by Raymond Bilodeau

Created on: October 24, 2008

Health care costs are largely the result of unintended consequences - in this case, of separating the cost from the recipient and requiring payment of insurance premiums by non-recipients. The first unintended consequence was that medical care providers shifted from non-profit entities to profit-making entities, then insurance companies changed from profit-sharing (with insureds) entities, "mutual insurance" companies, to for-profit legal entities, keeping the profits for shareholders instead of insureds. Once the goal of medical care and insurance changed from service to profit-making, they became much more entrepreneurial, with doctors grouping together to buy expensive medical testing equipment and steering patients to them, all paid by the insurance companies without much question. Doctors increasingly went into specialties, in order to increase their incomes and better justify their profits from the new technology. The insurance companies just increased the premiums paid by employers.

This system is now in collapse, as employers started refusing to bear the cost, or the full cost, of the increased premiums, and the number of uninsured became a huge cost to "the taxpayer" because of overuse of medical emergency facilities. Actually, the largest part of the costs were passed on to self-pay and insurance-covered patients.

Large insurance carriers quickly moved to contracts giving them a discount for payments from them to medical care providers. Smaller carriers either followed suit or went out of business. The difference between care costs and insurance payments were made up by self-pay patients and increased demands for public subsidies.

This may sound terrible, but we older persons remember when doctors treated patients who varied greatly in their ability to pay, and who charged rich patients more than poor patients. The doctors had no economic incentives to overuse technology or increase costs to patients to be paid by insurers.

It should be clear by now that the health care syatem has followed a path similar to that of mortgages, and the greed of the companies and corporate officers, now including doctors, has led to a very unstable economic situation. The government has not been able or willing to find a solution, in part because the medical community has provided huge contributions and lobbying in the political process. Patients and unions have been slow to recognize what is happening. The baby boomers, now reaching retirement age, will be the first to see the beginning of the end of Medicare as we now know it.

There is really only one solution, which has been in place in virtually all industrialized countries: universal health care insured by the government. Government-owned clinics and/or hospitals for uninsured people is another possible solution, but this establishes a clear-cut dual medical system, one for the poor and one for the rich, which may not be politically tolerable in the new post-Reaganism era.

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