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In response to my post on catastrophic health insurance, Grim commented:
I like the idea of market-based reforms. However, I'm not sure why a government plan would be better at simulating the market than, you know, the market.
For example, the DeLong plan that I surrender 20% of my income for health care expenses? The market as it currently exists offers much better deals than that.
In general my preference is for a free market with only as much government regulation as is necessary to keep the more predatory impulses of capitalism in check. However, I have a lot of reservations about whether a totally free-market approach is appropriate for health insurance. I prefer regulation that says, “Thou shalt not” rather than regulation that says “Thou shalt”. Once you wander into government telling private companies what they should do, you’re in trouble and that’s increasingly the case with government regulation of insurance companies. They’re being told what they must do - who to cover, what conditions to cover, how much treatment to provide. That’s a bad situation; bad for the companies, bad for the government, bad for the company’s customers.
Yet I understand why we’ve gone down that road. We want certain things from health insurance and we are trying to get them via government intervention while still maintaining - or appearing to maintain - the companies as private entities. I’m not at all sure that’s working well. We may simply be unable to get what we want from health insurance within the framework of our current system.
This is a big part of why I was so intrigued by the catastrophic insurance plans I discuss in my earlier post. These plans may be the best way to address five issues I think any health care or health insurance plan must handle, the issues we’re trying to handle through our increasingly intrusive regulation of the insurance industry. In sorting out why I think these plans are promising, I’ve written at considerable length about those five issues.
My post about the first issue is here; about the second issue is here; about the third issue is here. This post is about the fourth issue; my next post will deal with the fifth issue and then I’ll have a grand finale. As usual, I’ve created a new category - “Five Health Insurance Issues” - to link the posts.
Issue 4: The New York Times, in an article about how Democrats are concerned the health reform proposals on the table won’t control costs, writes (emphasis mine):
There are a variety of ideas for attacking cost increases more aggressively, including setting Medicare reimbursement rates for doctors and hospitals more rigorously and discouraging workers and employers from buying expensive health insurance policies that mask the true costs of treatment.
Guess what? All health insurance policies - private and government - mask the true costs of treatment. I go to the doctor. I have a copay. I pay the copay, let’s say $30. Is that all the doctor gets? I have no idea. Or I go to the doctor. I have a traditional plan so I pay nothing during my visit. The doctor bills my insurance company for $150. My insurance company allows only $70 for the visit. I haven’t met my deductible so I pay the $70. Or I go to the doctor. I don’t have any insurance. I pay $150 on the spot. What is the true cost of the treatment? $50? $70? $150? Who knows?
Why is this bad? For a number of reasons. First, it means patients - health care consumers - with insurance have less incentive to think twice about seeking health care. This reason usually gets expressed as “people go to doctors when they don’t need to”. I’ve never been sold on that idea - I personally would be willing to pay money not to have to go to doctors. I will somewhat grudgingly concede that having insurance means I don’t blink when my doctors tell me I need another blood test or another X-ray or another MRI . And the doctors don’t blink either - we all know I’m not paying for it. But this is not the real problem with that lack of incentive to think twice.
The real problem is that when the true costs of treatment are masked an individual neither has to decide nor gets the opportunity to decide whether a particular treatment is worth what it costs him. This is an easy formulation to attack: why, I’m suggesting some poor person should have to choose between getting a flu shot and putting food on the table. No, I’m not. I am suggesting that all of us should have to choose between getting flu shots and getting FIOS - or buying a latte every morning or buying a new winter coat every year. If you would rather have cable TV than a flu shot why should my tax dollars buy your flu shot?
This is why I’m so intrigued by the catastrophic coverage proposals I wrote about in my earlier post. The existence of Health Savings Accounts (subsidized for those who need it) gives everyone - rich and poor - a chance to decide how to spend their money: health care or something else. If you never, ever get the flu then skip the flu shot and use the money for something else. If you really, really need to avoid the flu then get the flu shot and give up something else. Under these types of plans if my doctor tells me I need another X-ray, I do a lot more than sit glassy-eyed. I ask how much that X-ray will cost me and when I realize getting the X-ray will cost me, say, as much as buying gas for a visit to my relatives, I’m likely to ask a lot more questions about exactly why I need that X-ray and how bad would it be if I waited and can we just see how things go. The flu shot and the X-ray are there for those who need them enough to pay for them - but they’re not forced on those who would rather spend their money on something else.
