An interesting article in the Chronicle of Higher Education (I’m not sure if it is subscriber-only) raises some excellent points about the health-reform legislation that hadn’t really occurred to me previously. One point that I should have thought of myself but didn’t occur to me is the peculiar incentives created by the mandate to cover preexisting conditions:
I guess one could say that the best thing about the current bill is that it allows individuals and families to opt out of insurance coverage until they need it. Since insurance companies would not be allowed to deny coverage based on preexisting conditions, but individuals and families will be penalized only at the rate of only 2.5 percent of their annual income if they do not have insurance, it makes sense for families earning under around $500,000 per year to forego insurance coverage until they get sick. Clearly insurance coverage costs most middle-class families far more that 2.5 percent of their annual income, so the current bill serves as a disincentive to purchase insurance. Bravo, Mr. President!
I should note that her opening and closing sentences in this passage although seemingly facetious are not entirely so, in that elsewhere in the article she discusses how the current version of health insurance encourages overuse of the medical system, overuse of the most expensive aspects of the medical system particularly, and that this high usage level provides no demonstrable increase in health.
A review of data for people over 65, all of whom have health insurance, shows that when they have access to more care, they endure more medical visits and procedures, which costs more money, but does not necessarily lead to improved outcomes. The folks at Dartmouth have been studying this for years, and their data shows that having access to more specialists and medical facilities increases Medicare costs, but does not improve outcomes. I’d encourage you to read Shannon Brownlee’s insightful book, Overtreated: Why Too Much Medical Treatment is Making us Sicker and Poorer, to understand how overtreatment is costing us more money, but not improving health-care outcomes.
She also calls for tort reform for the medical malpractice system and reforms to align patient and doctor incentives more closely to making more cost-effective choice treatments.
zuch says:
Prof. Zywicki:
This is true, and a significant problem. But it is mainly the Republicans that are wholly opposed to (amongst other things) any mandate, compulsory insurance, or tax for non-participation, to avoid such “free rider” problems.
To be sure, I’m somewhat surprised that this particular issue is new to you. It’s been discussed a fair bit in more rational health care debate.
Cheers,
March 10, 2010, 11:09 amLior says:
It is strange to call a product “insurance” when it is intended to be purchased only after the covered event has taken place.
March 10, 2010, 11:10 amsteve says:
Basic fallacy: families earning under $500,000 won’t drop coverage until they get sick… because it will cost them a bunch of money to do so. (1) employers usually don’t give raises to those not taking coverage, so employees will pay truly out of pocket.
March 10, 2010, 11:11 am2) costs of routine care that they pay out of pocket will go up as they lose the benefits of the artificially (?) low costs negotiated by their health insurance provider.
Arthur Kirkland says:
It’s a little late in the game for a former Bush administration official to decide she wants to be part of health care reform — if, indeed, that is what she wants.
March 10, 2010, 11:12 amBig Green says:
Yes, but the real question vexing your readership is how will the Dartmouth elections reshape the healthcare debate?
March 10, 2010, 11:13 amzuch says:
Prof. Zywicki:
[I]t makes sense for families earning under around $500,000 per year to forego insurance coverage until they get sick.
Perhaps. I guess it also pays for you to forego buying a fire extinguisher for your house until such time as you actually need it. I hear rumour that there’s some Home Depots that are open 24X7.
And do feel free to avoid preventive medicine for your children. I’m quite sure they’ll make it through any untoward incidents OK.
Cheers,
March 10, 2010, 11:13 amzuch says:
Prof. Zywicki:
OMG! Death Panels!!!
Cheers,
March 10, 2010, 11:18 amPLR says:
Lots of people conflate the insurance function with the financial intermediary function.
Politics, you know.
March 10, 2010, 11:27 amruuffles says:
Lipstick on a pig indeed.
March 10, 2010, 11:29 amRichard Atwood says:
The Wall Street Journal had a piece about a year ago making the same point about the Massachusetts plan. The political problem is that the politicians never want to set the penalty high enough to force compliance. That would make it obvious that they are penalizing the very people they claim to be “giving” insurance coverage.
March 10, 2010, 11:29 amneurodoc says:
Yes, strange, but not unprecedented. After the MGM Grand fire in Las Vegas years ago, the hotel was able to pay an insurance company to assume responsibility for however much would have to be paid out to settle claims later. The insurance company thought it was a good bet because they would have the premium dollars to invest until such time as they had to pay claims. But it turned out to be a losing proposition for the insurance company because they couldn’t put off paying those claims for as long as they had expected to and because the dollar amount of the claims proved to be higher than what they had counted on.
