Insurance and Risk Management

Posted by PITHOCRATES - April 2nd, 2012

Economics 101

By collecting a Small Fee from Many Policy Holders Insurance Companies can Afford to Pay for the Large Losses of a Few

Insurance has one purpose.  To protect wealth.  People work hard accruing wealth.  Buying a house.  Cars.  College fund for the kids.  Retirement 401(k)s and IRAs.  It takes a long time to earn the money that lets us have these things.  And they take a constant stream of payments to sustain them.  And we are always at risk of losing them.  Something can interrupt that stream of payments to sustain them.  An accident or illness that prevents us from working.  Burying us in a stack of unexpected bills.  A tree could fall onto the house during a bad storm.  You could total your car while driving to work in a thick fog.  A wife could lose her husband leaving her to raise their children on her own.

These are very real risks that we must manage.  Because we need to protect our wealth.  We buy house and car insurance so we can keep or replace our houses and cars because we can’t afford to buy new ones should we lose the old ones.  We buy life insurance to provide for our families should we die.  We buy health insurance so an accident or disease doesn’t wipe out our savings, college fund and retirement investments.  Because we do do these things we can manage the risks in life.  So that something unexpected and incredibly expensive doesn’t take everything away that we worked so hard for.

Managing our risks allows us to live our lives.  To plan for the future.  A future that has a price tag.  A future that takes a lifetime of accumulating wealth to pay for.  And to protect the wealth that provides for our families and our retirements we buy insurance.  Groups of people join together and pay a small fee for an insurance policy that will protect a very large amount of wealth.  So if we have an unexpected and very expensive event in our lives our insurance will protect our wealth by paying for our losses.  By collecting a small fee from hundreds of thousands of policy holders insurance companies can afford to pay for the large losses of a few.  Allowing life to go on.  As best as it can following these  unexpected events.  So even in the worst of events families can keep their homes.  Keep their kids in their schools.  Protect their kids’ future by keeping their college fund intact.  Replace their property.  Allowing life to go on as close to what it was before the event.  All thanks to insurance.

Bad Insurance Risks have an Advantage over Insurance Companies due to Asymmetric Information and Adverse Selection

Insurance companies provide this valuable service.  But it isn’t easy.  Because insurance isn’t a science.  But statistical analysis.  And risk analysis.  Which is how they determine the cost of their insurance policies.  A critical part for the survival of insurance companies.  So they can continue to provide this valuable service.

Insurance companies are at a disadvantage because of asymmetric information.  Meaning their customers know more about how great a risk they are than the insurance company.  For example, reckless drivers don’t offer that information when someone is quoting a policy for them.  For they want a low price.  Not a high price that reckless drivers normally get charged.  This is a problem mostly with young drivers.  Older drivers have a driving record.  If it’s a safe record they get a low quote.  If the record includes many points and at-fault accidents they will get a high quote.  Young drivers, though, don’t have a driving record yet.  This is where the statistical analysis comes in.  On average young men drive more recklessly than young women.  Based on the statistical evidence.  So they charge young men higher rates than they charge young women.  Problem solved.  But this causes another problem.

Not all young women are good drivers.  But by charging young women lower rates some bad women drivers are getting a rate lower than their risk warrants.  Which means insurance companies will lose money insuring these drivers at rates below their risk level.  In fact, this will attract more high-risk drivers.  Thus increasing an insurance company’s risk exposure.  And as they pay out claims that exceed the premiums they collect they have to raise insurance rates for all women drivers.  Thus discouraging some good drivers from buying insurance because of the higher premiums.  Thus increasing the percentage of high-risk drivers.  Which forces the insurance companies to raise their premiums again to cover these higher losses.  We call this problem adverse selection.  Where pricing plans to manage risk ends up increasing risk.  One way around this is by group coverage.  Like in health insurance.  Where everyone at a company buys insurance in exchange for a lower group rate.  Including the high-risk people.  And the low-risk people.  Thus avoiding adverse selection.

