The current drive toward mandatory health coverage is touted as a "solution" to the problem of "uninsured citizens". California recently refused to mandate that all employers provide health coverage, but the issue is not likely to go away. Our health care systems produce such a maze of costly interconnected problems that desperation is giving rise to extreme solutions.

Mandatory coverage would take a large group of people who are uninsured because of government tinkering and forcibly make them part of a health care system that is already in the process of self-destruction due to previous government manipulation. Since World War II, the American health care system has become a diabolical example of how government tinkering over time can screw up a system to the point where it is virtually unfixable.

How we became completely dependent on health insurance

Health care isn't simple to begin with. Diagnosis and treatment of the huge variety of things that can go wrong with humans requires a lot of knowledge and creativity. As a whole, the system includes many individuals who do work that most of us wouldn't want to do and wouldn't be very good at.

Diagnosis and treatment involves much uncertainty, which complicates the financial aspect. What can now be done to treat a patient's problems is elaborate, technologically amazing, and extremely expensive. There is a lot more that can be done, but the worst-case price is correspondingly high. We're faced with choices we didn't used to have... alternatives where suffering and death were once the only choice. As the complexity of medical knowledge and treatment has advanced, costs have become less predictable and the range of costs has widened greatly.

About 50 years ago, employers began to offer health insurance as a way to attract better workers. The federal government, in it's inimitable manner, stuck it's nose in and made a good thing worse by allowing employer contributions to health insurance to be excluded from employees' income and payroll taxes, thus providing a tax break for employer-provided health insurance. That tax advantage was not available to the self-employed, or to individuals who purchased health insurance on their own.

That was one major distortion of the health insurance industry. An employer would rather, from a tax standpoint, put money into health insurance "benefits" than into salary and wages. Over time, employees of such companies have been increasingly convinced that their health insurance is of critical importance... to the point where many employees are now more afraid to lose their health coverage than they are afraid of losing their job.

Insurance adds to the total cost of health care

Like any insurance, it is a service; a "leveling" gamble that can be of benefit to an individual by assuring that any large unexpected medical expenses will mostly be paid by the plan. For that assurance, the insurance plan charges regular premiums, payable whether the individual needs treatment or not.

What many people forget, or never understood, is that insurance companies make a profit. They pay out less in claims than they take in from premiums. They also have considerable expense involved in selling the policies, keeping records, and handling claims. All those additional costs just to have an insurance policy means that if you can cover the loss yourself, out of current income, savings, selling assets, or even borrowing, it will be cheaper to do so than to pay an insurance plan to cover the loss. Any good insurance advisor will advise you not to insure any loss that you don't need to, but with health insurance, that lesson has virtually vanished. Once, people saved money to cover emergencies, but we've been encouraged to cover them with first-dollar coverage. As a result, we save less and health care costs have skyrocketed. Savings not used were still there... premiums paid are not... they must be paid continually, whether or not loss occurs.

Health insurance has become distorted to the point that the "sense" of what insurance is good at and not good at has been lost. In 2003 total spending on health care was $1.7 trillion, some $5,800 for every man, woman, and child in the nation. In 1999 The New England Journal of Medicine published a study that found it cost $300 billion annually to administer various health insurance plans. That's almost 18% in administrative costs. It takes some 3 million clerks and managers to run the health care system; that's nearly four times the number of doctors practicing medicine in the United States. It costs between $8 and $18 just to file each insurance claim, and a third of them have to be refiled.

The effect on doctors and clinics has been devastating, changing their operation from medically-based to administratively based. Doctors are working more hours, spending less time with patients, resulting in more errors, all because of the massive amount of administrative work handling various insurance issues.

Because of the distortion of big prepaid insurance plans, health care costs are also driven up. The tax-free status of employer-provided health insurance promotes generous coverage that allows employees to ignore the prices of medical services, which encourages providers to charge more and more. Employees, in order to take advantage of the coverage they gave up salary for, tend to overutilize the system, which also puts upward pressure on prices.

State governments have tinkered in health plans to an extent that adds much to the administrative costs. Every state has some mandated benefit coverages... each state being unique. There are an average of 35 mandates for each state. To get an idea what a mess it is, check the massive tables in HEALTH INSURANCE MANDATES IN THE STATES 2005 (pdf) from the Council For Affordable Health Insurance. Every mandate adds cost to all the health plans in that state, which results in higher premiums for everyone, regardless of whether they ever use any of the mandated coverages.

Because of the distortion in favor of large-employer insurance plans, all other people have suffered... those who work for small employers who can't afford the overhead of having an insurance plan, and all those who are self-employed.  THIRTY PERCENT of the American workforce doesn't have health coverage through an employer... 30% who suffer from the advantage given to the 70%.  Some buy individual coverage; others are uninsured.

Government tax manipulation has twisted American health care into an uncontrollably expensive system, made a majority of workers psychologically dependent on it, and leaving a large minority unable to afford it.

Tomorrow, we'll take a look at those pesky uninsured folks.