Home > Economics > Health Insurance ≠ Health Care

Health Insurance ≠ Health Care

The Supreme Court of the United States (SCOTUS) is currently hearing arguments for and against the Affordable Care Act, better known as Obamacare. The arguments have mainly centered around the constitutionality of the individual mandate that would require all individuals to purchase health insurance or to pay some sort of penalty. The arguments against the individual mandate concern the right of the government to force people to buy insurance. They through around buzz-words like “freedom” and “death panels.” The arguments for talk about the number of uninsured, the number of medical bankruptcies and the role of the government in providing for all of it’s citizens.

To be frank, I am against the Affordable Care Act. Many of you, knowing I’m pretty progressive, might be asking why I would be against such a progressive bill. The answer is that this is not a progressive bill. The rest of this post will lay out the reasons why this bill should be opposed by both sides of the aisle as well as discuss a more amenable alternative.

Medical Bankruptcy

A study published in the American Journal of Medicine in 2009 called “Medical Bankruptcy in the United States, 2007” shows some concerning facts about healthcare in the US. From the abstract:

Using a conservative definition, 62.1% of all bankruptcies in 2007 were medical; 92% of these medical debtors had medical debts over $5000, or 10% of pretax family income. The rest met criteria for medical bankruptcy because they had lost significant income due to illness or mortgaged a home to pay medical bills. Most medical debtors were well educated, owned homes, and had middle-class occupations. Three quarters had health insurance. Using identical definitions in 2001 and 2007, the share of bankruptcies attributable to medical problems rose by 49.6%. In logistic regression analysis controlling for demographic factors, the odds that a bankruptcy had a medical cause was 2.38-fold higher in 2007 than in 2001.

Let’s consider some the the points in detail. Firstly, 62.1% of all bankruptcies in 2007, where medical. That number is considerable in itself. Most of these (92%) owed more than 10% of their pre-tax yearly income in medical bills. Consider what you would spend that much on normally. Even a $300 a month car payment would only come out to $3,600 (or 7.2% of pre-tax income based on the same math).

The most surprising thing about this is that 3/4 of the people in this study actually had health insurance. Think about that for a minute. These people, for the most part, did the responsible thing. They had insurance coverage, most of them went to college (60%) and had a job (75%). Yet, they still had to file bankruptcy due to medical expenses. What does this tell us about health insurance?

Health Insurance is not Health Care

That’s right. The Obama supporters are framing this as a healthcare debate, when it is really about health insurance. However, only 25% of the people who filed for bankruptcy due to medical reasons didn’t have insurance. Having health insurance helps with the ability to pay medical bills, but is not a sure thing. The fact remains, that even with insurance, you might still owe thousands of dollars you can’t afford to repay. Does it make a difference if you owe $5,000 or $500,000 if you can’t even afford the $5,000?

All the ACA does is help to line the pockets of insurance companies. Aside from a few minor rule changes like allowing kid’s to stay on their parent’s insurance longer, and not letting them deny you for pre-existing conditions, for the vast majority of people, this law will have no effect.

Let’s look at an example of what the individual mandate will look like to someone with no current insurance. Say Joe currently works a job for $10/hr ($20,000/yr) and has no insurance. He breaks his leg, so he goes to the emergency room. The emergency room has to treat him even if he can’t afford to pay, so they fix his leg and he now has a $15,000 bill he can’t afford to pay. Now lets say he is required to by health insurance, so he pays $200/mo (a steal for insurance). So now he is out $2,400 per year regardless of if he needs to go to the hospital or not. He goes to get his leg fixed and since he has insurance, the $15,000 gets knocked down to say $7,500 because the insurance company has a deal with the hospital. He has to pay $1,000 up front because that’s his deductible for having really cheap insurance. then he has to pay 20% of the rest (another $1,300). Now he’s only out $2,300 for this visit, but he also had to pay his $2,400 to the insurance company, so his real pre-tax income is actually $4,700 lower. At $20,000 a year pre-tax, do you think Joe has $4,700? Joe doesn’t care whether his visit cost him $15,000 or $4,700 because he can’t afford to pay either.

