Tyler Cowen discusses the effects of an individual insurance mandate in today’s NYT. A taste:
Americans seem to like the idea of broadening health insurance coverage, but they may not want to be forced to buy it. With health care costs high and rising, such government mandates would make many people worse off. . . .
Defenders of a broad health insurance mandate argue that it will lower average costs in the health care market. The claim is that many of the uninsured are young, healthy or both, and that bringing them into the insurance pool might lower average premiums by spreading risk across low-cost groups. Yet Massachusetts has had a health insurance mandate for several years and this cost-saving mechanism does not appear to be kicking in.
At this point, it seems more plausible that the cost of health insurance will keep rising, just as the costs of health care services have continued to climb. The upshot is that the burdens of mandatory purchase, the subsidy costs and the associated implicit marginal tax rates will all increase, eventually to the point of unsustainability. . . .
We’re often told that America should copy the health care institutions of Western Europe. Yet we’re failing to copy the single most important lesson from those systems — namely, to put cost control first. Instead, we’re putting our foot on the gas pedal and ratcheting up the fiscal pressures on the system, in the hope that someday, somehow, it will all work out.
As it stands, we’re on the verge of enacting a policy that is due to explode, penalizing many of the very people that it was ostensibly designed to help.
As with all of Tyler’s NYT columns, I recommend you read the whole thing.
Shertaugh says:
TC wrote in his article:
I’m certain the same outcome applies in Georgia vis-a-vis medical-malpractice reform.
Despite all the caps and hurdles on malpractice cases, the cost of private health insurance continues to spiral up.
I know because Blue Cross of Georgia just raised the premium on the policy for my 10 year-old HEALTHY daughter a staggering 31 percent. My 12 year-old son’s went up 26 percent. My wife’s went up 23 percent (and there’s no maternity coverage). And the deductible on each policy is $5,000.
Combined, the three of them went to a doctor 4 times. The only medication we bought was an antibiotic for my daughter’s sore throat.
I’ll be the first to confess I don’t know the answer. But the status quo is ridiculous.
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October 25, 2009, 10:20 amPersonFromPorlock says:
It’s the wet dream of businessmen everywhere to have government make people buy from them at their price. And it’s the pleasure of government to do so, for a consideration. There are no surprises here.
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October 25, 2009, 10:26 amHarry Schell says:
Every mandate from government about what a healthcare policy should cover and who should buy it has only resulted in increased premiums. Bringing the younger and healthier into coverage which is so expansive (such as including gender change as a reimbursable medical expense) will not reduce premiums, nor will freezing the price, which does not affect costs.
Government repeatedly has proven it does not know as well as citizens how to take care of citizens. The savants in DC, or even state houses (witness MA, NJ, ME and TN) fail because they are lawyers and talkers without the perspective of doers, and they think people will not change behaviors in response to new law or taxation.
A wiser group would admit they should free up the system to let the patient make choices they want, buy only the coverage they want, and let insurance companies offer what people want wherever those people are.
The worst outcome for healthcare is to install a monopoly, whether government or private.
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October 25, 2009, 11:00 amLarry Humphrey says:
Does anyone know where to find information on the per capita number of doctors graduating from U.S. medical schools over time? It seems to me that the “supply” of doctors has stayed relatively constant (i.e., few new med schools; nominal expansion of existing med schools) while the population has increased significantly. Hold supply steady while demand rises, what do you typically get? Higher prices, no? I would also be interested in the average annual compensation received by doctors over time. I’m not saying doctors should still be taking chickens as barter for treatment, but when you see someone in a Porsche or with a lake house these days, seems like it is even money that it is a doctor.
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October 25, 2009, 11:15 amcorneille1640 says:
How about a robust public option with no mandate? It might not drive down “costs,” but it might offer at least one set of insurance with a premium “price” that is affordable.
P.S. “Price” is certainly related to “cost,” but I suspect–and stand to be corrected–that the relationship is not a 1:1 correlation.
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October 25, 2009, 11:53 amJoe says:
Yes, read it all.
Estimates of this burden vary, but for a family of four it could range up to $14,000 a year over the next decade, according to the Congressional Budget Office.
Right now, many Americans take the gamble of going without insurance, just as many of us take our chances with how much we drive or how little we exercise.
What average family of four would not have health insurance? How did they have the babies? Midwife by gaslight? Did the children have to go to the doctor? Did the mom have prenatal care?
Right now, many don’t “gamble” (legally) when they drive without insurance. Others “gamble” knowing that if they need health care, like breaking a leg or some serious condition, they have a right to get care. Some go bankrupt, which means creditors lose lots of money. Or, the public has to pay when they or their “family of four” go on the dole.
Likewise, it is not as if the mandate is the only part of the proposals. It is part. For instance, I hear of many of the uninsured now will get some sort of subsidy to help them pay. Also, various refusals of care — one reason not to pay for insurance is that they won’t offer it anyhow — for pre-existing conditions etc. will be removed.
There is also the argument that the “mandate” will mean trivial things will become rights too. This is like saying the “mandate” to pay taxes for police services or libraries will mean there will be a push for 24/7 book service or something.
The bottom line is that like police or fire protection, health care is a fundamental human need that society needs to provide. And, at least to the basics, the people have every right to be asked to pay to help them do it.
I don’t have a right to “gamble” that I won’t be robbed and not pay for police “insurance.” Ditto drivers. And, for those who need to ‘gamble’ since health care costs so much, the solution can’t be to give them the oh so grand right to not go to the doctor so they can eat, but to have a system “mandated” where all can do both.
And, yeah, other nations manage this better than us. As to the cost thing. First, a bigger risk pool alone will help control costs. As would other things deemed too ‘left’ such as single payer. But, I put aside that open for debate stuff. Health care is a need. The push now is to better supply that need to all.
Cost is secondary ... if money was the first priority, we wouldn’t be wasting so much money on foreign wars. And, once everyone is mandated, cost control would seem to be a logical next step. After all, everyone has an incentive now.
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October 25, 2009, 12:30 pmJoe says:
The worst outcome for health care is to install a monopoly, whether government or private.
Well, great. Let’s remove the special antitrust exemption. Oh, and the right to get emergency care.
Government repeatedly has proven it does not know as well as citizens how to take care of citizens.
That is, “the people” has repeatedly proven it doesn’t know, since they voted for the “government” who supplies police services, anti-discrimination laws, environmental protection policies, etc.
Let’s put the blame on where it belongs. The misinformed people here and abroad who want universal health care and is willing to help to pay for it.
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October 25, 2009, 12:41 pmpdxlawyer says:
An little-discussed consequence of a “mandate” is that living off-the-grid will be effectively illegal. For the first time, people will need to buy a product in order to exist legally. True, one can apply for a “subsidy,” but simply existing without filling out the appropriate forms and having them approved subjects one to a tax penalty.
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October 25, 2009, 12:43 pmGrover Gardner says:
FTFY.
I looked in vain for any supporting facts here but I don’t see any.
For instance, his assertion that employer-based insurance lowers wages. Well, yes–it also lowers expenses for employees. For instance, my employer pays $2400 a year for my coverage and I contribute $600. Sure, if I ask for that money in wages I might get it–provided my employer doesn’t mind raising his own costs when people like me drop out the group. Then I can buy similar coverage for myself–for about $6000 a year. Uh oh, I just lost $3000 in income to the insurance company! Plus, I would lose coverage for my pre-existing conditions and might face recision if I got seriously ill. Plus I pay taxes on the $3000 I “got back” from my employer. What happened to those “higher wages”?
Of course, I would have a choice as to what kind of insurance to buy, or whether to buy any at all. But my employer has made it clear that he doesn’t want his employees burdened by debt for medical expenses, or avoiding care because they can’t afford it. Quite simply, it’s bad for his bottom line. And as a very conservative, family-oriented individual, he wants his younger employees to be able to afford to have children.
I’d like to hear Professor Cowen’s take on what he’d have to pay for health insurance if he weren’t covered by GMU. Would GMU hand him the extra money? How would they feel about his going without coverage? Would they consider that a risk they don’t want to take?
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October 25, 2009, 12:52 pmjuris imprudent says:
The claim is that many of the uninsured are young, healthy or both, and that bringing them into the insurance pool might lower average premiums by spreading risk across low-cost groups.
Well, by that standard every homeowner in America should be forced to buy in to California’s earthquake insurance pool, since those lower risk folks would lower our premiums.
How can anyone with half a brain make such a suggestion.
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October 25, 2009, 12:52 pmGrover Gardner says:
Even someone with half a brain might consider that cancer, diabetes and heart disease aren’t regional phenomenons.
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October 25, 2009, 1:00 pmyankee says:
People who don’t live near fault lines and don’t have earthquake insurance don’t impose costs on anyone else. The chance that someone in Kansas will have their house destroyed in an earthquake is infinitesimal. By contrast, the chance that someone who is young and healthy will remain so is zero.
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October 25, 2009, 1:08 pmAbdul Abulbul Amir says:
There is something quite whacky about this. Do more 20 year olds with life insurance in any way reduce the cost to provide life insurance to 70 year olds? No.
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October 25, 2009, 1:16 pmAbdul Abulbul Amir says:
No one has zero risk, including that of earthquakes in Kansas. The health insurance risk (like life insurance risk) for a 20 year old is vastly different than that of a 60 year old. To charge the same price for very different risk is unfair discrimination.