Economic Growth is the Creation of Wealth and our Insurance Protects that Wealth

When is insurance not insurance?  When it is health insurance.  At least as it is today.  It still acts like insurance for the unexpected and catastrophic accident or illness.  But it is anything but insurance for most everything else.  The latest example in the media these days being birth control.  Which is neither an unexpected nor a catastrophic expense.  For there are few expenses that are more expected and more affordable than birth control.  Unlike, say, chemotherapy.  Or trauma care in the emergency room.  Both of which are unexpected.  And very, very expensive.

When insurance pays for everything for everybody it is no longer managing risk.  Insurance companies are no longer collecting a small fee from all policy holders to pay for the large losses of a few.  Instead they’re collecting a large fee from everyone to pay for the costs of everyone.  Or more precisely, they’re collecting a large fee from the employers who provide health insurance to their employees.  So the recipients of all those free health care goodies don’t see their costs.  Which is how they’ve been able to include everything but the kitchen sink in today’s health care insurance policies.  Causing the price of health insurance to soar.  Hurting families.  Businesses.  And the economy as a whole.

A healthy economy allocates scarce resources to where we use them most efficiently.  When we do we create the most goods possible from these scarce resources.  Making society as a whole better off.  By improving the standard of living for society as a whole.  But by turning health insurance into a welfare program it increases the cost of doing business.  Which puts downward pressures on wages.  Preventing real wages from keeping pace with the rise in consumer prices.  Leaving workers with less disposable income.  Which translates into weak economic growth.  And a stagnant or declining standard of living.

Economic growth is the creation of wealth.  And our insurance protects that wealth.  When we convert that insurance into welfare, though, we put our wealth at risk.  By putting greater pressures on that stream of payments to sustain our wealth.  Our future plans.  And our families.

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Seeing the Bleak Future of Obamacare in the UK and Canada

Posted by PITHOCRATES - May 6th, 2011

The UK and Canada look to the Private Sector to Rein in Health Care Costs

The UK founded the National Health Service (NHS) in 1948.  That’s over 50 years ago.  And you know what they say?  Practice makes perfect.  So the UK must really have this national health care thing down, right?  Delivering everything President Obama promises to deliver with his Obamacare.  Affordable yet quality health care for everyone.  For the problem the Americans have been having is that they don’t have a national board yet to limit health care costs.  To tell providers how much is enough.  To swat them on the nose with a rolled up newspaper and say, “Bad, health care provider.  Bad.  You have to learn to stop being so greedy.”  Like they must be doing in the UK (see Kill or cure by The Economist posted 5/5/2011 on The Economist).

THE government has put its ambitious health-care reforms on hold, while David Cameron tries to calm a bout of anxiety in his coalition. However, many hospitals are already finding that a combination of rising costs, heavy debts and looming budget cuts is forcing them to seek mergers with stronger institutions or even private-sector takeovers. Even less palatable for the coalition—and patients—there are worries that as the government seeks to save £20 billion ($33 billion) in hospital running costs over the next four years, some closures may be inevitable.

Iain Duncan Smith, a predecessor of Mr Cameron as Conservative leader, last month signed a petition outside 10 Downing Street against closures of the emergency and maternity units of a hospital in his London constituency. Trafford hospital near Manchester—the birthplace of the National Health Service (NHS), where its first patient was treated on its founding in 1948—is considering privatisation, among other options, to resolve its debt crisis. In London, three big hospitals, including the historic St Bartholomew’s, are contemplating joining up into one “superhospital”.

Well, that’s odd.  You see, the UK has a national board to control health care costs.  So they shouldn’t have rising costs.  Heavy debts.  Looming budget cuts.  Mergers.  Or private-sector takeovers.  But here the UK is.  Doing exactly these things.  It makes one wonder why the Americans want to go down this road when the UK has demonstrated that it is the wrong road to go down.  Unless it’s not about providing affordable yet quality health care for everyone.  But the government taking over one-sixth of the nation’s economy.  Whatever the consequences to the quality of health care.