March 10, 2010, 11:30 amnone says:
am i confused abt tort reform or something? i thought it was a total red herring. i mean, 30-some-odd states already have damage caps, and all the empirical research shows no bending of cost curve or decreasing of insurance premiums (for the doctors or the patients).
March 10, 2010, 11:39 amDave N. says:
We can always expect Arthur Kirkland to spout the Democratic talking points: Republicans don’t want health care reform. Period.
The reality, of course, is that Democrats didn’t want to work with Republicans on health care reform and couldn’t even keep Olympia Snowe on board because of their high handed tactics.
But thanks, Arthur, we now have the DNC talking points on this thread.
March 10, 2010, 11:42 amneurodoc says:
I wouldn’t be as categoric as you, asserting that they “won’t drop coverage until they get sick.” For some it may make economic sense to go uncovered until such time as there is a need, while for others it won’t. I don’t know for what % it would make sense and what % it wouldn’t. (And if you are uninsured and get clobbered in an auto accident, can you get coverage before the anesthesiologist puts you under and the trauma team gets to work trying to save your life?)
Some employers might return some of their savings on insurance premiums to employees who chose to go bare, and there are people who don’t get their insurance through work. Your second point about discounts is indisputable, though, and significant. It is shocking what hospitals, doctors, labs, imaging centers, etc. accept as payment in full from insurance carriers, while demanding 100% of their hyperinflated charges to the uninsured. Sometimes I am not as appreciative of how much my insurors lays out on my behalf as I am of what costs I have been spared by those big (sometimes huge) discounts I get because I am insured. I think there is something very wrong in this, and part of it is what it says about the relative bargaining power of the respective players – insurance companies, health care providers, drug companies, and the individual “customer”/patient.
March 10, 2010, 11:43 amneurodoc says:
How many people consider themselves informed at present as to the details of this legislation and the implications should it pass? I certainly am not, and if quized on what is in it, I imagine I would score higher than most Americans, especially if the test was a multiple choice one. More troubling, how many legislators have an
in-depth knowledge and understanding of what is in it?
I realize that it is fairly common for there to be “favors” tucked away out of plain sight in legislation and for budget bills to contain so many details that no one will be aware of all that is in them. But has there ever been legislation with such huge economic and social consequences to be voted on when few knew very much about what they were voting on?
March 10, 2010, 11:53 amBlue Neponset says:
This issue is easily fixed. Create a waiting period before coverage kicks in. If you don’t currently have insurance you will have to wait six to nine months before any pre-existing condition is covered by a new policy. This will make people think twice about not buying insurance.
March 10, 2010, 11:55 amjab says:
I’m glad we agree that the penalty should be raised to 10% of income.
March 10, 2010, 11:57 amArthur Kirkland says:
Why pay any attention to me, when you can rely on an obscure Republican political appointee with no discernible background in health care to provide belated insight and hackneyed recommendations concerning a complex legislative issue that Republicans ignored for a decade before turning it into a “just say no” political battle?
March 10, 2010, 12:00 pmCognitive Dissonance says:
Here is a hypothesis:
Republicans don’t want healthcare “reform.” They want the status quo. They want the status quo because the insurance industry makes huge $$$ according to the status quo, and the Republicans are backed heavily by the players in the insurance industry.
Republicans may cite other reasons to opposed changes in healthcare proposed by the Dems (philosophical opposition, “Death Panels!?!?”, etc.) but this is their central motivation.
How true is this hypothesis?
I would be that it’s true for at least a few Republican Congresscritters.
March 10, 2010, 12:04 pm(It may also be true for those Dem Congresscritters that are opposing the healthcare “reform” legislation, as well.)
Elliot says:
I have found providers quite willing to give the lower costs associated with insurance coverage when cash payment is made up front.
March 10, 2010, 12:05 pmjab says:
Blue,
That is pretty much the status quo now… most pre-existing condition requirements expire in 18 months anyway; that is, when they cover you at all. But that is a fair compromise that I’d be willing to accept if it meant that you could not be denied coverage.
March 10, 2010, 12:07 pmtomhynes says:
Can you pay the 2.5% penalty out of a “cafeteria plan”?
If so, this system makes perfect sense.
