The Rising Cost of Health Insurance

The cost of health insurance is rising, especially for small firms and individuals -- many companies are seeing increases of 20 percent this year, some as much as 40 percent. Despite what some Republicans would have you believe, this has nothing to do with the Affordable Care Act. The cost of health insurance is rising because the cost of health care is rising.

Now, there may not be anything wrong with that. Most of our health care spending is, in a sense, voluntary -- it happens when people go to the doctor or the hospital. So the cost of health care is rising because people choose to make more use of it. And since health care is getting a lot better for patients with some problems, why wouldn't people want more of it?

The problem as I see it is that in America the people using health care are not the ones paying for it. Most of the cost is born by employers or the government, and while the government collects taxes for its share the taxes are mainly paid by people other than those getting the care, that is, people still working pay for those on Medicare, and the better off pay for poor people on Medicaid. The system also confuses the issue by making all costs subject to negotiations, as in those bizarre hospital bills that start with a price of $5,211.34, of which your insurance company eventually pays $1987.64, leaving you with a cost of $87.48. It makes no sense to anyone, and the teams of accountants and lawyers all the players employ to shift the costs to someone else are one of the main reasons our health care costs so much more than anyone else's. The reaction of many business owners and workers to their rising premiums is to feel cheated. I think this is perfectly natural, given how different the costs can be for different people.

This is one of the few issues on which I have radical views -- radical in America, anyway. A single payer system would cut out a lot of this crap. Most of the costs would be borne by all of the tax-payers through a system like we use for social security, likely 4 or 5 percent of our pay, plus another 4 or 5 percent chipped in by employers (which we pay, of course, in the form of lower salaries over time). We could then proceed to have a debate about how much health care we would pay for, in the context of the tax rate -- the more procedures and drugs we want the system to pay for, the higher the tax rate has to be. This might be ugly, but at least it would take place out in the open instead of in the bowels of insurance company billing offices.

I think the Affordable Care Act is better than the status quo, but I don't think it will really solve the fundamental problem we face of how do decide who gets how much health care.