Given how Britons cherish the NHS, privatisations of hospitals might prove as controversial as closures. The government wants a “mixed economy” in the health service, citing Hinchingbrooke hospital in Huntingdonshire as an example of its readiness to bring in private-sector innovation. It will shortly become the first NHS general hospital to be franchised to a private company. Indeed, in Canada’s generally well regarded health service, hospital treatment is often provided by charitable or private operators, with the state paying the fees—so there is no reason why more private-sector involvement in Britain’s NHS would put its principle of free treatment for all at risk.

So things may not be that bad.  The NHS may just become more like the Canadian health care system.  In Canada, the Canada Health Act (CHA) determines how the government reimburses private health care providers for their services.  And it is these private health care providers who hire doctors and nurses.  And funds their retirement.  They are not government employees.  Like in the UK.  Canada is more like the USA.  Only with a single insurance company, i.e., a public option.  So the Britons don’t have to worry about change per se in paying for health care.  It will still ultimately come from tax dollars.  And they will have the same problems they currently have in the UK (see Canada’s health care crisis is an economics problem, not a management problem by Brett J. Skinner, President and Director of Health Policy Studies and Mark Rovere, Associate Director of Health Policy Studies Fraser Institute, posted 4/19/2011 on Troy Media).

Government health spending is growing at unsustainable rates, while patients are facing shortages of medical resources and declining access to necessary medical care.

The Canadian health system has been run as a government monopoly since 1970. It doesn’t really matter which level of government tries to manage the system, our experience shows that political planning doesn’t work. Adding federal management would be as effective at averting disaster as rearranging the deck chairs on a sinking ship.

So, yes, the UK is looking to the Canadian system as a lifeboat for the NHS.  Unfortunately, the lifeboat they chose also happens to be sinking.

This cost crisis is happening despite significant government efforts to centrally restrict spending on health, which has resulted in shortages that create long waits for access to necessary medical goods and services.

The Fraser Institute’s annual survey of Canadian physicians shows that, in 2010, patients waited approximately 18.2 weeks from the time they obtained a referral from a general practitioner to the time they received treatment from a specialist. Although health spending consumes a larger share of provincial revenues each year, Canadians are waiting 96 per cent longer for surgery than they did in 1993 when the average wait was only 9.3 weeks long.

The problem is that both the NHS and the CHA have the same problems.  Adopting a system more like the other doesn’t get rid of those underlying problems.  There is something they both can do, though.  Use less government.  And more market forces.

The real solutions are quite simple: user fees and private insurance options would introduce economic incentives for efficiency that would regulate supply and demand, shift costs off the public system and offer a sustainable source of additional resources.

The US has private insurance options.  For now, at least.  But they wrote Obamacare to put them out of business to get the public option in through the back door.  A two-step process to get the US to a national health care system.  So they can have the same problems as their dear friends in Canada and the UK.

National Health Care makes Unhappy Health Care Providers

The problem with a single-payer system is that there is no competition to keep costs down.  That’s what a free market economy does.  Keeps prices down.  That’s why one store can’t sell a TV set for $2,500 when another sells the exact same set for $750.  Because consumers will not pay more for the same thing.  That’s what competition does.  Makes people honest.  Without competition, though, you have to trust someone.  Or some panel.  To set fair prices.  And fair salaries and benefits.  And when costs are too high the only options available are to ration services.  Or pay health care providers less.  Or make them work longer hours for the same pay (see NHS reforms push third of GPs to head for exit by Laura Passi posted 5/5/2011on PulseToday).

The first part of Pulse’s State of the Profession Survey, published this week, paints an alarming picture of GPs’ working lives, suggesting they are being forced to work longer hours, are spending less time with patients and are struggling to meet expectations as a result. Almost half of the 576 GPs who responded to the poll reported they were suffering from stress.

