Free market magic in health care

Imagine the following scenario: A married couple has health insurance through his employer. Having just married, she had before carried her own insurance as a private individual, but in a gesture of friendliness, his boss suggested that she be added to his policy. But his was a small company, and costs were mounting, so that the cost of his insurance was approaching $10,000 per year. In the meantime, she had a bout with melanoma, and a couple of surgeries had probably saved her life.

He is called into the executive suite one day, and told that the health insurance policy is cancelled, and that each employee now must obtain insurance in the private market. But, he says, my wife had melanoma. She can’t get a policy anymore! The company was not aware of this, but the decision was made, the results final.

There’s a program called “COBRA” that forces insurance companies to offer policies to employees in this situation, but the company was too small for it to apply. In desperation, he found “fake” employment through a mutual acquaintance, pretending to be an employee so that he could continue to carry health insurance, for which he reimbursed the company. But the fake employment ended when the real company went out of business. In this case, COBRA applied, so that for a period of 18 months, they could continue to carry insurance. The price was outrageous, $1300 per month in 2005. Insurance companies do this to discourage people from using COBRA, but for this couple, it was the only option. At the end of 18 months, all coverage ended.

He had committed “insurance fraud.” The insurance companies and his employer had all operated within the law.
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The results were nothing short of barbaric. Think of it this way: Because she had a need for access to health care due to a serious medical condition, the insurance company blocked her access to the system.

What is it that causes people to operate in an antisocial manner, indifferent to human suffering? Easy. It’s the profit motive. Because of the demands of private investors, companies that behave in a humane manner are soon burdened with clients who have medical needs, while other companies are able to legally avoid them. The rules of the game mandate this behavior. If all insurance companies got together and agreed to behave in a civilized manner, the system would improve. But the profit motive forces them to band together to behave in a crude and inhumane fashion. It’s the free market working its magic.

Today we are entering a system in which the Obama Administration has supposedly remedied this situation, forcing us all to buy insurance policies from private health insurance companies. But far from being a fix, the profit motive still exists, and insurance companies are still incentivized to avoid people who need access to health care. (It doesn’t hurt that the insurance companies wrote the bill masquerading as the “Affordable Care Act,” structuring it to serve their own interests and prohibiting a “public option,” or access to health care through the logical insurer, government.)

We all await now the implementation of “Obamacare” and the private mandate. Insurance companies will no longer be allowed to reject people with “preexisting conditions”, better called “existing medical needs.” But the profit motive is still there so that the disincentive to provide access to affordable care are still there too.

The first adjustment has already appeared – companies in droves are no longer offering coverage for office visits, not even allowing them to apply against deductibles or out-of-pocket limits. They are thereby encouraging people to avoid seeking care for emergent conditions. People already spending thousands of dollars for insurance are not likely to add to that burden. So conditions will now fester until they become critical and require expensive care.

Tens of thousands of people will die premature deaths due to this new feature. It is bad public policy. It is short-sighted. But the profit motive demands it.

This problem will not go away until for-profit companies are driven from the market, as was done in Canada in the last century. Until we get our act together and separate profit from basic health care, barbaric behavior will still be legal. Back-door attempts to gain access to health care will still be called “insurance fraud.”

The profit motive is our enemy. It encourages bad public policy, and has caused hundreds of thousands of premature deaths in the previous decades. We must eliminate it from our health care system.