Tuesday, March 09, 2010

Game Change: Health Care

One of the most important points of Stephen M. Pollan's 'Die Broke' and 'Live Rich' books was that life in the American workplace had changed.

So many of America's institutions are based on a business model that belongs back in the golden age of the 1950s - when people earned livable wages in a job they might have for twenty or thirty years.

Health insurance is probably the most obvious of these; the American private insurance system worked beautifully when people worked for the same company for most of their adult lives; and therefore stuck with the same insurance company.

However, the system no longer works like that.

In general, people don't have 'jobs for life' any more. In fact, in Die Broke Pollan pointed out that most successful Americans give each job two years and then move onto something new - and if it's not the 'new American worker' jumping ship, it's corporate reshuffles firing huge portions of their workforce to improve margins and nudge company stock up a few cents.

This fluidity in the workplace is actually a real boon for corporate America. With less job security, companies can pay less to attract employees, or offer reduced benefit packages. Old institutions, like powerful unions who bent companies over a barrel for wage increases, are rapidly becoming a thing of the past (and partly because of their own greed and short-sightedness; a good example being in the American auto industry.)

But this is a terrible thing for you and me; the average American worker.

Not having any security in your job is a terrifying thing; I spent two years in my last job with the Pink Slip of Damocles hanging over my head and when it finally dropped, it was almost a relief not to have to worry about whether your job, or your entire company, would exist the following week.

But more noticeably, a fluid workforce means that wages are driven down; middle class incomes in America have actually dropped by 9% since the year 2000. The concept of a 'living wage' is becoming something of a fantasy. When I first moved here, the wonderful thing about America was that it was still possible to live on one person's income. These days, the cash-strapped middle class are finding that both parents need to go out to work just to make ends meet (as has occurred in most of the much more heavily taxed countries of Europe.)

And then there are benefits...

I've written several posts on the subject, but I'll reiterate my point one last time; losing your job is a terrifying thing in the United States. Just yesterday, our doctor called us to tell us that our health insurance had been canceled; it turned out that the company picking us up from our last program hadn't processed the forms we sent them two weeks ago, which in turn meant that the coverage that was meant to start at the beginning of the month hadn't.

Fortunately we got the situation sorted and our coverage reinstated retroactively; but it was a scary moment. Middle class families go bankrupt every single day because of medical expenses.

My point is this; back in the 1950s, when people had 'jobs for life', the idea of private medical insurance worked beautifully because people would stay with the same insurance company for decades. These days, the workforce is constantly switching jobs; and the current system is inadequate to deal with that.

What's worse, the health insurance companies have used this as an excuse to make gouging premium increases and quietly sift out the 'uninsurables' along the way; the poor folks who actually need health care, but can't get access to it because of 'pre-existing conditions.'

As Andy and Paul Mitchell pointed out in my last post on the subject; 45% of Americans are already on some kind of government-funded health insurance program and that figure is increasing every single day.

This is why I believe we'll have a European-style single payer system - so-called 'socialized medicine' - within the decade; because the private insurance companies are eating themselves alive and leaving more and more people for the government to look after.

One final point about the changing face of the American workforce; it's becoming increasingly popular, or necessary, to become one's own boss here in the states. 42 million Americans class themselves as 'freelancers' and that's a figure that's increasing every single day.

Working as free agents can be an attractive proposition; with fewer companies hiring full-time employees, a temporary contract worker is a commitment-free way to get the skilled staff you require onboard without having to offer them benefits and salary.

Along with single-payer health care, I wouldn't be surprised if the entire American middle-class was 'unemployed' within a decade; working for themselves as 'private contractors' and pulling extended gigs with companies that are too frugal to hire employees full-time any more.

But this is the area in which the current health care system is most deficit. Buying insurance outside of a company scheme is tough. Many people are denied because of pre-existing conditions. The rest are forced to pay 300% more than they would as part of a company scheme. It's currently an impossible situation; only the most successful freelancers can survive within it.

In the next few years, though, individual purchasers, such as freelancers, are going to become the largest growing customers for health insurance. Unless the insurance providers grow up and start offering them affordable coverage, this 'freelance middle class' will be the single biggest catalyst to ensuring the inevitable introduction of 'government funded' health care for all.