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October 25, 2009, 1:23 pmAllan Walstad says:
Joe, different institutional environments tend to lead to different decisions, even by the same people. Where people make their own decisions individually or as families, the incentives and specificity of knowledge that can be brought to bear are different that when decisions are made politically. There’s a huge literature on that. In particular, everybody can’t possibly be informed regarding all details of proposed legislation and implications thereof–even the pols don’t apparently read the thousand-page bills. And even if you invested 24/7 to do so (at the expense of sleep, work, etc) you would still have only one vote for each of a few pols every few years. “The people” can make completely insane decisions through the political process while generally making reasonable decisions about how to allocate their own time and resources in their private lives.
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October 25, 2009, 1:27 pmAllan Walstad says:
Apples vs oranges, Joe. Some sort of police protection is arguably necessary to preserve the general liberty for people to pursue their own goals and purposes in non-coercive interaction. Letting your own house burn may endanger others. But my failure to provide for my own health care does not endanger others or impact their liberty–EXCEPT under the insidious dogma that medical care is my right at others’ coerced expense.
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October 25, 2009, 1:33 pmAllan Walstad says:
Pithy and spot-on, PFP.
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October 25, 2009, 1:36 pmKevin says:
I’m sympathetic to Cowen’s argument but I think this is a pretty weak argument, just lots of opinions and airy speculation. His writing is usually so much more incisive.
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October 25, 2009, 1:43 pmCareless says:
Your error: you’ve inadvertently created a comparison between people who live in Kansas now and have low earthquake risk but who will certainly move to California or elsewhere in the ring of fire and people who are young and healthy. You should have broken “young” from “healthy” but if you had done that your statement would obviously have not made sense.
forcing the young=forcing the Kansan.
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October 25, 2009, 2:11 pmCareless says:
Because everyone dies and you pay based on the payout on your death. Health insurance is completely different.
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October 25, 2009, 2:16 pmbchurch says:
When your analogy requires positing the logical necessity of every Kansan moving to California, that might be telling you something about its aptness. It doesn’t prove much to say that your opponent’s arguments look ridiculous in the analogy, when the analogy is ridiculous to begin with.
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October 25, 2009, 2:18 pmBrian K says:
re-ask that question using car insurance and the answer is a resounding yes. car insurance is much more analogous to health insurance than is life insurance.
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October 25, 2009, 2:21 pmRelic says:
Except that the car insurance company isn’t required to pay for your gas.
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October 25, 2009, 2:23 pmepluribus says:
How is it discrimination to treat everybody alike? To discriminate is to treat different people or groups differently. When all are treated alike, it certainly isn’t discrimination. You are complaining here about the failure to discriminate.
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October 25, 2009, 2:41 pmMark Buehner says:
The irony here is that the mandate isn’t nearly severe enough, while the abolition of preexisting conditions is very real. Why, why, why would anyone young and healthy buy thousands of dollars worth of health insurance they probably wont use, when instead they can pay a much smaller fee and then buy the insurance if they get sick?
Until somebody explains that to me I can only argue that the current plans are a complete and utter debacle that will INCREASE premiums as the healthy actually dump their insurance. We will end up with less people covered and more expensive premiums. Nobody wants to talk about that.
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October 25, 2009, 2:46 pmMark Buehner says:
Oh– and to answer my own question, it seems to me that anyone looking to either kill off or at least demonize the insurance industry might come up with a plan that forces huge expenses onto the insurance industry while creating incentives for their best customers to jump ship.
In 3 years when insurance is more expensive and coverage hasn’t improved, Congress can blame the insurers and impose a single payer system.
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October 25, 2009, 2:49 pmbyomtov says:
To charge the same price for very different risk is unfair discrimination.
Is it? That’s the way virtually all employer-based plans operate. The overweight 55-year-old pays, directly or indirectly, the same premium as the 25-year old marathon runner. In any case, no one is suggesting that the premiums be equal for all age groups.
Cowen is usually pretty good, but I think he phoned this one in. For one thing, I think his claim that the CBO estimates a $14,000/yr increase is incorrect. There was such an estimate put forward by some organization, but, IIRC, it was refuted by the economist on whose studies it was based.
The reason for a mandate is so that you can have universal coverage without considering pre-existing conditions, etc. You can’t do that if you let people wait until they need care before buying insurance.
One way to look at the premium issue that the premium needs to be fair over the coverage period, not each and every year. If the object is to assure that people are covered over their entire lives, then it’s perfectly reasonable to spread the premiums out in a more manageable way. By paying more when you are younger you get the benefit of lower premiums later, as well as the guarantee of being able to buy insurance at a reasonable rate later on despite your future health experience.
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October 25, 2009, 2:54 pmBrian K says:
learn to read. i said “more analogous” not “exactly identical”.
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October 25, 2009, 2:56 pmRichard Nieporent says:
What we call heath insurance is actually prepaid health care. Insurance is for expensive low probability events where the risk is pooled among a large number of people. With health insurance we are paying for everyday health care as well as the expensive low probability events. The only way to cut health care costs is to provide health insurance, not prepaid health care.
Just because we need heath care does not make it a right. Everyone also needs food, clothing and shelter to survive. Should we also have the government supply these things for us as a right so that everyone has the same food, clothing and shelter?
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October 25, 2009, 2:57 pmpireader says:
Frankly, Tyler Cowen’s column is tedious. It brings no new facts about the national health insurance (NHI) proposals before Congress. Instead, it offers only armchair theorizing.
Every other developed country in the world has some form of NHI. Professor Cowen’s theorizing should apply to them as well. But that means there a serious problem with his theory, since they all have dramatically lower health-care costs than the US.
So what shall we believe ... Tyler Cowen’s theory or decades of history in dozens of countries? As Groucho said, “Who are you going to believe, me or your lyin’ eyes?”
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October 25, 2009, 3:13 pmJoe says:
What average family of four would not have health insurance? How did they have the babies? Midwife by gaslight? Did the children have to go to the doctor? Did the mom have prenatal care?
I went through the last half of the nineties uninsured. I ran my own business and paid ALL of my medical expenses out of pocket including several late night & weekend ER visits, an MRI and a childbirth. The latter was done by a midwife for $750, including all prenatal visits. (One reason we did this was observing with children 2 & 3, the nurses did almost all the work and in the case of #3 the head nurse actually delivered the child because the doctor thought he could wait at home [and when he did show up and expressed his displeasure to the head nurse, she put him in his spot and later raked him over the coals for being an ass.] Child #1 was a C-Section due to her being breach, which they didn’t discover until after they had induced my wife. I’ve since found that most midwives could have turned her BEFORE they induced.)
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October 25, 2009, 3:19 pmBruce Hayden says:
First issue — incomes are typically not steady over one’s working life. Rather, they tend to be much higher later one, and lower up front. Right after college, I didn’t make much more than minimum wage. Then, a couple years later, I took a programming job for the government at $1k a month and thought I was in heaven. Then, later, hit milestones of 1x, 2x, 3x, etc. of my age.
Yes, a lot of the 20 something males who are currently going without insurance do it because they have better things to do with their money (booze, women, partying, etc.), and they are bullet proof at that age. BUT, they are also one of the demographics most seriously hit with unemployment right now, and one of the reasons for that is the big jumps in minimum wages. So, requiring them to pay a significant amount of their income for health insurance that they likely won’t need for 30 years is just likely to keep a lot of them out of work.
Second, the multiplier when comparing young males to old males, right before Medicare, is far, far, higher than the 2x being proposed. Probably 5x or higher. When I sold health insurance years ago, I remember a 20 year old male paying $20 a month for comparable coverage that a 50 year old male would pay over $100 a month for. At a 2x maximum age rating disparity, the young males will be paying far more than their fair share — at a time in their lives when many are least able to afford it.
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October 25, 2009, 4:22 pmBruce Hayden says:
I do agree with the posters above who pointed out that the the latest bill to come of committee has insanely low penalties for failing to have insurance. Far lower than the expected premiums (esp. since the youngest full time workers are being expected to carry much more than their actual share of the costs of health care). And, this time around, no one can really say that they weren’t warned that a lot of people are going to just drop coverage and pay the fine, knowing that they can sign up for health insurance after getting sick.
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October 25, 2009, 4:28 pmAbdul Abulbul Amir says:
Participation in every employer based plan that I know of (quite a few) is completely voluntary. My employer offers offers a number of options at the same price to every employee. However no one is charged involuntarily.
Note that insurance companies will be prohibited from offering lower prices to lesser risks other than what the pols dictate. That is being unfair on purpose.
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October 25, 2009, 4:44 pmArthurKirkland says:
Why not?
A friend’s father has told me about accepting piano lessons, chickens (and eggs), lawnmowing and car repair for medical services. He also told me about house calls and caring for children whose parents couldn’t pay and being respected in his community as something other than a distant money-grubber. And about practicing without worrying as much about completing mind-numbing forms and complying with reimbursement deadlines as about knowing his patients and helping them.
He smiled as he told these stories (until he reached the parts about dealing with insurance companies). He told these stories in a large home on 20 acres of land within 15 miles of a major city, or at the country club at which he had been an enthusiastic golfer for most of his adult life, with one or more of his five children — all of whom earned a college degree at his expense — nearby.
If physicians were paid by their patients rather than by employers, through expensive, immunized and counterproductively incentivized filters, everyone — expect insurance company executives — could benefit. Including doctors. I believe most of the doctors I know would trade contexts with my friend’s father, their predecessor — chickens and all.
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October 25, 2009, 4:45 pmBruce Hayden says:
That is really a part of the problem — those of us with high deductible HSA plans are scheduled to lose them.
