The health care bill passed last night, and I have to admit I was initially indifferent, the main reason being that I honestly didn't expect it to pass so I had largely ignored it.  Last night I delved into the thing.  All crying in the beer aside, this bill is (probably) going to take a huge step towards making health care reasonably efficient for two reasons- 1) it makes a open system into a closed one, and 2) it will push insurers to follow the old maxim of "an ounce of prevention is worth a pound of cure" as a result of the switch to a closed system.

A closed system HAS to be efficient.  Basically a closed system says that you will eat what you... ummm...  excrete.  In an open system if your company or activities produce waste you just drop it into a stream call it a day.  In a closed system you live downstream from that plant and your wife will beat you senseless if you ruin her laundry with your mine tailings.  How does this translate to health care?  Well, we have a marvelous example in place in the US system (or did until Sunday).  Let's say you are a health insurer.  You're motivation as a private firm is to maximize profits.  To do this you minimize costs and maximize income.  A person with a pre-existing condition (let's say blood pressure issues) buys health insurance from your firm but you don't want to cover the cost of the blood-pressure meds they needs.  This person can't afford the meds without the coverage, so they go without it.  As a result they have a little incident followed by a pricey ambulance ride and a trip to the even pricier Emergency Room.  Well, that's a BIG expense if you are an insurer, and it was caused by a pre-existing condition.  What do you do?  Well, better drop their coverage!  Whew- problem solved and profits maximized.  Except for one thing- the problem has just been shifted from your part of the health care system into a larger arena.  Your former client goes bankrupt since they can't work, the hospital that treated her takes on a ton of debt since it can't recoup the expenses in treating her and now she's on Medicaid and a problem for the taxpayers, not you, the private insurer.

Now lets look at a closed system.  You are the same health insurer, but you can't preclude a customer for a pre-existing condition nor can you drop them if they have an actual health care problem.  Compared to the first scenario you might say "Whoa!  I'm not going to make any money!".  However, all your competitors face the same constraints, so the playing field is still level.  The difference is that now I have to find a way to actually provide health care to this person that will minimize costs.  The same customer comes to me and buys my health insurance.  Hmmm- if this person doesn't take blood pressure medicine then I'm going to be on the hook for an ambulance ride, plus an ER visit.  So, if I want to maximize my profits and reduce my risks I should make sure this person gets some decent medication that will deal with her blood pressure issues in the short and long run , and see if there is some kind of wellness program I can recommend to her to reduce her need for those meds and overall risk of related ailments.  

By making the health care system closed rather than open the health care bill has created an incentive for insurers to try and provide the best possible service at the lowest possible cost, which is exactly how the free market system should work.  The old system was so broken because it was an open system; it was a mix of private and public efforts with the private trying to absorb the income and pass on the expenses to the public.

I understand the beef the conservatives have with this law- it doesn't address costs, right?  Not directly, but it does something even better- it creates an incentive for private companies rather that the government to address costs.