But it is the fallout from the Government’s far-reaching NHS reforms that appears to have pushed the number of GPs looking to quit to the highest level for more than a decade, with 71% claiming morale had fallen as a direct result of the health bill and only 9% saying it had risen. Just 18% said they believe general practice is currently moving in the right direction.

Here’s a news flash.  Being a nurse is hard.  Being a doctor is hard.  Telling them that they have to work longer and harder for less pay just isn’t going to get people to go into medicine.  Or stay in medicine.

BMA chair Dr Hamish Meldrum told Pulse he feared low morale could lead to an exodus of senior GPs.

He said: ‘Morale isn’t that good when it comes to things like pay, the threats to pensions and the various other things that are going on in the NHS.

Yes, we want you to sacrifice and give all you can so we can live healthier lives.  But we don’t want you to get rich in the process or enjoy life.  Your reward should be knowing that we can live a long and healthy life so we can get rich and enjoy life.

Dr Julia Hodges, a GP in Elephant and Castle, south London, was one of many to blame the fall in morale on the NHS reforms: ‘A lot of people feel quite betrayed because the story was that there would be no major top-down reorganisation, and then suddenly the biggest changes since the inception of the NHS are being discussed. I feel the changes are badly thought out and so destructive. Inevitably there has to be more rationing, more cuts, more waiting lists. I think it’s going to be really unpleasant to try and commission services when the budget is shrinking rapidly.’

Yeah, it has to be this way.  Because when there is no competition, the only way to cut costs is for someone or some panel to determine who they are going to pay less.  Or who they are going to make work harder for the same amount of pay and benefits.

It’s about the Power and the Money

When it comes to the health care debate in the United States, people have to understand it’s not about providing affordable and quality health care for everyone.  It’s all about political power.  And the money.  The utopian solutions pointed to in the UK and Canada are not the utopias some think they are.  Their cost problems are worse than the American cost problems.  But does that dissuade the defenders of Obamacare?  No.  Which should tell you everything you need to know about their true intentions.

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Look Out – Here Comes the Public Option

Posted by PITHOCRATES - September 24th, 2010

Insurance or Welfare?

People must think insurance companies can crap money.  The truth is, though, they can’t.  They take a little bit of money from the many so they can make big payments to the few.  That’s insurance.  You pay a little to protect yourself from big, unexpected medical costs.  Like an accident.  Or a disease.

Years ago I worked in a small company.  One of my duties was managing our healthcare.  The older employees (especially those with children) always did the responsible thing.  They enrolled.  The young single men didn’t.  Employees contributed to the plan.  And, well, a young man had better uses for that money.  But when one knocked up his girlfriend and saw the pregnancy costs, he came a running to enroll. 

Insurance doesn’t work when you only buy the policy when you have a known expense coming.  If we all did that look at what would happen.  Everyone paying a premium will be collecting a benefit far greater than their premium.  And it just can’t work that way.  I mean, where is the insurance company going to get the money to keep paying benefits that exceed the amount they collect in premiums?  There’s only one way.  Jack up premiums.  Or decline coverage.  Well, two ways.  To stay in business, insurance companies, as well as every other business in the world, gotta have revenues that exceed their costs.  If they don’t, they go belly up.

We’re Not Stupid

Obamacare’s mandates began to kick in this week.  On Thursday (9/23/2010), insurers must wave pre-existing conditions for children.  Also, they can no longer limit the amount of health care a person receives per year or in their lifetime.  (See Insurers Dropping Some Coverage For Children by Matthew Sturdevant on the Insurance Capital blog.)  This means you don’t have to buy insurance for your kid anymore.  If he or she gets sick or is hurt in an accident, THEN you visit your friendly insurance agent and enroll your kid into a plan.  And the open-ended benefit limit?  Yeah, you try to work something like that in your household budget.  House payment, property insurance, car payment, car insurance, utilities, groceries, cable and sundry expenses…$3,500 per month.  And the unknown, open-ended, potentially catastrophic expense…$25,000 per month.  Hmmm.  Maybe we should drop the cable.

