The Ills of Health Insurance

I have been reading posts on what ails the American  Healthcare System and how the president elect Barack  Obama wishes to attempt to fix the problems on a high  priority basis.

The more I read the more I am realising that the American Healthcare System has been crippled by an health insurance system, which has grown to an extent, where it interferes with the delivery of care. 

Health Insurance Companies need to make profits to remain afloat. The only way they can do it is by ensuring that the premiums they collect are more than the claims that they pay out. Thus, to ensure profits they have to ensure high premiums (as high as the market can bear) and try and limit claims as far as possible.  

Health Insurance companies in a bid to limit claims often try their utmost to wriggle out of their policy commitments citing fine print regarding what is covered (and what is not) and asking for endless information regarding the disease and the treatment plan. All this has led to a system, where the focus is less on the disease and the care needed and more on getting the nod from the insurance companies. This is a pernicious system.

Another way of limiting claims is offering insurance covers to only those who are relatively healthy and have a lesser probability of getting hospitalised. This can be done by refusing coverage outright to people with existing diseases, or by refusing to offer insurance covers beyond a certain age. This kind of 'favourable selection' ironically eliminates the most vulnerable, who have a much higher need for insurance cover.

Another method of reducing claims is by questioning every item of cost that a hospital incurs in delivering care. Insurance companies also do not hesitate in questioning the judgement of the treating doctors and second guessing him. Thus, hospitals are required to use only certain kind of prosthesis, stents, joints, medicines et al, which allows the insurance companies to maximise their profits. Thus it may happen that the care that you and I get is remote controlled by a desk bound doctor, working for the insurance company.  Thus,  insurance companies in the role of payors dictate what kind and what quality of care we get. Scary isn't it.

I would hardly want to point out the adversarial relationship that exists between a hospital and an insurance company. The hospital as a business entity, would like to maximise its profits and so would the insurance companies. A big chunk of the hospital profits are controlled by the revenue that that they generate from their insured patients. This is directly controlled by the insurance companies, who would like to minimise their payouts to the hospitals thus impacting the hospital's revenues and profitability. This is a vicious cycle.

The fallout of all this relentless chase for higher profits, is the kind of chaos one is witnessing in the US healthcare system today. While big hospitals and bigger insurance companies fight their battles, the small consumer is caught in the middle. 

Their are no easy solutions here. However, we in India, while welcoming an increased penetration of insurance must be cognizant of what this may ultimately lead to. We do not want to go the US way.

The need of the hour here is to set up a regulatory body, which regulates both healthcare as well as health insurance. It should set out the rules of engagement, put in place a mechanism for monitoring all the players, ensure that they adhere to these set of rules and it should be empowered to act and penalise those who stray. 

At the end of the day, healthcare services are far too important and vital for all of us and they must not be allowed to become a prisoner of profit hungry hospitals or insurance companies.