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Health insurance, health care and health: The confusion of public debate

Dr. Fred McKinney

When I worked as an economist at the Council of Economic Advisers during the Carter administration, I was responsible for collecting and analyzing data and formulating health care policy. Thirty years have passed and the American public, the media and the political leadership continues to confuse three very different issues — health insurance, health care and health. This confusion leads to unnecessary acrimonious debate, because analysis and solutions to any one of these three related subjects do not translate into solutions for all three simultaneously.

Here is what Americans need to know about each of these related problems:

 Health insurance

First, the debate about the “public option” obscures the principles of insurance. Insurance works best when the insured are protecting against an event with a small probability of occurrence, a high cost if the event does happen, and presumably no desire on the part of the insured for the event to occur in the first place. Shipwreck insurance and life insurance are good examples where the principles of insurance are present.

Only some types of health insurance fit this model. Catastrophic medical events and emergencies come to mind, but well baby care and annual dental check-ups are not good services to insure without there being significant moral hazard, leading to explosive cost increases and other abuses.

Insurance that works well, whether for life insurance, shipwrecks or cancer treatment, at the end of the day is wealth insurance. It is doubtful that well baby care will bankrupt a typical American family, whereas cancer treatment can.

If we refocus the debate on providing wealth insurance for Americans to protect against a diminution in their wealth as a result of a catastrophic health event, health insurance becomes significantly less expensive.

A public option that guaranteed that no American would ever spend more than 10 percent of their income annually on health care expenses is inexpensive and is the type of insurance that many of the 50 million uninsured would willingly pay for. And all of this could be provided without tinkering with the highly inefficient private insurers who continue to sell policies at exorbitant rates because they are insuring events that should not be insured in the first place.

 Health care

Health care is not the same as health insurance. The health care system is the providing of services to consumers that address specific health demands. Hospitals, doctors, pharmaceutical companies and others are the major players in this health care delivery system.

The problem with health care is that it is costly, dangerous, difficult to access for some and, at times, of questionable value. Americans will spend upward of $1 trillion on all health-care-related services this year. Health care costs have increased at a rate 50 percent greater than the rate on all other consumer goods and services over the past 30 years, with no end in sight.

American health care is also extremely dangerous. It is estimated that there are over 500,000 annual iatrogenic deaths in America from adverse drug reactions, medical error, infections, bedsores and surgical errors. If 500,000 Americans a year died anywhere else, there would be uproar to say the least and heads would roll.

Access to health care services is one of the contentious issues. I have heard health care providers say that Americans are not denied access to health care services. This is perhaps true in the abstract, because when a patient is near death because they have no primary care coverage and end up in the medical room for something that could have been avoided with a simpler, less costly intervention, I guess you could say that that patient was not denied the care they needed. But this view would be easily challenged by looking at the dismal health care records of the poor.

The value of anything, including health care, is in the eye of the consumer, not the producer. All producers have a distorted view of the value of their goods and services. If you do not believe me, ask the first CEO you can find about the value of his or her product. The CEO’s view might be consistent with that of some consumers, but that is often a function of the success of a company’s marketing activities.

Health care consumers, while happy with the American health care system in general, have expressed significant complaints around the quality and appropriateness of care. Deloitte conducted a survey of 3,000 consumers in 2008 and found widespread room for improvement expressed by consumers regarding appointments, technology, information and types of care.


Underpinning this entire health insurance and health care debate is health itself. Health is only partially dependent of the payment system and the delivery system. The primary determinant of health for typical Americans is what they do to themselves and for themselves. We are the most obese people on the planet and want the health care system to make us thin.

Well, there is a solution, but it does not involve what most Americans want to hear. We are killing ourselves with our forks and knives and our slothful behavior. It is often the easiest solutions which are the most difficult to implement, because they require personal responsibility. If Americans adopted a vegetarian diet, not only would we lose weight, lower blood pressure and reduce incidence of cancer, diabetes and other chronic diseases, we would spend less on health care interventions and health insurance would be less expensive. Combine a vegetarian diet with taxes on meat, eggs, milk, sugar and refined grain products, and we would have the mechanism to pay for real health insurance for all Americans.

As the meat, egg, milk and sugar and processed foods industries collect their breath, let me admit that there are no stronger lobbies in Washington. Combined, these lobbies make the health insurance lobby look downright tame. These are not “sin” taxes. They are health taxes. I challenge any senator, representative, governor, editor of a major paper, physician or the president of the United States to go to any low-income neighborhood in this country, look at the obesity and the poor health of the residents, then go to their homes and see what is in their kitchen, and not conclude that an appropriate role of federal and state tax policy is to encourage the consumption of foods that are healthy and discourage the consumption of foods that are leading to premature death and chronic disease.

No amount of health insurance will change these conditions, and vastly restructuring the health care delivery system will not lead to improved health. Reforms in health insurance can be brought about inexpensively and paid for with taxes on the foods and substances that lead to poor health in the first place. To bring about improved health care delivery systems, we need consumers to take greater control over their own health care. And to improve health, consumers need to eat a peach and go for a walk.

Dr. Fred McKinney, Ph.D., is the president and CEO of the Greater New England Minority Supplier Development Council. He can be reached via e-mail at