Healthcare – Part Deux

The other day, my friend Scott McMillan posted a comment about the opening sentence of my (now ancient) last post.  He said, “I’d like you to comment on this statement: ‘It’s starting to look like we’re going to get some sort of healthcare reform.’”

Well, Scott, here you go.  It’s often been said of the Palestinians that they never miss an opportunity to miss an opportunity.  Turns out that the Democrats are Palestinians in sheep’s clothing.  Who knew?  This was a slow, hanging curveball that stopped over the plate, looked at the batter and said, “Hit me.  Please.  I beg you.  Hit me. ” It’s not easy to strike out under those circumstances, but Pelosi, Reid & Co. still managed to do it.

Health insurance reform will show up again.  It has to because the underlying problem won’t go away.  I’m not going to predict when the comet will reappear, but I’m sure that it will.  When it does, here’s something I’d like to see:

I’m a big believer in simple solutions to complex problems.  That’s actually a misstatement.  What I’ve found in my business life is that people make problems much more complicated than they need to be.  They do this by defining problems incorrectly and also by subconsciously accepting artificial constraints that are based on history rather than current reality.  Like algebra, the art really is in simplifying the problem first, then solving it.

In the healthcare debate, there is broad agreement that (unless the government steps in as the sole insurer) health insurance should be provided by employers.  Many go so far as to say that employers should be required to provide it.  This is silly, and is a classic case of an artificial constraint that should be done away with.

Employer-sponsored health insurance is an anachronism that is decades out of date.  It emerged in the 1940s as a valuable benefit for unions to demand and an easy, inexpensive concession for employers to give.  The government liked it because it broadened access to health insurance without the government having to do anything.  And the insurance companies liked it because it gave them random pools of people to insure.

Of all those factors, only the last is still relevant today.  The essence of insurance is that the lucky subsidize the unlucky.  That is only possible when individual outcomes either cannot be known (will you get into a car accident) or are known but are not factored into the cost of the insurance for individual buyers.  Factoring them in = “pre-existing condition.”

So let’s redefine the problem.  If you start with the assumption that employment is the right basis for inclusion in a random insurance pool, then the question is “How do we convince/enable/force more employers provide health insurance?”  However, if you do away with that assumption, the question becomes “How do we provide insurance companies with random pools of people to insure?”  That’s a much easier problem to solve.

Here’s one idea.  Create insurance pools that are based on last three digits of your Social Security number.  You are automatically entitled to join the pool with your number, either as an individual or as a head of household.  That would create 1000 pools for insurance companies to bid on.  Each pool would have a board that would collect and evaluate bids, and select 3-4 plans that members of the pool could purchase.  The government’s role would be limited to oversight of those boards.

Creation of these pools would allow us to eliminate employer-provided health insurance altogether.  Health insurance can and should be an individually purchased product, just like car insurance.  The cost could be made tax-deductible (although it’s not clear that it should be – but that’s a problem for another day).   Combine this with a subsidy to help those who can’t afford to pay (otherwise known as “welfare”) and voila, we have universal coverage.  There, now that wasn’t so bad, was it?

Running a business in America today is tough enough.  I can’t see any reason to continue burdening business owners with the obligation to provide health insurance when the need for them to do so expired long ago, and when it would be so easy to solve the problem another way.

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4 Responses to “Healthcare – Part Deux”


  1. 1 Scott McMillan February 17, 2010 at 3:09 pm

    While I agree with your approach, I do not believe that anything will get done on the healthcare front until the system collapses or is near collapse.

    Why?

    1. The Democrats are (and excuse the language, but this is the only word that works) Pussies. Capital P, and the Republicans want nothing to do with this issue simply because it is seen a Dem project. Congress passed nearly any bill that Bush wanted, and all he had to say to accomplish this was “If you don’t pass this bill, the terrorists will win.” The Dems couldn’t even count to 60.

    2. The political climate has gotten way too heated and governed by catch phrases. Sarah Palin did not win the VP spot, but she nearly single-handedly derailed the HC initiative by uttering (or Facebooking as it were) the phrase “Death Panels”, which struck a chord with seniors, who incidentally are the people who actually vote and write their congressmen. Rest assured, as this issue creeps up again, so with the rhetoric–if the plan is very broad, the static will come from the right, if narrow and focused, it will come from the left–and it will be angrier than it was late last year.

