Not one to shy from a debate, I (without taking sides) tried to write a response that both explained why the current situation was so expensive, and, ultimately, why enacting a realistic medical insurance plan would be nearly impossible. It was a textbook type of response, but it compelled me to conclude that a bill would not pass this year. Any such bill would also seem unlikely to pass in a subsequent year. The current major problem is that medical care in the U.S. is far too expensive. As many as 40 percent of our nation cannot afford or obtain health insurance. However, the problems are far deeper than that.

Big Business and Lobbyists

America's health-care system is a corporate system. Physicians are forced to operate not as individual professionals but as small business corporations, employing more administrative personnel than medical personnel. Major corporations are involved at every level, and that is what makes American health care different from that of Canada, the U.K., or other nations with a universal health-care plan.

In looking at my own second-quarter 401K fund reports, I find that my own financial future largely depends on the funds' investments in biotechnology, hospitals, health-care providers and services, pharmaceuticals, health-care technology, health-care equipment manufacturers, and health insurers and brokers. All of those industries — hundreds of U.S. corporations employing millions of people, including hospitals, MRI and CAT facilities, even medical office building owners — have a vested interest in keeping things the same. No wonder their lobbyists are busy in Washington. President Obama has already given up his campaign promise to seek a wholesale deal with the pharmaceutical industry.

As the Now program pointed out, health-care corporations own the hospitals and other facilities. They are building new ones all the time, or adding to those already in operation. They may visit and wine and dine physicians and surgeons, encouraging them to put patients in those hospitals and to use those expensive medical devices, such as MRI machines to boost both the physician's income and their own. If health care was rationalized — not rationed, but rather used with common sense — then those hospital rooms would be empty. The surgery suites would be less busy, expensive imaging equipment would sit unused, and stock prices for all those businesses would dramatically fall. Our mutual funds and 401Ks would suffer as a result. Congress knows this; the lobbyists have told them so.

I don't go to the doctor's office often, maybe once a year if I can get away with just the annual physical. However, I have noticed two things at my primary care physician's (PCP) office. One is that there are constantly beautiful young women coming and going with sample cases and promotional literature for the physician. “Oh, go right on in,” the receptionist tells them. Meanwhile, I sit and wait.

The second thing I've noticed is that when the physician is “concerned” about some minor thing he has noticed, he schedules me for some expensive procedure, such as a stress test or echo cardiogram. Some other medical contractor (not my PCP) actually comes to the physician's office to perform the test, which invariably is “negative.” It's a system, and it is expensive. I suppose that I am kept healthy as a result. A friend recently told my wife that her surgeon was recommending surgery of some sort. My wife suggested that she ask the surgeon where he was going on his vacation. He was going to a very expensive resort in Europe. The friend got a second opinion, learning that she did not need any surgery. Patients are nothing but big wallets to be opened by the system.

Why the Plan Won't Work

Let's consider what the Democrats or Obama plan has suggested: First, insurers cannot reject applicants on the basis of sex, age, or pre-existing conditions. There would be no restrictions on being insured for all of the costs associated with a condition you already have, such as terminal cancer, diabetes, or clogged arteries.

Second, insurance cannot be cancelled except for non-payment of the premiums. If you lose your job and your employer had been providing group coverage, then you could continue that coverage, provided that you are able to pay for it. In addition, if you can't afford the coverage, then the government may create an insurance company that will compete with the existing health insurers.

Congress is full of lawyers, most of whom have never worked in the insurance industry (nor has our President). Apparently they are unaware — unless a lobbyist tells them so — that insurance simply does not work that way. What this plan does, in effect, is make a rule that insurers can no longer underwrite their coverage. If you're breathing, then you could obtain coverage.

Insurance underwriting requires careful analysis of the insurance applicant. If a company agrees to write women aged 18 to 35 at the same premium rate as men 18 to 35, then the men are going to have to pay a much higher price than the women, because it is not the men who are going to be having the babies. Well, perhaps there is some justice in that as it is the men who help make the babies!

Group insurance, to a large extent, is not “underwritten” on the same basis as private insurance. New employees rarely need to fill out applications for coverage in an employer's group plan. Under the Fair Employment Act or EEOC, an employer cannot inquire about an applicant's health, only whether the applicant would be physically able to do the job. The Americans with Disability Act (ADA) requires employers to make “reasonable accommodations” for disabled employees.