There is a second reason why masking the true cost of treatment via insurance is a bad idea: it doesn’t give patients any incentive to patronize providers who come up with ways to improve treatment and/or lower costs - which means it doesn’t give providers any incentive to do those things. For example, let’s say I need shoulder surgery. I can get it done at a hospital-based outpatient center for $3000. I’ll need follow-up pain blocks from an anesthesiologist for a few days and for that I’ll have to go to the Emergency Room - there’s no other way for the anesthesiologists associated with the hospital-based center to handle that administratively. On the other hand, my surgeon participates in a free-standing surgical center. I can get my surgery and my follow-up pain blocks there. The surgery will cost me $2500.
Obviously, I’d much rather go to the surgical center - it’s more pleasant, more convenient, and cheaper - and if I’m paying for my surgery myself, I will. The orthopedic group is rewarded for providing a better product at a lower cost. But what if the surgical center doesn’t participate with my insurance company while the hospital does? Then I get the surgery for nothing from the hospital so that’s where I go. The orthopedic group is not rewarded for providing a better product at a lower cost. And why doesn’t the surgical center participate? Because the insurance company won’t actually pay $3000 for the surgery; it won’t even pay $2500. No, the insurance company pays the hospital $1000 for my surgery. The hospital makes this up by charging uninsured patients a higher price; the surgical center can’t do that - their prices are fixed.
And not only is the surgical center not rewarded for its efforts to provide better health care at a lower price, we also have no idea what the market price for my shoulder surgery really is. It might be $1000, $2500, or $3000. Or it might be $500 or $5000. We simply don’t know and we have no mechanism for figuring that out.
Or take this recent editorial from AARP. According to them, manufacturers are selling power wheelchairs to suppliers for about $1000. Then the suppliers are selling those same wheelchairs to Medicare recipients for about $4000. To AARP this is a clear case of waste made possible by the “medical equipment lobby, which spent $6.3 million in presidential and congressional campaign contributions last year” resulting in “Congress [blocking] attempts to impose competitive bidding.” To me this is a result of insurance masking the true costs of treatment. If I was spending my own money to buy a power wheelchair, I’d look for the best possible price. A supplier who was willing to sell the chairs for $3000 would own the market - until another supplier stared selling them for $2500. When producers and consumers deal directly with each other you don’t need competitive bidding.
Ah, you say, but if I bought catastrophic insurance from my insurance company I’d be well aware of the cost of treatment. Um, no. Somewhat more aware, yes; totally aware, no. Even with catastrophic insurance - at least around here - the insurance company differentiates between in-network and out-of-network providers. The company also decides how much it’s going to allow for a procedure. So my shoulder surgery would still cost $1000 for the hospital-based surgery versus $2500 for the surgical center surgery. The difference is that now I’d be paying the $1000 instead of having my insurance company pay it. On the other hand, I’d probably be less likely to think $4000 was a good price for my power wheelchair if I had the high deductible of catastrophic insurance. So catastrophic insurance can help keep government health insurance from paying unreasonably high prices (that’s not usually a problem with private insurance) but even catastrophic insurance as it’s currently structured doesn’t do enough to expose patients to the true cost of their health care. The true costs of treatment will always be masked to some degree as long as insurance companies stand between the consumer (the patient) and the producer (the health care provider).
These two reasons together - lack of incentive to consider the opportunity cost of purchasing health care on the part of patients and lack of incentive to produce a better product at a lower price on the part of health care providers - are also bad for society. It means we have no hope of reining in health care costs via individual decision-making and will be forced to do so by more draconian means such as paying providers less and refusing to pay for certain treatments. This will result in a “one size fits all” approach that will provide some people with services they would have foregone in order to get other, unavailable services they need or want.
So point the fourth: As currently structured, all insurance - private or government, cheap or expensive, HMO or traditional, catastrophic or first-dollar - masks the true costs of treatment from those who purchase that treatment. This is bad for patients and bad for health care providers and bad for any hope of reining in health care spending through individual decision making.
This is just a fragment, some left-over thoughts after an earlier post.
For me, the Democrats are too fiscally liberal while still remaining both too corporatist and too statist. They are also too socially liberal by which I mean not that I necessarily oppose their social policies (some I do, some I don’t) but that I think those policies should come about at the State level not the Federal and through voters not courts.
On the other hand, the Republicans claim to be fiscally conservative but don’t show any particular aversion to deficits, pork, and corporate welfare as long as they are in power. Once the Democrats are in power, of course, Republicans suddenly see the light. Republicans are also too socially conservative by which I mean they are every bit as interested as the Democrats in imposing their will on States via national legislation instead of letting the political process play out closer to home.
Neither party seems very interested in doing anything to get my vote. Maybe that means my views are pretty weird. But maybe it means I’m part of a vast untapped reservoir of votes just waiting for a party smart enough to appeal to us.