Now you don’t need to be particularly sharp with numbers to draw the obvious conclusion.  Insurance companies can NOT stay in business under Obamacare.  Even those in Washington know this.  Unless those in Congress are extremely stupid.   So why, then?  Why would they do this when they’ve said all along that we’ll be able to keep our current plans?  Think about it.  It’ll come to you.  Why would they do something that would do exactly what they said it wouldn’t do?  Because it’s what they wanted all along.  To put the private insurance companies out of business. 

‘No’ Means ‘No’.  Unless You’re the Federal Government

The people said ‘no’ to nationalizing our health care.  They said ‘no’ to the watered down version of nationalized health care.  The public option.  But the Obama administration wanted this.  It’s the Holy Grail of Big Government.  So what to do when the people say “no?”  You screw the people and find a way around them.  And you make it look like the insurance companies’ fault.  Make them look greedy.  By writing laws that will put them out of business UNLESS they make huge rate increases.  Threaten and bully them when they do.  Exclude them from the pool because they did.  Then you step in with the public option.  Then, Bob’s your uncle, you got what you wanted.  Control of one seventh of the U.S. economy.

Lying or stupid.  You pick.  Either way it’s a sad commentary on our elected ‘representatives’.

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LESSONS LEARNED #22: “The only problem with health care these days is that it’s approached from a cost basis more than a medical basis.” -Old Pithy

Posted by PITHOCRATES - July 15th, 2010

ONCE UPON A TIME, in a distant land, there once lived a merry people.  And life was good.  They lived together in sweet harmony.  They worked long and hard to sustain their happy life.   And when people fell ill, they went to the doctor.  And after treatment, THEY PAID THEIR OWN DAMN BILL!

But those days are gone.  We don’t pay our own doctor bills anymore.  Health care is no longer between a doctor and a patient.  There’s somebody else involved now.  Someone who says what a patient can or cannot have.  Someone that tells doctors what they can or cannot do.  And our doctors have a bull’s-eye on their backs.

Medical care has taken a back seat to medical costs.  It’s not about what’s best for the patient.  It’s about what costs the least.  Think of a graph.  Increasing along the bottom are medical services rendered.  Increasing up the y-axis are costs.  On this graph picture two curves.  One that plots costs of medical malpractice lawsuits (very high when the doctor provides no medical services and decrease as the amount of medical services increase).  The other that plots costs of doctor reimbursements for services rendered (very low when the doctor provides no medical services and increases as the amount of medical services increase).

This is what a doctor considers when seeing a patient.  They don’t want to.  But the system forces them to.  Because of the conversion of health insurance (to protect your personal financial wealth) into a benefit/entitlement (to get free stuff with other people’s money).  And the rise of that other benefit/entitlement, the malpractice lawsuit as a vehicle to early retirement.

What better way to illustrate how cost takes center stage in our health care today but by some personal anecdotes?  So here is a smattering of our collective pasts.

I WAS IN some junior officer training program.  It was the last full day.  The last training we did was a run on the obstacle course.  It was hot.  Humid.  I kept pushing myself.  Now, I’ve suffered dehydration and heat exhaustion before, but whatever hit me wasn’t that.  I looked okay.  I had one of those ‘spike driven through your skull behind the eye’ migraines.  Nausea.  Some other discomforts.  All we had left was retreat.  Where we formed, though, we faced into the setting sun.  I asked my CO if he would excuse me from retreat.  I just wanted to hit my bunk.  To die.  Or sleep it off.  Whatever it was.  Training was over.  After retreat, they were going to open the pool for us. 