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October 25, 2009, 4:47 pmPintler says:
I am trying to understand where this attitude comes from. We don’t assume that food is a ‘fundamental human need that society needs to provide’ even to the able bodied. If I, as a healthy adult male, decide to become a climbing bum, can I just hitchhike into town once a month to pick up my free food [note 1]? We make charity exceptions for the young (and perforce, their mothers), the elderly, and the disabled, but outside of that we are quite willing to let people starve to death.
Why is high quality health care a fundamental right when food itself isn’t? Food is both cheaper and more essential than health care. What’s the test that health care meets and food itself doesn’t?
I’m not arguing that we let uninsured accident victims lay in the street. I’m open to providing health care on a charity basis — but I don’t understand how it morphed from charity to a right.
[Note 1]Britain in the 50’s gave out assistance freely enough that a whole generation of climbers could afford to be climbing bums, and that generation really pushed the state of the art quite a bit forward. While I applaud their accomplishments, I don’t think we should spend tax money to support climbing in that way.
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October 25, 2009, 4:48 pmbyomtov says:
Bruce Hayden,
First issue — incomes are typically not steady over one’s working life. Rather, they tend to be much higher later one, and lower up front. Right after college, I didn’t make much more than minimum wage. Then, a couple years later, I took a programming job for the government at $1k a month and thought I was in heaven. Then, later, hit milestones of 1x, 2x, 3x, etc. of my age.
No doubt incomes tend to increase over one’s working life. And of course the premiums should do that too. I don’t have a strong opinion as how steep the increases should be, because I haven’t really looked at the numbers. All I’m saying is that just because the premium 25-yr-olds pay is actuarially high for that year, while the 55-yr-old’s premium is low, does not mean the premium structure is unfair. You have to look at the entire coverage period, and I do agree it makes sense to have a gradient that is manageable in light of expected income patterns.
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October 25, 2009, 4:51 pmAbdul Abulbul Amir says:
Denial of care and reduced capacity reduces costs. The use of cheaper less effective druds reduces cost as well. However, our overall cancer survival rate is better than that in Europe. This is true even though we lead the world in cigarette consumption into the 1980’s and our gang killings are world class as well.
That private parties choose to spend somewhat more on health care and somewhat less on pasta or pants or pianos is not a problem government needs to solve.
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October 25, 2009, 4:53 pmAbdul Abulbul Amir says:
On the contrary, it is proof of being unfair. Life insurance is priced fairly for every age group. Why must the dems health care plan require unfair pricing?
BTW, you may be shocked to learn that every 25 year old does not live to 55 nor do all that live to 55 continue to live in this country.
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October 25, 2009, 5:02 pmpireader says:
Abdul Abulbul Amir wrote:
Of course, greater efficiency also reduces costs. Do you have any actual evidence that care is “denied” in all those countries, relative to the US? Because there’s lots of evidence of greater efficiency in those countries.
We’re not getting more or better health care ... we’re just paying more for parity care with parity outcomes.
The US health care system is like the US auto industry. Once it was a glory of our civilization, but those days are long gone. Now it’s just bloated and stumbling. It only survives because the French cannot export their health care system, the way the Japanese exported autos.
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October 25, 2009, 5:20 pmAbdul Abulbul Amir says:
There is no intention to in any health care bill to “treat everyone alike.” Immediately after passage, will we all be required to take Chemo and radiation treatments in order to be treated like those that suffer from cancer? Don’t be silly.
If fire insurance were required in some city, would it be discrimination to charge more for the 8000 sqft wood frame home than for the 2000 sqft cinder block home? Most people would certainly say no. Most would say that charging those in modest dwellings the same as those in mansions would be rank discrimination.
Ignoring risk when pricing insurance is discrimination against those individuals that are less risky.
Risk based pricing is not discrimination in life or fire insurance just as it is not in health insurance.
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October 25, 2009, 5:24 pmMike McDougal says:
No, but it does a great job of taking money from poor young people and transferring it to relatively wealthy older people, often the very same people who are burdening the younger people with massive national debt.
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October 25, 2009, 5:29 pmMike McDougal says:
By paying more when you’re younger, you tend to inhibit young people from accumulating wealth, which tends to prolong the grip old people have on the nation.
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October 25, 2009, 5:36 pmMark Buehner says:
You’re painting with a wide brush. In Europe alone there are vastly different health care systems with varying degrees of costs and results.
If you want to look at Britain, we know there is widespread rationing of care (as with Canada).
People that say ‘look how Europe does it’ aren’t making a real argument. You have to talk specifics, and you also have to realize European nations are under the gun with the same demographics bomb we are about to endure. It may well be that the more socialized nations are heading for a massive unsustainable train wreck even faster than we are.
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October 25, 2009, 6:23 pmepluribus says:
Abdul Abulbul Amir wrote:
I replied:
Abdul countered:
Come off it, Abdul. You referred to “price,” which in insurance terms means premiums. YOu did not refer to chemo treatments. To charge everyone the same premiums is not discrimination. It is the failure to discriminate. And it’s absurd to suggest that anybody will be “required” to take chemo or any other kind of treatment. It will be available to all if they need it and want it. You should adhere to a minimum level of honesty if you want to participate in these discussions.
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October 25, 2009, 6:44 pmBrian K says:
This rests on the assumption that the more expensive drugs are better. This is a laughably incorrect assumption. In fact, in many cases the opposite case is true.
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October 25, 2009, 6:46 pmRebelyell says:
I think if you were to ask 100 Americans “Do you think insurance companies should be allowed to discriminate against people with pre-existing conditions by charging them substantially higher premiums?”, more than 90 percent would disagree. Thus they believe the government should force insurance companies to sell their product at a loss to unhealthy people.
The only way this can work is if all healthy people are forced to buy insurance, so that the insurance companies can recover their losses by cost savings on the healthy.
For what it’s worth, I think the government should stay out of it, except to somehow require a system so that people who choose less insurance (and agree to pay more of the costs themselves) get a higher paycheck. Of course, current law does nothing of the kind.
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October 25, 2009, 6:52 pmtheBuckWheat says:
When government perfects the legal theory that enables it to force every citizen to purchase health insurance, that same theory will also enable government to force citizens to buy other things as well. No new power goes unexpanded. Those other things might be: to purchase a subscription to a daily newspaper (to ensure the MSM has a sufficient customer base), or to even purchase a firearm.
The Left will be soooo conflicted when they realize the monster they have created.
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October 25, 2009, 7:14 pmLeo Marvin says:
Where’s Cowen’s evidence that those Western European (and Canadian and Australian) systems “put cost controls first”? Actually a potpourri of systems, what they have in common compared to ours are two key features: (1) they cost less, and (2) they provide universal coverage. And the universal coverage long preceded the concerns we all now share over spiraling costs. That they managed to keep their costs low compared to ours suggests universal coverage could be helpful, and certainly shouldn’t be an impediment to cost control. If anything, contra Cowen, it seems the single most important lesson from those systems is to put universal coverage first.
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October 25, 2009, 7:29 pmAbdul Abulbul Amir says:
Yes, sometimes cheaper is better and sometimes not. However, when cost reduction is the priority, then cheaper is always better regardless of health outcomes. The cost controller can always make the case that we can’t be certain that the more expensive treatment will always be more effective on average.
Wether its better for you as an individual or not is of no consideration whatsoever.
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October 25, 2009, 7:30 pmShelbyC says:
Well, you should too. You’re distorting his chemo example. And forcing young healthy folks to pay the costs of older folks may not technically be discrimination is this case, but it sure isn’t much different.
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October 25, 2009, 7:34 pmAbdul Abulbul Amir says:
Of course its absurd. Treating people differently who are of different condition is both appropriate and nondiscriminatory. This goes for medical treatment as well as pricing risk.
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October 25, 2009, 7:35 pmDavid Chesler says:
What do they mean by “average”? If they mean arithmetic mean (total of costs divided by total people) forcing heathy uninsured people into the pool will not lower the average cost among ALL people, since those not currently in the pool have zero cost for premiums, which ought to be averaged in.
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October 25, 2009, 7:52 pmEli Rabett says:
To Freak this thread, there was a 2.5 earthquake in OK not far from KS in the last few days, and there are little ones in MO and AR continually. Then, of course, there is the 8.3 one in New Madrid in what, 1812.
So yeah, KS can shake
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October 25, 2009, 8:19 pmpireader says:
Mark Buehner wrote:
Yes,the other developed countries have different systems. What they have in common are universal coverage, results as good as ours and much lower costs ... which was my point. The cost differences among them are much smaller than the gap between US costs and any of theirs.
Except that health-care costs in the other developed countries have not grown as fast as in the US. So if they face some trainwreck (aging population?), it’s not due to their health-care system.
And by the way, Switzerland and Japan are as far from “socialized” economies as one can easily imagine; but they both have universal coverage, good outcomes and lower costs.
The US is truly the outlier ... and not in a good way.
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October 25, 2009, 8:44 pmMark Buehner says:
Ok but universal coverage is an end of their system, not a means. France, for instance, has a very tight tort systems, free medical educations (instead of crushing med-school debt), and doctors that make FAR less than American doctors are accustom.
Point being– you can’t just say ‘universal coverage’ three times and get any particular European style results. There are BIG systematic and societal changes required to get on that road, and if anything the current plans under consideration have twisted themselves in knots to avoid those kinds of changes or even discussions. Everyone is supposed to get everything, cheaper, faster, and universally. That is absurd. So the truth is we really arent any closer to universal coverage, precisely because we haven’t made any of the grown up decisions that will be required to get there.
