Or: Why Health Insurance Is Like Auto Insurance And Unlike Almond Butter
In the shadow of ACA repeal and something vaguely resembling “replace eventually, maybe, if we figure out how," the media coverage of healthcare coverage has come fast and furious. It seems to leave us asking: Where, exactly, does healthcare coverage go from here?
In this period of sound and fury and abstruse intentions, I very much doubt anyone can say--perhaps least of all those leading the assault. What we can say, however, is that some very fundamental attributes of healthcare and its coverage account for the relative necessity of the ACA or something like it, and the widely cited and rather grave consequences of repeal-whether-or-not-ready-to-replace.
Let us start, then, with healthcare coverage 101, which we may reasonably distill down to three key principles:
1) Healthcare is not like almond butter.
2) Care only when sick is fine; coverage only when sick is ruinous.
3) All for one, and one from all.
1) Health care is not like almond butter.
For those of us who like almonds, almond butter is very tasty stuff. Which means we might want to buy it. But though we might want almond butter, and perhaps even love almond butter, the simple fact is we could never conceivably need almond butter. (Perhaps the same may be said of meatloaf, but I wouldn’t know.)
No one ever truly needs almond butter, and thus some who might want it would simply forego it if they couldn’t find it or afford it.
Healthcare, alas, is a case quite apart from this “two out of three ain’t bad” scenario. When run over by a bus, dismembered by a shark or more mundanely undone by the prevailing heart attacks, strokes, complications of diabetes and related scourges of modern epidemiology--we need healthcare. We are out of options.
Not only are we all prone to need healthcare in situations of blood and guts and hemodynamic mayhem, but we are often unconscious of it at the time. We don’t make any choices at all. We wake up--if we are fortunate--to find out what decisions were made on our behalf.
To the best of my knowledge, no one ever decides while you are unconscious that you must have almond butter, so that you wake to confront the bill for jars filling your pantry. Healthcare at the acute end of the spectrum is just so. You get it when you need it whether or not you want it, or can afford it.
2) Care only when sick is fine; coverage only when sick is ruinous.
While the travails of the ACA have been exploited to propagate many falsehoods (e.g., death panels), at least one valid lesson has run that same gauntlet all but universally: the importance of allowance for preexisting conditions. Even ardent ACA detractors seem inclined to acknowledge, however begrudgingly, that requirements for coverage despite preexisting conditions are essential. In their absence, the combination of a chronic, costly condition and employer-based health insurance would preclude any employee ever leaving that job. No insurer not required to do so would rationally want to take on your costs without charging you enough to make you a source of profit, which you couldn’t possibly afford. The logical choice is to reject you.
That has led to a great deal of vague and vapid rhetoric about protecting this part of the ACA, while dismembering the whole. Here’s the problem with that: if you can get coverage despite a preexisting condition, why get it until you have one?
In other words, if private insurance companies are obligated to take us on no matter what costly conditions we may have, it makes good sense for us to avoid the direct costs or payroll deductions for health insurance until we get sick. But that means the only clients health insurance providers will have are all sick and costly. When every one of your clients is a source of loss rather than profit, you are in a very dubious business.
One option, then, is to mandate coverage, but allow the charges to vary. This, of course, can’t work--because for an insurance company to profit, it would have to charge us more for coverage than the costs of our care. And the only reason we need coverage in the first place is because we can’t afford the costs of our care, let alone those plus the extra.
This, then, leads to a need to mandate not just coverage, but coverage at comparable cost, which brings us back to insurance companies losing money, going bankrupt and exiting the market. The only way obligatory coverage of preexisting conditions can work is if everyone is obligated to pay into the system when healthy, providing the revenue, and profits, that make universal “sick care” coverage possible. This, then, leads to the third principle.
3) All for one, and one from all.
Health insurance markets work as private enterprise like any other insurance market: clients pay more into them than the companies pay out. Consider, for instance, an auto insurance market that required coverage of a preexisting condition, but allowed for people to drive without insurance at all.
Presumably, all reasonable people would take advantage of the opportunity to drive without insurance, until we had a crash. That crash, and the attendant damage, would be our “preexisting condition,” despite which auto insurers would be obligated to cover us. We would then logically sign up for coverage only in the aftermath of a crash, and only when the costs of coverage were substantially less than the costs of repairing or replacing our car, and any related liabilities. Which of course means the auto insurer would lose money on every client, and this industry would collapse.
How, then, does auto insurance actually work? All for one, and one from all. In the complete absence of fuming and fussing attached to requirements for health insurance, all of us who drive are required to have auto insurance. Perhaps that bears repeating, since this seems so contentious when applied to obligatory insurance for humans: We are all required to insure our cars. And everybody seems OK with it.
This works, because most of us are not crashing most of the time. Those of us not crashing pay into the system without withdrawing. Those funds from us all cover the costs of any one client who does crash, leaving a profitable margin behind.
Auto insurance makes sense as a for-profit enterprise because there is revenue from all to cover costs of the one. Health insurance as a for-profit enterprise makes sense exactly, and only, under the same circumstances.
Implications
In the absence of health insurance at all, people who can’t afford routine healthcare simply don’t get any. They wait for a calamity, at which point they will get what they can’t afford, often while unconscious. They wake, if ever, to discover they have been bankrupted by bills they can’t pay. Who does pay? Taxpayers, of course; we all do. The same is true when health insurance exists, but is unaffordable for millions.
If coverage can be denied for preexisting conditions, it’s a variant on the same theme, particularly since in modern epidemiology, chronic conditions spanning years and decades are by far the greatest cost center.
The superficial remedy is to require coverage despite those conditions, but this can only work when coverage costs less than treatment. That, in turn, can only work for private companies if there is a way to derive profit; and that can only work if healthy people pay into the system, in a model exactly analogous to auto insurance. That, obviously, means that coverage for all must be mandated.
Absent that, private companies will exit the market, leaving only the government to cover costs no one else does. This leads to the public, single-payer option favored by many of our peer countries.
That model is certainly better than ours. In our model, taxpayers still get the bill, but for calamity care and bad outcomes. In sensible approaches to public insurance, taxpayers have bills to pay, but for routine and preventive care producing better outcomes at lower costs.
If the American approach to health insurance favors free-market competition, that can work--and perhaps even make the system better. But it requires treating health insurance more like auto insurance and less like almond butter. Everyone must be obligated to participate so the revenue from those not needing care covers the costs of those who do. Under these terms, companies can compete to lower costs and raise profits with creative approaches to disease prevention and health promotion. When costs go down, profits rise, and overall vitality increases--everybody wins.
The traditional antipathy to universal healthcare coverage in the U.S. is a benighted boondoggle for both public health and the economy. The burden of covering care for all does not go away; it just gets shifted to calamity-based care. We all still get the bill, but in the most irrational manner possible. This explains why the U.S. spends more on disease care than any other country, with worse outcomes than many.
The ACA was intended as a remedy to much of this, and has proven to be just that. It is, however, a very imperfect remedy not because it went too far, but rather because it did not go far enough. Its limitations were no accident. They were imposed on it by those opposed to it, so they could be invoked to justify the repeal that now looms. But even despite this willful sabotage, healthcare coverage in the U.S. is better and more rational with the ACA than it was before.
Where American healthcare coverage goes from here is uncertain. What is certain is that back to the future is a very bad choice. A system in which free-market ideology ignores the realities of modern epidemiology and pretends that healthcare coverage can be sold like almond butter–is, in a word, nuts.
David L. Katz, MD, MPH - President, American College of Lifestyle Medicine; Founder, True Health Initiative
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