By Cliff Johnson
Solve a problem by using scientific method
* Observation
* Analysis
* Build Hypothesis
* Test Hypothesis
* Scientific Theory
1. OBSERVATION: For many people, health care is too expensive to afford without insurance. And health insurance itself is too expensive for most to afford comfortably.
2. ANALYSIS: In the beginning, traditional health care consisted of a simple transaction. A patient who was sick had a doctor come over to diagnose and hopefully treat the problem using his or her knowledge of diseases and cures. The doctor charged a reasonable and affordable fee for his services and the patient paid the doctor directly.
In the case of a patient not being able to afford the service, most doctors had an amount of time they were willing to donate in charity. In serious cases of disease or chronic problems, churches, medical universities and charities were assisting patients who could not afford medical care. Point of interest: Many hospitals are named after “Saints”, medical schools or charities? Ex: St. Vincents, UF Shands, Shriners Childrens Hospital.
In the 1970’s government introduced mandates for Health Maintenance Organizations (HMO’s). This plan basically regulated the amount doctors could charge for services and created a bureaucracy that determined whether or not services were “Medically Necessary”. Doctors were basically paid a monthly payment for each of their patients on the roster. Regardless of amount of services rendered. They were also offered bonuses to keep patients from being referred to “specialists”. The intent was to keep health care costs down but the opposite was true and the quality of health care services was greatly diminished.
Doctors did not have incentive to treat patients, instead they had the incentive to load up their roster with as many patients as possible and ensure that the were not referred out to a specialist, even if it was medically beneficial to the patient.
Along with the degradation of the quality of health care, the doctors incurred a new expense. Billing. Patients were no longer paying for their services directly to their doctor, so now doctors had to bill insurance companies. They had to hire billing staff who would end up sitting on the phone all day with insurance companies explaining why a test was medically necessary. In the end to find out that the service was not covered by insurance, so no payment will be made.
Of course with this bureaucratic form of health care came higher costs to the doctors. When the cost of a product increases, naturally so does the price to the consumer. As the bureaucracy expanded and became more complicated, so did the expense. As a natural result, prices have continued to rise and are still rising today.
That generally covers the expense of Health Care on the Doctor side.
Now for the health insurance side.
Health insurance companies are probably best viewed as risk management or gambling companies. When you pay a health insurance premium you are placing a bet that you may get sick or hurt. The insurance companies weighs the statistics and probabilities that you wont get sick or, that if you do get sick or hurt, you would have paid more in that you take out. Pretty simple.
Traditionally health insurance policies were purchased for catastrophic illnesses or accidents. In no way did most of these policies pay for routine office visits. Doctors were paid directly from patients for basic services and a doctor visit may have cost you 20 or 30 dollars. But that was the transaction, no collections, no billing. The doctor received money in exchange for their services and that was that. If something catastrophic happened to a patient, there was possibly a deductible, and the rest was covered according to the insurance policy.
As the bureaucracy grew in the doctors office, so did their expense, and so did the price. Doctors were charging more money for services to cover the increased expenses. Being that the insurance companies were the sole payer, doctors were waiting longer for payments and in many cases reduced payments or no payments. Thus again increasing the cost of doing business for both Doctors and Insurance Companies.
Doctors were now inclined to bill for everything they could legally in hopes of receiving payment. Out of necessity, doctors had to ensure that they are bringing in money to stay in business. All the while the increased costs to insurance companies are being passed along to the patient in the form of higher premiums.
This constant cycle of cost increases on both sides, combined with two of the largest expenses for an insurance company, fraud and frivolous law suits, these things dramatically increase costs to consumers.
The life blood of value and quality, in any industry, is competition . For reasons I cannot determine, government has imposed regulations on insurance companies to prevent their competition between state lines. In the capitalist system, increasing free market competition always leads to higher quality and lower prices.
3. BUILD HYPOTHESIS: Health care costs have skyrocketed because of lack of regulation, greedy doctors and greedy insurance companies. (Of course this is not my hypothesis, but this is what the left and the current administration wants you to believe)
4. HYPOTHESIS TESTING: Looking at my research, apparently when government started getting involved with health care, the process became more complicated and more expensive. Also it seems that actual health care and the patient’s best interest has taken a back seat to the payment collection process. Doctors no longer had the patients health as priority, but held in its place the necessity of payment to stay in business. Losses and increased costs for doctors and insurance companies always lead to higher prices being passed to consumers. It appears that this cycle continues to no end.
SCIENTIFIC THEORY: Government involvement in the health care industry started a snowball effect that has led to ever increasing costs for all industries involved which result in higher prices to consumers. Government regulation interferes with free market competition thus hindering the capitalist system from raising the bar on quality and reducing prices to consumers.
FINAL STATEMENT: By removing government regulation on competition between insurance companies crossing state lines and by removing the government bureaucracy interfering with the simple economic transaction between doctor and patient, health care costs would once again be affordable to all Americans.
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March 28th, 2010 at 1:13 pm
Another cost factor that increases premiums is insurance mandates. When I enter into a contract with someone I expect that the contract will cover what I agreed to. When the government gets involved and mandates that the contract must be changed to include things that I did not purchase the premium goes up. What contracts with other industries are affected this way?
January 22nd, 2010 at 8:21 am
Government imposes regulations on insurance companies and medical practices often as a result of crony capitalism. Sometimes it’s hard to tell the difference between legitimate regulation and those that simply stifle competition or improve profits.