So far. On the other hand they are tied in to guaranteed entitlement spending, which if they required change could well lead to flat out social upheaval (France for example, any time they try to make a change to their employment laws).
Potentially, we have a silver lining of not being so tied down to a particular system aside from medicare (which is a huge enough challenge).
I just don’t understand how this half baked new entitlement can reduce costs. You can point at specific European models and we can discuss how to get there (I like the French system actually), but simply ‘manifesting’ universal coverage does not guarantee bending the cost curve down in any way. That is a fallacy.
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October 25, 2009, 9:17 pmepluribus says:
I wrote:
Abdul replied:
You’re dancing away from your initial point, which was that it is discrimination to charge the same premiums for all insured persons, regardless of their age. I pointed out that it is not discrimination to treat all alike with respect to premiums. You replied absurdly that you would have to require everybody to have chemo treatments to achieve non-discrimination. Why don’t you admit that your initial point was a misuse of the word discrimination? There may be valid policy arguments for charging different premiums to people of different ages. But it’s absurd to argue that the failure to do this is discrimination.
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theobromophile says:
Epluribus: not from a legal or moral perspective; only from a linguistic one. Let me put it to you this way: as a young person, I’m totally happy paying the same amount for my health care that an older person pays (so that insurance companies may not discriminate based on relative health) when employers stop discriminating based on age and experience and pay me just as much as they would pay a 50-year-old.
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October 25, 2009, 10:01 pmSuperSkeptic says:
(emphasis added)
Ask Ricci, or better yet, the hispanic guy. People cry discrimination all the time when people are actually treated alike. You don’t want people to be treated alike, some pigs are more equal, huh?
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October 25, 2009, 10:31 pmRicardo says:
Because medical costs have escalated well beyond the ability of any charity to provide medical services on a reliable basis.
What exactly do people propose as an alternative to the system of mandated emergency care we currently have? If you are hit by a car or experience a heart attack, do you really want to be sitting in the billing department of the hospital while a representative there works through the prompts on your insurance company’s 800 number to verify your coverage before admitting you? Or do you always carry around $15,000 in cash in your wallet just in case?
The point is that removing the mandate of emergency care would hurt those who are actually covered by health insurance or have the means to pay out of pocket. It wouldn’t just hurt those with no insurance and no means.
On the relationship between mandatory coverage and costs, requiring a 25-year-old to buy insurance will not lower the premium for a 75-year-old. It will, however, lower the premium for other demographically similar 25-year-olds who have been responsible enough to buy health insurance in the first place. Individual health insurance is expensive in large part due to adverse selection. Mandate coverage and you take away the adverse selection problem.
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October 25, 2009, 10:47 pmpireader says:
Mark Buehner —
Evidently we went past each other earlier. I agree with the points made in your last post.
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October 25, 2009, 11:22 pmBrian K says:
You’re dancing away from your initial point,
he does a lot of this.
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October 25, 2009, 11:29 pmJohn Dunshee says:
Riddle me this? If Congress has the power to force everyone to purchase health insurance, is there anything they cannot force us to buy?
If not, why?
And do you think that this newly discovered power to force American to buy something, for their own good or not, is going to stop with health insurance?
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October 25, 2009, 11:30 pmBruce Hayden says:
I would agree with the adverse selection problem, but that only rears its head when underwriting for preexisting conditions is banned.
But what you forget is that the proposals limit the age rating to 2x, and the health care costs of a 75 year old male are far, far, far higher than 2x those of a 25 year old male.
What we have now is that those males just entering the work force don’t make much money, often don’t carry health insurance, and if they did, it wouldn’t cost very much (assuming that there are no preexisting conditions, with is true for most of them). They are also, right now, bearing much of the burden of our high unemployment.
If age rating is limited to 2x and health rating (along with preexisting conditions) banned, as proposed, the cost to insure the average young male will skyrocket. And, to some extent, that is part of the plan, since presumably part of the reason for this whole project is to expand the number of healthy people paying into the system so that those not yet eligible for Medicare, and those with health problems already, will not pay as much. Maybe.
But, then, they can’t afford the mandatory payments, so would opt out if possible. The finance committee bill would implement penalties low enough that it is far cheaper for them to opt out until they need care, than to pay to support the health care of the aging Baby Boomers. Unless, of course, they get their health care “insurance” subsidized, which means taking money from the aging Boomers to pay for the insurance for those who cannot afford it (because the Boomers are the ones with the taxable incomes). But what the government can’t get by taxing the Boomers will have to paid for by borrowing from the Chinese, who will ultimately expect to get paid back, by the young adults being subsidized in the first (no, second) place.
I can’t tell right now if it is better described as a shell game, musical chairs, or a Ponzi scheme, with all this money going round and round.
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October 25, 2009, 11:56 pmepluribus says:
I wrote:
theobromophile replies:
If you like to use words to mean their opposites–black to mean white, up to mean down, discrimination to mean nondiscrimination–feel free to do so. But don’t expect anybody else to take you seriously. What you and Abdul are arguing is that the pending healthcare proposal should discriminate but it doesn’t, and you don’t like that. So you accuse it of discrimination. Nonsense. Linguistic, legal, and moral.
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October 25, 2009, 11:56 pmDavid Schwartz says:
John Dunshee: The power to tax, with the power to criminalize failure to pay, is effectively already the power to do anything to or with a person’s wealth, provided one does it to everyone equally. There is no new power here.
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October 26, 2009, 12:02 amRicardo says:
Is your problem the principle that a citizen can be forced to buy something or is the problem that Congress rather than the states is doing the forcing? If it’s the former, states had the authority from beginning of the Republic to require all able-bodied men to own a musket for militia duty — the state did not always provide it. More recently, states have forced their citizens to get vaccinated against various infectious diseases so there is plenty of precedent for this.
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October 26, 2009, 12:06 amBruce Hayden says:
Of course it is a fallacy. Covering more people with lower deductibles, would, out of necessity, and in accordance with the laws of economics, result in higher demand and costs. They are really only looking at one way to bend the cost curve down (having never allowed malpractice reform to get to the table), and that is rationing. Rationing is inevitable with all of the legislative bills that have come out of committee. Yes, I am talking Sarah Palin’s Death Panels. Unelected bureaucrats determining, one way or another, who gets what health care, based on some formula or another.
That is the entire point behind the comparative effectiveness and/or best practices commissions, panels, etc. — to determine what health care gets funded and what gets denied. The cost curve will be forced down by denying treatments that would be paid for under the current system. Everything else is window dressing.
Why is this bad? For one thing, because inevitably the determination of what treatments get funded and what doesn’t will be at least partially political. I am not talking just through the legislature, but also by different interest groups lobbying the commissions, etc. making the decisions. It is already happening with Medicare, with intense lobbying going on by suppliers to get their product, service, test, etc. approved for funding. I had a client last week spend a couple days in D.C. doing just that. Also, it means that the more experimental something is, the less likely it is to get approved. But that is where the innovation comes from.
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October 26, 2009, 12:24 amRicardo says:
Then why is group health insurance (where there is no detailed medical underwriting and where pre-existing condition exclusions are banned) generally cheaper than equivalent individual health insurance? I see two possibilities:
1. Adverse selection — group plans do a much better job of risk pooling than individual plans
2. Bargaining power — Employers can bargain down the price of coverage while individuals cannot.
Whichever one is more important, it’s pretty clear the individual health insurance market isn’t a highly competitive market where everyone has perfect information. Mandated coverage makes individual health insurance more like group health insurance which is generally an improvement.
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October 26, 2009, 1:14 amtheobromophile says:
Epluribus: don’t be so sure of that. Linguistically, discrimination deals with making judgments based on something besides merit. It is not “discrimination” to charge high-risk people more than low-risk people; it’s common sense. (As I’ve stated before, we accept this with car insurance and do not complain when 16-year-olds pay more than married 40-year-olds with kids.) You are assuming that, for the purposes of health insurance, a 50-year-old is identical to a 20-year-old. The rest of us are just pointing out that it’s nonsense.
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October 26, 2009, 1:40 amtheobromophile says:
By the way, Epluribus, if you think that any distinction based upon age — regardless of whether or not age is actually a relevant criterion — is silly, I can keep throwing counterexamples at you all night long. Reductio ad absurdum, Part II (since you weren’t a fan of my comment about employers paying me the same amount that they would pay a 50-year-old):
Most public secondary schools only allow area residents to get an education there until age 21. Discrimination!
Car insurance companies charge Volvo-driving 40-year-olds less than they charge 17-year-olds with Mustangs. Discrimination! Stop subsidising the middle-aged commuters!
Denny’s will give a “senior citizen’s discount” to old people. You cannot let private companies charge some diners less when everyone else has to pay full price. This is a classic example of discrimination in the private sector which must be stopped by a government takeover of the pancake industry.
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October 26, 2009, 1:46 amyankee says:
Nobody is compelled to move from Kansas to California by the laws of nature. But the laws of nature do compel the the young and healthy to cease to be either. There is no evading death, and you do not die without poor health first (unless you are hit by a bus).
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October 26, 2009, 2:58 amGaryC says:
In employer-paid group health insurance plans, there is at least some screening against people with serious pre-existing health conditions that would have prevented them from gaining the education and work experience required to compete for the job. This assumes that more invidious, and possibly illegal, screening by the employer is not taking place.
