Tuesday, October 14, 2008

Who Pays for Healthcare?

I know what you're thinking, "We do!!!"  However, that's not exactly true.  You see, I recently did an analysis of the healthcare industry for a graduate course I'm taking and I was surprised at what it showed me.  As I gathered information, one of the things I asked was "why does quality of care seem to be going down while prices are going up?"  That's just the opposite of what a capitalist economy is supposed to produce.  What I found is interesting.

Everybody who has health insurance knows that costs are skyrocketing.  Not only that, doctors seem more and more interested in moving you through as opposed to really getting to know you.  Why is that?

As I studied how things work, I found out something very interesting.  We (individuals) are not the customers of healthcare (doctors, hospitals, labs, etc).  Sure we go in for treatment but who writes the check that actually pays for the services?  The insurance companies.  Healthcare providers, like all businesses, tend to focus on who is paying for their services.  In this case, it is insurance companies.  The more patients a provider can run through in a day, the more money is billed to insurance companies.  The incentive for a healthcare provider is to get the patient out of the exam room as quickly as possible.  We're not people any more, we're $150 reimbursements.  OK, that's a bit cynical but that's where our healthcare is.

But wait, it gets better.  See you might be thinking that, since we are paying for the insurance, that we should get better treatment.  Right?  Wrong.  Once again, the individual or family is not the primary customer of insurance companies.  Their primary customers are businesses.  According to 2006 census bureau statistics, only 9% of us have individual healthcare plans.  The rest of the market is made up of business and government (Medicare and Medicaid).  Once again we, the individuals, get the short end of the stick because insurance companies don't care about us, they're trying to sell to HR departments.  If you don't like what your company offers, too bad because you probably can't afford to get it yourself.  After all, the government has made premiums tax free if they're paid for by businesses but not for individuals.

Another feature of our healthcare system is that insurance companies are limited to a specific state (it's not Blue Cross Blue Shield, it's Blue Cross Blue Shield of Arizona).  Thanks to government intervention, there's not as much choice in insurance.  If I want to get individual insurance, I have 7 choices instead of hundreds.  Which of those options creates the kind of competetion that improves services and drives down prices?

These are just a few of the issues with our healthcare system.  If you'd like more information, there is an excellent sight sponsored by the Harvard Business School that has even more data on our healthcare system.  Enjoy!

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