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View Full Version : How do HMO's raise medical cost?




danny987
12-07-2009, 07:08 PM
heard this somewhere. I think from ron paul? Is this true, if so how?

dannno
12-07-2009, 07:23 PM
True, but only because of government intervention.

In the 1970s the government decided that more people needed to be insured for medical care. Their solution was to give a tax break to companies who provide medical care to their employees by not taxing the portion spent on medical insurance. The problem was that they didn't give a tax break to INDIVIDUALS who wanted to purchase their own health insurance. This made getting health insurance through employers drastically cheaper than getting it on your own. What this lead to was a majority of the population getting their health insurance cheaply through their employer.

So where's the problem? There are a ton of problems that came from this, I'll try and touch on the main ones.

One problem is that by putting hundreds of individuals on a particular healthcare plan that fully insures nearly all of their medical costs, everybody who works for these companies essentially pay the same amount for health insurance. If individuals were getting insurance on their own, then people who lead healthy lifestyles would be paying less for health insurance and those with unhealthy lifestyles would be paying more. Currently there is no cost incentive for living a healthy lifestyle, thus people live very unhealthy lifestyles thanks in part to Uncle Sam. It would be like if the government decreed that everybody paid the same for car insurance regardless of accidents and tickets. People would be getting into more accidents and driving more recklessly because it wouldn't affect their premiums.

Soo.... consider that I am in my 20s and very healthy. Consider that I can go out and buy catastrophic insurance for about $65/month. All that covers are accidents and huge medical expenditures. Doesn't cover drugs or visits to the doctor or anything like that. On the other hand, for $75/month I could have my employer pay for it and be fully insured. That is what I do because it makes the most economic sense assuming that I go to the doctor..say.. once every 3 years or so and get some medications..and the off chance that I might actually need a mid-level service like a cat scan or something.

The reason why medical COSTS are so high is because too many people have full insurance. There is no incentive to go out and shop for the best value care, because you choose where you work and they choose your health provider and THEY choose your doctor... So there is NO PRICE MOBILITY, which is a market mechanism that helps keep prices LOW.

So if the government ended their tax subsidy and then gave an offsetting tax break to individuals, then individuals would have a bunch of extra money each year to spend on medical insurance. Those who live healthier lives would get catostrophic insurance and in fact most people would. They would go find reasonably priced medical services for that which their insurance doesn't cover, and they would be reasonably priced because the HMOs would not be bidding up and fixing prices on everything.



A second and very important point is with regards to insuring those with pre-existing conditions. By subsidizing employer insurance, the government basically forced people to switch insurance every time they got a job!! If people had individual insurance, then they wouldn't have to switch, and they could always be insured in case they are unemployed for a period of time or get a job that doesn't offer health insurance.

FunkBuddha
12-07-2009, 07:54 PM
Great post dannno!

bucfish
12-07-2009, 08:10 PM
Yeah great post Danno