“Affordable” Health Insurance Is Not “Affordable” Health Care

Recently, Idaho Republican Congressman, Representative Raul Labrador, encountered some passionate responses at a town hall, when he suggested that “nobody dies for lack of access to health care.” Please note the use of the term, “access to health care.” If I found myself alone, on top of a mountain, bleeding from various wounds, I’d argue that I am certainly more than likely going to die for lack of access to health care. I’m being facetious, of course, but my primary point is quite serious – too many people are confusing the term “health care” with “health insurance.”

I believe that Mr. Labrador was likely trying to reiterate something former Presidential Candidate, Governor Mitt Romney, said in 2012; that, “We don’t have people that become ill, who die in their apartment because they don’t have insurance.” I will credit Mr. Romney with accurately referencing the issue – that being “insurance” – rather than tossing out the catchall phrase most people seem to be using these days – that being “health care.” I expect nothing less from the author of my own home State, the Commonwealth of Massachusetts’, own so-called “health care” reform, aka RomneyCare.

This introduces the primary issue I seek to address herein; the difference between health insurance and health care. Health care – meaning the actual act of caring for someone’s health – is necessary for survival. Health insurance – meaning a method by which we pay for health care – is just that; merely a means to pay for health care. It does not, in and of itself, improve one’s health… or does it?

Addressing Mr. Labrador and Mr. Romney, we must reference contrary data. A few years ago (2009 to be precise), a report posted by the American Journal of Public Health indicated that nearly 45,000 deaths are annually associated with a “lack of health insurance” and that uninsured, working-age Americans have a forty percent higher risk of death than those with private insurance.

The knee-jerk reaction to this news is likely (and likely was) to rush to provide health insurance to as many people as possible. Indeed, according to this report, health insurance saves lives. Furthermore, one could argue, if saving lives is health care, and health insurance saves lives, then health insurance is health care, and your author has proven himself, Mr. Labrador and Mr. Romney wrong.

Yet… by focusing on the headline, we miss the bigger point. I’ve already suggested that health insurance is a method by which we pay for health care. It stands to reason, therefore, that it is not a lack of health insurance that kills people, but rather, it is a lack of means by which to pay for health care that kills people. This, then, leads us to a logical conclusion; the problem is not that we don’t have insurance … the problem is that we can’t pay for health care without insurance. This, then, leads to the next logical thought: why is health care so expensive?

President Obama’s landmark health care law, the Patient Protection and Affordable Care Act (“PPACA,” “ACA,” or “ObamaCare”) is literally called: the affordable care act. Affordable care, to me, should mean addressing the cost of health care, and thereby making it affordable. The law wasn’t called, “the Affordable Health Insurance Act.” Yet… that is what we got, and what we now see the Republicans attempting to replace with their own health insurance reform.

Make no mistake – no one has, or seems willing to address – the real issues; those being a lack of health amongst our population (a failure by our population to take preemptive measures to maintain or improve their wellbeing), and most importantly – reducing or capping how much we pay for health care. Focusing less on “who” will pay, and “how” we pay, and first addressing “how much” we pay, and identifying ways to pay less; in other words, making care affordable.

You might recall that the Congressional Budget Office (“CBO”) provided its less than flattering assessment of the first version of the Republican proposal – the American Health Care Act (“AHCA”) – and Congressional would-be supporters of the law suddenly jumped ship. The CBO’s analysis resulted in what was called a “devastating blow” to the proposed law. Primary among the negative reviews was the CBO analysis that predicted about 24 million fewer people would be insured by 2026 under the GOP bill, and that premiums would skyrocket for low-income Americans and the elderly.

Sadly, the new iteration of the AHCA has done nothing to address the actual cost of care, and instead sought only to close the gaps identified by the CBO – focusing on reducing the number of people likely to lose coverage; especially those with pre-existing conditions. Again – note the focus on health insurance, and disregard for the cost of care itself. I’m disappointed, since – at the time the first version of the AHCA was being bashed for disregarding insurance coverage as a means for keeping score – some supporters of the proposed law seemed to see the light, but have since lost their way. You likely heard about White House budget director, Mick Mulvaney’s remarks, shared with ABC News chief anchor George Stephanopoulos. He said that critics worry too much about “getting people coverage,” and that the purpose of the law should instead be, “… focused on getting people affordable health care.”

