Saturday, June 24, 2017
Is the insurance industry working on making itself extinct?
Economists have been saying for quite awhile that the current system isn't sustainable. There's a simple reason why: The more costs climb for a product, the fewer people there are going to be who can afford to buy it. It doesn't matter what the product is -- unless you're giving it away, there will always be people who can't afford it. We all know there will alwys be a lot more people around who can afford to wear Faded Glory* than to wear Versace. In a rational world, if you want to make money you've got basically two choices: sell a lot of widgets at the lowest possible price that still allows you to make a reasonable profit, i.e., go for quantity and make your money based on volume of sales, or sell just a few at a super high price. Mass production versus artisanal.
For various reasons, all predicated in some way on the fact that trying to buy good health is a lot less of a discretionary purchase than picking up some new tee-shirts or even a new car, the healthcare industry -- insurance companies, pharmaceuticals, doctors and hospitals -- have been busily jacking up prices to the point where fewer and fewer people can actually afford them. Back when the Affordable Care Act passed, the insurance companies viewed it as a giant gift. So do Big Pharma,. most doctors, and almost all hospitals. It provided them with guaranteed customers. Even better, the ACA included guaranteed payments -- to ensure that people could actually buy the insurance they were being mandated to acquire, the ACA includes subsidies.
So what has the Republican Congress decided to do? Jerk out the financial props for the ACA. People are still going to be told to buy insurance, but they're not going to get much help doing so. And you know something? Despite the fantasies of some politicians on the right, telling people they're going to be fined if they don't buy insurance or punished in some other fashion isn't going to make a bit of difference. Premiums are going to climb, fewer people will be able to afford them, and the customer base for private insurance is going to shrink. You know why? Because if you don't have the money, you don't have the money. Some people will give up on the idea of health insurance reluctantly; some will struggle to find a way to buy it; and some will just run the numbers and realize they're screwed so they might as well learn to live with uncertainty.
I'm not going to get into moral issues or the healthcare is a right debate or even the obvious need for a universal government-funded and managed system ("Medicare for all"). Nope. I'm just wondering why no one in any of the walnut-panelled office suites for Big Pharma or Aetna or any of the others has sufficient brain power to realize their customer base is shrinking. Instead of pushing for ever-higher prices, they should be working hard on trying to lower costs. Their short term greed has blinded them to the reality that the system they've created is doomed to implode. It's not going to happen any time soon, unfortunately, but give it a few more years and the fecal matter will hit the fan. I just hope things don't get too unpleasantly dystopian before the paradigm shifts.
*And isn't it a sad commentary on my life that the Walmart store brand is what immediately sprang to mind when thinking about something cheap? So much for my posturing that I never shop at the Evil Empire.