On Healthcare Reform
Stars are aligned for healthcare reform’, says President Obama. Yes, statistically the U.S. has one of the highest expenditures in healthcare according to the World Health Organization, yet it is ranked only 37th in the world in overall performance in 2000. Healthcare professionals in the U.S. have agree to the reform – hospitals have pledged to reduce 155 billion dollars in revenue from the government over the next 10 years, drug companies are willing to forego $80 billion in the same time period, physician representatives, and other healthcare related parties also expressed willingness to contribute. At the same time, stories from middle and lower income Americans on thousand-dollar-a-month premiums for inadequate family healthcare coverages and other lapses in healthcare are all too familiar.
Let s discuss healthcare, as not only is the topic of a healthcare reform raised, the response to it has also been very active from various groups. Based on the current trend in healthcare spending, the projection for future healthcare spending per income level and as national GDP is also worrisome. Yet there are many parties involved, where should we begin?
First of all, let s just simplify the picture of healthcare to involve just two parties, the sick and the provider. In this model, the economic outcome of healthcare depends very much on a Provider Motive. When a person is ill, this person has very little bargaining power against a healthcare provider. If the healthcare provider, who is in the position to improve this person s health, or even save a life, asks for the entire wealth that this person has accumulated so far in his/her lifetime in exchange for treating him/her, the sick would have no choice but to comply or else potentially lose his/her health or even life. As such, the Motive of the health care provider is key to the cost of healthcare, and this Motive, must necessarily be Altruistic. In the old days before healthcare became a ‘Corporate’ operation, as in within academic research or private practice, the Altruistic Motives in healthcare existed, privately, and prevailed.
However, with greater industry participating in Corporate America, the necessary Altruistic Motive was taken over by the Profit Maximizing Motive of the corporate environment, an environment that is ‘˜deadly for the sick, in terms of the economic outcome that this model inevitably converge towards. The Motive for a healthcare provider to be either Profit Maximizing or Altruistic, makes the entire difference for the recipient. Unfortunately, so far, with drug companies, insurance companies that are publically traded, profit must remain a motive. This motive will potentially focus its attention on increasing profit for the firms, which could translate into demanding that the individuals pay for all that they could pay and more, and healthcare towards those who can most afford it, and insurance for those don t really need.
What have presented to us as reality in the U.S. today, is consistent with the outcome from a Profit Maximizing Provider Motive in the healthcare industry, rather than an Altruistic Motive. In maximizing profits, healthcare provider ‘˜will demand that you pay high prices, perhaps all or more than all of your wealth in exchange for a valuable commodity ‘“ your health, driving many people to bankruptcy who sough to purchase it. Insurance companies necessarily drop those who have pre-existing, chronic conditions and insure those who are least likely to get sick. The sick who do not represent profit for the firm would not get coverage. Many people necessarily elected not to carry insurance plans when they decided that they would not be better off under the terms of the plans, including affordability. And the government running the healthcare programs, if it does not act competitively, will run the risk of racking up prohibitive deficits from the program.
What a government health plan can do, is to act as a social program and pay for healthcare services as if it would a social program. The funding must come from government funding in terms of taxes. The government can also act as a more powerful negotiator with hospitals, drug companies, and healthcare providers than individuals can on their own to negotiate better rates and provide preventive services that would in the long-run reduce the amount of expenses from major complications that go untreated. Or else, the government must remove the healthcare industry from profit seeking motive altogether.
In a townhall meeting on healthcare, Obama outlined some of the results that he had intended to achieve through healthcare reform, including:
- No Discrimination for Pre-Existing Conditions by insurance companies
- No exorbitant out-of-pocket expenses, deductibles or co-pays
- No Cost-Sharing for Preventive Care
- No Dropping of Coverage for Seriously Ill
- No Gender Discrimination
- No Annual or Lifetime Caps on Coverage
- Extended Coverage for Young Adults to age 26 under family coverage.
- Guaranteed Insurance Renewal even if you become sick.
The outlined would certainly create an ideal healthcare situation, though given the Profit Maximizing Motive that is still at play with insurance companies, these reforms are likely simply to translate into higher premiums for all insured, increasing burdens for business owners and perhaps the insured middle class.
So that is not a complete answer there. In order for healthcare reform to work, the Altruistic Motive in healthcare must be restored, and Profit Maximizing Motive diminished. Altruism on the healthcare providers part does not impoverish them, it only asks for reasonable compensation for their services, and serves to slow the transfer of wealth from the sick to the providers. Whereas more and more healthcare providing parties have taken the paths for Profit Maximization by participating in Corporate America, the government must act as an Altruistic agent to balance these intentions. Even with some form of healthcare reform in place, given the Corporate culture for profits, there must always be the other Altruistic force at place, to restore the ill who have no bargaining powers in the process. As such, a mechanism must be in place to balance Altruism and Profit Maximization in healthcare, so that this model can still work, in the long-run.
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