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Do you want to buy my medicine?

‘Sorry I haven’t called home lately mom, I have been studying a lot.’ That was the typical excuse I would tell my parents when they called. One night I really was studying when I collapsed in my fraternity house. I woke up in the hospital having suffered a grand mal seizure. Consequently I was diagnosed with epilepsy and was placed on a monthly prescription of anti-seizure medication. The cost of this prescription started at $60 per month with my insurance covering the bulk of the cost. However when my family changed the insurance plan, I went to refill my prescription and the CVS clerk informed me that I needed to pay $400.48 each month for my medication. Insert explicative here. Surely there must be some better health coverage plan out there. A recent CBS News/New York Times poll found 9 out of 10 Americas believe the US health care system needs fundamental changes. Now that Barack Obama has been elected President, he has promised to implement universal health coverage. However, before we jump on the bandwagon of health care for all, lets analyze international health care systems that have universal coverage and see how efficiently they operate. With this information we can evaluate President-Elect Obama’s plan and determine how effective it may be. ; Right now, the US health care system is an insurance-based privatized system. The idea is to instill competition among insurance companies which will, in theory, drive down prices. However, this market fails because it is dominated by inside information within the companies. Insurance companies get their information about their client by asking questions like: ‘Do you smoke? Do your parents smoke? Do you have a history of diabetes? Are you flat-footed?’ With answers to the questions, insurance companies are able to generate a more accurate picture of how ‘risky’ you will be to cover. This risk value determines your charge in premiums. The result is that someone who is ‘high risk’ will pay much more. Apparently because of my history of epilepsy, I am high-risk, leading to a payment of ; $400.48 monthly for my mandatory medication. As the CBS poll indicates, health care in the United States is in need of change, but how should we do it? The British system provides full coverage so that is a good starting point for our analysis. Their system is almost completely free and it provides health care for all of Her Majesty’s citizens. However, we must remember that where markets can fail, governments can fail too. Patients face long lines for treatment. Surgeries that would occur in one week in the US are given a waiting period of four months or more. The British have virtually no say in the type of treatment they should receive so the doctors tell you what they need and that’s the treatment they get. Thus, you will find rationing of health care in the British system. To control this system of rationing, the British created a government agency called the National Institute for Clinical Excellence (NICE) to decide who will get what type of health care. They use a Quality Adjusted Life Years (QUALY) system to determine the necessity of coverage. For example, suppose one patient is going blind while the other has full sight. NICE would tell doctors to focus their attention on the full sighted individual because he has a better QUALY value than the blind individual. How nice of the British government. This is not the answer we are looking for. ; The approval rating for health care in Sweden is 42%. This is much higher than that of the America and British system so let’s examine it. Just like the British system, health care is provided for all. Maternity leave is a full 32 weeks paid and if you have a surgery that leaves a scar, you can receive damages from the Government as an ‘apology’ for the scar. Again however, we must remember that government has failures. To fund this system, the Swedish pay between 33-55% of their income on taxes. Furthermore, the Swedes pay a 25% sales tax on all goods purchased. The cost of this system comes from high taxes the Swedes pay. Further analysis of other systems that impose universal health care plans all lead to similar failures. High taxes are needed to fund the coverage plan and the government implements a system of rationing to control the scarce amount of health care. But how does Obama’s plan compare with the previously mentioned ones? Obama says his plan could save the average consumer $2,500 a year while bringing health care to all. He will ‘retain the private insurance systems but inject additional money into the system to pay for expanding coverage.’ Again, private insurance systems fail due to inside information and expansion of the current insurance system will add to the failure. Also, Obama plans to create a National Health Insurance Exchange to monitor the health coverage. If this is anything similar to the British NICE, I would certainly advise you to question it. Obama stated that, ‘virtually all businesses would have to share in the cost of coverage for their workers.’ If employers are going pay more for health care cost, the employees will not benefit. To cover cost, employers will transfer the added cost onto employees by cutting wages, hours or firing the employees. There is no reason your job should come with health insurance. You are basically paying for that coverage through lower wages. Also, your employer is not looking for ideal coverage for you; he is looking for a cheap ‘one-size fits all’ bulk package to cover his base requirements. The employee will not benefit with Obama’s plan to expand business cost of health insurance. Finally, Obama has admitted that the cost of his plan will be high. How much higher can it get considering America already has the most expensive plan in the world? The President-Elect should remember that it’s not about more money but using that money efficiently. As Obama’s plan stands now, there are some obvious inefficiencies highlighted that have already been shown to fail in other systems across the world. Healthcare is a mess, but the President should consider other options to universal health care. I would like to conclude with a plan for health care presented in by the economist Tim Harford in his book The Undercover Economist. Keyhole surgery is a technique surgeons use to operate without making large incisions thus minimizing risk of complications. This same idea can be applied to health care with ‘keyhole’ economics. Harford suggest that we should remain with the free market health care system but identify the specific market failures in scarcity power, externalities and imperfect information. Government provided care is ineffective because decision-making is out of patient’s hands, and the political process rations our resources. The best system would be one that compels patients to pay minor cost, thus providing an incentive to make informed choices and the government or insurance companies would pay the cost of catastrophic care. President-Elect Obama should listen to an economist such as Tim Harford or others and truly understand the necessity of making the right choice in health care plans. Editor’s note: The proceeding article was written by Casey Geiger, nephew of Herald-Gazette publishers Laura and Walter Geiger and a student in the Stetson College of Business and Economics at Mercer University in Macon.

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