Unless you’ve had your head stuck in some sand, you’ll know that the hot topic of the day is the debate about reforming our health care industry. The overarching goals of the Obama administration in this effort is to curb the growth of medical costs and increase the number of people who have access to quality medical care. However, the discussion has boiled down to an ideological war of words with dramatic extremes and over exaggerated claims like “socialized medicine”, “public insurance option” and “death panels”. We’re not going to get very far if we allow this to continue much longer. But first we need to define what it is we as individuals want in a “health care plan”.
Let’s start by using consistent terminology and knowing what we mean by it. So many terms are tossed about willy-nilly with the assumption that they mean the same thing. For example “health care” and “health insurance” are used interchangeably. That’s a mistake. Even President Obama has re-focused his words from “health care reform” on Friday August 15th (See the NY Times Op-Ed piece) to his weekend address on Saturday where he uses the phrase “health insurance reform”. This change may be a good thing, if you understand the definition of the terms. So, let’s define them.
Health Care, as defined by dictionary.com, “is the field concerned with the maintenance or restoration of the health of the body or mind”. Even more simply, health care is the service you receive when you visit your doctor or get a massage at Mountain Waves.
Health Insurance “compensates the insured for expenses or loss incurred for medical reasons, as through illness or hospitalization”. This determines who is going to pay for that visit to the doctor or the massage at Mountain Waves. In fact, health insurance didn’t come into existence until 1929 with the creation of Blue Cross in Dallas, Texas as a way for local school teachers to pre-pay for maternity services at the local hospital. The maternity plan later evolved to include sickness and injury care. Prior to that there were basically two types of insurance: life insurance and accident insurance. Accident insurance paid out a pre-determined amount in the event of an accident, much like the way today’s disability insurance works.
Now as flawed as our system is today, it is exactly what we’ve asked for. We have a health care and payment system that gives certain individuals access to nearly any medical service when ever they want and never have to pay the doctor. Well, I’ve got news for you. If you’re afraid of socialized medicine, some of us already have it. What I’ve just illustrated is a text book example of what you might find in France or the Neatherlands. The only difference is our socialized medicine is not universal as it is in those countries. In this current debate I hear people using the “socialized medicine” argument who are the same people who actually have it! I don’t hear people who are without health insurance decrying that we are on the path to socialized medicine.
The flaw in our system lies in the exchange at the time of the doctor visit. Services are exchanged between the doctor and the patient, but the exchange of money is between the doctor and the insurance company. This creates and energetic imbalance. It creates the perception that the patient is getting something for nothing. “Ah, but I’ve paid all of those insurance premiums” you might say. Yeah, but what is insurance again? Insurance is a protection from an unexpected loss. This is where it gets tricky, because most people don’t understand how insurance is supposed to work.
Let’s do a little Insurance 101. The fact is that people experience accidental loss from time to time that can be so great it might wipe them out. The fear of this possibility has caused many individuals lots of sleepless nights. At some point in time, some forward thinking entrepreneurial types identified this desire of people to get a good night’s sleep. So they created the first insurance company. Their business plan worked like this. People would contract with the insurance company to provide insurance (peace of mind) in the event of an accidental loss. The idea is that if enough people contracted with the insurance company, then the loss of one person (which would have been catastrophic for them) would never be great enough to wipe out the insurance company. “And how can the insurance company afford to do this?” you might ask. Well, that good night’s sleep has a price tag attached to it. It’s called a monthly insurance premium. It’s not much relative to the potential loss you are insuring against and if enough people contract with the insurance company and pay their monthly premium then there’s plenty of money to go around to cover the occasional loss of an individual here or there.
You see, that’s the key insurance companies are counting on. Most people, most of the time never experience the accidental loss that they fear. In fact there are whole departments of people at the insurance company who do nothing but calculate the likelihood of you having an accidental loss – or debilitating disease to bring it back to the health care issue. They’re called actuaries. Their job is to make sure that the insurance company always collects more money in monthly premiums than they are likely to pay out in claims. Very simply, insurance is a bet between you and the insurance company. You are betting that you are going to become sick and the insurance company is betting that you’ll stay healthy. This is another flaw in our system. We are betting against ourselves! But as backwards as I’ve painted it to be, the peace of mind of the safety net that insurance can provide frees us up to walk on some pretty high wires that we might not otherwise be willing to do. There’s real value there.
But when we are talking about reforming our delivery of health care, we forget that insurance companies are only there to provde us a safety net (even though most have tried to become more). Yet we keep demanding for them to pay for all things medical so we don’t have to be inconvenienced by pulling out our check book at the doctor’s office. We can’t have it both ways. Either we have the freedom to consume health care the way that suits us individually and recognize that we have a responsibility in the service/money exchange at the doctor’s office, or we have one sized fits all socialized medicine so we don’t have to be nickeled and dimed to death every time we get the sniffles. We as a nation first have to agree on this major detail before we’ll ever move forward on real health care reform.
There is a plan that most insurance companies already offer that can be a bridge solution. Unfortunately it doesn’t seem to get much attention. That’s the Health Savings Account or HSA. With the HSA, you have a high deductable insurance plan (a safety net) to cover you in the event of a catestrophic illness. Along with that, you have a pre-tax savings account that you control and use to pay for your doctor’s visits, tests, medicines, etc. The important part of this is that it puts you back into the money exchange and removes the middle man (the insurance company). In fact, at most medical offices, when you tell them you are going to pay in cash at the time of your visit they will usually discount their price by about 30%! The other advantage of the HSA as opposed to the FSA (Flexibile Spending Account), is that if you don’t use all of the money in your savings account, it rolls over into the next year. If you stay healthy and still have money left over when you’re 65, it then converts into an IRA account from which you can use the money for any expense in your retirement. The beauty of the HSA is only realized when you, the patient, assume your proper role in the doctor/patient/payer relationship. This means we have to pay attention and make choices that are in our own best interest – not those of the insurance company nor the medical provider. When most of us can play that role consistently, then we’ll have real health care reform.