This blog post was originally published on May 30, 2017 at LivingThePursuit.com.


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Legislation to Turn Your Stomach

My Facebook news feed blew up earlier this month when the House of Representatives passed the American Healthcare Act (AHCA). Without comment on the merits or faults of AHCA, I can sympathize with my friends who are horrified by AHCA’s passing through the House: as a staunch, outspoken opponent of Obamacare/the Affordable Care Act (ACA) back in 2009 and 2010, I know what you’re going through. It’s a gut wrenching experience to watch a bill of magnificent consequence pass through government when you’re sickened by its contents.

Debates over healthcare and health insurance are hotly contested in our American culture today – and for good reason: the legislative results of our cultural debates will have direct, deeply-personal impacts on our individual lives. No matter where you stand on any particular proposals in these debates, let us agree on this much: healthcare and health insurance are complicated matters.

I don’t claim to have all the answers when it comes to American healthcare and health insurance, but I am eager to inject two truths into our national conversation. I suggest that American healthcare and health insurance will improve only after these two truths are embraced by We the People and subsequently incorporated into healthcare and/or health insurance legislation. Failure to embrace these two truths in our culture and subsequent legislation will inevitably yield disappointing results.

Two American Healthcare and Health Insurance Truths

Truth #1: Those who value their health are willing to pay for healthcare and health insurance

Liberty empowers we individuals to align our lives with our values. Do we individuals value health? Moreover, do we individuals value healthcare and health insurance? It’s easy to say that we do – but talk is cheap. There’s no doubt that we individuals want health, healthcare, and health insurance, but want is different from value.

Want is an emotional desire to possess; it is, itself, unaccompanied by action. Consider: I want to have a body like Brad Pitt. If some wizard shows up at my doorstep and offers to magically turn my want into my reality, I’ll happily accept his offer. But do I value having a body like Brad Pitt? All self-deprecating fat jokes aside, clearly I do not – because my want is unaccompanied by the actions required to achieve a Brad Pitt body.

Value, on the other hand, is want combined with personal willingness to sacrifice to achieve. While I don’t value having a Brad Pitt body, I do value my physical well-being – so I do about 30 minutes of physical exercise three or four nights each week. I sacrifice everything else I could do with that time so that I can achieve what I value.

Zig Ziglar is credited to have said, “show me your calendar and your checkbook, and I will tell you what is most important in your life.” Those who are willing to pay (i.e. incur sacrifices) for their healthcare and health insurance clearly value their health. Those unwilling to pay for either healthcare or health insurance clearly do not value their health.

In other words, if you claim to value health, put your time and money where your mouth is.

I choose my words very carefully in preceding paragraphs. When it comes to paying for healthcare and health insurance, the key concept is willingness – which is different from ability. I fully recognize that some persons and families in America have very expensive preexisting medical conditions, and those persons and families may be unable to fully pay for their healthcare and health insurance. Yet those persons and families can still reveal that they value health through their eager willingness to pay at least some amount for their healthcare and health insurance.

Importantly, the “free healthcare for all” argument doesn’t escape this conversation about value. Universal coverage is an admirable objective – surely no one wishes to see others dying in the streets because they lack access to healthcare or declaring bankruptcy because they lack access to health insurance – but wanting healthcare so badly that you’re unwilling to pay a dime for it out of pocket doesn’t indicate value. It indicates entitlement.

Intense want does not equal value.

It’s true: those individuals who value health are willing to pay – or are, at least, eager to help pay – for their healthcare and health insurance.

Truth #2: Healthcare and health insurance are two very different things with two very different functions

“Healthcare” and “health insurance” are not synonymous terms. Rather, they are two very different things with two very different functions. Healthcare is something which addresses, maintains, and improves your physical, emotional, and mental well-being. Health insurance, on the other hand, is something which protects your financial well-being as you incur healthcare costs. Our politicians tend to use these two terms interchangeably  (“perhaps deliberately to confuse the issues,” he thought cynically), and we foolishly follow their lead.

So let’s get this much clear: health insurance is exactly like any other kind of insurance. It is nothing more and nothing less than a transfer of financial risk. Insurance policies of all types – health, auto, homeowner, life, and so on – become increasingly expensive as you transfer more financial risk from you to your insurance company. Of course, the opposite is also true: insurance policies become increasingly less expensive when you transfer less financial risk from you to your insurance company.

When you come to understand that the role of insurance is to protect your financial well-being, you come to understand that it’s important to insure against scenarios which would harm your financial well-being. You also come to understand that it’s foolish to insure against scenarios which would not harm your financial well-being because such coverage only serves to jack up the prices of your premiums!

Can you imagine how expensive your auto insurance policy would be if it covered your oil changes, or how expensive your homeowners insurance would be if it covered a leaky faucet? While it’s never fun to pay for maintenance or home repairs, you intuitively understand that it would be ridiculous to insure against these $50 scenarios because they do not threaten your financial well-being: you can pay for the scenarios out of pocket with relative ease. There is no need to insure against them.

