The Affordable Care Act was enacted to address two problems: the inability of Americans to obtain health insurance due to a pre-existing health condition and the growing cost of health insurance that renders it unaffordable for many Americans.
In my opinion the arguments for or against the Act are illegitimate because the Act was a poor attempt to fix a real social problem in America - the high cost of health care services. It is the high cost of health care services which has led to expensive health insurance, and since insurance companies are not themselves providing the health care, they should not be the primary target of reform.
The debate was flawed from the beginning because each side of the argument accepted the current health care delivery system when it realized it could not magically create its own ideal system. If the Democrats had been given a magic wand to reform health insurance, they would have created a single-payer, Medicare-for-all program that outlawed private insurance companies. A single payer system could have addressed the problem of the high cost of health care services from the top-down. Reform was not a priority for Republicans so they could not be expected to automatically propose an alternative.
Republicans are by nature adversaries to sweeping social reform, especially when it involves moving away from privatization toward government control. They have opposed funding for government run health care programs such as Medicare and Medicaid. Their hostility toward these programs and their defense of private industry led them to a position against Democrats in the health care reform debate which equated to more or less a defense of the status quo. Republicans were too concerned with issues like Iran, the economy, and the budget deficit to try and find solutions to the rising cost of health care services.
Democrats were unwilling to try for a single payer system because they wanted to have some Republican assistance in reform, or at least they wanted to minimize the level of heated opposition. Democrats even removed the public insurance option to garner Republican support, but in the end the vote ran along strict party lines anyway! So their ideal solution was not tried, and their watered-down reform of health insurance was heatedly opposed too! Instead of risking thinking big and trying to address the real root of the problem by completely overhauling the entire delivery system with a universal, single payer plan, and doing the hard work of conducting a carefully crafted debate while generating populist appeal, they decided to just accept the current delivery system, flawed as it was, and manipulate it the way a puppeteer controls a marionette by slapping all sorts of mandates on everyone participating in the health care delivery system. Their lack of courage and creativity meant they would just accept the current system while legislating countless mandates on consumers and providers within that system.
Even though Republicans were blamed for blocking reform I suspect the partisanship of the Democrats and their inability to start a healthy discussion of the root causes of the problem contributed more toward of Republican reticence than the Republican's defense of the current system. Even if Republicans wanted to reform the system in some way, the smell of partisanship was so strong that they knew it would be better to defend it than participate in a solution they knew would be too heavy on mandates. I am not letting Republicans off the hook here. Republicans did not oppose the Affordable Care Act because it failed to address the root of the problem; they opposed it because of the level of government intrusion into the market - an understandable position to take, but they missed the point just like the Democrats did. The reason to oppose the Act was because it would not work, but that had to be demonstrated thoughtfully!
So Democrat unwillingness to find an idealistic leftist solution led it to a tacit approval of the current system which the party then decided to reform around the edges while Republicans had no choice but to defend that system. This is where the grounds for debate got completely muddled. Each side had to accept the current health care delivery method! (By "that current system" and "health care delivery method" I am referring to the inefficient way in which health care services are paid for.) From the time the Act was first mentioned until the present day, every time a news organization prints or broadcasts a story for- or against the Act, the journalist or commentator accepts the Act as a given, as a legitimate attempt to solve a problem, and then tries to show how the Act is either working or not working by giving examples of how difficult the law is making the lives of Citizen X while supporters show how much it is helping Citizen Y.
I would like to show why the Act is illegitimate by peeling back the layers of the main problem the Act should have addressed - the high cost of health care services (not insurance) in America. I will do this by highlighting the role the private insurance industry plays in the purchase of health care services. In order to defend the private insurance industry it is necessary to first demonstrate what an insurance company is and how its business model relates to other types of goods or services we purchase. In the end I will show why attacking this financial intermediary between doctors and patients is the wrong target.
Picture a community in which each resident is a sole proprietor and each is the only owner/employee of his or her respective business. The town has enough sole proprietorships to meet the needs of everyone in the community.
