Gaps in Coverage and in Logic

In an article in the Washington Post this morning it came to light that President Bush would veto bipartisan legislation to continue a program that provides health insurance to low income children who’s families are not poor enough to qualify for Medicaid and aren’t rich enough to afford private insurance.

Now I could write a post about how President Bush has squandered an opportunity to pass important compromise legislation and finally start to reclaim that “compassionate conservative” moniker he was peddling back in 2000, but I won’t. Everyone in this country is aware of President Bush’s ideological zealotry to all things conservative, no matter the consequences. This has made him a literal God-send for many and the proverbial Anti-christ to others.

Instead, inspired by the file Sicko, this will examine how critical a program like this is, as well as serving as a primer for my own economic analysis of healthcare and the paradoxical conflict within the healthcare industry that our country has yet to solve. I won’t focus on the political sniping in Sicko, as I think those are Michael Moore’s weaker, or at least, more-open-to-interpretation arguments.

The program, known as the State Children’s Health Insurance Program, provides coverage to the most helpless among us when their families can not afford health insurance coverage. Apparently President Bush thinks their families should pull themselves up by the boot straps and find coverage at the expense of education, gas for their cars, or maybe food. It’s hard to say where these working poor are supposed to go for affordable coverage. Why is there no affordable coverage? Because your basic economic model is topsy-turvy when applied to the health care industry. We’ll look at a basic economic principle everyone should know and how the health care industry distorts it.

Competition:
In your everyday marketplace prices of good and some services face constant downward pressure from competition within in the industry. Factors like substitutability of goods and price elasticity prevent products from reaching perfectly competitive price levels where the consumer completely determines the price.

Let’s take an example. You find a shirt at Abercrombie & Fitch (because that’s how you roll) for $45. This is your standard issue Tshirt except this one has the Abercrombie & Fitch logo on it. You’re not quite sure you want to spend the money on it. You decide to shop around for different Tshirts which may not have the A&F logo on them, but very likely will be cheaper. Finally you find yourself at target and see a Tshirt of lesser quality and sans A&F logo, but it costs $15. This process of searching has taken 72 hours. You decide that in actuality A&F is not how you roll and buy the shirt at Target for $15. The substitutability of the Target shirt was sufficient for you to warrant buying it.

Let’s apply this to the healthcare industry. Let’s go back to the mall. You find yourself in Abercrombie & Fitch again, pining over a different hipper shirt, when suddenly that food court Chinese food completes the mounting arterial blockage, thrusting you into a severe heart attack at an early age. Medical personnel rush to your attention. They have sworn and oath to assist people who are ill regardless of fiscal status. They throw you in the back of an ambulance. Sirens ablaze they get you stabilized in route to the hospital, but you have since ceased being conscious. No one has quoted you a price or if the sirens cost extra. You arrive unconscious at the hospital and after looking over your vitals it becomes clear you’re still in dire straits and need bypass surgery very soon or else risk dying. So they we’ll you up to the OR, while unconscious. You’re unconscious so they don’t ask if you want standard, premium, or super premium care. Worse yet, they can’t even ask you if you’d just rather die to avoid the expense. By the way they don’t tell you how much this is going to cost. In all likelihood they can’t tell you. They are doctors and nurses bound by the Hippocratic Oath to care for your sorry A&F gazing ass whether you’re rolling AMEX Platinum or moths fly out of your wallet. The doctors are successful, you life is saved and you regain consciousness to find yourself with a killer new scar and lots of painkillers in your blood stream. Total expense $50,000. You protest, “Wait, someone could have done this for less. I’m almost certain Wal-Mart put a surgical center next to the Tire and Hair Care center.” Yet your protests are to no avail. The market has failed you because you couldn’t choose in those moments of unconsciousness. Decisions were made for you and charges were accrued in your name without your knowledge, like identity theft, only this time Visa doesn’t forgive the $3000 some charged at Chipotle for apparently a year’s supply of burritos. No, you’ve got to pay it now.

“But wait.” my critics will quickly retort, “the competition comes in the selection of health insurance.” Does it? When you take a job, nearly any job, if it comes with health insurance do you pick the provider or do you pick the plan? Typically people working for large organizations who usually get some of the best coverage pick a plan, Chinese menu style, from a brochure from one insurance company. So what really ends up happening is that your large company picks a large health insurance company to provide coverage to its workers. Neither of these entities care too much about your well being. They are entities motivated by profit, for your company that means selecting a provider with coverage just good enough to entice people to work there. That is a low bar when people just desire to be covered. For the health insurance agency it means doing everything possible to pay as little as possible. Neither entity is wrong to want to maximize profits. That is their motivation in the economy and a noble one that has propelled the U.S. forward, but it is not way to price health coverage.


Healer Profit Margins
My final retort is based as much on morals as it is on economics. People should not profit from healing others. Doctors should be afforded a certain level of luxury. It is a life calling they have signed on for with extensive schooling and near constant mental and physical stress to accomplish their task, but insurance executives, pharmaceutical executives, and medical supply executives should not get rich making things people need to live. Those who make life saving drugs and then make sure no one can afford them, or those that promise to cover the exorbitant expenses of healthcare by accepting a customers premiums and then refusing to pay are morally weak people.

Humanity and healing should not have a price and they should not have a profit margin. The industry is broken because the industry fails to adhere to the economics that drive every other market and because they profit from the pain of others.

This is not a blanket endorsement for nationalized health care. There are many pitfalls to such a system, but at the very least, shouldn’t this country do what it can to ensure every child is insured? Shouldn’t that be beyond ideological squabbles of public vs. private enterprise? Aren’t children the unquestioned future of our republic? Shouldn’t we do whatever we can to give them at least the best physically capable bodies to follow their dreams? Apparently for this president the answer to all these questions is no.

[President Bush] [Sicko] [healthcare]