It’s as if the two sides are talking past each other. If you value securing health insurance for everyone in the nation, then the CBO’s report should have scared you. If you care more about securing affordable, accessible, health care for everyone – then the whole discussion over “insurance” should be irrelevant to you. Why? Because Health Insurance is NOT Health Care.

President Obama knew this, once. On the evening of September 9, 2009, President Obama advised a joint session of Congress, that the amount spent on health care is the root cause of skyrocketing insurance premiums. He said, “We spend one and a half times more per person on health care than any other country, but we aren’t any healthier for it. This is one of the reasons that insurance premiums have gone up three times faster than wages.”

Yet… when the ACA was revealed, that fundamental problem was essentially ignored, in exchange for a law whose primary mission was merely to get everyone insured. By focusing entirely on who will pay, and not on what we’re paying (and paying for), we literally “passed the buck.”

So… the money comes out of a different pocket, but what are we doing to reduce the amount actually being spent? Nothing. If I go to a baseball game with my wife, and I buy a beer for $10, whether I pay for it with my debit card, a wad of cash my grandmother sent me for my birthday, or my \credit card, it doesn’t make it any cheaper. $10 for a beer is outrageous, but not as outrageous as the cost of health care.

Just as health insurance is not health care, so too health insurance reform is not health care reform. Yet, because the ACA got so much press, and many previously uninsured individuals did secure insurance, the result was a nationwide misconception that affordable insurance equates with affordable health care. For many, ObamaCare is therefore viewed as a success because millions of uninsured Americans are now insured. In truth, we ignored the fact that all the ACA did was for those previously unable to pay for health care, it secured payment for health care – but did so at the cost of other insureds, insurance carriers, and employers (amongst others). This, of course, is because the money had to come from somewhere – and we did nothing to actually reduce the cost of the care itself. We literally began paying not only for our own health care, but for the care of the previously uninsurable – those who incur the most cost for care – as well as all the other folks who didn’t want insurance or couldn’t afford insurance – and somehow, we thought, the cost would decrease?

Imagine, if you would, a shoe shop. Presently, only those with enough money can purchase new shoes from the shop. We pass a law, requiring everyone to buy shoes – and require everyone with more funds to pay more, to cover the cost of the shoes with fewer funds. This, naturally, causes the demand for shoes to increase (by law), but we’ve done nothing to increase the supply of shoes or statutorily cap how much the shoe shop can charge for shoes. So now… demand is up, supply is level, and there is a bottomless pocket in which the shoe shop’s owner can dip his hand for payment. What do you think will happen to the cost of shoes?

Insurance isn’t a magical money-tree, and as we quickly discovered, that “bottomless pocket” is not bottomless after all. Like a college student wielding his first credit card, a newly insured America forgets that “someone” has to pay, eventually. What you buy – with your own money, or with insurance – and how much it costs, still matters.

So – the first issue is the cost of care, and the fact that we’ve done nothing to curb it.

Another problem is that – despite the name “insurance” – health insurance isn’t insurance. There is in inherent problem with relying on “insurance” to pay for known costs, rather than protect people from unforeseen catastrophic loss.

Once upon a time, seafarers and merchants relied upon trade to pay for their living. They had to load ships with cargo, set sail, and arrive in other ports. They’d trade, make money, and the merchant would split his proceeds with the crew. Unfortunately – the risk of storm, sea monsters, and sailing over the edge of the planet forced many to stay home and watch daytime television. Then, an entrepreneurial spirit emerged, and offered – for a small payment – to indemnify the sailors and merchant against such risk. “You pay me a small fee, and if you are gobbled up by a sea monster, I’ll pay your families the value of your lost goods, and an extra sum for the loss of their loved one.” People are naturally risk averse, and so they happily paid a small fee to avoid the cost – albeit unlikely – inherent in their perceived worst-case-scenarios. The insurance agent – for that is what the entrepreneurial spirit was – on the other hand, did the math and decided the chance of having to pay up was slim. Here was his thought process:

“The goods on the ship are worth 100,000 gold pieces. There is a one-in-ten chance the ship will sink. That means I’m likely to pay out 100,000 gold pieces 10% of the time. 10% of 100,000 gold pieces is 10,000 – so the “risk” is 10,000 gold pieces. If I take 10,000 gold pieces from the merchant and sailors, I break even. But these guys are so scared of losing their goods, they’d pay more to move the risk to me. I will ask them for 15,000 gold pieces. They will no longer fear sailing, and will likely make back the money (and more), and I will make 5,000 more gold pieces then the risk was worth. We all win.”