They agree to a common set of laws to protect themselves from each other and from hostile outsiders. The residents do not simply live together for safety but also benefit from each other's expertise. The Barber can cut the hair of the General Store Owner in exchange for smoked fish the General Store Owner has obtained from the Fisherman. An exchange takes place for the following reasons:
1. No man will work for free so he wants something in return for his services
2. No one man can provide every possible need himself
3. Even if he could provide every need himself it would be so time consuming that life would be very difficult
4. Those enforcing safety within and without the town must be compensated, for they will not work for free either (this is the government)
The ease with which one good or service is exchanged for another is improved by creating a mutually agreed upon measure and store of value called money. Money makes it easier to quantify the value of each individual's good or service; in addition, it also allows for everyone to store up value for something that might be needed in the future. A bank is created to safely guard this money. In exchange for this storage, the bank lends money to residents who desire expensive items that can be used while the owner pays financial installments for them over a period of time. The bank charges interest on the money to cover the cost of lending the money for that time period and to protect customer deposits in a central location.
In a very short time we have created a group of individuals with occupations, a government to safeguard that population, and a means of exchange by which residents can purchase and store the value of their goods and services.
What is the incentive for each resident to work and not mooch? Who determines how many sole proprietors are in each field? How are the Safety Enforcers (the government) elected and held accountable? and What guarantees the store of value will not be stolen by the banks?
Man's desire to work stems from two primary motivations: the need to survive and the desire to perform meaningful work. The motivation to achieve these two goals are sufficient reasons to acquire the necessary knowledge and training to perform the role.
What determines the role is determined partially by the desire to follow one's personal interest and partially to meet a need in society. If society is flooded with Police Officers, one can obtain the knowledge and training to become a Police Officer, but unless the individual can prove himself more worthy than an existing Police Officer or there is a strong need for another, pursuit of that occupation will be a failed endeavor and he will be forced to either stay in the community and die or move to another community with an unmet need for Police Officers.
Safety Enforcers, or government officials, will be elected and held accountable by residents who place them in charge of enforcing laws which protect residents from each other and from outside threats.
Banks are one of the entities bound to abide by these laws that protect customers from theft.
The value, and therefore the price, of each good or service is determined strictly by the need in the community and not by any centrally planned amount. Prices develop organically and are subject to change. If the Barber charges 5 sheckels for a haircut but gets no customers because patrons like the Lawyer and Fisherman have determined it is too expensive. The Lawyer makes 12 sheckels per day and the Fisherman makes 5 sheckels per day and they determine that 3 sheckels for a hair cut is a good deal. The Barber has no choice but to lower his price to 3 sheckels. Seeing the lower price, the Lawyer and Fisherman can stop poorly cutting their own hair and decide pay for the service once again. The amount of sheckels each man receives is based on how difficult the occupation is to perform and how important the job is to the community.
At a very basic level this is an example of humanity living in a free market economic system under the protection of laws overseen and enforced by a democratically elected government. Next, I will demonstrate how one occupation provides its services.
There are two Doctors who provide all of the health care services in the community. The occupation is one of the most advanced, requiring years of study and apprenticeship; consequently, the work is difficult but it pays handsomely. On average, a Doctor will make 15 sheckels per day. The pay can vary widely because each service costs a different amount and there are periods of time like the winter when there are more sick people visiting him.
Prices for all services are written in a book and the most common services are displayed on a giant chalk board above the Doctor's desk at his office downtown.
Regular physical evaluations are common and only cost 1 sheckel for the 15 minute visit. Every service is paid for out of pocket after the visit with no financial institution facilitating the transaction. If a person is unable to pay for a service the customer has the option of asking the Doctor to provide the service for free or for a reduced amount. The Doctor is under no obligation by the community or the Safety Enforcers to provide a service for which he is not compensated. When asked why he will not perform his services for free he retorts, "Must you provide your expertly crafted _____ to me for free?"
When the Doctor provides a service to a resident in exchange for money it is no different than the Lawyer purchasing fish from the General Store Owner. The General Store Owner is not obligated to give the Lawyer the fish for free, but only for the price that is determined in the marketplace, which is based on the need for fish in the community and the difficulty in obtaining the fish from the sea. In the same way the Doctor is not obligated to fix the Lawyer's broken arm for free, but instead charges him 9 sheckels, the advertised price, which is based on the need to fix broken arms in the community and the difficulty of providing such a service.