Well, he denied my request.  And made me feel like a little girl for even asking.  (I regret that moment of weakness to this day).  After I was dismissed, he called me back and said, “And if you do vomit in rank, vomit with bearing.”  “Yes, sir,” I replied and saluted.  Made it through without vomiting.  Crawled into my bunk.  When my CO saw that I was not partaking in the ‘mandatory’ fun he came to see me.  Was about to send my ass to the infirmary.  But whatever I had passed.  I felt fine.  The following day it was as if nothing had happened.

When you got through something like that, you’d be surprised how it impacts you.  You ignore things.  And live with things. 

I HAD A WART once under my thumbnail.  I made an appointment with my doctor to have it removed.  The day before my appointment, though, was a very busy day at work.  Didn’t sleep well the night before, either.  So I was tired.  And drinking coffee.  Apparently, I was the only one.  In the afternoon, half a pot was still remaining.  From the morning.  Nice and black.  Thick, too.  Like tar.  Strong.  I finished that pot.  Later that night, I had heart palpitations.  I rationalized it was from drinking too much coffee.

While getting that wart removed, I mentioned in passing the heart palpitations from the night before.  Laughing about it.  Last time I drink a pot of coffee, I said.  The doctor looked up from the wart and said, “Heart palpitations?  That’s serious.  This,” he pointed to the wart, “is piddling.  Heart palpitations?  That’s serious.”  The next thing I knew was getting an EKG and sent home with a heart monitor strapped to my chest.

I now thought about those things I was ignoring and living with.  Perhaps I was being irresponsible.  I mean, I was feeling things in my chest.  When I went in to get the results of all those tests, I told him about those things I’ve been ignoring and living with.  My test results were fine.  I asked him about those other things.  He asked, “How old are you?  You’re fine. You just have some anxiety.  Here’s some Xanax.”

When I mentioned heart palpitations, he couldn’t laugh it off with me.  For one, he was a doctor.  It’s what doctors do.  Save lives.  But he also buys malpractice insurance.  He was leaving himself open to a lawsuit if he didn’t do everything expected when a patient says he has had heart palpitations.  Once those tests came back confirming it was most probably the excess amount of coffee I drank that day that gave me the palpitations, I was just a young, healthy man.  Who did not justify any further testing.  At least, my insurance company wasn’t going to reimburse any further testing.

My test results looked good.  Feeling things in the chest, though, could mean something.  A stress test might be prudent.  But unless something turned up in that test, the insurance company wouldn’t reimburse that cost.  Which meant I would ultimately end up paying for it.  And stress tests are expensive.  Of course, if I paid cash outside the bureaucracy of the health insurance maze, it could be less.  So I said let’s do the stress test.  I’m buying.  I took the test.  Did okay.  Didn’t die.  Nothing strange happened.  The cost?  About half of what they would have charged had it gone through the myriad levels of overhead that process an insurance claim (at the health insurance company, at the hospital where the test was done and at my doctor’s office).

And I continued to ignore and live with those things I was feeling in my chest.  Even stopped taking the Xanax.  If I was feeling any anxiety, it was from my little episode in the health care machinery.

BUT THINGS SEEMED to only get worse after a year or so.  I started wondering that maybe I was only making things worse by ignoring them.  So I went to the doctor.  I explained what I was feeling.  He did the perfunctory tests that shrunk the lawsuit window.  Again, things looked good.  “How old are you?” he asked.  “You’re fine.  Look, we can keep doing tests but it’s going to get expensive.  Your insurance isn’t going to pay for them if nothing turns up.  And, I gotta tell you, I don’t think anything’s going to turn up.”

Again, he was looking at the cost-service tradeoff.  He felt he had minimized his costs.  He did enough testing to protect himself from a frivolous lawsuit.  And he didn’t do more testing than the insurance companies would reimburse.  Further testing would be on my dime.  Not that I didn’t think my life was worth the investment, but more tests would mean more missed work.  And with me feeling he wasn’t going to do anything but throw darts in the dark, I didn’t pursue additional testing.  It didn’t appear that anything big was wrong so I continued to live with those feelings.

