Home, life, auto and health insurance are all – depending on your needs – products that are designed to protect from catastrophic events. The debate currently being discussed in town hall meetings across this country misses the point entirely. Health insurance is a product issued to policyholders to cover medical costs. It not only covers catastrophic events, but just about everything over the co-pay or the deductible when satisfied.
What the introduction of health insurance, and its subsequent evolution has insured, is the removal of the market place from healthcare. When is the last time you compared the prices that physicians charge for fee based services? When is the last time that you picked a hospital based on the price of services?
There are no market forces constraining the double-digit increases in premiums and other healthcare fees. In fact, the average wage of physicians in the early 1900s was about the same as the common laborer. It wasn’t until the introduction of health insurance that there were significant increases in the average salary of a physician. During the same period hospitals realized large increases in income as well.
The biggest proponents of mandatory health insurance at the turn of the century were the progressives. In fact the progressive American Association for Labor Legislation (AALL) organized the first national conference on social insurance. This included what are now Social Security as well as a mandatory national health insurance program.
Originally the American Medical Association (AMA) supported efforts to insure the general public. They saw this as a way to serve more patients and consequently be assured of a larger paycheck. In fact in 1916 the Journal of the American Medical Association (JAMA) encouraged physicians to adopt the proposals being presented. They saw the writing on the wall.
The AMA’s Committee on Social Insurance lobbied its members to get behind legislation because it was going to pass and they should join the effort and control it rather than oppose it and have no say in its implementation.
In 1916, the initial pilot plans were introduced in three states – New York, Massachusetts and New Jersey. The bill that was proposed in New York was entitled the Mills Bill. The New York medical community, which earlier that year was willing to work with a mandatory health insurance system, soon became its biggest opponent. Why? The Mills Bill not only challenged the fee-for-service system but did not allow patients free choice of physicians. It essentially was putting the state in charge of the healthcare system. Samuel Gompers the legendary leader of the American Federation of Labor (AFL) even opposed the AALL’s push for state run health insurance on the basis that it would take away individual freedom!
By 1920, with the election of Warren G. Harding, the public sentiments as well as those of most of the medical associations across the nation were turned solidly against the progressives and other proponents of mandatory health insurance. The fact that most of the proponents put forth socialist messages did little to help sell the program.
Why, then, are we having this discussion 90 years after the public discovered they didn’t want mandatory health insurance?
First the introduction of health insurance into the workplace as a core benefit has led to the assumption that it is a right. Employees that purchase health insurance through work typically have their wages reduced every payday to pay for the company plan. It is an invisible payment – much like local, state and federal taxes. The employee never sees the money so it is never missed. Second, when an insured uses his plan there is little or no incentive to “shop around.” The deductible that is paid out to the provider is the same. If there is a plan that has out-of-network providers, there is a disincentive, but all that does is limit the choices for the insured.
What it comes down to is that healthcare insurance is an insurance plan just like auto or homeowners. The principle should be the same. The government shouldn’t control insurance otherwise it will control the care. We need to introduce – or re-introduce – competition into the marketplace, not restrict it.
One way to control costs – and quickly – would be to move to Health Savings Accounts (HSA) coupled with catastrophic coverage. Patients themselves could choose any physician for their preventive needs and sick visits using their HSA’s funds. If something terrible would befall the insured, the catastrophic coverage would kick in keeping the insured from losing their life savings and going bankrupt. This would bring free-market forces to bear in the marketplace. Patients would truly have choice and the healthy could roll over their savings for possible later use.
Remember it’s insurance.