In order to provide better services the Doctor must learn how to improve his services. This involves studying new subjects and investing in new technology. One area of improvement the Doctor is determined to focus on is infant mortality. He has learned of a new technique for delivering babies that increases the chance of survival and reduces pain for the mother. Using the new method will require hours of study and an investment in a new machine that costs 85 sheckels. To compensate for the improved baby delivery, the Doctor increases the price for that service from 20 to 22 sheckels.
Over time other improvements are made that cause an increase in prices but residents do not complain because have never been healthier. Meanwhile, the rest of the community has seen an improvement in their own occupations because of advances in technology and an increase in the population. Residents pay more for shovels from the General Store Owner because the new model he carries is made with a metal that makes the shovel last twice as long as the older models. The overall standard of living has increased so while prices have increased so have the quality of goods and services.
The rate of the prices charged by the Doctor have outpaced prices for other goods and services because of a more rapid investment in technology and a high level of need in the community. While most in the community are still able to afford the basic services like checkups, fixing broken bones, and medicine by paying out of pocket at the end of a visit, there are some services like baby delivery and major surgeries that cost more than what a person can pay at once. The cost of a baby delivery has risen to 65 sheckels and surgeries can be as high as 100 sheckels for life-threatening situations.
Since these large sums are only needed once in a while some members in the community decide to pool some of their monthly pay to a fund that can be used to cover these services when they occur. Pooling the resources transfers the risk of having to pay a high amount at once to a third party entity that can manage the funds, keep track of who is involved, and pay the Doctor at the end of the visit for services rendered. This marks the beginning of the creation of the Health Insurance Proprietor
The Health Insurance Proprietor is just like any other individual in the community. He begins his career wanting to be a Banker but finds there are too many other Bankers and his passion is more for health related issues. When he hears some members of the community are pooling money to pay the Doctor for more advanced emergency services he writes up a plan to start a business. The Health Insurance Proprietor will collect an affordable amount of sheckels from the Fisherman, General Store Owner, Lawyer, and others and pay the Doctor for the expensive service when the need arrives. The Proprietor's business is similar to that of the Bankers in that it keeps some amount in reserves to pay claims while investing the rest in other things.
In order for the Health Insurance Proprietor to stay in business he must successfully collect premiums from participants, invest the money responsibly, and pay for services in a timely manner. The amount of money going toward services must be less than the amount of money being collected by participants. If at any point the cost and volume of expensive services charged by the Doctor exceeds the amount of money collected and reserved for his customers, the Health Insurance Proprietor will have no choice but to go out of business.
To protect himself from going out of business and to ensure that the prices for the insurance can be affordable, the Proprietor develops a conditional underwriting standard. This standard asks a series of questions to the applicant who wants to join the pool that render the applicant eligible for participation. If the applicant has a condition like kidney failure that requires the Proprietor to pay the Doctor 60 sheckels per month but the applicant can only afford 15 sheckels per month in premium then the Proprietor can deny entry into the pool. Agreeing to allow the applicant into the pool would be the equivalent of the Doctor offering his services for free. The Proprietor knows if he must pay the Doctor 60 sheckels per month while only collecting 15 sheckels per month from the customer he will quickly go out of business. And just as the General Store Owner cannot be forced to price his fish lower than what it costs him to obtain the fish from the Fisherman, so the Health Insurance Proprietor is not forced to offer his service for less than what it costs to provide it.
Residents are not demanding the Doctor reduce his prices because they value the service he is providing. What residents want is a means by which they might budget for an unforeseeable medical emergency that costs more than what they can pay at one time. Eventually the automobile business develops its own version of insurance and an Automobile Insurance Proprietor is born. And just as the Doctor still gets paid out of pocket for basic procedures like physical checkups and pain pills and reserves insurance only for very expensive services, so the Auto Mechanic continues to receive out of pocket payments for oil changes and popped tires while reserving insurance payments for major accidents.
