Several weeks ago, I provided a list of possible deficit-reduction moves the federal government could make and what their effect would be on the trillion-dollar-plus deficit the country is currently facing. My purpose was two-fold: first, to indicate how difficult, if not impossible, it will be even to approach a balanced budget without a major increase in revenues; and, second, to point out how out of touch the tea-bagger crowd is with reality.
As might be expected, my mail was full of scorn from the members of that movement and their cheerleaders in the Republican Party. (The two are morphing none-too-gradually into one, as more and more Republicans, either because they feel intimidated or because they are completely Machiavellian, embrace the movement’s talking points. That the movement is a product of Glenn Beck and his Fox News colleagues makes the morphing all the more plausible, since Rupert Murdoch’s cable network is also the most aggressive champion of the Republican Party.)
Some of the correspondence I received was respectful, along the lines of “damning with faint praise.” One writer lauded my rhetorical skills while dismissing the facts I recited as “obfucatory.” Another suggested Bush wasn’t a true conservative and that whether he was or not doesn’t change the fact (in his opinion) that Obama is a socialist. Others were just angry, at me and at Obama and the Democrats, because, well, just because, I guess; most of them didn’t provide much in the way of specific reasons.
That anger is certainly at the heart of the tea bagger movement. Everyday folks don’t go to rallies carrying signs like “Left My Guns at Home – This Time” unless they are very angry. How much less anger do they have collectively than Joe Stark (the guy who flew his private plane into the IRS building in Texas last week) had personally? Hopefully a good bit; but with some of the irrational things they purport to support (and oppose), you have to wonder.
But because most of them are everyday folks, the hope is that most of them can be educated. (I’ll mention only in passing the fear that they are far closer to Madame Defarge than Benjamin Franklin in their revolutionary zeal, thus being beyond reason and incapable of hearing rational arguments, let alone learning from them.)
And so, in an effort to educate those consumed with anger, here is a relatively simple reason (one among many that are all equally pressing and real) that explains why major health care/health insurance reform is necessary to contain health care costs.
Let’s start with an indisputable fact. Under the current system, wherein health care is largely regulated by insurance companies, costs are increasing at an alarming rate.
Just last week, as if to drive home the point, one of the largest healthcare insurance companies – Anthem – announced a 39% average increase in insurance premiums for its policies. Other companies are said to be on the verge of announcing similar increases, holding off only because of the impolitic nature of any such announcements. (Anthem was severely castigated by Obama and many commentators on the left and right almost immediately after it announced its plan; it has since pulled back on it to “study” the issue.)
So why are the costs of health care increasing? Part of the reason, certainly, is the nature of the for-profit system itself. Companies like Anthem exist to make money for their shareholders, their executives and, hopefully, their employees. It’s how things are supposed to work in a capitalist economy. You provide an essential service, you employ people who earn commensurate with the earnings of the company, and you survive because you continue to provide the service to a sufficient number of consumers to keep the business viable.
But there’s another, probably more significant, reason for the increased cost of health insurance, and it is far more invidious and far less containable in the current system. It’s called the “insurance death spiral,” and here’s how it works:
In order to make a profit, insurance companies must secure more in premiums than they pay out in benefits. In the case of health insurance, that fact means that companies must insure more individuals who don’t need health care than those who do. (The specific ratio will depend on a variety of factors, but the basic point is indisputable.)
Thus, if an insurance company’s customers are primarily a healthy lot, it can keep its premium rates relatively low and still make a profit. But if the company’s customers are primarily in need of medical care, i.e., if they are unhealthy, the company must increase its premiums to maintain a meaningful degree of profitability.
Now let’s juxtapose the reality of a struggling economy, with many, especially those likely to be most healthy (young people), seeking ways to make ends meet. They have absolute needs (food, shelter) that they will use their limited income to meet. One of the things they may decide they don’t need (or at least are willing to take a chance on not needing) is medical care.
And so the pool of healthy customers for the insurance company dwindles, while the pool of the unhealthy remains constant. To meet its profit goals, the company will have to increase its premiums.
But then a second wave of difficulties is likely to emerge as private companies who provide health insurance for their employees are also hit with the weakened economy. They, too, look for ways to make ends meet, and their employee benefit package, to wit: the health care benefits they provide, is also likely to be cut.
And those employees will now be faced with a difficult decision: Do they pick up the costs of insurance or go uninsured? With premiums escalating, many will choose not to insure, leaving the insurance company with even fewer healthy insureds, and with even more reason to increase premium costs.
The insurance death spiral is real. Anthem is just the tip of the iceberg. Private industry isn’t capable of solving this problem alone.
Health care reform is the only viable solution.