But employers aren't stupid. When an applicant interviews for a job, do we realistically think that the human resources director isn't going to ponder the impact that the applicant might have on the employer's group health insurance premiums? If the applicant weighs 350 pounds and arrives huffing and puffing and smelling of cigarette smoke, then how will that applicant's chances for employment stack up against that of a healthy-looking individual? There is a “waiting period” in the group insurance for “pre-existing conditions” under the current system. That would apparently be eliminated in the plans being discussed in Congress.

Elimination of Caps

A third aspect of the plans being discussed in Congress is the elimination of “caps” on health insurance. It's also possible that schedules of the coverage amounts for certain procedures would be limited. Again, anyone in the insurance industry is going to seriously question Congress' judgment if that passes. That would be the same as selling automobile liability insurance without any limits of liability, regardless of the risk. Are you a bad driver with a history of multiple accidents, traffic tickets, and drunk driving? No problem! You can have millions of dollars in limits of liability. What is that going to do to the cost of insurance?

As discussed back in October, costs get out-of-hand when a catastrophe occurs, such as an infant born with birth defects who will require highly expensive care for many years. If anything useful is to come out of Congress this session, then it should be some form of catastrophic care fund, perhaps paid into by insurance companies similar to how they now contribute to state insolvency funds. If surgery goes bad and Uncle Max ends up a quadriplegic, then a fund would be a better solution than a system of malpractice litigation.

Rather than placing caps on coverage, the insurance industry needs to create and market reasonably priced levels of excess medical insurance for catastrophic situations. I have a close friend who is battling leukemia. Her chemotherapy, radiation, stem-cell implants from a donor, rehabilitation, and nursing care are not cheap. She's not a young person (but not old either) and is thus not on Medicare. What will happen when she reaches the treatment “cap”? Is it any wonder that medical and hospital bills are the major reason for personal bankruptcies? The system is sick, but removing the caps or schedules placed by insurance is not a realistic answer.

If Congress wants to create its own competing insurance plan, then market it to the uninsurable, or market excess coverage where such insurance is needed. It could replace Medicaid under a “mandatory insurance” law, which, as stated in last month's column, doesn't really help much, as there are not enough PCPs. Those with limited coverage still go to the emergency room.

Health Insurance and the Duck

There is far more to health insurance than medical and hospitalization insurance. What about prescription coverage, dental insurance, coverage for optical service, disability insurance (which is what that AFLAC duck is quacking about), and all the related medical items from Botox to massage that is outside the realm of health insurance? What about coverage for alternative medicine and herbal medications that millions of Americans believe is better than expensive, doctor-prescribed pharmaceuticals? Is Congress considering the 60 percent factor — that is, 60 percent of health problems are psychosomatic, and 60 percent of the cure is also mental attitude? This is where alternative medicine often proves beneficial, be it acupuncture, chiropractic, or aroma therapy. Now we've even been told that early cancer screening may be a waste, as inaccurate testing leads to the biopsies and other tests that prove that there was no real problem at all. Further, no one in Congress has mentioned injuries and illnesses that are occupational in origin. Universal care would include both occupational and non-occupational diseases and injuries. That's not going to happen. The states still control most of the workers' compensation rules and benefits, other than for employees subject to various federal compensation legislation.

Add to that dilemma the issue of federal versus state regulation. Currently, except for employee benefit insurance that is subject to ERISA, health insurance is state-regulated and subject to litigation in state courts. If Congress passes federal health insurance legislation, then will it also pass federal regulation of the health insurance industry? As adjusters, that might be a very important issue for us to consider. Is the U.S. a “one-size-fits-all” nation like the U.K.?

I hope I'm wrong and Congress will actually come up with some plan that suits everyone, saves us big bucks, and doesn't ruin our stock portfolios. But I'm doubtful. This is not a right-wing or left-wing, liberal or conservative, Republican or Democratic issue. Rather, it is truly a national issue. The U.S. Constitution, Article One, Section 8, says “The Congress shall have power to lay and collect taxes, duties, imposts and excises, to pay the debts and provide for the common defense and general welfare of the United States….” Congress has a tough job ahead. I doubt it has the will to do it, but our general welfare is at stake.