An American Health Insurance Company as we know it today is a corporation made up of a CEO who could be considered the initial sole proprietor who has hired employees to act as extensions of himself to handle the thousands of policies he cannot possibly handle on his own. Their collective expertise involves taking small, affordable monthly payments from individuals, and then paying for expensive services listed in a contract when that service is required. This contractual relationship transfers the financial risk from the customer to the insurance company. In order for the insurance company to continue to exist it must collect more premiums than it distributes. To do this is must make sure it is only accepting those into the pool who meet the entry requirements. If the customer would end up getting more benefits than they could possibly pay in over time, the Health Insurance Company has the right to refuse entry into the pool. The customer says, "I am healthy. I will pay X for this plan in exchange for this company Y amount for services should the need arise. I am under no obligation to remain in the plan, and the insurance company must keep me for as long as the terms and conditions indicate in the contract."
The insurance company is not obligated to accept anyone but wants to accept as many as possible so as to have a thriving business with a greater pool of resources. It is not the facilitator of all financial transactions between a doctor and a patient but only those deemed too expensive for a customer to afford all at once at the time the service is provided. The service should not purchased by employers as a tax free benefit but by individuals in the marketplace. The insurance company is not an enemy, a health care provider, the facilitator of all transactions, the determinant of prices charged by doctors, nor are they to be taken for granted. They are to be perceived and treated like any other business in the free marketplace.
At one time private insurance companies in America resembled the Health Insurance Proprietor of our theoretical town. Like auto insurance companies of today it only paid for very expensive health care services. When employers started giving health insurance as a tax free benefit it took it off the private market, distorting the price. When insurance companies became the facilitators of all health related transactions, not just the expensive ones, it became equated with health care services, and thus a gatekeeper between you and the doctor. When the Affordable Care Act went into effect it kept the insurance company in this role instead of bringing it back to the Health Insurance Proprietor is had always meant to be.
The insurance company is not obligated to accept anyone but wants to accept as many as possible so as to have a thriving business with a greater pool of resources. It is not the facilitator of all financial transactions between a doctor and a patient but only those deemed too expensive for a customer to afford all at once at the time the service is provided. The service should not purchased by employers as a tax free benefit but by individuals in the marketplace. The insurance company is not an enemy, a health care provider, the facilitator of all transactions, the determinant of prices charged by doctors, nor are they to be taken for granted. They are to be perceived and treated like any other business in the free marketplace.
At one time private insurance companies in America resembled the Health Insurance Proprietor of our theoretical town. Like auto insurance companies of today it only paid for very expensive health care services. When employers started giving health insurance as a tax free benefit it took it off the private market, distorting the price. When insurance companies became the facilitators of all health related transactions, not just the expensive ones, it became equated with health care services, and thus a gatekeeper between you and the doctor. When the Affordable Care Act went into effect it kept the insurance company in this role instead of bringing it back to the Health Insurance Proprietor is had always meant to be.
In 2014 the Affordable Care Act took effect. Here is what it has done:
It forces the Health Insurance Proprietor to accept every applicant.
It tells the Proprietor what services it must cover.
It maintains the status of the Proprietor as the facilitator of the most basic services that should be paid for out of pocket.
It continues to favor tax-free employer payments as the main method of purchase.
It equates the Doctor with a Health Insurance Proprietor under the term "health care."
It blames the Proprietor for the high prices charged by the Doctor.
It takes the occupation of the Health Insurance Proprietor for granted, demonizes it, then tells it what to do.
By "It" I mean the Safety Enforcers - the elected officials - the lawmakers - who will fine the Proprietor for failure to comply with its demands until it is fined into bankruptcy. This is health care reform in the United States.
The act gives the Safety Enforcers who know nothing about the Health Insurance Proprietor or the Doctor the authority to determine what services are necessary, what services should cost, how services should be provided.
So when evaluating the pros and cons of the Affordable Care Act, please take into consideration what is actually being debated. If you believe that every American should have access to affordable health care, that is quite a different thing than the Safety Enforcers making the Health Care Proprietor let someone into its pool while also forcing the General Store Owner and Fisherman and Barber to purchase that service from the Proprietor. If you believe that every American does not have the right to affordable health care, that is quite different than giving preferential tax treatment to employers who purchase plans from the Health Insurance Proprietor whose role has drifted from risk pool manager to service denier and premium hiker.