Yet, with health insurance and the ACA, we ask the carrier to pay for everything – including certain, absolute expenses. If the scenario above worked like health insurance in a post-ACA era, here is the dialogue:

“The goods on the ship are worth 100,000 gold pieces. The ship has a gaping hole in the hull, and sails are already aflame. There is a ten-in-ten chance the ship will sink. That means I’m definitely going to pay 100,000 gold pieces. 100% of 100,000 gold pieces is 100,000. I really shouldn’t take anything less than 100,000 gold pieces, or I’ll lose money. Sadly, there is a law that forces me to do this, for 10,000 gold pieces. Sigh. Well; hopefully I can rely on other merchants that are less costly to make up the difference when they pay me 10,000 gold pieces too, but in those instances – they will (hopefully) cost me less than 10,000 gold pieces. Of course, those merchants don’t want to buy insurance from me for 10,000 gold pieces. I guess all I can do is hope that their sense of charity, and a 1,000 gold piece penalty will force them to buy insurance from me and pay for the absolute loss of 90,000 gold pieces I’m about to suffer.”

That hasn’t worked out for anyone. The issue, again, is that we’re relying on insurance to pay for absolute costs, and we’re not doing anything to reduce those costs.

In any other market, people pay out of their own pocket “maintenance” and other expected costs – and purchase insurance only to cover catastrophic (but unforeseen) costs; shifting the “risk” to a carrier. That is why auto insurance pays for collision damages, but not oil changes. That is why home owner’s insurance pays for tornado damage, but not the monthly utility bill.

Consider this… People are involved in car accidents, get out of their vehicle, examine the minor damage, and agree NOT TO REPORT IT TO THEIR INSURANCE, because they DON’T WANT THEIR PREMIUM TO INCREASE! People actually choose to pay for car repairs out of pocket, because they fear insurance premium increases and want to save their insurance for “when they really need it.” Yet, if we treated auto insurance the way we treat health insurance, we’d be outraged that insurance doesn’t pay for the air in my tires, or the dancing hula girl on my dashboard.

Providing insurance (meaning, digging into another pocket to pay for healthcare) didn’t reduce the cost of said care. In fact, in many instances, having new, direct access to deeper pockets incentivized providers to increase their rates – and why not? Instead of balance billing an uninsured patient, I – as a provider of health care – now have direct access to the deep pockets of a carrier? Sign me up!

In addition to addressing the actual cost of care, we need to be honest about what insurance is, and is not; as well as what it is, and is not, meant to cover. Insurance only works when the insurer is allowed to assess risk, and through underwriting, quote premiums and offer limits adjusted to the individual policy holder. Forcing a carrier or health plan to accept $1,000 in premium for coverage that we know, with certainty, will cost the carrier $1,000 is outrageous and – in my mind – amounts to a form of eminent domain or a governmental taking.

When insurance is required to cover people without regard for risk, forcibly collecting money from all to pay for benefits afforded to some more than others; with limits placed upon carriers regarding how much they can charge, what they must provide, and more, insurance ceases to be insurance and becomes an agent of wealth distribution, a.k.a. a tax collector.

A promise to pay for all but certain future costs eliminates the entire reason to engage in the business of insurance. The time has come to be honest with each other and ourselves. What do we hope to accomplish with health care reform? What is the easiest, most direct way to achieve that goal? Do that. Commandeering an entire private industry to camouflage a tax because politicians are too scared to openly admit that is what they are doing – taxing the nation to raise capital for the purpose of paying out-of-control health care costs – just doesn’t work for me.

Address the cost of care, make it affordable, and then it won’t matter who pays – because we’ll all save. THAT is “affordable care.”

By: Ron E. Peck, Esq.


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