If the raging debate on the health care industry has helped me realize anything, it's that this is a battle the opponents of 'socialized medicine' have already lost.


paul mitchell said...

Roland, your post skates right up to the edge of the issue, then away again. If the workforce is becoming MORE mobile, isn't that a good thing for individuals? And if the medical services dollars to be had are going to be tied to individuals more and more, rather than huge blocks of people, why does the government need to get involved? The "insurance" companies will adjust to market forces to keep their HUGE profit of 3.2%.

If you listen, you will never actually hear any of the Democrats talk about margin, they only talk about dollar amounts of the insurance profits. Wonder why?

One Salient Oversight said...

I have NEVER had fears about medical treatment.

I pay my taxes so that people in my country have universal health care.

And people in my country pay taxes so that I can have universal health care.

It's cheap, it's effective and most people want to keep it.

paul mitchell said...

Good OSO, y'all keep it, and we shall keep ours so y'all can have new medicines and learn about new procedures.

Andy said...

Roland, as I see the "problem" (just accepting the premise here), it is health care "cost."

Insurance companies are very profitable, but the margins truly are tiny. We've beat this horse before. Americans truly do foot the bill for the rest of the world.

I don't have the figures handy, but in many cases, our $10 pill sells for 30 cents often in poor countries. Almost all the R&D is paid for by Americans. (almost)

$160,000 avg. medical malpractice insurance per physician (don't quote me...but that's the last I heard).

You may be right. Socialized medicine may be inevitable. But, I'd be more inclined to blame that on our desire for "more and better," our litigious society, and short-sightedness of medical professionals than I would on insurance companies shooting themselves in the foot.

If I only netted 3 or 4 bucks on every 100 I took in in my business, I'd starve. Of course, it's "apples & oranges," because of the work I do. But, I just can't lay much blame on the insurers for the mess.

Roland Hulme said...

Paul - margins vs. profits is an interesting one.

If you made 50% margin on a $100 deal, you net $50.

If you make 3.2% on a billion dollar deal, you make $32 million.

Which 'margin' would you prefer?

The truth is, it's not a question of margins, it's a question of volume.

The oil companies and the health insurance companies make small margins, but sell HUGE volumes.

And, yes, the govt. talks about profits because regardless of their margins, they rake in ENORMOUS amounts of PURE PROFIT from a monopoly on the American consumer.

Margins is a totally red herring in this instance.

paul mitchell said...

Roland, it is exactly the margin. Those companies in order to make that profit have to be incorporated in every place they do business. As a whole, the dollar amount seems staggering, yet, 3.2% margin? Back away from it and try to realize that a margin so small doesn't leave any area for failure at all.

ck said...

The right wing actually won this debate during GWB's presidency.

How you ask? The supreme court. If (and this is a big if) this passes this will be over turned in a big way by the supreme court. Just watch.

Then come November when the democrats work really hard to lose the house and the senate... then in 2012 when Jimmy Carter celebrates not being the worst president ever... the Republicans will again control all three houses and do away with any remaining waste of 'health care deform'.

Neil said...

Talking about profit margins of insurance companies is missing the bigger picture. Under the current system every doctor's office that has to deal with insurance companies has to pretty much have a full time employee just for that. That, combined with the fact that insurance companies are for-profit, and combined with ridiculous malpractice insurance (why not introduce lawsuit limitations in the same way we have on auto insurance policies), means that administrative costs across the whole system are huge.

One Salient Oversight said...

Americans truly do foot the bill for the rest of the world.

They do *not*. There are plenty of medicines and "procedures" that are developed in other first world countries.


Bayer is German.

Roche is Swiss.

GlaxoSmithKline is from the UK.

Sanofi-Aventis is from France.

AstraZeneca is from the UK.

Hoffman-La Roche is Swiss.

Boehringer Ingelheim is German.

And they are funded by governments subsidising prescription drugs.

Oh, and the research these European companies do is enjoyed by the United States.

It cuts both ways - US research benefits the world; world research benefits the US.

paul mitchell said...

OSO, where is the research done? Because those countries that you mentioned do not add up to a third of the US research individually. OR, have you not read the WHO Report?

paul mitchell said...

And it is really, really weird that every single company you listed is publicly traded. Just weird to the hilt.