The Essential Problem with Health Care

I tend to believe that the primary systemic issue driving US health care costs is the interaction between the very concentrated nature of health care needs and the very fractured system of paying for it.  This gives every individual payer a massive incentive to attempt to pass on those with high health care needs to another payer rather than to seek ways to reduce costs for those people with high needs.  I'm not saying that fixing this problem will do anything on its own to reduce health care costs.  What I am suggesting is that this problem creates incentives that prevent fixes from being made.  Unless these incentives can be fixed health care reform to lower costs will be impossible. 

The only tested way to fix this problem is universal health care.  Reform proposals that avoid this don't appear to me to address this structural issue.  The essential reason for this is that without universal health care uncertainty as to whether a procedure will be payed for enters the system.  If there was a reasonable certainty that those without coverage that need treatment wouldn't be treated than it would be reasonable to expect that a non-universal system could work.  But as long as needed treatment can still be expected to be received whether or not someone can pay it is reasonable to expect that there is no real possibility of a proper market ever functioning in a way that will control costs (though it can function to raise capital and expand the system, the only part that seems to be malfunctioning is cost control, which seems to me predictable as a result of needed treatments being covered anyway).

With the payment system how it is, any individual entity can best achieve cost control by maximizing its responsibility for the 50% of people with low costs and minimizing its coverage of the 5% responsible for almost half the costs.  This is simply a much bigger reduction in costs than trying to deliver care most efficiently for a given mix of patients would be.  This problem has led to a vast array of ad hoc laws seeking to plug various gaps in the system.  I know that in New York one passed over the past year that would prevent health insurers from canceling entire insurance policies to avoid covering individuals with very high costs.  Laws such as this exist in every state and massively increase the complexity of regulation (and in my opinion, the size of the state) and thus the inefficiency of our health care system.

Public opinion on these issues unsurprisingly displays a high degree of cognitive dissonance.  We get extremely upset over individual instances of insurance company abuse, such as rescinding entire policies to deny one person coverage, yet get very upset over the high cost of insurance due to covering people that actually cost significant amounts of money to treat, like the kid whose insurance coverage got rescinded by the insurer.  At the same time, we expect to be covered ourselves if something ever goes horribly wrong.  The costs we face day to day in health care are just so disconnected from the high costs of treating serious conditions that it is difficult to keep the message focused on paying for complex medical needs rather than how much it costs to get a bottle of penicillin.  Which provides those that profit from expensive health care plenty of room to muddy the debate by taking the focus off the high cost sections of the system to instead focus on the low cost sections we experience day to day that are the source of all their profits.