Why Our Modern Health Insurance System Won’t Survive

According to this report from Reuters today, “Health insurance premiums will cost families and employers an extra $922 on average this year to cover the costs of caring for the uninsured.”

How does this happen, you may be asking? Well, it’s what is otherwise known as a “vicious circle”: The costs of traditional medical care in this country are rising faster than the average rate of income for most Americans. Even if these Americans have full-time jobs, they still can’t afford health insurance for themselves and their familes, and so delay visits to doctors’ offices and hospitals until their conditions are acute. This, of course, makes that care more expensive. Doctors and hospitals have to raise what they charge for services, making it even more difficult for the uninsured to pay. According to that same Reuters report, uninsured patients only pay about one-third of the costs of their care provided by doctors and hospitals. The rest of the tab (about $43 billion, in round numbers) is split by the government (i.e., the tax payers) which takes the lion’s share, and the rest is added to insurance premiums for those who in addition are paying their share of taxes to cover the first part of the bill, now get gouged by their insurance companies so that they can pay the other.

Some more facts to chew on. The source for these is Familes USA, a nonprofit health care advocacy organization:

• 51 million insured Amercians spend more than one-tenth of their income on health care.
• 10.7 million insured Americans spend more than a quarter of their paycheck on health care.
• 6.8 million insured Americans spend more than one-third of their income on health care.
• Every 30 seconds, an American files for bankruptcy after having a health problem.
• About half of all personal bankruptcy cases are due to medical reasons, and the bills that inevitably result.
• Among those whose illness led to bankruptcy, more than 3 in 4 had insurance at the onset of the illness.
• The majority of the medically bankrupt had been to college, had responsible jobs,and had been homeowners.

And from the Kaiser Family Foundation:

• Eighty-five percent of the civilian, non-institutionalized U.S. population had health care expenses in 2002.
• 1% of the civilian, non-institutionalized population accounted for over one-fifth (22.3%) of the total health care spending in 2002.
• 50% of the population had few or no health care expenses — they were responsible for only 3.4% of total health care spending.

Now, to close that vicious circle with ironic elegance, that extra $1000 in premiums makes it likely that more participants are going to be forced out of health care coverage, making the pool of those able to foot all those costs even smaller. To give you an idea of the numbers, a report issued by Families USA estimates that nearly 48 million Americans will lack health insurance for 2005. Given that health care costs are rising at double-digit percentages, and insurance premiums in the last four years have gone up three times faster than wages, it’s likely that this particular “vicious circle” will ravage itself to pieces before the end of the decade if nothing is done to stop it.

While it might be fun to imagine the insurance companies and HMOs going at it tooth and fang, the consequences for the poor and indigent in this country can hardly be ignored. While the well-off will always be able to afford whatever health care they wish, it’s the elderly and children who will suffer the most if this particular vicious circle is allowed to continue unchecked.

(Obligatory disclaimer: I am not a member of the medical community. I have no medical insurance. I am of that 50% who have few or no medical costs (in 2002 or ever). I use alternative therapies to preserve health, and homeopathic remedies to treat the (rare) illnesses that occur.)