THIRD TIME’S A charm.  After another year or so, I went to another doctor.  Again, I thought I might be doing more harm by ignoring these things.  Being further away from my original heart tests, I didn’t really discuss them this time.  Which was good.  It was a red herring.  You start talking ‘heart’, you look at all things ‘heart’.  High risk.  High costs.  But if you don’t start from ‘heart’, you can explore things that are lower risk and lower costs.  I had some serious acid reflux.  Acid regurgitating up your esophagus can mimic heart attack symptoms.  Who’d a thunk it?

HAVING AN INTERMITTENT problem is hard to diagnose.  All but impossible if you’re young.  I was a young college student.  With intermittent stomach pain.  I went to a doctor.  He felt me up to see if it was appendicitis.  I didn’t feel anything when he pressed over my appendix.  So he ruled that out.  “How old are you?” he asked.  “You’re fine.  You just need to get drunk and get laid.” 

A couple of years later, I was still feeling that intermittent stomach pain.  So I went to another doctor.  (It was a clinic.  The doctor I saw last since retired.)  He felt me up.  Ruled out appendicitis.  Sent me for an upper GI (where you drink a cup of barium and they x-ray your esophagus and stomach).  Test came back.  Everything looked fine.  “How old are you?” he asked.  “You’re fine.  Just drink some Maalox.”

So I drank some Maalox for awhile.  Didn’t seem to help.  Another year and another trip to the doctor.  And another upper GI.  The instructions this time called for a wait time before one last x-ray.  This x-ray showed an ulcer.  Just past the stomach at the beginning of the small intestine.

MY MOTHERINLAW WENT into the hospital with chest pains.  She was in her mid-sixties.  She spent the night in the ICU.  The next morning they transferred her to the cardiac care wing.  They did just about every test they could.  She was elderly.  Elderly people have health problems.  So doctors do ALL the tests to slam shut the lawsuit window knowing that the health insurance company or Medicare will reimburse for most of those tests.  They found nothing.  She went home.  Without them doing anything or being able to explain what had happened.  They had practiced due diligence to protect themselves legally.  And the health insurance company would rule that any further testing would be frivolous and unnecessary, only to produce additional revenues for the hospital and doctors. 

This repeated a few times until they found pancreatitis and stones in her bile duct. 

IT’S NOT THE doctors.  It’s not the hospitals.  Or the insurance companies.  It’s the system.  When other people pay your way there has to be rules.  For a free ride is not free.  We just make other people pay.  The problem with all things free?  We over consume.

How many plates of food do you eat in a restaurant when you pay per plate?  One?  How many plates of food do you eat when you eat at an all-you-can-eat buffet?  The answer?  More.  It’s happening in health care.  Those with insurance don’t care a whit about cost.  Don’t give me generics, I have insurance.

But someone is paying all those bills.  And they see this over-consumption.  They raise their premiums to cover it.  But when they do, they find some people stop buying their health insurance.  Which means they have to raise their premiums again.  More people stop buying.  So they need to raise their premiums again.  But they can’t keep doing this.  So they have to put in some kind of spending rules.  Say what they will reimburse and what they will not.  And they force the poor doctor to police this mess who is trying to help you get well at the same time.  All the while trying to keep the lawyers off his back.

It’s worse on the Medicare side.  For private health insurance has some young, healthy people paying for insurance who aren’t consuming medical care.  Everyone in Medicare is sick and/or old.  Big consumers of medical care.  The trend has been to micromanage the rules more as the consumption of medical care has outpaced the taxes collected to pay for that care.  And with an aging population, those costs are running well ahead of tax receipts.  It’s not a question of if the program will go bankrupt.  But when.  And a national health care system will only be worse.  The added costs will require massive taxation and cost management worse than any hated HMO.

AND LOST IN the shuffle is the patient.  Who, once upon a time, went to his doctor.  And the doctor did what was best for the patient.  And the patient paid the doctor for his services.  And everyone lived happily ever after.

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