March 10, 2010, 12:07 pmConstantin says:
You might want to check the financial contributions made by insurance companies to guys named Reid and Obama. And maybe then look at the windfall the insurance companies stand to realize with an enforced individual mandate (last check was nearly half a trillion dollars). Then re-hypothesize.
This is why we have to pass it, so that everyone can figure these things out. Use your head, chief. The time for debate is over.
March 10, 2010, 12:13 pmjab says:
constantin…
if the insurance companies are expected to make a windfall profit, then why are they uniformly opposed?
March 10, 2010, 12:15 pmMaryG says:
BUT WE’VE GOT TO PASS SOMETHING! no matter how tailored (or not) it is to effectively address the problems identified…
Otherwise, the Democrats will look weak politically!!
/*snark off/
March 10, 2010, 12:22 pmht4 says:
I’m pretty sure this is exactly the approach that many state insurance commissions impose with respect to group coverage.
March 10, 2010, 12:22 pmTamerlane says:
For the same reason Lacoon opposed bringing the horse into Illium.
March 10, 2010, 12:25 pmCorkie the Dog says:
They’re not. Insurance lobbyists favor the Obama reforms 5-to-1, when measured by lobbying/advertising dollars.
See:
http://reason.com/archives/2010/03/09/obama-and-the-l-word
“During the president’s nonstop gabfests before, during, and after the State of the Union speech, he kept repeating the fiction that the medical industry’s “special interests” were significantly to blame for scotching his health care legislation. In fact, the administration and Congress negotiated with those interests every step of the way, receiving crucial buy-in and millions in campaign contributions. Pro-reform lobbyists outspent anti-reform lobbyists on advertising by a factor of 5 to 1.”
March 10, 2010, 12:26 pmDavid M. Nieporent says:
You know how to fix it even more easily? Shoot anybody who comes up with the moronic idea of “community rating.” This notion that your insurance premiums shouldn’t be based on your risk factors is insane.
Oh, but of course then some people with “pre-existing conditions” couldn’t afford the premiums. Well, duh. People with “pre-existing conditions” don’t need insurance; they need welfare.
March 10, 2010, 12:37 pmPhatty says:
No, you don’t seem to be confused at all. You’re exactly right that it is a red herring.
March 10, 2010, 12:39 pmjab says:
In my opinion, health care “insurance” doesn’t make sense… we get insurance against low probability events that in the tiny chance they occur, the costs to recover would be overwhelming… eg. fire insurance for your home, car insurance, etc. In those cases, you spread the risk across large pools of people.
Health care is just a different category. We all need health care… from the yearly or bi-yearly check-ups, or for those with chronic conditions, ongoing care. And we all will die: whether that is through accident, some horrible disease, or reaching an advanced age where regular care will be needed.
We know that health care costs can be reduced by regular maintenance care and prevention, rather than waiting until something catastrophic happens, when it might be too late…. so that argues against simply having catastrophic coverage if that discourages people from getting the regular care that might help prevent or at least catch early serious disease.
Of the top of my head, I seem to favor national single-payer… but if we can’t go that route, HMOs… I know some people have had very bad experiences with HMOs… maybe I have been lucky, but my experience has been fantastic… I have two serious life-long chronic conditions that I must receive care for… and as long as I get that care, I can live a full life, working, pay taxes, etc.
Sorry if that was rambling… just putting down my thoughts.
March 10, 2010, 12:53 pmyankee says:
That explains why conservatives’ proposal for health care reform is to expand Medicare, Medicaid, and SSDI.
March 10, 2010, 12:54 pmDave N. says:
Quote of the day on Health Care Reform, courtesy of the Wall Street Journal‘s “Political Diary” (by subscription):
March 10, 2010, 12:58 pmsecond history says:
Republicans favor tort “reform” to the extent it punishes a Democratic constituency (trial lawyers). In fact, what does one mean by “tort reform”? The CBO has a report that reviews the impact of various tort reform experiments by the states and summarizes the results of studies of their impacts.
Frankly, the most effective tort reform would be to ban tort lawsuits in general.
March 10, 2010, 1:02 pmVultureTX says:
It looks like I missed the part where the informed here decided it was legal to mandate that I would have to buy insurance from a private corporation or pay a penalty to the government. Since I don’t currently pay into Social Security or Medicare , I had hoped to avoid giving the government any money besides taxes and specific usage fees.
Because now it looks like I hearing how much my pound(s) of flesh will cost just to exist in the US.