    3. I recently read a report that stated that 49% of households in this country pay no federal income taxes. Zero. Obviously that does not include supplemental things like FICA, etc., but I honestly feel that there is no way we can have a dialog about this issue as a country when only 50% of the players have skin in the game. The sad fact is that most of those who stand to benefit the most are the ones who are a) not paying, and b) up in arms over “death panels”, and are vehemently against any sort of socialized medicine (but do want their medicare).

    4. It will be really hard to divorce the concept of employment and healthcare as a benefit of employment in this country.

    5. Any arbitrary method of “dividing up the masses” into cohesive units will not be arbitrary and thus cause much consternation with in the tin-foil hat community. Can you imagine the Orwellian outrage at the government tying healthcare to part of your social security number (even though it already is)? What’s next? Microchips?

    The fact of the matter is, nothing will be done until this thing hits critical mass, at which time, they’ll cobble together some crappy, expensive program that benefits no one.

    • 2 dwallace12 February 18, 2010 at 1:19 pm

      Scott,

      Quick comments about your numbered points:

      1) Agree. Not sure which of us is in more trouble, you for calling the Dems Pussies (w/capital P) or me for calling them Palestinians (also w/capital P).

      2) IMHO, the political climate has been like this for a long time. I worked on Capital Hill nearly 25 years ago and it was the same as it is now, except the volume has been turned up a bit. All the focus is on posturing/optics. Very little interest in actually solving problems. My conclusion after a couple of years in that environment: The Founding Fathers did a brilliant job of designing a system to apportion increasing resources fairly (not perfectly fair in every instance, but averaging out to pretty fair over time). Nothing about that system enables it to apportion the pain of diminishing (or even slower-growing) resources. This isn’t new. We had commissions to decide which military bases to close and to “save” Social Security in the mid-80s because they were way too politically charged for Congress to deal with directly. The rhetoric about Social Security was just as bad as what’s been passed around lately on healthcare. Also, per my previous post, THE key underlying problem here is that the Dems are deluding themselves if they think that rationing won’t be necessary, and the R’s are deluding themselves if they think the market can handle this alone. EVERYBODY’S wrong about one of their core assumptions – hard to make progress under those circumstances.

      3) It has been the case for a long time that Americans want lots more from their government than they’re willing to pay for. See (2) above.

      4) Actually, I disagree here. I believe people would be delighted to have health insurance separated from employment (and it would have a big impact on the job market too, since people wouldn’t have to take/keep jobs they don’t want just to be covered). It would take some time and lots of communication. Presumably, wages/salaries would go up as company benefits costs went down, which would smooth the way.

      5) Actually, I totally disagree here. The last 2-3 digits of SSNs are arbitrary, so there you go. If that won’t work, a PC with a random number generator will.

      I totally agree with your last point. Again, see (2) above.

  2. 3 steve February 18, 2010 at 5:43 am

    Or if you want to make heathcare really simple…single payer government program covering everyone. Gee, just like every other industrial country except us has done. Wo cares if the insurance companies go out of business? In heathcare they have been and continue to be leeches on society more interested in making profits than providing heathcare…which is fine for a business but horrible for a society.

    Perhaps our senators and representatives should be foreced to deal directly with the illness profit industry and purchase their own insurance, get pre approved, not have their own medical office paid for by you and me…why…governement funded healthcare! Good enough for them but not good enough for the rest of the country.

  3. 4 adam February 18, 2010 at 8:22 am

    Great blog! You are so accurate. Nobody wants insurance until they get sick, so too many people try to “opt out” and end up killing the model. And in global competition, American employers are hampered by paying these health care costs that employers in other countries either don’t pay at all, or have at a much lower cost. It’s an accident of history that the U.S. model exists (happened during wage/price controls of WWII when “benefits” became a way to attract employees) that far, far too many people are Locked-in to. It would be good if a lot more people would abandon the assumptions – then we could start to find much better solutions. Thanks!!


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