In response to my post on catastrophic health insurance, Grim commented:
I like the idea of market-based reforms. However, I'm not sure why a government plan would be better at simulating the market than, you know, the market.
For example, the DeLong plan that I surrender 20% of my income for health care expenses? The market as it currently exists offers much better deals than that.
In general my preference is for a free market with only as much government regulation as is necessary to keep the more predatory impulses of capitalism in check. However, I have a lot of reservations about whether a totally free-market approach is appropriate for health insurance. I prefer regulation that says, “Thou shalt not” rather than regulation that says “Thou shalt”. Once you wander into government telling private companies what they should do, you’re in trouble and that’s increasingly the case with government regulation of insurance companies. They’re being told what they must do - who to cover, what conditions to cover, how much treatment to provide. That’s a bad situation; bad for the companies, bad for the government, bad for the company’s customers.
Yet I understand why we’ve gone down that road. We want certain things from health insurance and we are trying to get them via government intervention while still maintaining - or appearing to maintain - the companies as private entities. I’m not at all sure that’s working well. We may simply be unable to get what we want from health insurance within the framework of our current system.
This is a big part of why I was so intrigued by the catastrophic insurance plans I discuss in my earlier post. These plans may be the best way to address five issues I think any health care or health insurance plan must handle, the issues we’re trying to handle through our increasingly intrusive regulation of the insurance industry. In sorting out why I think these plans are promising, I’ve written at considerable length about those five issues.
My post about the first issue is here; about the second issue is here. This post is about the third issue; subsequent posts will deal with the other issues and then I’ll have a grand finale. As usual, I’ve created a new category - “Five Health Insurance Issues” - to link the posts.
Issue 3: A health care system completely run by the government is a very bad idea. One of two things will happen. The first possibility is that the government-run health care system will pay for anything anyone wants covered. The best description I read of how this happens - and I’m sorry I can’t remember where to credit the author - is that a group which wants a treatment covered has a lot of intensity and can lobby energetically; those who will pay the bill (i.e., the rest of the taxpayers) have little intensity so there is no lobbying group to mount a counter-offensive. The squeaky wheel gets the grease. This is, of course, unsustainable in the long run so even if this is the first result of a totally government-run health care system, we’ll eventually end up with the second possibility.
The government will begin rationing care. Decisions will be be made on some combination of effectiveness and cost with a lot of (again) lobbying thrown in. This is not an irrational approach: there is only so much money to go around and what we spend on health care we don’t have to spend on, say, national defense or education. However as the horror stories that float out of Britain and Canada make clear, this is not a good thing for the individuals who will suffer more pain or die sooner than they would if the most effective possible health care was available to them.
So point the third: A health care system run entirely by the government is a bad idea.
In response to my post on catastrophic health insurance, Grim commented:
I like the idea of market-based reforms. However, I'm not sure why a government plan would be better at simulating the market than, you know, the market.
For example, the DeLong plan that I surrender 20% of my income for health care expenses? The market as it currently exists offers much better deals than that.
In general my preference is for a free market with only as much government regulation as is necessary to keep the more predatory impulses of capitalism in check. However, I have a lot of reservations about whether a totally free-market approach is appropriate for health insurance. I prefer regulation that says, “Thou shalt not” rather than regulation that says “Thou shalt”. Once you wander into government telling private companies what they should do, you’re in trouble and that’s increasingly the case with government regulation of insurance companies. They’re being told what they must do - who to cover, what conditions to cover, how much treatment to provide. That’s a bad situation; bad for the companies, bad for the government, bad for the company’s customers.
Yet I understand why we’ve gone down that road. We want certain things from health insurance and we are trying to get them via government intervention while still maintaining - or appearing to maintain - the companies as private entities. I’m not at all sure that’s working well. We may simply be unable to get what we want from health insurance within the framework of our current system.
This is a big part of why I was so intrigued by the catastrophic insurance plans I discuss in my earlier post. These plans may be the best way to address five issues I think any health care or health insurance plan must handle, the issues we’re trying to handle through our increasingly intrusive regulation of the insurance industry. In sorting out why I think these plans are promising, I’ve written at considerable length about those five issues.
My post about the first issue is here. This post is about the second issue; subsequent posts will deal with the other issues and then I’ll have a grand finale. As usual, I’ve created a new category - “Five Health Insurance Issues” - to link the posts.
