As the debate on health care rages on in Washington and throughout the United States, and if there is only one thing that I can articulate with this blog, let’s agree to make on thing perfectly clear:
Health Insurance Is Not Health Care and Health Care is Not Health Insurance.
I feel like I need to keep shouting this from the rooftops. The cost of your health care is not the cost of your health insurance. As an example, just yesterday, in the Wall Street Journal letters to the editor section, a very reasonable reader misconstrues the terms in the middle of his statement and uses the terms interchangeably.
Health Care includes services offered by doctors, hospitals and other providers.
Health insurance is a contract between an individual or group (employer, government entity, union) that provides for performance of payment for stated provisions in the contract. The insured pays premiums as consideration for the contracted performance by the insurance company.
Health insurance premiums are derived from the total cost of care (payments to doctors, hospitals, other providers) as reflected in paid claims for the total insureds in your risk pool (i.e. your company plan, your individual community plan, groups of small employers in a community). See my post on Loss Ratios
for more on how insurers calculate rates based as a percentage of health care costs.
Health insurance is often assumed to pay for every last penny of health care provided by doctors, hospital and other providers. Because of this, consumers wrongly ascribe the term health care to mean health insurance. The media and political class have done little to change this misperception.
As my mentor, Arch Parker, used to say, “let’s play kindergarten for a second.” Let’s assume that auto insurance was miscontrued for car care. You would believe that the cost for an oil change, tire rotation, flat tire repair, dented door, smashed front end and transmission repair were all reflected as the cost of your auto insurance and that your auto insurance should pay for all of it. You would further believe that the cost of your auto insurance would be outrageously expensive if the cost of auto insurance was raised to the proper level to pay for all of these regular and catastrophic repairs.
Before Medicare was created by LBJ as part of the Great Society – yes, the federal government created Medicare only 40 years ago – Americans treated health insurance the way auto insurance is still offered today. Regular maintenance (doctor visits, immunizations, colds, coughs and fevers) used to be paid for out of your own pocket. Catastophic smash-ups and collisions (broken bones, trauma, baby delivery, major disease and maladies) were paid for with hospitalization insurance (only when you were admitted to the hospital). No such thing as major medical insurance existed.
Another factor in why the terms are misconstrued is that insured customers never see the money. Providers want certainty to be paid. Insurers seek to limit fraudulent payments. In order to accomodate both aims, doctors ask patients to sign a form that assigns benefits – basically allowing the insurance company to by-pass payment to the insured patient and send it directly to the doctor/hospital/other provider. I believe, patients need to see the money from the insurance company and need to see payment to the provider. By absolving themselves of the repsoniblity of payment, patients do not see themselves as accountable and therefore insulate themselves from the transaction and see the insurer and provider as the same transaction.
Health insurance is a payment mechanism to pay insureds. Health care is care provided by a doctor, hospital or other provider.
Health insurance is not health care.
Health care is not health insurance.
{ 18 comments… read them below or add one }
The most important take from this article is that when progressives seek a single payer plan like Medicare, this plans is NOT the "government providing health care", as most conservatives would have you believe. It eliminates the profit motive in the payment for services from actual DOCTORS.
Thank you, Mr. Dowling, for stressing the distinction between health care and health insurance.
You are most welcome, Mr. Genise.
As to whether or not we need Single Payer/Medicare For All/Public Option, that will be a good topic for my next post.
Regarding profit motive for services, you will want to visit the blog of The Century Foundation Fellow, Maggie Mahar, http://www.healthbeatblog.org. Maggies' book, "Money Driven Medicine" takes a good look as to how medical costs got out of hand following the advent of Medicare.
Just as there exists a clear distinction between health insurance and health care, there exists a clear distinction of profit from health insurance companies bearing risk and health care providers delivering services. The two forms of profit are separate and distinct.
Thanks, Mr. Genise, for your comments and your suggestion for a future post!
Keep them coming!