At the other end of the spectrum, however, you also intuitively understand that it is worthwhile to insure against your car being totaled in an accident or your house burning down in a fire because these scenarios do threaten your financial well-being. In other words, it’s hard or impossible for most of us to suddenly scrape together $20,000 for a new car or $250,000 for a new house, so we purchase insurance to protect us against such disastrous scenarios. But think about it: what is actually protected by such insurance policies? Recognize: it’s neither your totaled car nor your burnt home – but rather your finances as you work to restore normalcy in your life.

Not surprisingly, these same concepts apply to health insurance. Health insurance is not designed to “pay for your healthcare” any more than auto insurance is meant to pay for your oil change. Rather, it’s designed to protect your finances in case you incur major medical costs.

You don’t need to insure against a $200 annual physical because the exam doesn’t threaten your financial well-being. But you probably do need to insure against a $15,000 surgical procedure or a half-million dollar hospital stay. Health insurance allows you to receive costly healthcare in a timely fashion without destroying your finances in the process. It protects your finances as you recover from medical disasters.

“But Ross, what about people who won’t get an annual physical if they have to pay for it out of pocket? It’s far less expensive to keep a person healthy through routine care than it is to treat them after they’re sick!”

I know. I agree. It’s a problem. Yet it’s not a problem of insurance but rather a problem of value. It goes back to Truth #1: those people unwilling (again, I choose my words carefully) to pay for their annual physical or other routine healthcare services do not value their health. I don’t need a government grant to conclude that it’s costly to provide healthcare to people who do not value their health to begin with. And I recognize that insuring against routine healthcare doesn’t change anyone’s values; it only drives up the price of insurance premiums.

And yes, just like oil changes and leaky faucets, the vast majority of people who value their health can afford their $200 annual physical. Recall that “sacrifice to achieve” bit from Truth #1? Have four fewer pizza delivery nights per year and you’ve got it covered. (Check out DaveRamsey.com if you need help gaining control of your finances.)

It’s true: healthcare and health insurance are two different things with two different functions. Improvements in either industry will continue to escape us if We the People continue to treat them as one and the same.

Why It’s Important to Embrace These Truths

When We the People understand and embrace these two truths about healthcare and health insurance in America, our healthcare and health insurance industries – and our health! – will rapidly improve for three reasons.

Reason #1: Increase Personal Ownership of Health

These truths encourage we individuals to take greater ownership of our health. By removing the entitlement mentality surrounding healthcare and health insurance, we individuals are forced to answer a fundamentally important question: do we value our health? Speaking from personal experience, I know that when you’re forced to answer that question, you’ll likely answer “yes” – and your answer will have a massive lifestyle ripple effect.

If you value your health, act like it. Eat like it. Exercise like it. Put your time and your money where your mouth is. Make sacrifices. Or, if you do not value your health, own your choice. Don’t whine. Don’t play the blame game. Don’t be a hypocrite. Accept 100% responsibility for your choice. You have the liberty to choose, and I won’t judge you for whatever choice you make – so long as you own it.

I suggest that the net effect of encouraging individuals to take greater ownership of their personal health is to encourage healthier lifestyles in America. Healthier lifestyles will lead to lower net demand for healthcare, and thus relieve upward pressure on healthcare and health insurance prices.

Reason #2: Lessen the Financial Risks Transferred to Health Insurance Companies

If it’s our desire to lower the cost of health insurance in America, lessening the financial risks transferred from we individuals to health insurance companies must be part of the answer.

Mind you, as a fan of liberty, I am adamantly opposed to outlawing or punishing so-called Cadillac insurance plans. Such plans should be freely available for purchase so long as someone willingly demands them and someone willingly supplies them. But I suggest that increased literacy in American culture about the proper function of health insurance will a) lower free market demand for expensive health insurance policies and b) increase free market demand for relatively inexpensive health insurance plans with high deductibles which offer only “major medical” coverage. Increased demand for such HSA-style plans would dramatically lower the costs of health insurance because health insurance companies would be less liable for routine healthcare costs. Such plans would also amplify free market forces in the healthcare industry – which leads me to Reason #3.

Reason #3: Amplify Free Market Forces in the Healthcare Industry

When we individuals pay out-of-pocket for the goods and services we obtain, we care about price. When somebody else is paying for those goods and services (or at least when there’s a perception that someone else is paying, e.g. an insurance company), we don’t care about price in the same way. While we might be somewhat price conscious in the second scenario, human nature dictates that no one spends somebody else’s money as carefully as they spend their own. This fundamental principle of economics is a huge reason why free markets work efficiently – but only when the principle is actually applied in the marketplace!