Issue 2: Grim is right: the health insurance market offers far better deals than 20%* of income. If - and only if - you’re healthy now and you’ve always been healthy. The problem with the market as it currently exists is that for people who become ill (especially if they become too ill to work) and for people who have had a serious illness it is difficult to find health insurance and if it can be found, difficult to afford (especially for people who are too ill to work). Please note that I’m not talking here about people who don’t bother to buy health insurance and then find themselves ill; I’m talking about people who have health insurance and lose it when they lose their job or move to another State or find the premiums beyond their reach because the premiums skyrocket for them because they’re ill or because they’re lost their job or simply because premiums in general have gone up.
I understand that there is an argument to be made that this is exactly how the market should work: people with higher costs/risk pay higher premiums. I have never found this logic compelling perhaps because I think of health insurance longitudinally rather than as a snapshot. Even if you buy this logic, however, that does not solve the problem: what does the market do with people who either cannot get or cannot afford health insurance? A pure market approach would let them die from lack of health care. I’m not comfortable with that and I don’t think most Americans are comfortable with that. This is the basis of the claim that health care is a right, not a consumer good. I cannot accept that claim but I do believe there’s a difference between someone not being able to afford a top of the line car and ending up with a clunker and someone not being able to afford top of the line health care and ending up with considerably less chance of surviving a serious illness.
So, point the second: Health insurance is not universally available or universally affordable through the market as it currently exists.
My belief about the meaning of point the second: Lack of health insurance does in fact often mean less effective medical care when someone is seriously ill. I know this claim is disputed by many people who point to the fact that any emergency room anywhere must take you if you’re really sick but that’s not the situation I’m concerned about. I’m concerned about situations where someone needs lots of expensive, long-term care to survive. (Plus the requirement that ERs take you if you’re sick isn’t exactly a shining example of the free market.)
My moral judgment about the meaning of point the second: This is not right. I understand that of course the richer you are the better chance you have to get super-duper health care. But I do not think someone should get less than, say, the level of care available to a Blue Cross Blue Shield policyholder because he is poor - or because his parents are poor.
*****
* DeLong does not actually want 20% of your income for health care. He wants 5% to buy catastrophic insurance; the other 15% is a mandatory Health Savings Account and you get it back next year if you don’t spend it.
In response to my post on catastrophic health insurance, Grim commented:
I like the idea of market-based reforms. However, I'm not sure why a government plan would be better at simulating the market than, you know, the market.
For example, the DeLong plan that I surrender 20% of my income for health care expenses? The market as it currently exists offers much better deals than that.
In general my preference is for a free market with only as much government regulation as is necessary to keep the more predatory impulses of capitalism in check. However, I have a lot of reservations about whether a totally free-market approach is appropriate for health insurance. I prefer regulation that says, “Thou shalt not” rather than regulation that says “Thou shalt”. Once you wander into government telling private companies what they should do, you’re in trouble and that’s increasingly the case with government regulation of insurance companies. They’re being told what they must do - who to cover, what conditions to cover, how much treatment to provide. That’s a bad situation; bad for the companies, bad for the government, bad for the company’s customers.
Yet I understand why we’ve gone down that road. We want certain things from health insurance and we are trying to get them via government intervention while still maintaining - or appearing to maintain - the companies as private entities. I’m not at all sure that’s working well. We may simply be unable to get what we want from health insurance within the framework of our current system.
This is a big part of why I was so intrigued by the catastrophic insurance plans I discuss in my earlier post. These plans may be the best way to address five issues I think any health care or health insurance plan must handle, the issues we’re trying to handle through our increasingly intrusive regulation of the insurance industry. In sorting out why I think these plans are promising, I’ve written at considerable length about those five issues. This post is about the first issue; subsequent posts will deal with the other issues and then I’ll have a grand finale. As usual, I’ve created a new category - “Five Health Insurance Issues” - to link the posts.
Issue 1: If you become seriously ill, it is extremely unlikely you will be able to afford the best possible treatment without health insurance. Paying for normal health care out of pocket is feasible for most people; annual exams, the flu, simple broken bones, childhood immunizations, having a baby, well-child care - these are all health expenses that most of us can pay for as we go or save up for or pay for with credit and have some hope of paying off. Big ticket items, no. Cancer; heart problems; a liver transplant; kidney disease; a premature baby; a child with serious birth defects - health problems of this sort will cost more than most people can afford.
It’s fine to hark back to the days of yore when people paid for their health care themselves but when in comes to serious illness things are not as they were back in good old yore. One of my uncles died of leukemia more than 60 years ago. He felt ill, went in for a blood test, and was dead before the lab results came back - the only lab in the State that did blood work was 100 miles away and backed up. Today he’d be diagnosed almost instantly, admitted, given chemotherapy; everyone who was willing would be tested for a bone marrow match; if a match was found, the bone marrow would be donated. If through some miracle he survived, there would be years of regular exams, regular tests, special tests if he felt ill or something didn’t look right. A lot more expensive than one blood test and a few weeks at home in bed.
