Thursday, February 25, 2010

The Socialized Medicine Scheme: the wrong focus

What is extremely odd about the current argument put forth by proponents for socialized medicine is their focus on health-care insurance.

One could go on for fifty paragraphs about claim frequency, claim severity, expense ratios, claim reserves, etc., etc. but at the end of the day the cost of health insurance reflects the underlying cost to provide health-care.

The ridiculous assumption that fixing or controlling health insurance premiums will cause the underlying cost of health-care to change is insanity.

It really boils down to: the current cost to provide health-care is a reflection of demand and supply for health-care given the current government regulation frame work. The solution is in the cost to deliver health-care which includes demand efficiency by reducing/eliminating over utilization, supply to be expanded as well as supply costs to be simultaneous reduced, and government regulation to be reduced or eliminated.

Once demand and supply for health-care produces a price point, all insurance is doing is insuring “price”. Average price is not really the insurance event. It’s the outlier of average price that is the insurance event. That is, it’s the catastrophic price component, that is calculated into average price, which is the true insurance event.

Hence demand and supply for health-care produces price and the cost of insurance is merely a reflection of price determined by demand and supply for health care.

1 comment:

  1. Hi,

    What about price transparency from the provider side? I don't think that providers know how to price their services because they tend to think in terms of total costs and total revenues without regard to intermediate costs in the production of healthcare. It is in those processes represented by intermediate costs where efficiencies can be realized. Dartmouth's practice variation research comes to mind.