Why health care costs are rising
The steeply rising cost of medical care in the United States has been universally condemned and is, in fact, the central argument put forward by the administration to justify further government intervention in our health delivery system. With profuse repetition of superficial arguments, the administration has assigned the U.S. health insurance industry as the culprit. Certainly the insurance industry is culpable, but in relatively limited degree. There are a number of other factors that account for much more on the cost curve. In view of the abundant discourse on the subject, there has been surprisingly little in-depth public discussion of the root causes of the cost escalation. This writing is directed to exploring a few of the more obvious of those.
THIRD PARTY PAYER — In America we practice a medical system wherein none of the several participants is motivated to control or reduce cost. The patient wants the best outcome from his illness. He is insured, so he incurs no direct or immediate cost penalty for selecting maximum medical attention and service. The medical provider is ethically bound to do his best to deliver comfort and cure. Beyond that, to guard against personal liability in the event of a negative outcome, the provider is motivated to generously deliver any services that some court might ultimately deem necessary. Thus, neither of those two direct participants is motivated to consider cost in their decision-making. After all, the insurance company will pay.
Shouldn’t then, the insurance company be motivated to reduce costs? You would think so, and certainly there is the facade of cost containment (said facade is currently being vigorously condemned), but, in fact, the medical insurance companies operate on what is effectively a “commission” basis. They take a small percentage of the costs as profit so that as costs go up so goes their profit. The reality then is that none of the three participants in the medical transaction is motivated to control costs. In fact, all have intrinsic motives tending to increase costs.
Clearly, until we devise a health care system wherein the participants somehow need to limit costs we cannot expect improvement. To their credit, some planners, conscious of the problem, have proposed systems that intend to restore the traditional seller-purchaser relationship in the health care transaction by providing each beneficiary with funds dedicated for medical care instead of by purchasing insurance.
TECHNOLOGICAL ADVANCEMENT — This major component of the increases in medical cost is appropriate, desirable and fully justified. Life extending and life quality improving innovations are regularly coming on line. Of course, each of those has a price tag so that each makes its contribution to the slope of the medical costs curve. We do all want to live longer and more comfortably, though, so don’t we expect, nay hope, that the innovations, despite their associated cost increases, will continue regardless of the medical system in place? Shouldn’t technological advancement be acknowledged as an appropriate part of the historical cost increases and shouldn’t it be a planned permanent part of any new health care strategy?
ILLEGAL IMMIGRANTS — The number of illegal aliens living in the United States has steadily increased. The actual total number today is estimated to be somewhere between 12 million and 20 million. Federal law requires the provision of emergency services whether or not paid for by the beneficiary. Large numbers of immigrants exploit that requirement so that their general health care requirements are routinely provided by emergency rooms across the United States. Of course, the cost of that service is borne by the taxpayers and that cost increases as the number of immigrants increases. It is reported that 86 hospital emergency rooms in California have been closed due to inadequate compensation for such services.
There are certainly other factors tending to increase medical costs, but the forgoing three are probably the largest contributors. It is important to recognize that none of the several health care plans currently before the nation mitigate, or even seem to recognize, even those three.
Ralph Koerner is a Ramona resident.