Universal Health Care: A New Concept That Can Work

If you’ve read any of my previous posts, you’ll know that I am not a firm believer that any of the proposed solutions to the current health care crisis will work. Universal health care is a lofty goal but if there is any hope that it will work, it has to involve every American as an invested individual, equally and fairly.

In a conversation I was having with a few colleagues, an idea came to me that seems so simple it just has to work.  Let us assume that some form of universal health care will be enacted.  We must also assume that in order for the insurance companies to survive, only the largest and most efficient, able to take advantage of economies of scale, will be likely to survive.  Participation in any form of universal health care will be mandatory, whether it is sponsored or offered by an employer or the government. You will have little or no choice. When there are only a few suppliers or producers, you have an oligopoly.  An oligopoly is defined as “A market dominated by a small number of participants who are able to collectively exert control over supply and market prices”.  Does insurance fit his definition? Yes it will.

If we do have a situation where a few large suppliers or producers dominate a market, we as consumers, need regulation and protection from them just like we do in the utilities markets. You may not be aware of their presence, but the public utilities commissions of your individual states make sure that the suppliers of your water, electric, natural gas, railways and telephone services are treating you, the public, fairly. They are also responsible for the oversight of those industries, review requests for rate increases and monitor the industry’s return on equity and investment to their respective shareholders.  Can this model be applied to health insurance? Absolutely.

Anthem BC/BS was a mutual insurance company until it changed it’s status and was later acquired by Wellpoint, Inc.  A mutual company is defined as ” A company whose profits are distributed in proportion to the amount of business each participant does with the company”.  Sounds like a perfect structure for universal health care.  Since there will likely be mandatory participation, all payments to the insurance companies will come from the government in the form of direct or indirect payments. If each household is given a “share” in their insurance provider for each covered life, that household has a direct invested interest in seeing that their insurance company is as successful and profitable as possible.  They would be encouraged to utilize their health care resources only when necessary.  Decreased utilization by the individual covered lives means lower insurance company expenses , greater profits and additional distributions (dividends) per covered life.  Since every person covered receives a share when they sign up for insurance, you receive a direct financial dividend when your insurance provider earns a profit.  The most efficient insurance companies that are also providing the best health care benefit will naturally attract more participants, increasing their efficiencies through economies of scale.  In an effort to increase “shareholder” satisfaction, these companies, like their utility company counterparts, will seek to be more efficient, maximize value, return on investment and equity, and take the greatest advantage of financial leverage.  Rather refreshing for an insurance company to be operating on your behalf, as a shareholder, instead of only a hostage or paying customer.

It makes much more sense to combine the benefits of a regulated industry where each covered life is treated like a shareholder with a voice, in conjunction with what will be mandatory participation.  Under this scenario, you are as important to the insurer as a consumer as you are as shareholder.  The shareholder’s voice of displeasure can effect who runs the insurance company depending on how they vote at the annual shareholder’s meeting.  You also have a voice on how well you feel your insurance provider cares for you as a consumer.  If they do a good job, you’ll tell others, attracting more members/shareholders.  If you don’t like how you are being treated, you’ll change insurance carriers and tell all your friends and co-workers.

I don’t have a lot of confidence in the government to fix the problems with health care and I have less confidence that the insurance industry will do anything in the individual’s best interest unless they are made to do so.  But, if I am in a position to benefit directly from their quality and efficient care to patients (me and mine), I would feel much better about universal health care, government regulation and the insurance companies continuing as ongoing concerns.

Doc B.

My opinion is free.

Advice is worth exactly what you pay for it.

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One Response to “Universal Health Care: A New Concept That Can Work”

  1. Wow, this is in every resecpt what I needed to know.

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