So.  Months ago I started this health-care cost topic.  We started off on the topic of routine costs.

And to summarize the main point of that post: Routine health care — all those preventative check-ups, and the care and treatment of run-of-the-mill colds and flu and stubbed toes is not something we actually “insure”.   These are planned expenses.

Insurance is the means of having everyone contribute a modest amount to a funding pool, so that the few who suffer the unlikely catastrophe are not devasted by the enormous costs.    So, we insure against a car wreck — many drivers will never be in one.  But gasoline and oil changes are part of our routine costs — costs every driver will incur, no matter how careful you are.

When we say we have “insurance” to cover routine health care costs, what we really have is a pre-payment plan.

(The same can be said of larger unplanned-but-still-expected expenses.  Sprained ankle, the weird stomach thing that felt like a heart-attack but you went to the ER and it turned out you were okay, the  routine delivery of a healthy baby.   You might not know exactly when and what expenses are coming your way, but come on, you knew something was bound to happen.  You set aside an “emergency fund” of cash to cover these odds and ends.)

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On the other end of the health care spectrum are insurable costs.  Not everyone will get cancer, or suffer massive injuries in a car wreck, or contract some other equally expensive ailment.   Insurance to cover the cost of treatment makes sense.   We all contribute a modest amount towards paying those expenses, and if you are the unlucky one, the pool of funding is there to help pay your enormous bills.

–> Now it should be observed that as with home insurance or car insurance, there are factors that affect how likely you are to suffer the big disaster.   Within reason, it makes sense to allow the health-care corrollary to safe-driver and good-homeowner discounts.  Recognizing, however, that unlike obeying the speed limit or installing a sprinker system, a significant chunk of a person’s health is not within their control.  Like being male & under 25, slightly elevated rates are understandable, but it isn’t fair to price a guy completely off the streets for something he can’t control.

But here’s where health insurance differs entirely from car and home insurance: You can’t buy a cheaper body.

If my budget is tight, I can choose to live in a small home and drive an inexpensive, easily-repaired, fuel-efficient used car.    My insurance rates will, correspondingly, be lower.  Likewise, my routine maintenance costs will be lower.

(Indeed, how do we measure a living wage?  We aren’t looking for a wage that will pay for a mansion and a cadillac.  We look at whether it will cover such basic needs as modest housing and frugal transportation.)

With health care, we aren’t so lucky.  If I take a big pay cut, I can’t go sell my McMansion body and rent a modest little apartment of a body instead.  I can’t take my late-model BMW body to Car Max, and come home with a cute little ’92 Civic in exhange.   I can’t even park my gas-guzzler body in the driveway and take public transit for all my bodily needs instead.  Indeed, for the most part I never got to choose whether I wanted an expensive body or frugal one to begin with.  I’m stuck with whatever body I was given, and bodies aren’t given out according to income.

What does this mean for health insurance?

It means that the point where health care becomes unaffordable depends on your income.   Partly a living-wage problem, of course.   But let’s imagine a worker earning enough to cover routine appointments and modest amount of emergency health-care besides.  The illness that is an inconvenience and a bit of a strain to a wealthier family is something that would be absolutely unaffordable to a person of more modest means.

(Check out the wheelchair world for a specific example: Some people can just go out and buy the chair that suits them best, even though it costs something in between a high-end racing bike and a quality new car, depending on their needs.  Other people have to hope someone, anyone, is willing to fund a chair approximating what they need to function in a healthy manner.)

It also means that the ability to afford insurance premiums varies.  How much of your monthly budget can you set aside?

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Two very obvious points, I know.  And hence the importance of sliding-scale charges for health care.  If we mean to have a fair health care system, it is reasonable to give discounts to people who cannot afford as much.   Kind of the way we have student discounts for opera tickets.

Does that mean we have to go with a tax-funded, nationalized health-care system?  Not necessarily.  Physicians could be allowed to post discounted prices.    Insurance companies could be allowed to issue policies where the premiums and deductibles are percentages-of-income rather than flat rates.   Employers that offer health insurance benefits could be allowed to vary the “employee’s share” of the expense according the employee’s income.   If we are creative enough to think up double-coupons, Sam’s Club, and Early Bird Specials, we can figure this out, too.

Something the WSJ hasn’t taken up yet, and really, really needs to be addressed in this whole health-care-reform debate:  The way our current insurance system supresses entrepreneurship.

What works well right now is the company-sponsored health insurance plan.   Go to work for a large organization with good benefits, and you’re in pretty good shape, healthcare-wise.  Thus it goes against the grain, when thinking about improving access to health care, to do anything to fiddle with the one part of our system that is actually providing decent care.

–> But because it is the *only* method that is working well, people who need good insurance at an affordable rate are essentially barred from entrepreneurship.

It needn’t be this way.  There is nothing special about insurance pools formed by grouping co-workers.  Individuals could be be grouped by location, by industry, by favorite color — however you like, the principle of pooling risk works the same, as long as you have a large number of buyers over whom to spread the risk.

–>  A reform of the insurance industry could open up affordable insurance options to individual buyers, regardless of their employer.  Transparent pricing policies would further enable individuals to make confident health care purchases without relying on an insurance company to do all the negotiating for reasonable rates.

But as the system stands now, large companies are able to suck in a disproportionate amount of talent because they hold the key to reliable, affordable health care.  And specifically, they are able to suck in over-qualified talent because of the cost/price differential between health care costs in the corporate versus the individual markets.

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People work around it.  You start your own business on the evenings and weekends, and hold onto the corporate job until you finally have enough income to go on your own.  Or your spouse works the corporate job, any job, just to get the benefits, so you can be covered while you get the business up and running.   As you grow your little company, at first you try to hire employees who already have insurance through a parent or spouse or a 2nd job.  There are ways to work the system.

But I think economically it is a drain.  We would be better off– and better able to whether economic downturns — if our structures for providing health care were more favorable towards entrepreneurship and small businesses.

Glad to see the Journal has finally started running op-eds with proposals for solutions to the health care situation, rather than just storming against the Obamacare thing.

What I’ve seen that I really like:  Reforming and expanding Healthcare Savings Accounts, combined with high-deductible insurance policies.  And then providing health care stamps, analagous to food stamps, with which people who have legitimate financial need can fill their HSA.

This seems to me like a relatively efficient, manageable solution that offers a real possibility of helping the poor without undermining the many things that actually work in American healthcare.

I also, of course, am firmly convinced that we need pricing transparency.  Just no way you can run an efficient market when nobody even knows the product prices.

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One thing I’d like to argue about:  Saw a comment a week or so ago about how Americans, compared to other nations, spend the most on healthcare, but do not have the best health outcomes.  To which I’d observe:  If you are in poor health, you will spend more money on healthcare.

I believe our obesity rates alone probably explain a significant portion of the gap.  We as a nation choose to be in poorer health than we must, and then we choose to treat the health problems we give ourselves (understandably!).  No surprise the figures run as they do.

[There is also a significant amount of money spent on elective procedures such as cosmetic surgery that are may be bundled into our ‘healthcare expenses’, but have nothing to do with making people healthier.]

None of which is to deny that our health care situation has its problems.  Just that the raw statistics do not tell you what the problem really is.