woody_zimmerman_118_2007As a writer, I find the counsel of my children invaluable. Whether my counsel is invaluable to them, I’m not so sure, but I always learn something when we have a chance to converse. On the recent Thanksgiving holiday, one of my sons and I fell to discussing health care – not politically, but in the larger sense of availability and affordability in the reality of their daily lives.

My son, Bill, is 42. He works hard; has a good marriage and a fine family of 4 children. Like many Americans, he works in a business area (home building) that has shrunk radically during the recession of recent years. They are hanging on, financially, but he had to move to another state and accept a demotion within his company in order to stay employed. His wife had to go back to work to keep them afloat.

During our conversation about finances, Bill mentioned the booming cost of health-care, and he related how he had built a new home for a young dentist who worked only four days a week. Bill wondered how any professional field could pay so well that only four days of work, per week, could produce enough income to buy one of his company’s very nice homes. I pointed out that the dentist probably works more than 8 hours a day, but that didn’t impress Bill, who works 5-day weeks of days longer than 8 hours.

Bill agreed that people are entitled to earn a decent living, but he wondered where the limit was – especially with essential occupations that serve the public good. He thought health care was a necessity – not a luxury that a family could choose to buy (or not buy) at their discretion.

“You have to have health-care,” Bill said, by way of comparing it to the service a utility furnishes – such as water, sewage, electricity, or natural gas. You pay for those services, of course. And the more you use, the more you pay. But utility commissions regulate the rates to make sure they don’t get out of hand. In return for monopoly control of their product, and a guaranteed profit-margin, utilities accept regulation. Without it, they could price their service at any level, and people would have to pay it because they must have power, sanitation, etc. Uncontrolled pricing of these would not be in the public interest, of course.

Bill believes an uncontrolled situation now exists with medical care, and I had to agree that he has a point. Families must have medical care when they need it. It is not exactly a monopoly situation, but there are limited numbers of suppliers, and there are few controls on price. In an earlier time – e.g., when I was raising a young family – medical costs were not growing as they are now. Was that because medical suppliers were more principled or more altruistic? Are they less so now?

I wouldn’t know the answers to these questions, and I won’t speculate. I doubt if there is reduced altruism on the part of medical people – or a corresponding increase in greed. Both then and now such people have been interested in giving good service and making a good living. This is not exactly a sign of degeneracy. They charge what the market will bear for their services. But that is exactly the problem. Somehow, the “governor” has been lost on the pricing for medical services and products. Thinking people need to try to find out what became of that governor, and try to restore it. If we don’t, things will go from bad to worse.

Some of the “bad” part has already happened, unfortunately. Politicians have glommed onto the medical “problem” because a child could see that something was out of control. But instead of trying to regulate medical costs directly, Mr. Obama and his Democratic Congress went after the suppliers of medical insurance because they were an easier target. Most ordinary people like their doctors, whom they know personally, but they find it easier to dislike their insurance carriers, whom they don’t usually know on a personal level. Democrats spent a full year demonizing medical insurers, finally producing an expensive and exceedingly complex bill which most legislators didn’t read before signing it.

It will take years before average people realize the bill’s effects on their personal lives, although some of those effects are already emerging. In some states, medical insurers have stopped offering child-only policies because Obamacare law requires that all applicants be covered for pre-existing conditions. In the insurance world, this is considered an unacceptable risk. It’s one thing to insure a healthy child who might get sick, but quite another thing to insure a child with a known illness. Insurers would have to raise the prices of all policies to levels where healthy children (i.e., their parents) would not buy them, leaving only unhealthy children in the insurance pool. This would destroy the entire concept of insurance, which is based on a pool of mostly healthy people, with a few unhealthy ones, to make the plan financially viable.

With only unhealthy people in your insurance pool, premiums will soar to unacceptable levels. I know about this because when I retired I was placed in a pool of retirees from my company. This was not the same as being in a pool of mixed ages, where most people are fairly young and healthy. The premiums bounded upward at a shocking pace until they reached $1900/month by the time I reached age 65. (This was for my own medical coverage only. My wife’s was separate.)

The experience taught me that there is certainly a problem with medical insurance and medical costs. It is one of the reasons I have written – and continue to write – that everything in the garden will not be lovely if we can just reverse Obamacare. The horse-choker that Democrats passed created new problems, to be sure, but my own galloping premiums predated all that. Millions of people don’t realize there is a problem because they have excellent insurance coverage that seems to cost little. Acquaintances of mine think the $300 a month they pay for family-coverage is “high.” Evidently they have no idea that their family policy probably costs their employer $15,000-20,000 a year (or more). This is not a flaw in those insurers. It is a flaw in the pricing of medical services and products, and a flaw in what insurance has become.

When I was on my first job, fresh out of college, medical insurance for my family cost me nothing. We called it “major medical” then. It was meant for serious illnesses or operations – typically involving a hospital-stay. You paid ordinary doctor’s visits and tests out of your own pocket. In the mid-60s, a doctor-visit cost $6. Prescriptions and tests were cheap, too. Medical costs could be significant – like when we missed insurance-coverage for the birth of our youngest child – but generally they were not a major problem for our young family.

That fairly benign scenario began to change, starting in the 1980s. Medical insurance went from being something you hoped you wouldn’t have to use – like your fire insurance or car insurance – to being a third-party payer that took care of costs you were barely aware of. In this case, ignorance is not “bliss.” It allows the patient to be careless – even profligate – about his use of medical care. I personally knew people who would see different doctors until they found one who told them what they wanted to hear.

The company I worked for spent most of the 1990s trying to educate employees in the prudent use of medical care, so insurance costs could be kept down. For a time that effort seemed to be succeeding, but booming medical costs eventually overcame them. A doctor’s visit now costs 25 times those old $6 charges from the 1960s – many times the rate of inflation from that time to this. Tests and prescriptions are out of sight. Repeating myself – the situation is out of control. Somehow, it must be retrieved. Despite what politicians think, it can’t be done through insurance regulations.

As I thought over what Bill said in our conversation, I realized that he might be onto something. The “utility” solution might be the way back in the medical-costs situation. We know it can work with electricity, sanitation, etc. Why can’t we make it work for the essential service of medical care? Everyone has a right to a decent living, but there are limits to everything. Uncontrolled medical costs really cannot continue. The situation must be corrected. More on this in a later column.