My car was recently broken in to, and I had to work together with my auto insurance company in order to replace the damage. I was a bit unfamiliar with how this process would work because I do not need to use my auto insurance very often. This got me thinking….why do I never use my auto insurance, but every time I get any sort of health care I use my health insurance? This question is worth a bit of pondering….
We must first start by learning how our current form of health care system made its run to prominence. The HMO Act of 1973 is unbeknownst to most, but it mandated managed health care. To answer the escalating costs in Medicaid and Medicare, Congress turned to HMOs for help. In 1973, the HMO Act was passed which mandated companies with more than 25 employees to offer HMOs as a health care option. Until then most employers had avoided HMOs fearing increasing costs.
In 1995, Congress repealed the HMO-employer mandate, but it was too late.  HMOs had already gained a staunch position in the medical marketplace and in our everyday lives. These HMOs grew in size and scope and nearly encapsulated the entire health care industry. The very thing that government thought would bring down prices has now started to be the reason that prices were so high.
Now it’s 2012, and health care is even more expensive than ever, and the root cause is a lack of competition. The high cost for health insurance falls on the US Government and their regulations. Let me explain.
When comparing health insurance to auto insurance, I noticed a very interesting difference. Do you use your auto insurance when you get your tires rotated or oil changed? No, but do you use your health insurance when you go for a simple physical? YES! Why do we prefer using health care for simple “routine maintenance” (physicals, sprained fingers), but not for our cars? Simple, the government has subsidized health care with taxes, and we have become overly reliant on health insurance. Remember, if the government wants more of something they subsidize it, and if they want less of something they tax it. Since the HMO debacle in the 60s-70s, it became common for employers to offer health insurance to potential employees as part of their benefits package for tax advantage purposes.
True to form the average American still gets his/her health insurance through their employer. As the tax code currently stands we (employees or employers) do not have to pay income taxes on employer-provided health insurance benefits, but do on normal income. This is a subsidy on health insurance. Since we pay taxes on our income, we want to keep as much as possible after the government takes their share. In an attempt to save money we use our health insurance every chance we can. Got a splinter?  Go to the doctor and use your co-pay. Need a new set of tires? Go to Tire King and pay for them out of pocket. Only in health care does a 3rd party pay for nearly every service rendered.
Few experts will debate the fact that health care (Medicare/Medicaid), along with Social Security, are going to be the largest financial drains on the US economy in the future. We have a generation of “baby boomers” that are just now reaching retirement, and not enough young people to pay for them. Remember, these government programs were set up with the expectation that an ever growing base of people would expand and pay for the elderly. When the young people get old, there will be more young people to fill in the gaps. This as we all know hasn’t been the case. This is an endless, vicious cycle and we must understand the cause of health care’s continual price increases if we are ever going to solve the problem.
What can we do?
A good solution to the problem would be to end government regulation mandating who must buy health insurance, and who must provide it. If I do not want health insurance, I should NOT be forced by the government to buy it. What if we were all required to buy iPhones? We would expect the price for iPhones to increase due to the abnormally high demand. The same is true for health care. It’s honorable to want everyone to be healthy, but making a law requiring everyone to purchase an over-priced good is hardly compassionate.
The #1 government regulation that could be reformed is the inability to purchase your health insurance from whomever you desire. Currently you are forced to purchase your health insurance from a company within the state which you live. If you live in North Carolina it is illegal to purchase health insurance from a company in South Carolina. This is not the case for car insurance. Government is creating an artificial restriction on competition in the health insurance industry. When competition is stifled, prices rise. It’s that simple. Without the Freedom to choose the company we want to buy our health insurance from, we are forced to purchase from the few companies that are allowed to provide it. We have forgotten how health insurance should be delivered in the Free Market. Like your car insurance, you should be able to purchase health insurance from whomever you want, and be able to shop around for the best prices and services offered.
You never hear the line “you could save 15% on your health insuranceâ€.  This is because the competition is lacking to such a degree that the health insurance companies don’t need to advertise for your business. They simply have the government create laws requiring you to buy it , and they are the only show in town.
The game is rigged. The Free Market brings about competition which eventually lowers prices and increases the quality of goods and services. The electronics industry is a prime example of how the Free Market allows more and more people the ability to purchase new goods. Remember when a plasma TV was ~$10k?
If government really wanted to help bring down the costs of health care, and actually wanted people to stay healthy, then it would remove the laws and regulations causing us to have fewer choices to insure ourselves. If health care and insurance is not left to Market Forces, we will eventually have a socialized, inefficient, bureaucratically red-taped health care system that treats you like the DMV.
great article!