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October 26, 2009, 3:20 amDavid Schwartz says:
Discrimination is, at its root, when you treat all members of a class substantially the same by virtue of their membership in that class despite their relevant individual differences. Discrimination is first and foremost the offense against an individual of failing to distinguish him from other members of his class. It is only secondarily an offense against the class, if the treatment of the class as a whole is worse than the treatment of other classes. Discrimination is to focus on irrelevant similarities and to ignore relevant differences.
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October 26, 2009, 3:32 amRicardo says:
Sure but insurers get to do even more rigorous screening for individual applicants. Why, in spite of this fact, is individual health insurance expensive compared to group health insurance?
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October 26, 2009, 3:56 amLaurie says:
Why isn’t Washington placing incentives out there for these CEO “zillionaires” to create a Health Ins Relief Foundation which could disperse money to the nation’s hospitals and let them divie up the money to the uninsured and indigent. Surely hospitals have the protocols in place to minimilize fraud. And individuals could make tax free donations to their local hospitals. Forget mandates altogether...don’t cap Wall Street earnings and don’t mandate everyone to have health ins. Plus who would care if a non American was paid for from these funds?
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October 26, 2009, 6:50 amepluribus says:
theobromophile says:
I never once said it was “silly.” Search this thread and show me where I said that. I did say:
If you want to disagree with me, disagree with what I have said, not what I didn’t say.
Black’s Law Dictionary 8th edition defines
discrimination as:
Charging the same health insurance premiums to all insured persons, regardless of age differences, does not qualify as discrimination. It is nondiscrimination.
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October 26, 2009, 7:19 amDavid Schwartz says:
epluribus: It most certainly is age discrimination, as it provides (on average) a lower return to younger folks than older folks. It is a subtle form of discrimination, but subtle forms are just as bad. An analogy would be having a minimum weight lifting requirement to get a particular job that requires no weight lifting. Does this treat men and women the same?
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October 26, 2009, 7:26 amepluribus says:
David, I can’t follow your argument. The argument was made here that charging the same premiums for young and old is discrimination. The key concept here is “the same.” Now, of course, some people will use the insurance more than others; some will get very sick and have lots of claims and some won’t. But I have yet to see a rational argument that charging “the same” premiums to young and old alike is discrimination. Simply saying it is doesn’t make it so. As I understand the argument advanced here, it is that the law should either require or permit insurance companies to discriminate between young and old insureds in the premiums they are charged. The proposed law in fact forbids that kind of discrimination. It is not discrimination to forbid discrimination. Black is not white. Up is not down. Nondiscrimination is not discrimination.
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October 26, 2009, 8:50 amDavid Schwartz says:
epluribus:
No, nondiscrimination is the essence of discrimination. How is treating all black people the same, despite relevant individual differences, not discrimination? The crux of discrimination is treating people, first and foremost, as members of a group. The crux of discrimination is the refusal to consider relevant individual traits. Discrimination is the substitution of group membership for relevant factors.
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October 26, 2009, 8:59 amRichard Johnston says:
For one thing group health insurance is illusory in that the insurance company can breach its contracts and commit fraud with impunity. If you can remove from your calculus the cost of living up to your contractual obligations then you can sell stuff cheaper, especially if what you are selling is that illusory promise.
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October 26, 2009, 9:22 amepluribus says:
David. Nonsense. You are making this up. You are saying in effect that discrimination is sometimes good, sometimes even necessary. Of course it is. The law is full of discrimination, much of it beneficial. But that does not make nondiscrimination discrimination. It does not mean that charging young and old equal health insurance premiums is discrimination. When you say “nondiscrimination is the essence of discrimination” you are playing with words to suit your purposes. I could say “black is the essence of white.” I could say it, but it wouldn’t make it so. You are saying, in effect, the word discrimination means whatever you want it to mean. Check the dictionary.
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October 26, 2009, 9:24 amAbdul Abulbul Amir says:
Because it was not.
Car insurance is required in most states. 18 year olds pay more than 50 year olds, based on actuarial costs. If a single rate were mandated for all regardless of age or driving record, then there would be price discrimination against safer/older drivers.
This would be discrimination because insurance premiums price risk. If you are being charged more than your risk justifies you are being discriminated against. Is that too hard to understand?
BTW, we both see treating individuals differently based on condition when it comes to medical treatment as non-disdriminatory. Further, it would be both absurd and discriminatory to subject everyone to Chemo and radiation treatment just because some cancer patients need that treatment.
However, you seem to feel that discriminatory pricing (higher priced that the risk entails) is completely appropriate for younger workers in order to provide benefits to a generally wealthier age group.
BTW, do you feel it would be price discrimination to charge a black borrower a higher interest rate (i.e. a risk premium) than his creditworthiness indicated?
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October 26, 2009, 9:26 amMark Buehner says:
I don’t know that this is true, but I know for a fact its true of the government.
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October 26, 2009, 9:35 amRichard Johnston says:
In fact judicial review of denied Social Security disability claim is far more meaningful than is judicial review of denied disability claims under an ERISA policy. I presume the same would be true for denied health insurance claims; indeed I distinctly recall that enforcement mechanisms in at least some of the current proposals expressly incorporate the SSDI enforcement mechanism. That said I am not an advocate for governmental care and do not support attempts to enact same. I am an advocate for allowing insurers to peddle their policies and then making them live up to their contractual obligations once they’ve done so.
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October 26, 2009, 9:42 amMark Buehner says:
Hard to argue with that.
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October 26, 2009, 9:45 amRichard Johnston says:
You would think so. And yet...
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October 26, 2009, 9:49 amDavid Chesler says:
You’re both being silly about discrimination.
Sometimes the law uses the phrase “invidious discrimination”.
My task at work is programming a machine that can discriminate bacteria in the air from pollen. Nothing invidious about that unless you’re a bioterrorist.
Does it comport with our sense of justice for young healthy people to pay substantially the same for both health insurance and first-dollar health care payment as old sickly people? That’s a judgement call. Will it reduce total costs? Debatable.
Group plans NOW have more bargaining power with insurers than individuals. It’s not clear that making it mandatory wouldn’t also embolden the insurers to say “Your [collective] demand is greater, so we are raising the price, since Hobson’s Choice is now no longer available to you.”
As for the inter-generational it-all-evens-out, that’s easy to say if you’re a 65-year-old boomer, who hasn’t paid into the system, telling the young folks they’ll get theirs by and by. It’s no different from the early investor in a Ponzi scheme saying the same to a late investor. (I’ve been paying into Social Security for 30 years, to pay for my grandparents’ and parents’ generations. I don’t trust that it will be there for me. I’m at about the mid-point, and I don’t believe free health care will be there for me either. If I were 25 years younger I certainly wouldn’t believe Social Security or health care would still be there for me — we can only bleed so much from the generations yet to come.)
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October 26, 2009, 10:03 amA.C. says:
Does ANYONE out there see the individual mandate as anything other than a transfer payment to the Baby Boomers? I mean, we knew they had the potential to bankrupt the federal government when they all turned 65. If we were honest in looking at our entitlements, that would be the problem we paid attention to. But instead we’re talking about a roundabout way for them to get a nose in the trough 10 years early.
If health care is 16% of the economy, then the average household should be spending 16% of its income on health care. There’s no way average people can spend 4%, or 0%, even if they prefer to spend the difference on something more amusing. (Consuming health care is never enjoyable, and sometimes it’s agonizing.) To think that there’s a trick, a way to subsidize the whole middle class on a permanent basis, is just wrong. We should concentrate on subsidizing the people who, because of low incomes or unusually bad health or both, have to spend a much higher percentage than average on health care.
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October 26, 2009, 10:08 amepluribus says:
Abdul, when you repeat yourself, you repeat your errors. All of the examples you give are in favor of discrimination, not against it. No, it is not discrimination to charge equal premiums to young and old alike. Maybe it’s not good policy (I happen to think it is good policy). Maybe it’s “unfair” (I happen to think it’s fair). Maybe it’s counterproductive (I happen to think it will help to produce an affordable healthcare system for all). But it’s not discrimination. It would be discrimination to charge old people higher premiums than young people. You might think that kind of discrimination is good. But it is still dscrimination. As long as you refuse to use the accepted definition of a word your argument is going to be nonsense.
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October 26, 2009, 10:09 amAbdul Abulbul Amir says:
You misunderstand. Similar to both life insurance, and auto insurance health insurance premiums should be acturaially based on age and sex related risk. Like life and auto those that present the same risk should pay the same premium.
Is it your contention that a building that is only accessable (treating everyone the same) by steps is nondiscriminatory to those that are wheelchair bound?
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October 26, 2009, 10:11 amepluribus says:
A.C. says:
Yes, several million people “out here” believe it will extend healthcare coverage to more Americans who need it and that it will spread the costs more equitably among a larger pool of insured persons. I am one of those several million.
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October 26, 2009, 10:13 amPintler says:
I hear what you’re saying, but it still seems a little odd to find a right based on expense. If food prices go way up, does food then become a right? Are housing prices high enough that a house is a right? I would also point out that these new rights are not only not enumerated, but were specifically not considered to be rights in colonial America — health care was very much a cash and carry business then.
Indeed, and that is a very good argument for providing emergency care first and talking about payment later. The current debate isn’t about that — it is about establishing a generalized right to health care regardless of ability to pay. To contrast the two approaches, you could imagine a charity system deciding that their limited resources are not best spent on liver transplants for indigent alcoholics, that the obese will have to eat less instead of getting bariatric surgery, etc. OTOH, if health care is a fundamental right, then we can’t really be denying those kinds of things to people just because they can’t pay for them.
