Health is Wealth? Health needs Wealth!

I would like to start with the old proverb:

If wealth is gone nothing is gone,
If health is gone something is gone,
If character is gone everything is gone.

While creating this proverb our ancestors assumed that all three, character, health and wealth are not only mutually exclusive but also totally in one’s own control. I am not sure how evolution has changed the dynamics between these variable but they seem to have become interwoven and the precedence has changed to the fact that wealth has gained the top position in this survival of the fittest race. If you don’t have wealth it is tough to keep up with your health and what use is a human full of character but no health and wealth. I see all three variables linked very nicely in the new Michael Moore movie, “Sicko”.

I have not seen Michael Moore’s “Sicko” yet but am experiencing “Sicko” through all television network debates and on NPR while I am on my way to office and back. I truly believe that Michael makes a point and that too in a typical Michael Moore style. He has a punch in his presentation. His reputation precedes the grim issue in this movie and that is the sad part of all. The big dilemma is no reputed journalist is willing to take risk of covering any topic that really matters and very few want to take things seriously when they are said by Michael Moore. Well who said life way easy and why should Michael be an exception. Let’s not focus too much on the movie stuff and lets us do a reality check on this issue.

It is indeed a fact that healthcare costs are increasing day by day and so are the insurance premiums. Some would say that the market forces would correct it and keep things balanced and if costs are increasing that is the new balance point. Now when I think of the healthcare panic in the general public, I find at least one reason why the theory of free market does not sound good here. I believe in a regulated free market else you will run Microsoft computers and everything else will be Wal-Mart. I feel that the healthcare companies have successfully created a panic in the people that might be dividing the population in two categories, the rich who want to pay more and more and make sure that they and covered and the poor who cannot pay and are stuck with a big healthcare question mark. When we just see the numbers or dollars that go in the healthcare funding we are missing a big portion of the reality. To get the reality I think we need to find why the costs are increasing when the demand side seems to be unhappy.

We need to divide the demand in at least two segments and study this issue in the light of these two segments. It might not be the typical 80-20 distribution but the costs are for sure not evenly distributed as well. To make the point more clear lets assume a town with 100 people. Let’s say of which 20 people can be classified as rich and remaining as not rich. The average premium that the not rich people can afford is, say $100. Suppose the rich people can afford $500 on insurance premium. Currently everyone pays $100 to the insurance company. The insurance company is smart enough to know how much more can the rich people give in premium. Let’s say a randomly chosen person the town develops cancer. The cost of this treatment is $5000. Hence, the insurance company starts Co-pays beyond $2000 in treatment costs. The co-pay creates a panic in the town as everyone is worried what if they develop cancer. The rich immediately pay $500 for complete coverage when the poor are already at their threshold of premium payment. So overall the rich contribute $10000 as total premium and the total premium for the town is now $10000(Rich) + $8000(not Rich) compared to the $10000(All people) before the cancer case and co-pay rule. Overall the demand side seems to be very excited to pay more and the equilibrium starts shifting up as the average premium for the town is now $180 against $100 in the previous case. My point is again some serious math (not beyond arithmetic indeed) needs to go behind this issue to get to the root.

Let us do an audit trail of the healthcare spending and how many pockets it ends before and after the customer reaps benefits.

Expense for the customer = Revenue for Insurance company + Revenue for the provider + Revenue for the malpractice insurance company + revenue for the pharmaceutical company + Uncle Sam’s share.

Among the right side elements of the equation revenue for Insurance Company and Revenue for malpractice insurance company are realized even before the direct benefit to the expense bearer. Also these indirect costs are the biggest influentials of the healthcare costs as the interface or separate the real supply and demand of the healthcare service.

I am just creating a framework for everyone to think on this issue and trace the problem to its roots. I am not providing any conclusion to what needs to be done to resolve the problem though the following two are probable alternatives to the solution. First one is the universal healthcare plan and the second being healthcare outsourcing. If the dissatisfaction among the general population continues it might result in Healthcare tourism industry to flourish in countries in Asia, Latin America and Europe.

I am hopeful that our ancestors were right about wealth, health and, character and that the market forces will resolve the problem to benefit all parties involved in the system.