Further, if a healthy society is not a desirable goal because a proposed solution to fix the system contains allegedly socialist undertones, perhaps having an educated society is too socialist and therefore the public school system as we know it should be completely privatized as it was before the adoption of a national public school system. Under that old system, only the rich could afford a quality education. Can you imagine if we had that system today and some in the government wanted to take some of the richer people's money to educate the public? The move could be perceived as too radical so its proponents would settle for a hybrid system where private teachers would be forced to teach some quota of poor students while also forcing the parents of poor students to attend those classes.
Further, if a healthy society is not a desirable goal because a proposed solution to fix the system contains allegedly socialist undertones, perhaps having an educated society is too socialist and therefore the public school system as we know it should be completely privatized as it was before the adoption of a national public school system. Under that old system, only the rich could afford a quality education. Can you imagine if we had that system today and some in the government wanted to take some of the richer people's money to educate the public? The move could be perceived as too radical so its proponents would settle for a hybrid system where private teachers would be forced to teach some quota of poor students while also forcing the parents of poor students to attend those classes.
These are the grounds on which the debate should have taken place in Washington D.C. Instead, politicians decided to accept the current delivery system while forcing everyone involved to do something at the point of a gun. Employers have to offer minimum coverage or pay a penalty, individuals have to enroll or pay a tax, insurance companies have to cover everyone regardless of medical condition or pay a fine, and states have to provide exchanges or lose Medicaid funding. And why? How did the purchase of a service from a doctor turn into fining and mandating everyone do something? To make matters worse the price of services are still high and the cost of insurance is still high.
Current news stories updating the public on the Act are providing evidence for or against the Act within the context of that poor debate and poor solution. So when we get angry about insurance companies dropping plans because of the mandates or individuals paying higher premiums than before we are getting angry about the wrong things!
In spite of this criticism, the Affordable Care Act has accomplished what it set out to do. It has forced the Health Insurance Proprietor to accept everyone into its pool of customers regardless of the cost. It has also made the previously uninsured Fisherman and Barber get plans at an income-adjusted monthly price. Congratulations Washington! The Safety Enforcers are now intimately involved in the health care delivery system because they force everyone to participate while taking a small amount of money from the income of the Lawyer and redistribute it to the Fisherman and Barbers to make their insurance plan cheaper.
In order to reform something you must first identify the real problem. Only by stripping away the layers of complexity can this be achieved. In the end the market favors private health care, private health insurance companies with individuals making the choices, not the government. The social impacts and solutions to the problem of pre-existing conditions can be addressed concurrently with the private solution. If a society believes that the need for public health is similar to the need for public education, the debate must still go back to basic principles and its merits should be debated in a bi-partisan way with true leadership that brings everyone together.
Current news stories updating the public on the Act are providing evidence for or against the Act within the context of that poor debate and poor solution. So when we get angry about insurance companies dropping plans because of the mandates or individuals paying higher premiums than before we are getting angry about the wrong things!
In spite of this criticism, the Affordable Care Act has accomplished what it set out to do. It has forced the Health Insurance Proprietor to accept everyone into its pool of customers regardless of the cost. It has also made the previously uninsured Fisherman and Barber get plans at an income-adjusted monthly price. Congratulations Washington! The Safety Enforcers are now intimately involved in the health care delivery system because they force everyone to participate while taking a small amount of money from the income of the Lawyer and redistribute it to the Fisherman and Barbers to make their insurance plan cheaper.
In order to reform something you must first identify the real problem. Only by stripping away the layers of complexity can this be achieved. In the end the market favors private health care, private health insurance companies with individuals making the choices, not the government. The social impacts and solutions to the problem of pre-existing conditions can be addressed concurrently with the private solution. If a society believes that the need for public health is similar to the need for public education, the debate must still go back to basic principles and its merits should be debated in a bi-partisan way with true leadership that brings everyone together.
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