March 10, 2010, 1:04 pmRedlands says:
Many seem to assume insurance companies will be virtually reformed into nonprofits upon implementation of Obamacare.
What actually will be the impact, if any, on health care insurers? How will costs be reduced, or at least controlled, and how will health be improved?
March 10, 2010, 1:07 pmjab says:
vulture…
how do you avoid paying SS or Medicare taxes? If you are self-employed, you still pay those through a self-employment tax.
March 10, 2010, 1:07 pmcubanbob says:
I find it interesting that in a law blog the one question not really discussed is even if this monstrosity passes will it stand the inevitable court challenges? It appears that most of the key points of this bill are either blatantly unconstitutional to say the least or certainly on rather dubious constitutional grounds.
As an employer I can tell you if the option to drop health insurance coverage for my employees and pay an 8% payroll tax is implemented, it would be cheaper for me to pay the tax and drop the insurance. For most employers it would be the cheaper option. It is simply not possible to mandate insurance carriers to cover everything and not have exclusions. There is no real way to price risk and either the companies become insolvent if they attempt to do so or raise premiums so high few can afford them which in turn leads the companies into insolvency. Perhaps this what the democrats want, a stealth elimination of the health insurance industry and a replacement of it by an NHS style system.
Again there so many aspects of this bill that are so constitutionally dubious as to question why people who have sworn an oath to uphold and defend the constitution are so willing to willfully violate it?
March 10, 2010, 1:09 pmArthur Kirkland says:
The functional equivalent certainly worked like a charm for those who caused the Johnstown Flood. (Didn’t seem to hurt the firm that is now Reed Smith, either.)
March 10, 2010, 1:10 pmSteve says:
It probably makes good sense for a family making over $500,000 to forego traditional health insurance in favor of a catastrophic policy plus a tax-exempt HSA. You’re almost always better off self-insuring if you can afford it – which most families can’t.
As for the idea of foregoing insurance altogether, not every catastrophic medical problem takes the form of “you’re going to need major surgery next month, so better go fill out an insurance application now.” It is a bit silly to presume that as you’re being rushed to the hospital with a traumatic brain injury, you’re going to be allowed to fill out an application for insurance that will cover all your expenses. The mandate will ensure that the free-rider problem is very, very minor if it exists at all.
Of course single-payer obviates the issue altogether because everyone is covered and there’s not an option to strategically opt-out.
March 10, 2010, 1:12 pmSteve says:
As an employer I can tell you if the option to drop health insurance coverage for my employees and pay an 8% payroll tax is implemented, it would be cheaper for me to pay the tax and drop the insurance.
It’s cheaper for you to drop coverage for your employees right now; in fact it’s free. So why haven’t you already done it? I find it hard to believe that increasing the penalty from 0% to 8% would somehow provide you with extra incentive to drop coverage you voluntarily provide right now.
As to the constitutional issues, they have been discussed extensively at this blog. Most of the bloggers don’t seem impressed by the constitutional arguments, although there are exceptions. Personally, it seems to me like most of the arguments take the form of “this is something I don’t like, so it must be unconstitutional somehow.”
March 10, 2010, 1:14 pmChrisHo says:
More than likely the reason to not drop it now is there no one to blame.
If a system is designed to be abused it will be. The only reasoning I can see behind not making it mandatory and then forcing insurance companies to accept the person at the time of the problem is to drive the insurance companies out.
March 10, 2010, 1:27 pmcubanbob says:
As it stands I have it now as an inducement to retain employees as a majority of employers presently do. However if this bill passes the new rates on insurance will be so high I will drop the coverage. Payroll tax notwithstanding. And so will most employers. At 10% official unemployment few employees will quite if their employer drops health insurance coverage. Besides the bill provides for the public option so by dropping the coverage the employee is still ‘covered’ by the government and the employer instead of paying about 15% of payroll for a halfway decent plan will be able to save nearly half the insurance premiums. Not to mention COBRA coverages as well. It is easy to drop the coverage when the government will take off my hands.
March 10, 2010, 1:36 pmjab says:
cubanbob,
March 10, 2010, 1:38 pmthere is NO public option in the bills before congress
Steve says:
However if this bill passes the new rates on insurance will be so high I will drop the coverage.
I lack your crystal ball.
At 10% official unemployment few employees will quite if their employer drops health insurance coverage.
If you really believed this you would have dropped the coverage already. It’s not as though health insurance is cheap for you right now.
