Listen to the broadcast of You Tell Me on KTBB AM 600, Friday, August 24, 2012.
Imagine if you bought groceries the way most people buy health care. You go to the store, you pick up some chicken and some ground meat. A carton of eggs, a loaf of bread, a gallon of milk. A package of cheese. A head of lettuce, some yellow squash and a couple of tomatoes and a couple of cans of canned green beans.
Oh, and a bag of Nacho Cheese Doritos and a half-gallon of chocolate mint ice cream.
Then you go to the checkout stand. The first thing the checker asks you for is your “Grocery Plan” card. It’s the card you keep in your wallet right next to your health insurance card – it and your grocery card in this fictional scenario both provided by either your employer or the government.
The cashier at the supermarket scans your Grocery Plan card and then scans all of your items. She then tells you that Doritos and chocolate mint ice cream aren’t covered on your plan.
The rest of your purchase is, however, covered minus the $5 co-pay. You fork over the five dollars plus the full retail cost of the Doritos and the ice cream.
As a result of this transaction you would know what ice cream and corn chips cost but you would have only a vague idea or no idea at all what meat, produce, bread, milk and cheese cost.
Also as a result of this transaction the grocery store would hand the paperwork from your purchase to someone in a huge and hopelessly backlogged grocery claims processing department. An army of employees would spend their days filing Grocery Plan claims with Grocery Plan carriers in order that the store might be reimbursed for the food it bought and delivered.
If all went well and there were no snafus with the paperwork, the grocery store would expect to receive payment about six months from now for the groceries you took home today.
That this illustration is a bit absurd does not negate the fact that it fairly closely describes how most Americans – about 90 percent – purchase their health care.
If we bought our food this way, the cost for food would explode just as it has for health care. This would lead to the posturing of eager politicians seeking to win election by promising to “go to work on behalf of hard-working Americans to bring down the high cost of groceries.” Whereupon the problem would only get worse.
Third party payment drives up prices. If someone else pays for your ground meat, what do you care what it costs? (Take “ground meat” out of that sentence and substitute “mammogram.”)
If at the point of consumption a good or service appears to be free, the price signals that serve to keep supply and demand in balance no longer function. When you pay for something yourself, you are sensitive as to the price and the producer is therefore sensitive as to the cost. Thus computers, cell phones, corn chips, cars, TV sets and laser eye surgery all cost less today in constant dollars than they did ten years ago.
Add to this the cost of processing the claims and getting paid. In economic transactions, time and money are interchangeable. Impose upon the grocery industry the horrendous processing and collection costs and long delays in receiving payment now weighing down the health care industry, and food prices would rise.
Thus no one would seriously propose our health care payment model as a way to pay for food, even though food is every bit as essential as health care.
The challenge, therefore, lies in cleaning up the deeply-entrenched health care model before it bankrupts the country. Unfortunately, doing so will require political skill bordering on supernatural.