I've been remembering the USPS discussions of the early/mid 1980s. That was a time when everyone was terribly impressed with the successful efficiency of Federal Express and UPS. And there was talk that we could disband the USPS and let the Free Market handle all postal service.

Of course the problem with that idea was that Federal Express and UPS don't deliver everywhere. While the USPS delivers a first class letter everywhere in the country for the same price, Federal Express & UPS wouldn't. It wouldn't make Free-Market-Sense to price a letter to Alaska at the same rate as a letter across New York City. Rural customers, those in Hawaii or Alaska -- they'd be charged the full market cost of transporting their mail. If they could get it delivered at all.
And gradually talk of dismantling the USPS quietly faded away.

How does the Postal Service compare to Health Care?

Just as it doesn't make sense to expect private companies to deliver mail to remote & rural customers (in some cases at any price) -- it also doesn't make sense for us to expect private companies to insure the health of people at risk for health problems. It just doesn't make financial sense to them. So they don't.

At the blog Common Ground Common Sense, on January 1, 2007, Matt Stoller wrote a post on Health Care and unveiled the phrase, "Murder by Spreadsheet":

These companies render our health care system bloated and inefficient, but let's be honest, that's somewhat dry language to describe what they are really doing. Through their immoral decisions to deny care and coverage based on excessive bureaucracy, the executives of these companies are simply killers. Their wealth is literally built with blood money. And their chief lobbyist, Tom Donahue, probably believes that there should be a special tax exemption for equipment to clean the blood off their hands. You might think I'm being rhetorically hot or irresponsible, but dealing with horrible customer service designed to deny you care when you have, say, cancer, demands a certain level of honest outrage. It isn't wrong to disdain these people, though I suppose that Very Serious People like to pretend that decisions made by a corporate elite denying millions medical care isn't actually murder by spreadsheet. But it is. (emphasis mine)

And at The DailyKos Saturday, bonddad described the decision making process quite graphically: Why Market-Based Health Insurance Doesn't Work -

Market-based solutions are usually a good way to solve economic problems. Competition and the profit motive usually provide a strong incentive to market participants to provide what the consumer wants. However, there are some economic areas where the profit motive especially prevents the consumer from getting what that person needs.

Health insurance is a prime example.

First, let's remember we are trying to provide a solution to people's health problems. This is a unique market. We're not trying to build a product more efficiently with better parts. We're focusing on peoples lives. A delayed decision or a cost-cutting treatment may prevent someone from having a high quality of life or actually lead to someone's premature death.

Let's flesh out the above statement. The insured (I) has a policy with health insurance company (X). I has a complicated medical situation and seeks treatment. I sees 2 doctors. One prescribes a cheaper treatment that is less effective while the other prescribes a more expensive treatment that is more effective. X says it will only pay for the cheaper treatment. I starts and completes the this treatment and it is ineffective.

At this point, notice what has happened.

1.) Time has elapsed and I is not better. In fact, I could be in worse condition because the ineffective treatment has now allowed the medical problem to become worse.

2.) I's quality of life has decreased because he is still sick. Personal and family level stress have increased because I is not at 100%. I is probably less productive at work because he is still sick.

3.) However, X has saved money. Because the company is profit oriented the company has increased shareholder value which is a prime motivator in a market based system. In other words, the company has operated exactly how it should in a market-based economy.

And it's this train of thought that makes me wonder why we are so committed to using the insurance industry as our official medical bill paying service. We don't do it for other aspects of our life (like the postal service or roads & highways) but we do for this most fundamentally important industry.

And is anyone outside the insurance industry happy with it?

(originally posted at Eat4Today.com)