March 10, 2010, 1:46 pmJRL says:
What would we do without the good folks at Dartmouth to tell us that even people with access to healthcare still die 100% of the time?
March 10, 2010, 1:50 pmbyomtov says:
The reality, of course, is that Democrats didn’t want to work with Republicans on health care reform and couldn’t even keep Olympia Snowe on board because of their high handed tactics.
But thanks, Arthur, we now have the DNC talking points on this thread.
And you’ve kindly provided the Republican talking points.
The fact is, the Republicans don’t want health care reform. Where is the evidence that they do? What bills did Bush introduce?
March 10, 2010, 1:51 pmJeff says:
If ObamaCare leads to large numbers of people dropping their insurance until they have some really large medical expenses, there will be more people spending their own money on routine care, which could lead to lower utilization rates and prices. On the other hand, the ability to make an insurance company pay for the major expenses increases the demand for big-ticket procedures, so costs there will probably go up.
March 10, 2010, 2:06 pmCognitive Dissonance says:
http://volokh.com/tag/constitutionality-of-the-health-insurance-mandate/
March 10, 2010, 2:07 pmmattc says:
the real question is whether penalty I am going to pay will be credited to my family’s use of medical care or do I have to pay both the penalty and for additonal medical care if I seek it because then I think we will have areal constitutional issue
March 10, 2010, 2:07 pmneurodoc says:
If you don’t report “earned” income, only that gained through investments, then for the present at least you don’t pay SS or Medicare taxes.
March 10, 2010, 2:08 pmTatil says:
Which scare story convinced you that the prices will skyrocket?
March 10, 2010, 2:19 pmneurodoc says:
People “know” a great deal for certain that is simply wrong, for example that routine physicals, more screening, electronic records, and other measures will result in decreased health care costs. And it is that “knowledge” that salesmen seek to exploit.
Less health care in the aggregate is what can be counted on to bring about reduced health care costs, and less health care in the aggregate does not have to mean inferior results.
March 10, 2010, 2:21 pmRowerinVA says:
Can we at least admit that reducing health care costs means reducing the money made by health care providers? It’s as if everyone pretends that there is an anonymous health care monster out there, and if we just slew it, everyone would have more money. Poppycock. Less money spent on healthcare means less money spent on health care providers. Admit that’s what you are proposing. If you deleted the entire overhead costs of the insurance industry, that still wouldn’t make a dent in heathcare costs, or even the rise in costs.
Health costs are up because of (1) aging of the population, (2) more expensive treatments to treat previously untreated or untreatable conditions, or to treat things better, and (3) explicit rules (usually, at the state level) that permit hospitals and physician groups to stifle competition and keep prices high (including “certificates of need” (CONs)).
The health care “reform” will not change any of the three. Ergo, it will not keep costs down.
(1) can’t be stopped, of course. But wouldn’t it be grand if President Obama used the bully pulpit to admit and discuss the fact that reducing (2) requires rationing, and changing (3) requires pols to challenge a rich and powerful lobby? Then perhaps we could accomplish something.
March 10, 2010, 2:24 pmjab says:
neurodoc,
so… if routine care reveals someone has, say, early stage diabetes… and then that individual can make lifestyle changes and/or go on medication, as opposed to to not finding out until the disease has progressed for decades… you don’t think the costs work out in favor of prevention/early diagnosis? same for early-stage heart disease? same for catching cancers pretty early?
March 10, 2010, 2:31 pmRPT says:
Dave:
What was done or proposed by the R’s during the period when Frist and Delay ran Congress?
March 10, 2010, 2:39 pmjab says:
In that case, vulture is not paying SS nor medicare taxes, and his income is being taxed at the far lower capital gains rate, correct? which means his overall tax rate is pretty damn low relative to anyone with a similar income? and he is complaining about a 2.5% tax increase that he would have to pay ONLY if he chooses not to have health insurance of any kind? is this all correct?
well… honestly… as far as anecdotes go… this one rates a negative 3 on the sympathy meter.
March 10, 2010, 2:42 pmi am sure i can find a fraction of my taxes that go to pay things I certainly don’t support.
Duracomm says:
Zuch said
Actually I think you meant to say Candidate Obama and somehow you typed Republicans.
MATT WELCH: The president’s habit of telling untruths.