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October 26, 2009, 10:15 amepluribus says:
No. Such a building would violate the Americans with Disabilities Act, an act of Congress mandating equal accessibility to buildings regardless of physical disabilities. The proposed healthcare legislation, if passed, will be an act of Congress mandating equal access to healthcare regardless of age. Next question.
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October 26, 2009, 10:20 amMark Buehner says:
It seems to me (and by that I mean, I have no idea how you can conclude otherwise) that while the bills under consideration will extend health insurance to some of the uninsured (but not all by everyone’s admission), it will certainly create a large incentive for the healthy to get out of the pool banking on saving their premiums now and the insurance companies being required to take them when they get ill. Do we end up with more or less people uninsured?
And clearly adding sick people and subtracting healthy people from the insurance pools will drive up costs.
Is anybody arguing otherwise?
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October 26, 2009, 10:46 amepluribus says:
Mark, I think your argument is that the tax penalties for failure to buy health insurance aren’t high enough to discourage those who want to wait until they get sick to enroll. The argument was made above, I think. The answer should simply be to make the tax penalties high enough to discourage those who think they can save money by not enrolling. Those people will, in effect, be freeloading on the system until they get sick. Failing to pay in years when they are well, but demanding insurance when they get sick.
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October 26, 2009, 11:08 amMark Buehner says:
True– but the arguments we are seeing now are that the penalties are too high, or alternately that the subsidies aren’t high enough. We’re trying to beat a square peg into a round hole. Either you truly force people to buy insurance (essentially a hefty tax on many middle class young people), or you subsidize well into the middle class. This would be exorbitantly expensive, as well as creating huge perverse incentives (that big raise could end up costing you more money by cutting your health insurance subsidy).
In other words– we are on the wrong track here. Politically, a substantial penalty for not having insurance is a non-starter even though this is precisely the behavior everyone agrees is costly to the system. Everyone decries the freeriders but nobody has the guts to punish them if they don’t play ball.
If you really want to do this, the only way is to automatically enroll everyone in some sort of social security type regiment so you can garner their wages directly if they aren’t insured. Then you remove tax incentives from the employer end and offer tax credits as the subsidy. The logical end of this type of plan is to require or have the government offer a basic level of insurance for everyone, with private insurance legal and available for bells and whistle plans (you don’t want to wait in line). The political problem with this plan is the left will certainly insist that the ‘basic plan’ ends up being anything but basic. This is another point of cognitive dissonance where Americans (particularly progressives) want everyone to have everything equally but also want the ability to buy what they want when they want it. You can’t reconcile those two urges.
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October 26, 2009, 11:33 ambendjamin says:
When government perfects the legal theory that enables it to force every citizen to purchase health insurance, that same theory will also enable government to force citizens to buy other things as well. No new power goes unexpanded. Those other things might be: to purchase a subscription to a daily newspaper (to ensure the MSM has a sufficient customer base), or to even purchase a firearm.
The Left will be so conflicted when they realize the monster they have created.
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October 26, 2009, 12:12 pmtheobromophile says:
Epluribus: you still refuse to address my analogy to salary. By your definition, employers discriminate against young people when they pay them less than old people.
As I said, I’ll pay the same for health care when I earn the same amount of money. You ignore this. Why?
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October 26, 2009, 3:17 pmAllan Walstad says:
From Cowen’s piece:
Cowen is invoking the same intractable incentives problem that was pointed out 25 years ago by Charles Murray in his book Losing Ground, with regard to various government subsidies to help people or change their behavior. Cowen also points out, as Murray did long ago and as economists are always demonstrating, the tendency of such programs ultimately to harm the very folks they are supposed to help.
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October 26, 2009, 3:19 pmepluribus says:
theobromophile says:
I’m not a witness here, and I have no obligation to answer your questions. I frankly didn’t get to this little gem because your earlier points were so lame. Can you understand that there is lots of discrimination in life, and lots of discrimination in the law? Some is fine. Some violates the Constitution. Some runs afoul of statutes. If employers discriminate against young people by paying them less for equal work, find a statute or constitutional provision that is violated. If not, accept it. If you will only comply with the healthcare law if all examples of unequal treatment in the business place are eradicated, you are either a fool or you are inordinately fond paying tax penalties.
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October 26, 2009, 3:30 pmepluribus says:
Mark, if the government can’t mandate the purchase of private healthcare insurance funded with private premiums paid to private insurance companies, the alternative will be government-provided healthcare insurance paid for by taxes. I recognize that government-provided healthcare insurance is politically impossible in the present environment, and I also believe it would be fraught with many more problems than government-mandated purchase of private healthcare insurance. I want to see everybody (or nearly everybody) covered by healthcare insurance and costs reduced, and the proposal presently on the table seems to me to be calculated to do that. Of course, it’s not perfect, but it’s a whole lot better than what we have now, and the perfect should never be the enemy of the good.
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October 26, 2009, 3:40 pmJeremy says:
According to your provided definition, Community Rating is in fact discrimination. The actuarial value of a health insurance policy increases with age. A law that forces all people of all ages to pay the same price for a product that increases in value with age confers a privilege to older people (a discount on health insurance relative to value). Thus the law (Community Rating) confers a privilege (health insurance discount) on a certain class (older people) because of age; it is discriminatory by definition.
J
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October 26, 2009, 3:47 pmMark Buehner says:
“Mark, if the government can’t mandate the purchase of private healthcare insurance funded with private premiums paid to private insurance companies, the alternative will be government-provided healthcare insurance paid for by taxes.”
Probably. Again– this is a political problem, there is nothing fundamentally impossible about the former.
“I recognize that government-provided healthcare insurance is politically impossible in the present environment, and I also believe it would be fraught with many more problems than government-mandated purchase of private healthcare insurance.”
Agreed, but aren’t we trying to mandate being a little bit pregnant? I think THAT is fraught with even more unintended consequences, and quite likely to get us the worst of both worlds. The problem appears to be that American want universal coverage in theory, but they don’t want anything to do with the remedies that make that possible and affordable. Until that changes it seems we’re in for a lot of magical thinking by our political class that could very well create dire economic consequences. Its especially unnerving that they don’t seem to know what they are doing.
“I want to see everybody (or nearly everybody) covered by healthcare insurance and costs reduced, and the proposal presently on the table seems to me to be calculated to do that. ”
Now thats entirely untrue. None of the current proposals cover everyone (or even close to it), and none of them reduce costs– at best they shift them which is unpredictable.
“Of course, it’s not perfect, but it’s a whole lot better than what we have now, and the perfect should never be the enemy of the good.”
But what if this isn’t good in any way shape or form? What if it in fact exacerbates all of our current problems and creates new ones? Don’t mistake the appearance of motion for progress! A goal is not a means, and nobody seems to even believe these plans will work dramatically well. There does seem to be some ‘hope by some miraculous force’ this plan will work. There is a cult cargo mentality that we have– ie, because Europeans have universal coverage and lower costs, we can achieve lower costs by crowbarring in universal coverage by any means necessary. It does not follow. We can all eat croissant and drink bordeaux, but that doesn’t make us French.
In a sense, Hillary knew something. Maybe you CANT piecemeal a change like this. There are too many fundamentally connected pieces that everyone is terrified to touch for political reasons. And hence we get this free lunch fantasy.
In the end I DONT see how the bill as currently written wont bankrupt the insurance companies purely due to the preexisting condition problem. Thats not the kind of minor flaw you can live with or fix later. Its the kind of flaw that you look back on and say ‘what the hell were we thinking?’
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October 26, 2009, 4:56 pmepluribus says:
Jeremy, do you believe that Medicare is discrimination because it exacts a tax on all workers but confers benefits only on those who are disabled or over sixty-five? Do you believe that Social Security is discrimination because it exacts a tax on all workers but confers benefits only on the disabled and the aged? Your argument amounts to just another assertion that healthcare insurance premiums should discriminate on the basis of age. It overlooks the fact that young people will evetually become old people, and when they do their premiums won’t be raised simply because of their age. All their lives long they will pay equal premiums regardless of age. Age will no longer be a factor is charging premiums. All will benefit on an equal basis from the requirement that different age groups will not be charged unequal premiums.
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October 26, 2009, 5:02 pmtheobromophile says:
Epluribus: um... this is supposed to be an intellectual board. If you choose to deliberately ignore my points, fine, but do not then pretend that I am not putting forth a rebuttal to your arguments.
My point is incredibly simple: paying older people a higher salary is no more justified than charging young people less for health insurance.
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October 26, 2009, 5:09 pmJeremy says:
Medicare satisfies the definition of discrimination you presented.
Social Security satisfies the definition of discrimination you presented.
Whether these policies are a “good idea” is independent from the fact that they satisfy the definition of discrimination you presented. “Senior pricing” in restaurants and “Ladies nights” at bars / clubs are also discrimination ... but we still consider them a good idea.
Not all young people become old people, plenty die well before that. Thus, there are plenty of people who will not “benefit on an equal basis”. What exactly is the benefit from “same price for all” in health insurance premiums? If it costs $X to provide health services for the entire insured pool, what is the “benefit” to charging everyone $Y vs. charging some $Z and some $A (A < Y < Z)?
J
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October 26, 2009, 5:51 pmDan Weber says:
There’s been a whole lot of bull in this comment thread, and I could only take so much before I skipped to the end, so sorry if I repeat stuff:
Two points:
1. You can do mandates on the young and still have them pay less: make age the sole determiner of your risk profile. All the 20-somethings would pay a fraction of what the 70-somethings pay. Their insurance expenses would rise as their ages rise, but the amount that their birthyear receives in medical spending will also rise.