One reason why healthcare costs are high is because health insurance companies are paying for routine healthcare. In other words, we healthcare consumers are not paying out-of-pocket for the healthcare goods and services we obtain (either through our deductibles or independently of insurance all together) as much as we should be. It feels like we’re spending somebody else’s (i.e. the insurance company’s) money, so we pay less attention to the price of goods and services. That doesn’t make us bad people. It just makes us human beings.

Let’s go back to the auto insurance analogy. If your insurance company is paying for your oil change, you don’t really care if your auto mechanic charges $50 or $150 for the service so long as she does quality work and can fit you into her schedule at a convenient time. Be honest: there’s a good chance that you won’t even ask how much the service costs, and there’s an even better chance that your auto mechanic won’t volunteer price information. Because between you and your auto mechanic, price doesn’t matter. You just get your oil changed and your insurance company pays the bill.

But consider reality. You do pay for your oil changes out-of-pocket, so you do care about price. If some jerk mechanic tries to charge you $150, you’ll tell him to take a hike and shop around for a better deal. When we individuals pay for goods and services out-of-pocket, we also pay attention to the value we receive in exchange for the value we offer: our cash!

The ripple effect of consumers paying out-of-pocket for the goods and services they obtain in the free marketplace is enormous for consumers and suppliers alike. As evidenced by a quick Google search for “oil change”, price immediately becomes a relevant selling point!

Auto shops know you’re paying for your oil change out-of-pocket, so they know that you care about price. It comes as no surprise then that auto shops prominently display prices for their service offerings in Google search results. They compete with one another not only in terms of quality and service, but also in terms of price as they attempt to win your business!

But take it back to healthcare. We consumers don’t pay for routine healthcare like our annual physicals out-of-pocket. The insurance company picks up the tab. So what happens when you search for “annual physical exam madison wi” (of which my hometown of Verona is a suburb) on Google? Something dramatically different.

You’ll find lots of information encouraging you to get a physical exam, but there is absolutely zero information about price in the search results. Zero. Why? Because potential suppliers of your annual physical exam (i.e. competing doctors’ offices) understand that the price of the exam is irrelevant to you as a healthcare consumer. Price is irrelevant to you because you’re not paying for your exam out-of-pocket.

Doctors’ offices aren’t doing anything wrong by not listing their prices. They’re just marketing to you as a consumer with a decision to make. You’re not thinking about price, so why bother you with price information? When your insurance company pays for your annual physical exam, price is as irrelevant to you as the brand of wrench your mechanic uses to change your oil.

“But Ross, health is so much more important than oil changes. Price is never a relevant selling point when it comes to health because good health is priceless!”

Wrong! Good health may be priceless, but price is always a selling point whenever we consumers are paying for goods and services out-of-pocket, including in the healthcare industry. Consider LASIK, a surgical procedure “that uses a laser to correct nearsightedness, farsightedness, and/or astigmatism.” In most cases, insurance companies consider LASIK to be “an elective or cosmetic surgery,” so they won’t pay for the surgery. In other words, if you get LASIK surgery, you’re going to be paying for it out-of-pocket.

Check out the Google search results for “lasik surgery.” Are you surprised? Prices and special offers are once again prominently displayed – because price is once again a relevant selling point to you when you are paying for the procedure!

If we healthcare consumers paid for our routine healthcare out-of-pocket, prices of routine healthcare services would become relevant – and free market competition would go to work to bring prices down. Doctors’ offices would be forced to compete not only in terms of quality and service, but also in terms of price.

Under current circumstances, routine healthcare prices are not held in check by competition because the recipient of the good or service (you!) doesn’t pay for the good or service out-of-pocket. Of note, “single payer” (replacing your insurance company with your government) also fails to address this problem. Until the recipient and the payer of healthcare are one and the same, free market competition will not yield its favorable results on price. But it will instantly yield favorable results once the recipient and payer of healthcare are wed!

Establishing a True Starting Line

While my studies of economics and my family’s first-hand experiences lead me to fully support economic liberty (i.e. free market capitalism) in healthcare and health insurance, I also fully understand that healthcare matters are different from – say – buying a candy bar at the grocery store: if the candy bar is too expensive, you simply don’t buy it; purchasing cancer treatment, on the other hand, isn’t really a matter of “consumer choice” unless you consider death to be a reasonable alternative to treatment. So, like I said at the beginning of this post, I don’t claim to have all the answers when it comes to healthcare and health insurance in America.

But that’s okay, because this post isn’t written as a finish line. It’s rather written as a starting line. If We the People are to realize improvements in American health, healthcare, and health insurance, we need to start with what we know to be true. It is true that those who value their health are willing to pay for healthcare and health insurance, and it is true that healthcare and health insurance are two very different things with two very different functions. Embracing these truths is the right place for We the People to start.

With this true starting line established, let us carry on with our discussions – but let us never forget these truths in the course of our conversations. Because to deny, forget, or ignore these truths is to vest our hope for improvements in majestic healthcare wizards. I’ll be ready to do that right after I’m granted my Brad Pitt body.