On this issue I’m going to side with the Republican’s. Not because I don’t think people should have healthcare, but because private insurance is not the best way to pay for it. It only works if you can afford the insurance and the part that insurance can’t pay for. I showed a relatively small example. You can imagine what the scenario looks like in the case of a catastrophic illness like cancer.

What’s the Alternative?

The best way to get universal healthcare is not through private health insurance. The best way is through healthcare reform. A true universal healthcare program is the way to go. It is the system that (almost) ALL western democracies – EXCEPT the US – have. (some have health-insurance companies which are run as not-for-profit institutions) While it is true that you may have to wait a little longer to see a doctor for non-life threatening problems, I think that is a small price to pay. The reason our waits are so short here is that lots of people can’t afford to go to the doctor. I think that is a really heartless way to keep waiting lines short.

The best place to start would be to actually have a public health insurance option similar to medicare or social security. You can make people pay taxes for this if you want, although I don’t think it’s necessary (read this blog for insight into the reason why). The private insurers could compete with this public option if they want to, or they can offer additional coverage that the public option doesn’t cover (like a private room or other amenities)

The arguments against this usually involve the word “socialism” or whining about how this would put private insurers out of business. My answer to both is that I don’t care. Socialism is a buzz word that sounds scary to people, but is used out of context by most conservatives. Socialism is about state ownership of the means of production, which this in no way is. This is about the public (through it’s rightfully elected government) deciding that it wants a service which is better than what is offered privately. As for the argument that private insurers will go out of business, I say tough. Businesses either change with the times or go under. This would be no different. A business has no right to make a profit. If people can find better services elsewhere that’s just too bad.

Conclusion

The ACA is a crap bill from both a conservative and progressive perspective. In trying to appease conservatives Obama has drafted a plan that neither side wants. The individual mandate is both unconstitutional (in that it forces people to buy insurance) and anti-progressive (in that it redistributes money from the 99% to the 1%). Obama would like you to think that this bill will help provide healthcare for those that don’t have it. In reality, all it will do is put more money in the hands of the insurance companies at the expense of low income earners. For those who will then be covered that get sick, they will be no better off financially than they were previously, and for those who don’t get sick, they will just have less money than they would have had prior. This is a lose-lose situation.

Inspired by this post, which you should read (because it’s written better than mine).

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  1. jasph
    April 6, 2012 at 9:27 pm

    No one should have to declare bankruptcy over medical bills. Plain. Simple. Truth. Needing medical care is not the same as running up a huge balance on credit cards so you can have/do things you really cannot afford. There is nothing irresponsible about seeking medical care when necessary. Why should people have to choose between food and medicine? Between the electric bill or a trip to the doctor? Losing your home due to illness is just inhumane cruelty. You’re already struggling so you might as well be homeless too? What will it take to change things in a country that is so damn afraid of change? The US continues to fall behind……..

  2. May 24, 2012 at 12:57 pm

    jasph :
    You’re already struggling so you might as well be homeless too? What will it take to change things in a country that is so damn afraid of change? The US continues to fall behind……..

    The causes of poverty tend to be cascading effects. Not many commentators get this right(especially those on television). I get sick, lose my job because I take so many sick days, lose my insurance, delay going to the doctor, I get sicker, I then go to the E.R., lose house to pay the bill. It’s just like a snowball rolling down the hill. It started with a small pebble, but turned into an avalanche.

  3. May 24, 2012 at 1:04 pm

    I agree that the ACA was not a great bill. However, it was the Republican health care plan from 1996. Which goes to show how far rightward our country has moved that the Republicans are treating their own 1996 health care plan it like it’s the end of private enterprise.

    Personally, I would start not by offering a public option. I would start by just providing single-payer for certain things. For instance, have the government pay for all preventative care. Gradually, growing that list as the country is willing and can afford it. Then I would start removing regulations on health insurance – not all, just the ones that prevent other insurers from entering the market and drive down prices. There’s a reason insurance premiums are high, and much of it is because the existing insurers are using their lobbyists to pass rules to their benefit.

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