2. I really wish that we were trying to do cost-control. Time was when the conservatives in America worried about making sure the government was spending money efficiently. But if you even think of bringing this up, the Republicans start shitting bricks about death panels. (Not that the Democrats wouldn’t do the exact same thing.)
A pox on all their houses.
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October 26, 2009, 6:00 pmBlake says:
The “they’ll get it back when they’re older” argument isn’t persuasive in my view.
eplubrius, I don’t why should we prefer that an individual’s health insurance premiums remain the same for every year of his or her life. You hinted that social security is nondiscriminatory but that isn’t exactly the kind of model we want to follow in a healthcare plan, is it? Many young people in my generation are highly skeptical they’ll ever see a dime from social security, for example, and they might be right. Similarly, it’s not clear that if a healthy 25 year old subsidizes others’ care by paying much more in premiums than his own coverage would ordinarily cost, he’ll assuredly get a return on that investment later on in life. This seems especially true given that developments in health services are going to make more treatments possible (which will cost more $ in the future) and folks will live longer and longer (which will in turn be more expensive). Thoughts?
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October 26, 2009, 6:35 pmepluribus says:
Jeremy, I don’t think you don’t understand the original argument. It was stated by Abdul above that charging people the same premiums even though they belong to different age groups is “unfair discrimination.” That was his point, not mine. He/she referred to the premiums charged, not the benefits conferred. Now you have shifted the argument to the amount of healthcare consumed, based on age. Actually, an insurance policy under the proposed law will confer the same healthcare benefits on all insureds, regardless of age. They will receive healthcare when they need it, whether they are young or old or somewhere in between. The policy will not give more healthcare to people based on their age. Some people will use more of the benefits, of course, and some will use less. On average, old people will use more than young people. Why? Simply because old people tend to have more illnesses than young people, on average. But that is only an average. Young people with prexisting conditions will, on average, use more healthcare than old people without preexisting conditions. Take, for example, a diabetic. Many young people are diabetics. They will, on average, use more healthcare than old people who are not diabetics. Take, for another example, illegal drug users, or alcoholics, who are young. They will on average, use more healthcare than old people who are not illegal drug users or alcoholics. Some minors will demand a lot of medical care. Some octogenarians will demand practically none. We are only talking about averages. If you want to charge premiums based on age, sex, weight, lifestyles, preexisting conditions, or other factors that are variable over the population, then there will be an endless array of differences. But it is fallacious to say that because different people will use more or less healthcare than others, it is discreiminatory not to charge them different premiums. When all people are charged equal premiums regardless of age, the premium structure is nondiscriminatory as to age. And remember it is the premium structure that was brought up here, not by me, but by Abdul.
Yes, I heard something about that, Jeremy, but thanks for reminding me. I believe I also heard that under the proposed law dead people won’t have to pay any premiums at all, at least not after they are dead. Do you regard that as discrimination?
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October 26, 2009, 7:16 pmJohn Dunshee says:
First, we are not talking about the individual States, we are talking about the Federal Government.
Secondly, the State (again the individual States, not the Feds) might require such things. I can’t think of what required vaccinations you are talking about. But if there is such a thing I’ll bet that refusal would not result in fines or criminal charges. Most likely it would just be that I would not be allowed to participate in some State program or receive a benefit.
The militia thing? I seriously doubt that it was ever put to the test. What was the penalty for not complying?
No, where does Congress get the power to force us to purchase something? Anything?
If they can force us to buy health insurance can they also force us to buy certain fruits and vegetables? Could they outlaw Capt Crunch and make Wheaties the State cereal and require us to buy it?
Also, what do you think is going to happen when Congress (which is made up of 535 egomanical little tin gods) discovers that they have this power. And you thought earmarks were bad.
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October 26, 2009, 10:41 pmDavid Schwartz says:
That’s the correct argument, not the argument that treating people the same (despite relevant differences) is not discrimination.
In fact, a health person gets back less in expected short-term payments, but he gets back more in the expected future value of the system to him. An older person gets back more in expected short-term payments, but less in expected long-term payments (since he has already gotten some of them and has less of his lifespan left).
In other words, the rebuttal argument is not that to treat people the same is not discrimination but to argue that a relevant difference (difference in expected lifespans, difference in amount of previous benefits extracted from the system, and so on) justifies the, admittedly, disparate short-term treatment.
I buy my older daughter the car she needs but not my younger son the car he does not need. Is this “same” treatment (each gets what they need) discrimination? No, because my son has the future expectation of a car when he needs one and my daughter does not. So this “similar treatment despite relevant differences” is not discrimination because of other counterbalancing relevant differences.
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October 26, 2009, 10:48 pmJeremy says:
I understand just fine. Community Rating, charging people the same premiums despite different risk profiles (age, etc.), is discriminatory for the reasons I stated previously. I am not discussing health care services consumed. Strictly from an insurance perspective old people are more expensive to insure, period. So by community rating you are extending a benefit of premiums below actuarial cost to old people (or other higher risk groups); that meets the definition of discrimination you presented.
That’s what we have in the existing system. Everyone who buys the same policy with the same coverage receives the same benefits. The proposed law does nothing to alter this.
Imagine that, tailoring health insurance to the individual customer so they can get the coverage they want at a price they are willing to pay. To bad the proposed law goes in the completely opposite direction towards “one size fits all”.
Again, false. The definition of discrimination you provided clearly shows that the premium discount benefit that old people (or other high risk groups) would receive under community rating is discriminatory. The proposed law confers a benefit of discounts on premiums (relative to actuarial value) to old people.
You also failed to answer my previous question. What is the benefit of charging people the same premiums despite their varying risk profiles?
You proposed looking at the benefits over the expected lifetime of a person. When they are young they pay higher premiums (relative to actuarial value) for the benefit of paying the same premium later (now lower relative to actuarial value). It should be obvious that not everyone who is young will be able to reap the benefit of paying that same premium “down the road” because they won’t make it that far. I never claimed this was discriminatory, but it clearly does not “benefit all on an equal basis” as you claimed. I ask again, what is the benefit to a young person who pays higher premiums (relative to actuarial value) but doesn’t make it to old age to enjoy the “locked in” premiums (now lower relative to actuarial value)?
J
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October 27, 2009, 12:24 amepluribus says:
Jeremy:
Yes, and who does the tailoring? The insurance companies, of course. And what is the object of their tailoring? Not to extend coverage to more people who need health insurance coverage, of course, but to maximize their profits by collecting premiums from those who are unlikely to need much in the way of healthcare and excluding those who are likely to need it. Unequal pricing is a great tool to achieve this kind of exclusion.
Premiums geared to age would authorize insurance companies to cherry pick their insureds, as they do now. The premiums in many instances would not only be more than the insureds are “willing to pay,” they would be more than they are able to pay. The premiums charged to some would be so high they couldn’t afford to pay them even if they wanted to. A person cannot be required to purchase a policy the person can’t afford. Requiring an older person to pay more than a younger person for the same insurance coverage is age discrimination. Providing that all will pay the same premiums for the same coverage regardless of age is not discrimination.
The benefit is in making health insurance available to everyone (or almost everyone). Now millions are excluded from coverage because they can’t afford it. There are various reasons they can’t afford it. Your proposal would add age to the reasons millions can’t afford health insurance, increasing the premium costs for older Americans. The current proposal would make premiums for equal coverage equal for all, regardless of age. To make the costs higher for some simply because they are older would be age discrimination.
The idea of insurance is to pool the risks. Spreading the risks among different age groups without disparities in premiums will enlarge the pool and achieve this goal more equitably than a premium system geared to age.
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October 27, 2009, 7:16 amMark Buehner says:
1. You can do mandates on the young and still have them pay less: make age the sole determiner of your risk profile. All the 20-somethings would pay a fraction of what the 70-somethings pay. Their insurance expenses would rise as their ages rise, but the amount that their birthyear receives in medical spending will also rise.
If you did that, older people’s insurance premiums would increase by an order of magnitude. Nobody is willing to accept that.
2. I really wish that we were trying to do cost-control. Time was when the conservatives in America worried about making sure the government was spending money efficiently. B
What do cost-controls and efficiency have to do with each other? I can say i’m only going to pay a quarter for a hamburger, but i’m just going to end up with a crappy hamburger or no lunch. Thats not efficiency. The problem here is everybody wants to control costs, but nobody knows how to do it. Democrats have some vague notion that somehow insuring more people (on the government dime) will somehow automatically lower costs, which in reality will mean price controls (ala medicare) and exploding deficits. Republicans propose modest measures to encourage competition and relieve regulation (interstate insurance and tort reform) which will do something to lower cost inflation but wont insure very many more people. The fundamental problem is that Americans want high tech, cutting edge medicine on demand, and that’s expensive!
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October 27, 2009, 10:35 amDan Weber says:
What in the world are you talking about? Right now in the private market age is used all the time. Even employer-provided plans that don’t look at specific individuals often charge based on age.
I’m not saying “get rid of Medicare.” If we are going to mandate that adults get coverage before the age of 65, then you can use age as the only determinant. The healthy 21 year old will still subsidize the unhealthy 21 year old, but there are so few of the latter that the former will hardly notice.
It really isn’t a mystery. As Tyler Cowen said, look at other countries. In Britain, NHS decides only to fund treatments that cost less than (very roughly, and the specific number doesn’t matter for this discussion) £30,000 to extend someone’s life by a year. Given a fixed number of health care resources, such a metric is a great way to get the maximum benefit.
