July 29, 2007

With the release of Michael Moore‘s new film, Sicko, it seems appropriate to offer a summary view of American healthcare. Many Americans remain unaware of the regime under which they live, until hit by illness or accident. Canadians, debating needed improvements for their system, often argue with little understanding of the bizarre realities of America’s.

As someone who has lived roughly half my life in the United States and half in Canada, and as an economist by profession, I think I can provide a vivid sketch of American healthcare.

There actually is no system.

There is private health insurance for most middle-class people, and the tradition, not a requirement, is that this is paid by your employer as an employee benefit.

Since there are about 1,500 insurance companies looking for this business, the nature and quality of the policies vary immensely.

For a privileged cut of the population - those working for the government and large corporations and legislators - the benefits are very good, and they get excellent medical care.

As you may imagine, the quality and quantity of the benefits goes down as you move down the prestige scale. For a more typical office worker, there will usually be many limits on the policy. Examples: an annual $1500 deductible; a 15-20% deductible for each procedure; and, in some cases, coverage that is as low as 60% of costs.

This is why health care is the single largest cause of personal bankruptcy in the U.S. Inflation in fees and costs by the health-providing industry means that a single-day as an outpatient with some relatively minor procedure - has a full cost on the order of $7,000 when all the bills are in.

I say 'when all the bills are in' because the patient for weeks after the procedure will receive bills: from each doctor, from the anesthetist, from the hospital, from laboratories, from the ambulance company, etc. There will be items on your bill, on a long computer list, like $150 for the use of a scissors or $10 for some aspirins in a cup.

Under some insurance policies, you pay and are later reimbursed. This can still cause a cash crunch where the bills are high. Under other policies, the bill you receive will be for the residual after separate billing to your insurance.

In any case, if you do not pay the balance fairly promptly, your file will be turned over to a collection agency who will then hound you daily for the money.

There are invariably disagreements with the insurance company over specifics. You usually have an 800-number where you will often wait a long time to talk to call center about the issue. Because of the complexity of the terms of a given policy, you will have to be well-informed even to discuss your point.

On some policies, even pretty decent ones, you are required to call an 800-number before going to the emergency room to get the insurance companies permission for what you are doing. Otherwise, you will pay the emergency-room bill yourself.

But even for pretty good insurances, typically policies have lifetime limits on benefits. If you are struck with something really seriously expensive, you will reach the end of your benefits.

Note the fact that very good to excellent coverage for upper-middle class and government people effectively silences those who would be active in changing the system.

This is a key reason why the healthcare chaos never becomes a burning political issue. It also provides a lever to be used if someone, as the Clintons did, wants to reform things. Upper middle-class people were directly appealed to, being told in a barrage of ads that the excellent level of their care would be reduced, a very effective ploy.

For many of the privately insured however, benefits range from mediocre to terrible. America has more than forty million with no benefits, but a statistic never given, and more important, is the huge number of under-insured.

Note that you can approach some companies to buy your own insurance if your employer provides none. Because you are not part of pool in these circumstances, your fees will be very high. The benefits are also likely to be poor to mediocre.

The industrial sector of the U.S. has badly declined for decades, and with its decline the opportunity for decent, employer-paid insurance for most working people. The growth sector of the economy is services, and these places typically offer poor or no insurance. Of course, many of these are the infamous McJobs.

People in non-union factory or middling office jobs or much of the service industry get benefits so limited that a serious event can throw them into bankruptcy. This is how the policies, where they are available, are priced low enough for such employers to afford.

There are many other disturbing elements in this national healthcare chaos.

For example, your private health records are in the hands of private insurance companies, and this is marketing information in which they trade for profit.

It is possible for your private health-care information to disqualify you from employment somewhere else.

People with better policies hang desperately on to their jobs for fear of losing coverage in middle-age, just when you most need it.

Morality enters American health care, as some private companies will not cover procedures such as abortion.

You may have a policy with which you are quite satisfied, but for some reason, usually cost-cutting, your employer may change insurers suddenly. You will be faced with a whole new set of qualifiers, requirements, 800-numbers, deductibles, and limits. And this can happen a number of times in your career, and it is very unsettling.

Companies deeply concerned about costs will gradually work their way down from excellent policies to mediocre ones. You must adjust accordingly.

There are hundreds off details not possible to cover outside of a major essay. As an example, not many years ago, if you lost your job, you, in most cases, immediately lost your insurance. Too bad if you or your child had chronic needs. Now, there is a time-limited bridging mechanism - for which you must apply, fill out forms, and pay – that allows you to be insured until you secure your new job with new insurance.

The chaos includes often-impoverished county hospital emergency wards for the really poor. These will still try getting some degree of payment out of you according to your means. In general, the care in such places is poor. There is the Veterans’ Administration system for qualified ex-soldiers. There is Medicare for retired Americans, a system whose benefits are completely inadequate to modern needs. If you retire without a supplemental insurance – either paid by your past employer in a good job or by yourself in other cases - you may face serious problems.

There is the Medicaid system for poor Americans. It is an extremely complex system, and the extent and nature of benefits vary considerably from state to state. If you move from one state to another you can lose coverage for the services you were using before. Again, depending on the state, you may be required to make co-payments for services. You really do have to be needy to qualify for benefits, and your means are examined in detail. For some Medicaid services, officials are entitled to recover expenses from a beneficiary’s estate.

Private hospitals in the U.S. – generally the best but not always – are in various jurisdictions required to take a certain quota of non-insured patients. This quota is never generous. The cost of this effectively gets dumped onto the insured, increasing the cost of insurance.

This also leads to some bizarre results. Suppose you are an uninsured person picked up on the street by an ambulance after an accident. The ambulance will be calling ahead to the nearest hospital to see whether they can take another uninsured. If the answer is no, another hospital is called. This continues until there is a taker, however, by that time, you may expire in the ambulance, a not uncommon event.

Imagine the horrors as an uninsured person, whether a citizen or a visitor from abroad, of getting mugged in the United States? First, there is the horror of the mugging or rape or assault, and then the horrors of dealing with the Medical Kremlin.

This brief review gives you a realistic sketch of healthcare in America. If you are young and healthy, you need not be overly concerned. Of course, it is precisely the pool of young and healthy people that insurers love, because their employers pay but the employees don’t use many benefits. That is why institutions like the high-tech industry or huge multi-national corporations have such good policies. They get used comparatively little.

The entire ‘system’ segments the population into many different pools, from low risk with excellent benefits to high risk with terrible benefits. It truly is medical Social Darwinism, organized by lawyers and financiers.