Will Nationalized Healthcare Pay for the Obese?

In an orgy of self-inflicted problems, Americans are becoming more and more obese.  Read more about it here.

23 states saw a rise in obesity rates, with Mississippi the most corpulent at 32% of all adults (and 44% of all children).  The leanest state?  Colorado, with 18% of its citizens obese.  Basically, look to your left, look to your right.  If neither of those folks are over-weight, you’re statistically the one shopping for spandex-panel pants.

With the nation’s very quick dialogue on reforming our health care system, there is little discussion about what is causing the huge increase in health care costs — us.  It’s estimated (in the same article) that those of us who are overweight are costing the healthcare system an extra $1,500 per year.   That’s about $150B per year in avoidable costs assuming that 100 million of the nations 300 million folks are overweight.  And of course, the people who are eating all that extra food don’t have to pay for their extra health care — it’s spread across all of us through the insurance system.

Recognize that insurance is “pooled risk”.  It averages all the costs across everyone, plus some administrative costs and profit.  (In an even further digression, Medicare costs on a per patient basis are higher than private insurers.  This is a different conclusion than when looking at a percentage of total costs.  Medicare patients are older and more expensive, so percentage of all costs is misleading versus private insurance. I’m quoting the conservative leaning Heritage Foundation here, so be forewarned of where they stand)

HHS Secretary Kathleen Sebelius is the surrogate for the President’s “public option” for health insurance.  She’s certainly not talking about reducing any coverage or making patients responsible for their health.

“I think there is a lot of understanding that the private market has really failed to provide affordable coverage to Americans,” Sebelius said. The industry has had “a lot of opportunities” to get rid of coverage restrictions and other unpopular policies, Sebelius said, and really “hasn’t served Americans very well.”

OK, great, Madame Secretary.  Good talking points.  But talking and pointing at the capitalists in a capitalist country is the current pop culture “pin the tail on the donkey.”  The challenge for any reform is “where will cost savings come from”?  There are really just four options:

1)  Pay doctors less.  Whether it’s through “fewer unnecessary tests and procedures” or lower absolute reimbursement payments, doctors and hospitals could get paid less.  Given the shortage of doctors and nurses, this will only exacerbate quality problems and wait times.

2) “Administrative efficiencies”.  Having been involved with companies small and large trying to gain efficiency, I generally believe that dedicated management teams can find 20% efficiency gain.  That’s of course in one company.  Across an industry, this is much harder to find.  But even if we believe there are efficiencies to be gained, efficiency reductions are largely a one time hit.  After you get the reduction (through, say, reducing headcount or reducing paperwork costs), then all the underlying cost drivers keep doing their thing.  Thus, a 20% absolute reduction in health care costs will defray the growth in costs for just 2 years.  Then, it’s back to 6-9% cost increases per year.  New procedures and technologies deliver better results but cost more.  And of course, we’re still eating more calories than we’re burning on a daily basis and storing that as fat.  Not a great long term solution.

3) reduce coverage.  I want to write this here so I can say “I told you so” in years to come.  A public option health care plan will have a risk pool that is, on average, more expensive than others.  To stay competitive, it will have to reduce coverage.  Of course, being the government, there is one other thing they can do:

4) not play fair.  As soon as the government option starts to run into competitive problems, they can change the rules.  By removing the constraints that are placed on private insurance companies, the public option plan can continue to be “competitive”.  The government has a track record of using funny math to make the numbers work, so even if there aren’t competition problems, this could start happening.  (for more on funny math in government, just take a look at California’s current budget crisis)

So, it’s fine to believe in “health insurance for all”.  It’s a beautiful aspirational policy goal for our nation and we should keep trying.  Of course, so is “I want a pony” for a 10 year old girl.  But who is going to pay for it, feed it, and clean up it’s mess?  That’s right, you.  You’re going to pay for it.

And that’s the reason why “ponies for all” is not the parenting policy in this nation.