There are both public and private systems in the United States that do similar things, deciding what will be covered based on science and evidence. It’s the minority, though. Most funding decisions right now happen either via your political power (if you are in a government plan) or your market power (if you are in a private plan). They have nothing to do with good medicine.
Americans who want the latest and greatest should pay extra for it. Those of us who want normal evidence-based medicine should be able to pay for just that. It’s not one-size-fits-all.
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October 27, 2009, 11:12 amMark Buehner says:
What in the world are you talking about? Right now in the private market age is used all the time. Even employer-provided plans that don’t look at specific individuals often charge based on age.
They charge the pool based on average age. How can you look at our current insurance regime without the context of the pool?
I’m not saying “get rid of Medicare.” If we are going to mandate that adults get coverage before the age of 65, then you can use age as the only determinant. The healthy 21 year old will still subsidize the unhealthy 21 year old, but there are so few of the latter that the former will hardly notice.
Right, and the 60 year olds will be paying 30,000$ a year in health insurance. That isn’t going to happen.
It really isn’t a mystery. As Tyler Cowen said, look at other countries. In Britain, NHS decides only to fund treatments that cost less than (very roughly, and the specific number doesn’t matter for this discussion) £30,000 to extend someone’s life by a year. Given a fixed number of health care resources, such a metric is a great way to get the maximum benefit.
Great unless its your life theyre putting a dollar sign on. Again, Americans won’t stand for this. Its a political decision.
Americans who want the latest and greatest should pay extra for it. Those of us who want normal evidence-based medicine should be able to pay for just that. It’s not one-size-fits-all.
I agree. The statists pushing the latest plans do not.
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October 27, 2009, 11:50 amDan Weber says:
Right, and the 60 year olds will be paying 30,000$ a year in health insurance. That isn’t going to happen.
Who is subsidizing them right now? Or are 60 year olds paying $30,000 a year in the private market right now?
As a political matter, it’s quite likely that the older workers will vote that the young people who don’t vote should give them more money. But it’s not good policy.
Great unless its your life theyre putting a dollar sign on. Again, Americans won’t stand for this. Its a political decision.
Anyone in any kind of health care pool (i.e., 99.9% of the population) has decisions made for them already. There is something that could save you that isn’t being covered.
I do think lots of people will be just as stupid as that, saying “I don’t want a value placed on my life!” I think those stupid people should go buy expensive plans. Rational people who know “hey, they are going to be basing the yes/no decision on something, it might as well be something based in science” need to be able to get out.
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October 27, 2009, 12:57 pmMark Buehner says:
Who is subsidizing them right now? Or are 60 year olds paying $30,000 a year in the private market right now?
Everyone else! What part of ‘Pool’ aren’t you getting?
Anyone in any kind of health care pool (i.e., 99.9% of the population) has decisions made for them already. There is something that could save you that isn’t being covered.
Sadly not only is that not always true, its probably not generally true. Most people aren’t routinely denied lifesaving procedures because of the expense. That is a myth. It happens, but much more commonly people are given reems of desperate, life saving procedures every single day, no matter their prognosis. This is one of the reason (a huge one) our healthcare system is expensive. Maybe its worth paying for.
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October 27, 2009, 2:08 pmDan Weber says:
The part where I say “private market,” where individuals shop for insurance. As distinct from the employer market.
How much does it cost a 60 year old to get an individual plan, right now?
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October 27, 2009, 3:09 pmMark Buehner says:
I just checked ehealthinsurance.com
For a healthy 23 year old non smoking male, you can get a 250$ deductible with 20% copay and prescriptions with a 5mil lifetime limit for $2316 a year
For a healthy 63 year old non smoking male you can get the same plan for 10,620$ a year. I’m not sure how many 60 year olds are running around without some sort of health history, so your mileage is certainly going to very. But nominally its already almost 5 times as expensive.
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October 27, 2009, 5:42 pmMark Buehner says:
Note– some states like New York limit or outlaw using age to set premiums. What this (of course) does is raise the premiums for younger people, which makes them less likely to buy insurance. Ta-dah.
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October 27, 2009, 5:50 pmJeremy says:
And yet, this drive to maximize profits works just fine for every other form of insurance where a vast majority of people are able to purchase the insurance they need or want. Aside from people placing a larger value on health (thus they should be willing to pay more for it), there need not be any difference between health insurance and every other form of insurance. If insurers are allowed to price according to risk they will be happy to cover high risk people who need insurance (at a higher premium). They maximize their profits by insuring as many people as possible and charging them premiums that reflect their risk. If insurers must charge everyone the same premium then they will seek to exclude those who are high risk to keep the premium down (attempting to mitigate adverse selection). It is discriminatory laws such as community rating that lead insurers to “cherry pick” healthy customers and/or exacerbate adverse selection.
It is not. You seem to not understand some fundamentals of insurance. Namely, insurance premiums are directly proportional to risk, period. High risk, high premium. The value of a policy with specific benefits is higher for an older person than a younger person. This is a simple fact you seem to be ignoring. If age is a risk factor, as it is in health insurance, then this is not discrimination. As I have pointed out it is discriminatory to discount the cost of risk for some and increase it for others.
Currently, high risk people pay $Z, low risk people pay $X; some high risk people can’t afford $Z, some low risk people can’t afford $X. By requiring everyone to pay $Y (Z > Y > X), then there will be low risk people who can’t afford the new price $Y but could afford $X. How is making insurance affordable for some but making it unaffordable for others a benefit? Community rating simply shifts the costs from high risk people to low risk people. This discriminates against low risk people, as high risk people receive a discount on their premiums. This is why community rating is always lumped together with a mandate, to ensure that low risk people can’t avoid the cost shifting onto them.
Read that sentence again slowly. Now replace ‘older’ with ‘younger’. That is what community rating does. It increases the premiums for younger people above the value of the insurance policy. It decreases the premiums for older people below the value of the insurance policy. This is clearly a benefit to older people at the expense of younger people; this is discriminatory.
Almost, the idea of insurance is to pool unpredictable risks. Pooling predictable risks is cost shifting, not insurance.
While I’ll admit that having to add the explanation of “relative to actuarial value” is clumsy, it is only “Newspeak” to people who don’t understand how insurance works.
This is discriminatory against the person buying the six-cylinder economy car. The value of the economy car is $10k, the value of the luxury car is $50k. You want the salesman to sell both for $30k. The purchasers of the luxury car receive a discount against the value of the car, the purchasers of the economy car do not (they in fact pay more than the car is worth). This is obviously discriminatory. If you extended a discount on certain items to white people while charging black people more than some items are worth, this is obviously discriminatory. So why is it that you consider giving old people a discount, while charging young people more than the insurance is worth, to be non-discriminatory?
Charging the same price (community rating premiums) does not change the value of the car (actuarial value of the insurance policy, which equals risk). I wouldn’t respond ‘the luxury car is cheaper’, I’d respond ‘the purchasers of the luxury car are getting a better deal while the purchasers of the economy car are getting screwed’.
It should also be obvious from your example that community rating by itself does nothing to enlarge the pool of insured. The car salesman’s volume will be the same, he loses out on sales of the economy car but gains sales on the luxury car. However, community rating does exacerbate adverse selection; no one would buy an economy car. Again this is why community rating is always paired with an individual mandate. Tyler Cowen’s article was pointing out that the people who had trouble affording the $10k for a car in the first place are really going to be screwed trying to come up with the $30k.
Bryan Caplan has pointed out that mandates in auto insurance are to correct for advantageous selection. The mandate ensures the worst drivers buy insurance, the good drivers already had it. When people talk about a health insurance mandate they assume that new entrants will be low risk (thus “reducing costs for all”), but at the same time complain that high-risk people are priced out of the market. These two opinions are mutually exclusive.
Community Rating, individual mandates, and insurance content mandates, have a myriad of unintended consequences that require much more action to remedy or minimize. It far superior to skip the distorting regulations.
J
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October 27, 2009, 7:38 pmDavid Chesler says:
If you extended a discount on certain items to white people while charging black people more than some items are worth, this is obviously discriminatory.
Presumably it’s the same product, worth the same to all buyers. If the product is hair relaxer it’s worth a lot more to black people (who can get use out of it) than to white people. So charging the SAME price is discrimination, isn’t it?
Nothing wrong per se with discrimination. My employer makes a product that discriminates between aerosol bioagents and dust. My employer also discriminates on the basis of ability in its hiring.
How about a restaurant that charges more if you eat more? Is that discriminating? Is that a bad thing?
The issue with insurance is the young person and the old person are not buying the same thing. Suppose there are two lotteries. Both offer a thousand dollar prize. One sells ten thousand tickets, the other sells two thousand tickets. Is there a problem forcing young people to buy from one pool and old people to buy from the other pool? After all most people will get nothing for their ticket. The maximum payment is the same. Does it matter if the price is the same? Or if the price for the tickets from the smaller pool is no more than twice the cost of tickets from the larger pool?
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October 27, 2009, 8:32 pmepluribus says:
Jeremy, I have enjoyed reading your posts, even though I strongly disagree with them.
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October 28, 2009, 10:52 amDan Weber says:
Okay, so it’s already 5 times as expensive. So how would a law that says “1. all citizens must have health insurance (purchasing it privately if they don’t already get it through the government or an employer), 2. health insurers must take all customers 3. they may only base what they charge on the age” drive that up by “an order of magnitude”?
In the individual health insurance market, the old are already paying more because they are riskier. Saying “charge prices based only on health” is very close to what we have now.
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October 29, 2009, 1:23 pm