My thoughts on US healthcare reform: II

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When I first came to the US in fall 1997, I bought the university healthcare insurance plan, which is pretty basic, and pretty cheap. I don’t have a primary physician, and I never went to the university clinic (part of the reason was I don’t know how to say those medical terms in English, part of reason is I did not have major illness). I did take one of my fellow graduate student to the University hospital at Columbia, Missouri, and was very impressed by the facilities. Hey the hospital in the US looks much better than China: less crowded, clean, new facilities etc.

After I started to work in fall 2000, I have better medical insurance from work (I am responsible for about 20% of the cost). Over the years the premium goes up consistently, so as the copay and out-of-pocket expense. For instance, I remember in year 2001, the tonsil surgery cost me only $10 copay (the $5,000+ bill was picked up by the plan). As of recently, a check up with eye specialist cost $160 (insurance only paid only $100). I understand the circumstance could be different, plan was not exactly the same, but still quite a dramatic change.

Why the cost keeps rising?
I read an interesting health care economics piece at trader1688 (again in Chinese, use Google translate if necessary) a few days ago. It talks about supply (doctors and hospitals), demand, insurance companies (middleman), and government regulation. I also listened to the Charlie Rose interview with Mayo Clinic CEO. They talked about the current US system is a for-profit system: encouraging patients use more services and drugs so that providers can make more money (similar augument goes to the providers), rather than try to keep people healthy (ultimately will use less services and reduce the healthcare revenue).

Economics-wise, Health care is an interesting service, for most other services (mobile phone, entertainment etc.) consumer would like to have more. For health care most people (deep in their heart) really don’t want to use more. Once in water-cooler talk I asked my co-worker what plan (HMO, PPO) should I pick, pros and cons, he said “the best way is not to get sick” 🙂

That’s a really good point. I understand there is different views on use of health care and drugs between people in China and in the US, and between different people in the same country. But it seems to me generally the people in the US take more prescription drugs than people in China: Lipitor for one. Another interesting point, is currently US consumers pay a large portion of the western drug companies’ R&D cost, due to the high price consumers pay (vs. the price consumers in Canada pay).

Besides drug cost (both the price and the consumption of prescription drugs), other service cost also keep rising. Diagnostics, hospital stay, surgery, and so on. The money went through the following route:

consumers, employers and US government => Medicare/Medicaid and private insurance providers => doctors, hospitals, drug companies (via. drug benefits management companies or Walgreen/CVS stc.) and other service providers

To be continued. For next episode I will talk about the accessibility of healthcare services in the US, from personal experience. Note accessibility comes hand in hand with cost, those two things are not isolated.

Bonus material
The following was written early this year, when the stock market was in turmoil and Madoff was in the headline. Last night I was watching the Enron documentary: the smartest guys in the room. When Enron talks about the broadband trading, and trading (gambling) on weather, I was thinking: wow, this emperor has no clothes. Sadly, Madoff cheated on many old people, just like Enron cheated the PGE (Portland Generator and Energy?) line workers: their retirement was tied up in the Enron stocks as Enron executives was unloading 1$ billion worth of stock, and those executives told the employees everything was fine.

Life insurers and mutual fund?
I have a quite wild thought. I think in a broad terms, all these life insurers and mutual fund serve a same goal: help people manage their retirement income. The former provides this annuity (which means the participants need to contribute monthly), this is very much like pension (although one can argue employers pay for that, but hey where the employer’s money come from). For mutual fund, if we can dollar average cost (put in fixed amount each month), that’s very similar to the life insurance senario.

Then comes to the withdrawal stage. If the investments go sour, they can use new money to pay off the old obligations. Hey, are we talking about Ponzi scheme here? Why we only punish Madoff?

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