Everyone has their own theories about what is causing the high rises in the cost of health care. Today I want to talk about one of my favorites: insurance companies.
Many people say that there isn’t enough competition in the insurance market. There’s plenty of competition already. There are more health insurance companies, options and plans than there are companies making many of the high-quality, low-cost consumer goods sold at Best Buy. People may argue that one insurer controls a certain market; however, I don’t believe that more competition among insurers will help solve the problem.
I heard one talk show host claim that being a “for-profit” insurance company means a company’s goal is just to make money. For-profit companies have multi-faceted goals. FedEx is a for-profit company whose mission is to deliver packages quickly. Canon is a for-profit company that makes great cameras. Apple is a for-profit company that makes great, easy-to-use computers. Disney is a for-profit company that gives people a magically great experience. Don’t be fooled into thinking that because a health insurance company is “for profit” that its only reason to exist is to make money or that its “for-profit” status underlies the high cost of medical care.
High salaries for executives at health insurance companies aren’t the heart of the health care crisis either. I must say that seeing some of the ridiculously high salaries makes me sick (being naturally envious may be part of my thinking there). Some of the salary figures seem unconscionable. But even if those salaries are somehow unfair, they aren’t the problem underlying the U.S. health care crisis. The combined value of all the health insurance companies’ top executives’ pay probably doesn’t add up to more than a small percentage of annual health care spending — perhaps less. There’s high executive pay in many industries. The heads of Microsoft, FedEx, Apple and Disney probably do very well; however, those industries provide great quality and affordable prices. No insurance is needed to purchase products or services from those industries.
So if we have plenty of competition, and the insurers aren’t inherently “evil,” why is the U.S. health care system broken? Why are we spending so much for medical care with no end in sight to the increases in cost? Why is the cost of medical care so different than the costs of so many other goods that we buy?
Insurers are a problem, but it’s not for the reasons you think. The way our insurance system is set up actually creates an obstacle to a consumer-driven health care market that would help drive down costs. Unlike other products that we buy ourselves, consumers generally do not pay for medical care directly. Instead, the insurer pays the medical bills, which insulates us from the price of the medical care we use.
How do we create consumers who are more cost-conscious about purchasing health care? That’s a topic for another blog after we explore more about the “evil” drug companies and lawyers.