My father died of a heart attack 45 years ago. He felt chest pains while over-exerting himself and saw a doctor a few days later (!). He worked overseas so a doctor told him to lose some weight and see a specialist when he got back to the States. His doctor put him on a diet that would curl a cardiologist’s hair today - soft-boiled egg for breakfast, broiled hamburger patty for lunch, that kind of thing - with the predictable result. Today he would have gone to the emergency room at the first hint of pain and gotten at least an EKG and a blood test as soon as he walked in the door. If an attack was confirmed he would have been admitted and put on an array of drugs designed to keep him alive while more tests were done. He would probably have had roto-rooter surgery, stents, and so on. There would have been years of follow-up exams and tests and a lifetime of taking meds. A lot more expensive than one doctor’s visit and a mimeographed diet menu.
Not so very long ago it was simply a given that premature babies died; people with AIDS died; people with Stage IV cancers died; people with serious heart problems died. Now they live. Children with cystic fibrosis were lucky to make it into elementary school; now they can hope to graduate from high school. Childhood leukemia was a death sentence; now most patients survive. Once upon a time when a seventy-year-old woman fell and broke her hip she lived with the break - and probably didn’t live long. Today she gets a hip replacement. All of this is good, all of this is joyous. All of this is very, very expensive.
So, point the first: While most of us could pay for normal health care expenses ourselves, most of us need health insurance to cover serious situations.
Megan McArdle does her usual excellent job in explaining why the Stupak amendment was pretty much inevitable. After dismissing the “transparently ineffective gimmick” of “segregating the funds so that the federal subsidy wouldn't pay for the abortion part” she writes (emphasis mine):
I knew this was coming two years ago, and not because I'm sort of amazing prognosticator. Medicaid in most places covers abortion only in the cases of rape, incest, and the life of the mother because, well, when the government provides your health care, the procedures that are covered will be determined politically.
My favorite part of her post, though, is what comes right after that quote:
I had thought that Democratic feminists understood the trade off they were making, and believed that it was worth it. But many of them seem to be genuinely surprised that health care rules will be written with respect to the opinions of the National Right to Life Committee.
Yes, they are surprised. Even liberal feminists who saw clearly the misogyny in last year’s Democratic primary fight and Presidential campaign never seem to have realized there would be any trade-off. Oh, sure, they worried a little about what might happen if we had government health care and the Republicans ran the government. But that was a concern for later, not for now. After all, they somehow managed to convince themselves, surely Democratic health reform would include support for abortion funding - and birth control.
I can’t really blame the Democrats for thinking liberal feminists will be willing to sit still for this: 2008 proved the Democratic Party owns most liberal feminists literally body and soul. Or as our mothers might put it, why would they buy the cow when they're getting the milk for free?
Octogalore has up a must-read post about health reform legislation, the Stupak amendment, and why women should not be wholly owned subsidiaries of either political party. She starts off in a way that warms my heart:
“Feminism is about more than women’s rights, it’s about an interlocking network of all oppressions!”
Not by my definition.
She then explains why electing Republicans who appoint Supreme Court justices who overturn Roe v Wade would not be the cataclysm Democrats would like women to believe. She further explains why the House health reform bill would raise higher barriers to poor women getting abortions than would the overturn of Roe v Wade. She sums up with:
I think in this instance they [Republicans] would be better for women’s rights simply because smaller government has less ability to affect women’s choices, not because they also wouldn’t sell women out for the “greater good.” This particular health plan, rather than simply straight-out subsidizing health care for those Americans who cannot get it through their employers and cannot otherwise afford it, seeks to expand government (male-dominated) power, which then takes advantage of those it sees as reliable, uncomplaining loyalists: women.
Not content with having written a truly outstanding post, Octogalore responds very thoughtfully to a commenter who claims President Obama is not a fiscal liberal but rather a corporatist. She talks about what defines a fiscal liberal and concudes:
I think one can be a corporatist and still be fiscally liberal, in in a lot of ways Obama and Bush were both. And I also think being a fiscal liberal does not equate to caring about lower socioeconomic classes. Some fiscal liberals do -- others don't. The latter are more concerned with expansion of government (and therefore their own) power. Similarly, some fiscal conservatives do care about lower socioeconomic classes -- and others don't.
Read the whole thing.
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