Health Insurance Part 1

Health insurance has been a big part of the presidential race thus far. Both the democratic hopefuls are touting some form of universal health care while John McCain seems a bit more for the status quo. Not surprisingly, Republicans love the current system. They like to talk about "personal responsibility" and believe that privatized health care equals choice, savings, and no "big government" bureaucracy. So, I'm going to take a look at these claims based on the available evidence and my own experience. We already know that this wonderful health care system of our places us about pretty low on the totem pole of industrialized nations so I don't think we can even hope to make an argument in favor of our current system based on quality.

So what about that "big bureaucracy?" Well, lest people forget, the government already provides health care via Medicare and Medicaid. Yes, the systems can be tough to navigate and yes, there is fraud and abuse. But the fact is that millions of people are covered by these systems, the checks get written, and most of these folks would not want to give up what they have to jump into the private pool. They already know how much that costs just for supplemental insurance.

But private insurance companies reduce all the bloated waste of the government, don't they? Well, a few years ago when I owned my own company, I shopped for health insurance. Because my employees were all teenagers or married women on their husbands' insurance, I offered a group plan through Anthem of Ohio (formerly Blue Cross). I was the only person who needed to be on the plan and it cost about $300 per month. Not terrible. When I got married and added my wife, the premium jumped to over $800 per month. Mind you, my wife is 14 years my junior so at the time she was about 23, perfectly healthy, and used less than $1000 a year in medical services. But, because she was a woman, especially in child-bearing years, the cost to add her was ridiculous. It didn't matter that we worked out regularly and had no intention of having children. Nope. The price was set by actuarial tables.

Okay, so private insurance isn't cheap but at least we don't have the bureaucracy of big government, right? Well, about two years into having my group plan, I began to notice a $25 per month surcharge on my bill labeled "Administrative Fee." I called and asked Anthem what this was for and was told that it is a fee imposed for preparing and sending out my bill. Apparently the $850 per month in premiums didn't cover that. Now, since I was the only person getting insurance at my company, the monthly mailing from Anthem included exactly 2 pieces of paper (2 copies of the bill) and a return envelope. So Anthem basically tried to tell me that it cost them $25 per month to send me 2 pieces of paper and an envelope. Last I checked, you could do this for $.41 (soon to be $.42). That gives them a profit on this "fee" of $24.59. Of course, they say the bill has to be prepared, as if some human is diligently sitting there calculating my bill every month with an abacus. Even if I grant them another buck a month for the computer program that automatically prints, folds, stuffs, and mails my bill every month, they are still making an extra $23.59 for absolutely nothing. Just because they can. Just because no one challenges them.

So, there's no bureaucracy in private health care, huh? Then why does it cost me nearly $300 a year extra in administrative fees. "Administrative" sounds like bureaucracy to me. And if you don't think there's bloated bureaucracy in private health care, tell that to someone who needs pre-approval for services. When I worked as a psychologist, we could often get only a few sessions at a time for our clients. Then we would have to call in for approval for further sessions. Often the person approving them was a nurse, ostensibly with psychiatric training, or a social worker. While there's nothing wrong with either profession, I have a Ph.D., and I actually saw the patient. While the insurance companies tout this system as eliminating waste, it is really just a way to deny service and keep costs down. Not costs for comsumers mind you, but costs to the insurance companies.

Again, do government administered programs have waste? Certainly. But I've seen nothing in my personal or professional experience to convince me that there isn't just as much waste in the private system. The reality is that it is a matter of semantics. In the goverment, it's called waste. In the private sector, it's called profits. We used to have a system where a customer (patient) went to a provider (doctor) and they simply had an exchange of services for fees. Because we thought doctors made too much money, we decided that it would make sense to put an enormous, for-profit company right in the middle. Somehow this was going to magically reduce costs. Hmm...does anyone see anything wrong with this picture? More on that in Part 2.