Thoughts on Healthcare: Luxury vs. Necessity

Preface

As a follow-up to my Thoughts on Healthcare: Private Health Insurance, I wanted to address a view point that people don't often think about. Healthcare is a Necessity. If people do not receive proper healthcare when required, they will often be greatly harmed or dead. This is apparent from an article from Center for Disease Control, which states that 20 to 40 percent of annual deaths from each of five leading US causes are preventable. That is quite horrifying.

Why Should I Pay for Someone Else?

When brought up the data of death or serious harm from preventable diseases, one of the phrase I hear the most often is: 

"Why should I pay for someone else?" 

I have a question in reply:

"Who says that you are not already?"

A quote from a survey done by the Kaiser Family Foundation in 2016: "Overall, about a quarter (26 percent) of U.S. adults ages 18-64 say they or someone in their household had problems paying or an inability to pay medical bills in the past 12 months." This inability to pay included both insured and uninsured people. Where do those unpaid costs go? 

• Parts of those costs are eaten away by the hospitals. These would be passed to others who can afford the healthcare.
• Parts of those costs are eaten away by the government. These would be passed into your tax dollars anyways.

Directly or indirectly, you already pay for people who cannot pay their medical bills. Not only that, if people become disabled due to their treatable diseases, they will be unable to sustain themselves, which means that they will need further assistance to survive.

You already pay for other people's healthcare.

In the mean time, Health Insurance companies take the people who cost less in healthcare costs (as mentioned in my previous post, they make tens of billions of dollars in revenue) and make profit from them.

What Are Luxuries?

Luxuries are things that add to pleasure or comfort but not absolutely necessary (From Merriam Webster).  Luxuries are things that free market can flourish with. Prices go up and down depending on supply and demand, and if people cannot afford them, they can still live out their lives fine. Companies can compete with each other, and they can rise and fall depending on how much people want them. If a monopoly or oligopoly forms on a luxury, and the cost rises to the point of in-affordability, people can choose to stop purchasing such things. That last statement does not apply to necessities.

What Are Necessities?

Necessities are things that are not optional to people, but are required for proper life. I would consider things like clean water and food to be among them. You don't have a choice on any of these. If you don't drink water, you will die. If you don't eat food, you will die. If you don't get proper medical treatment when you need it, you will die. 

If you try to apply free market to necessities, monopolies or oligopoly can form to raise the cost as much as desired, and people do not have the choice of not buying them.

Because of that, water and food are heavily controlled by the government. Not only are quality of water and food heavily regulated, they are also made affordable or made accessible through subsidies. Though healthcare is a necessity, it is not given the same treatment as other necessities, allowing companies to take advantage of this lack of protection.

Conclusion

I feel that a lot of arguments against government control / universal healthcare revolve around viewing healthcare as a luxury rather than a necessity. As described above, I believe that healthcare is a necessity, and should be treated as such. We already pay devastatingly large amount of money on healthcare, and the government spends more than almost any other country in the world on healthcare. I hope that if we treat healthcare as a necessity and regulate it as such, we can improve the quality of life for everyone in the country.

Thoughts on Healthcare: Private Health Insurance

Preface

Healthcare in America is something that greatly bothers me. As one of the world's superpower and one of the strongest country in the world, USA manages to perform three remarkable feats:

• Have one of the worst average wellness and lifespan among the developed countries.
• Have one of the highest government spending per capita on healthcare.
• Have one of the highest individual payer cost on healthcare.

These three factors seem almost self-contradicting and paradoxical. What is going on here? I wanted to list my thoughts on what issues may be present, and what can be done. (You can read more in detail at The Commonwealth Fund)

I decided to focus my first post on the Private Health Insurance, and what problems may be stemming from that.

Private Health Insurance

It always bothered me that health insurance in America is run by private corporations looking to make profits rather than the government. Why should it be ok that profits are made here when it doesn't actually provide any global value? All insurances do is aggregate and distribute the money, not provide more services and heal people. It feels to me that the government has a larger stake in keeping the population healthy while private corporations have larger stakes in strictly making profit.

All of the factors below make me believe that having universal healthcare system would be beneficial to the country, as shown to be working in various other parts of the developed world.

Profit margins on private health insurance

First thought, it seemed best to analyze how much profit is being made in the health insurance industry. To start, I looked up the top health insurance companies by market share, as I believe that would most accurately portray the amount of net income made by the companies.

Here are the top 11 health insurance companies by market share, which cover 50.14% of America in 2015.

Company	Market Share	Net Income 2015 (in millions USD)
UNITEDHEALTH GRP	12.20%	5,813
KAISER FOUNDATION GRP	7.51%	1,900
ANTHEM INC GRP	6.13%	2,560
HUMANA GRP	5.67%	1,276
AETNA GRP	5.60%	2,390
HCSC GRP	3.58%	1,009
CIGNA HLTH GRP	2.51%	2,077
CENTENE CORP GRP	2.10%	356
BLUE CROSS OF CALIFORNIA	1.64%	*Seems to be subset of Anthem Inc
HIGHMARK GRP	1.63%	294
MOLINA HEALTHCARE INC GRP	1.56%	143
TOTAL	50.14%	17,818

These 11 companies, covering ~50% of the population, make a net income of around 17.8 billion dollars. That may not be a lot of money by government standards, but it is definitely not an insignificant amount.

Healthcare Administrative Costs

Due to the sheer number of private health insurance companies in the US, the government spends 31% of it's healthcare expenditure on healthcare administration. That is in stark contrast to Canada, which spends only 16.7% percent of it's healthcare expenditure on the issue. As Canada's expenditure is lower in general, the discrepancy in money spent per capita is huge.

Also, the health insurance companies themselves have huge extra operating costs, far outweighing the profit made by the companies. For example, United Health had total revenue of 157 billion dollars, with operating cost of 24 billion dollars. That is over 4 times their net income, and is a significant portion of their revenue. If the health insurance companies are consolidated, we should be able to significantly reduce the operating costs, as the redundant administrative costs would be removed.

Negotiation On Pharmacy and Healthcare Costs

Another issue with having numerous small insurance companies without one collective insurance agency is the lack of bargaining power. To put simply, medical bills themselves are extremely high in America compared to the rest of the world. For the same exact treatment, Americans spend a lot more than most other countries. Here is a news article that addresses the point. 

If the health insurance and medical fees were regulated by the government, or controlled by the government, then the fees can be reduced to be more inline with the rest of the developed world.

Some argue that having expensive healthcare in America is the only way for medical research to progress, and I disagree. If that really was the case, if the money was the only reason the medical researches have been progressing so fast, then why do medical researchers not get paid so highly? Here is the reports of median salary of medical scientists, which isn't particularly high compared to other medical or engineering professions. This causes me to believe that the profit generated are sent into the pockets of investors and higher administration rather than the researchers themselves.

Conclusion

It seems to me that just by removing the healthcare companies (removing the administrative costs and applying the revenue to further treatments) we would have tens of billions of dollars, possibly even hundreds of billions of dollars (accounting for administrative costs in all the insurance companies, not just one) that can be used to treat people better and cover more people. It could also greatly alleviate the medical cost gap America has with the rest of the developed world, by allowing the country to bid for pharmacy costs more in line with them.

This is my personal opinion: it is not in the interest of the insurance companies to improve the well-being of the people. It is, however, in the interest of a country to improve the well-being of the people. I believe that something as crucial as insurance or health should be handled by a body that is interested in improving the well-being of the people. I'm not viewing the corporate as evil nor government as angelic. It merely makes sense from selfish interest point of view, that a government wants a healthy populace to become stronger, while a corporation has no such desires.