It’s health care time

Today, I’m starting a series on health care in America. It’s pretty much the biggest deal in… Today, I’m starting a series on health care in America. It’s pretty much the biggest deal in the Democratic candidate debates right now and will probably become the biggest deal in the presidential debate once each side picks its candidate, considering that both sides are really opaque and boring when it comes to Iraq.

What’s going on with our health system?

Basically, things are getting very expensive. America’s general rate of inflation is about 3 percent per year, but the cost of health insurance rises by anywhere from 7 to 11 percent per year. And in spite of the rising cost, Americans keep consuming more health care.

Because health insurance has gotten more expensive, less employers purchase it for their employees, and less people can afford to buy health insurance on their own. So, not as many Americans have insurance as you might think, considering how incredibly rich and awesome America is.

Finally, health care in America is very inefficient by most measures. Some high estimates will say that 30 percent of health care spending is wasted. Considering that health care is about 16 percent of our gross domestic product, this could mean that we waste as much in health spending as we spend on our entire military.

First, what is insurance about?

Health insurance is different than health care, just like buying a life insurance policy is different than saving for your heirs. When you buy health insurance, you purchase a guarantee that, when you need health care, the insurance company will help you pay.

Clearly, a buyer of insurance can’t expect to receive more than he pays, just like no one in a lottery can. But many treatments, though rarely needed, are very expensive – so expensive most people can’t really even save for them – and important – vitally so.

Thus, everyone who buys insurance gets peace of mind, although very few people get more in dollars than they paid in insurance premiums. Without health insurance, few but the rich could pay for many very costly treatments in the unlikely event they are needed.

This sounds fine, but a market for individual health insurance will usually collapse, since you know more about your health than the insurer does. Here’s why: Imagine a policy that covers a certain treatment. The policy’s price takes into account the chance an average person in the population will need the treatment.

But some healthy people know their chance of needing that treatment is much less than average, so they don’t buy the policy. Now the company offers a higher price, since its pool of buyers doesn’t include all the healthiest people like it did at first. The higher price discourages other healthy people from buying. This cycle runs until the insurance costs as much as the treatment.

What is the status quo?

Under our system, elderly people are insured by a government health insurance company called Medicare. Impoverished people receive health insurance from a government health insurance company called Medicaid. Most of the people remaining receive health insurance through their employer or don’t have health insurance. The employer system exists because your employer knows less about your health than you do, so an insurance market where they buy is less likely to collapse, especially when propped up by tax breaks.

The employer can deduct much of the cost of your health insurance. This is a subsidy, plain and simple. People who purchase individual health insurance also receive a tax subsidy. Thus, pretty much everyone’s health insurance is paid for entirely or partially by the government. Our system is actually a public-private partnership.

The phrase “public-private partnership” sounds awesome and appeals to all but the most hardened conservatives and communists.

Why is that partnership so strained?

Our system is elitist. If you are in the club and you have insurance, the sky is pretty much the limit. When my doctor tells me I need something, no matter how ineffective and expensive the treatment is, I’m like, “Whatever. Bring it on.” New technologies are constantly coming out that expand the scope of what medical care can do for people, and we insured customers, uninformed and insulated from costs, lap it all up. As you can imagine, a large cadre of people who couldn’t care less about the cost of their treatments doesn’t do a lot to control prices. Meanwhile, those who aren’t insured often can’t afford even basic care. There’s not much in-between in America. It’s like living in a town that has two things to do: a country club and a pinball machine.

But why would this situation arise? And what can we do about it? Stay tuned for another exciting installment in my series on health care in America. Next week: How I cured cancer in my free time, and why I refuse to share my historic insight.

Lewis is now working on the AIDS vaccine and he’s close. E-mail him at ljl10@pitt.edu.