even the superficial, rigged costs of the program. Add in the "unexpected" inflationary effects (including more and more employers dumping employees into subsidized/individual systems), and it's catastrophic.

Your question is a bit like asking what's wrong with a program that guarantees every American a car for $100. The principle may be great, and the side of the program that hands out the goodies may be fine, but it's a fantasy land proposal.

Posted by: Justin Katz at July 6, 2010 5:19 PM

Heck, I'm paying 12,000 a year and I still have to pay cash for everything (considering the high deductibles!).

That solution sucks. People without cash will avoid doctors and show up at the emergency room and cost 10X as much.

You really cannot be that foolish........to think such a system will work...and if you are that foolish, why don't you point us to ONE COUNTRY in the world where this works (a modern country, please!)

Ah, there is none....I see.

Posted by: Stuart at July 6, 2010 6:17 PM

>>asking what's wrong with a program that guarantees every American a car for $100

So the fact that hundreds of millions of people in every equiv. nation on earth.......have $100 cars that work fine....should not enter into it?

(in other words, universal health care works well in ALL of the civilized world and even in much of the less civilized world - the care you suggest DOES NOT)

Does real world experience and results mean anything to you, Justin? The only reason Obamacare sucks is that because of folks like you (and the GOP), we could not do it right. It's like you spilling the soda and then saying someone else ruined the carpet.

Posted by: Stuart at July 6, 2010 7:21 PM
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