Gambling With Our Lives: How Private Industry Has Ruined Healthcare

Meet Vivian, from Hilsboro, Oregon. Vivian’s husband is disabled and she retired with a partial disability pension. Right now the couple is using COBRA¹ to cover their health insurance needs but time is running out. COBRA is not and was never intended to be a long term solution for those who lose health insurance; it essentially extends some prior coverage for up to 18 months. After that, COBRA runs out and the policy-holder has to find new insurance, a task that is often impossible for people like Vivian.

This is the situation that Vivian faces and one of the least talked about problems with our privately run health system. Bluntly, health insurance is a bet between the policy holder and the insurance company that the policy-holder will not get sick and health insurance companies find it difficult to win that bet if they insure people who are already sick.

Advocates for a public option – a catch-all safety net for those who can not be profitably insured by the private system – point to stories like Vivian’s as an argument for reform. They make good arguments but encounter resistance from people who would rather keep the government out of the health insurance business and instead regulate the private companies that fulfill the role today.

They forget that we have been down this road before; we have tried to address the failings of private insurance and our efforts have done little save to complicate and confuse the issue.

This should not surprise anyone. The purpose of a corporation is to turn a profit and that becomes difficult when government forces that industry to make bad bets. Either health care is a human right which must be funded, in whole or in part, through taxes rather than premiums or health care is a luxury that we must be prepared to deny, sending the destitute to their graves for want of treatment for curable diseases.

Our present middle ground is the source of much of the absurd cost of health care. Our efforts to preserve the free-market system while simultaneously providing health care for those in need has driven the price of care and insurance ever higher while doing little to address the fundamental contradiction between for-profit health-insurance and humane care for the sick and unprivileged.

When Vivian’s COBRA runs out she will apply for private health insurance policies – essentially asking health insurance companies to make a bet with her that neither she nor her husband will get sick. Since both of them are already on disability, this is a very bad bet and – with the free market left to its own devices – no competently managed insurance company would take it.

Now the heavy hand of government intrudes; under HIPAA² Vivian has a “qualifying event:” her retirement. She can use this event to force her way onto a private policy thanks to the Clinton-era reforms but the insurance company will underwrite her at their very highest risk level. Her premium will be several thousand dollars a month or more. It will almost certainly bankrupt her in short order but the alternative is no insurance at all and financial catastrophe when the inevitable occurs. Even at these absurd rates, Vivian’s new health insurance provider risks substantial loss and thus its other policies are padded somewhat to make up for the expense of insuring her; everyone loses.

Vivian’s situation elegantly illustrates the fundamental problem of private health insurance. Two undeniable facts create market conditions which prevent any private health insurance system from being universal. First, health care has what economists call a nearly vertical demand curve. Since “you can’t take it with you” patients will happily pay anything for the care that saves their lives. Second, sickness and the need for medical care are inevitable; the human body breaks down and when it does we seek out those with the training and knowledge to fix it.

Health insurance companies remain viable as corporate entities only so long as they manage to take in more money than they give out. Since we will all eventually require medical care, their profit margins demand that those most in need of that care are the ones least able to get it.

The stories of people like Vivian then, are the cost of a private health care system which, to survive, must abandon in their hour of need those who have faithfully paid their premiums for decades. The issues that Congress now considers are questions of national priority. Which do we value more: the free market or human life?

If we, the tax-payers, are unwilling to bear the burden of caring for the sick and destitute why should private industry?

Footnotes