Is Health Insurance Itself the Problem with the System?

Kim BellardLet's say you have a product that you just can't get the public to want.  You market the heck out of it, you sell a bunch of different versions of it, and you warn people about how their lives could be ruined if they don't buy it, which, in fact, isn't untrue.  You even manage to get the government to require people to buy it, and also to provide subsidies for them to purchase it.  Yet still the customers you want most remain stubbornly uninterested.  At some point most people would conclude it isn't a marketing problem but a product problem.

When the product is health insurance, though, we tend to think those who won't buy it are short-sighted and even irresponsible -- but what if they're right?

The New York Times just reported that many Americans find that it is cheaper for them to pay the fine for not having health insurance than it is to actually pay for health insurance, despite increasing fines, subsidies for the purchase, and the presumed financial benefits of having health insurance.  It cites a recent Kaiser Family Foundation analysis which found that there are some seven million such uninsured Americans.  As one resister told the Times, "I don’t see the logic behind that [buying coverage], and I’m just not going to do it."

The article gave examples of several consumers who were surprised -- in one case, "offended" -- that the plans featured large deductibles that would require them to pay the initial several thousand dollars of medical expenses.  If something truly catastrophic happened, one claimed: "I feel like it’s better just to die."

Maybe not such a great strategy.

It's not that there aren't some positive signs.  National Center for Health Statistics (NCHS) data indicate that the number of uninsured has dropped from 45 million in 2013 to 28.5 million for the first half of 2015.  Sarah Kliff reports that people under 35 account for 35% of healthcare.gov's open enrollment sign-ups, versus 33% in 2014, with close to million new enrollments from that demographic, versus under 700,000 a year prior.  Not wanting to pay the penalty motivated their enrollment more than older enrollees.

The NCHS also reported that the number of people under 65 who had problems paying medical bills in the past 12 months decreased from 56.5 million in 2011 to 44 million in the first half of 2015.  The percentage varies by insurance status (29.8% for uninsured, 21.8% for those with public coverage, and 12.2% for those with private coverage) and income (24.5% for the poor, 27.1% for the near-poor, and 12.2% for the not-poor).

Still, 28.5 million people remain without coverage, 44 million are having trouble paying medical bills, even among those with private insurance or "not-poor"...gosh, that doesn't seem like a raging success.

A couple other articles have deepened my belief that we've gone down the wrong path:

• A new study, as reported by The New York Times and with some additional observations in Health Affairs, confirms the long-known wide ranging pricing and utilization in the U.S.  What's new is that Medicare spending is not necessarily linked to private insurance spending -- "lower cost" markets for one does not automatically result in lower costs for the other.  It also reaffirmed that prices vary wildly not just across markets but within markets, even for negotiated insurance rates.    
• A new study found that our convoluted patent/FDA approval system makes it more financially advantageous to invest in cancer drugs that extend cancer patients' lives by a few months instead of on drugs that might prevent cancer.  Huh?

This is not all the fault of health insurance, but it has had a role.  We entrusted public and private payors with negotiating on our behalf with health care professionals and industries.  As it turned out, it was easiest for them to do within some arbitrarily narrow definitions, limiting who can be paid how much for what.  Our "health" system is a medical one.

The end result is this system where prices vary irrationally even when one has insurance, where the care you get is a function of which provider you get it from rather than what is best, and where we spend more than any other country and certainly more than many of us can afford.  The end result is that the same kinds of entities that were getting the biggest share of our health care dollar in 1960 are still getting about the same shares now (as I discussed previously), which sure seems like some kind of a sweetheart deal to me.

It seems foolhardy to self-fund oneself in a world where a lengthy hospital stay or drug regime can easily bankrupt anyone other than the so-called 1%, yet health insurance allows and, to some extent, exacerbates that kind of expensive treatment.  It has become part of the problem.

Look, I worked in the health insurance industry for a long time.  I helped introduce consumer-driven/high deductible plans to help foster cost-awareness.  I bought into the protection-against-big-expenses meme.  I personally have never not had health insurance.  So, by most standards, I should be biased in its favor.  But I'm beginning to wonder if health insurance itself is the problem, or at least a big part of the problem.  

I've written before about some of the new entrants into health insurance; more power to them, and the more the merrier.  What I continue to be disappointed by is that we're not really seeing fundamentally new approaches to what health insurance is.  Going back to the product analogy above, we're just iterating versions of the iPod instead of introducing the iPhone.  We probably would have continued to love our iPods if the iPhone hadn't come along, but not many of us would opt for a world that had better iPods but no iPhones.

I wish I knew what the alternative to health insurance was.  I wish I even had a good idea for an idea for it.  The closest I've come is a thought experiment I posed some time ago, where we crowdsourced any help we wanted for our health spending, which would be subjective and unpredictable, but which would at least open our eyes about who is paying for our care.

Here's a radical suggestion: instead of thinking of more ways to force people to buy health insurance they don't want, we should be developing products to protect their heath that they actually want to buy.