March 10, 2010, 2:43 pmneurodoc says:
It may make sense for an individual to self-insure, that is go bare or elect a policy with a very high deductible, when they can afford a hit on account of property loss. (Even then, they may miss out on the benefit of an insurance company’s legal department to provide legal services that would cost them a great deal more to purchase on their own.) It makes sense for very few, however, to go that route with health care, and it makes the least sense for those in the top tax bracket to try it, since the government hugely subsidizes health care for those who can see it paid for in pre-tax dollars. Why forego that very substantial subsidy? (With disability insurance, it may be a closer call whether or not to pay with after-tax dollars rather than pre-tax ones.) Even if someone isn’t covered through an employer or their own company through which they can run the expense, there is still the matter of those huge discounts on the cost of care that many get through their insurance carrier, though they most are blithely unaware of the magnitude of those discounts, if indeed they are even aware that the discounts are there.
March 10, 2010, 2:47 pmTatil says:
(2) should be rephrased as “more expensive treatments THAT CLAIM to treat previously untreated or untreatable conditions, or to treat things better”, often without evidence (especially in surgical fields, but also with drugs), strongly recommended by doctors who stand to get paid more if you take that advice. In some cases there exists a body of knowledge that could shed light on whether the new treatment actually works better, but the patients often have to rely on doctors and hospitals to make these decisions, whose financial interests are not aligned with the patients. In most cases, hospitals and doctors also refuse to release information about how well the treatments work. At the moment there is a huge information asymmetry in health care for an efficient free market.
March 10, 2010, 2:47 pmneurodoc says:
I can’t tell whether you are trying to be droll or just being silly. The studies that they have done at Dartmouth about how health care dollars are spent from one place to another and what results follow have been very, very illuminating.
March 10, 2010, 3:00 pmMLS says:
Why do I keep hearing about “insurance” when the issue, or so it seems to me, is to try and bring some measure of affordability to the cost of receiving health care…even without insurance in hand?
March 10, 2010, 3:05 pmneurodoc says:
I included “aggregate” as a qualifier for a reason, that being that it does pay to detect and start treating as early as possible some conditions, hypertension and diabetes being among the best examples of such conditions. “Catching cancers pretty early” is not a good example, because for most forms of cancer early detection will not mean much either in terms of ultimate mortality or reduced costs. Counter-intuitive perhaps, but true.
Detecting glaucoma early is also good thing. Having a colonoscopy to look for pre-cancerous polyps or for frankly cancerous tumors is certainly in the individual’s best interest, but the total cost of screening large numbers of people will far outweigh any savings in health care costs. PSA screening looking for prostate cancer in the asymptomatic is probably a bad idea all the way around, as discussed on the NYT’s op-ed page today by the person who developed the PSA test decades ago. Mammography very problematic, and a highly emotional issue.
March 10, 2010, 3:12 pmneurodoc says:
Some investment income is subject to long-term capital gains taxes, which at the federal level are currently 15%, but likely to increase; other investment income is taxed at the same rate as “earned” income, but is not subject to “payroll taxes” currently, though that too may change before long.
(What I think is flat out wrong and should be changed is “carried interest,” which allows hedge fund managers to treat that which should be treated as “earned income”, with the correspondingly higher rates, as capital gains, which they aren’t.)
March 10, 2010, 3:15 pmOldEasterner says:
Doesn’t coverarge of “kids” up to age 26y on parents’ policies, create another hurdle for them to move out?
“Son, it’s time to get a place of your own.”
“But Dad, I’ll have to pay $300/mo on top of rent.”
Who wants that?
March 10, 2010, 3:19 pmDavid Chesler says:
They’re on the EOB. And plenty of providers will discount for direct cash payments. Apparently I lost chiropractic coverage this year. It works for one of us, and the insurance gave us the EOB showing the amount it would have been discounted if it were covered. So I paid that amount – $48, not much more than my $30 PCP co-pay. The biller didn’t accept that, but does routinely charge the uninsured $50/visit instead of the $150 they were billing the insurance company, so they said close enough.
This base issue of gaming the system is related to the issue of “By enrolling healthy people we can lower the average premium” without considering the premium those uninsured healthy people are paying now, namely zero. If it is in fact insurance pooling more people shouldn’t change the average cost. (If it’s properly rated, it wouldn’t change the individual costs, but that wouldn’t be “fair”. If you’re going to have waiting periods, as Blue Neponset said, we’re not much better off than the unfair system we have now. Didn’t Kennedy and the original Health Insurance Portability Act eliminate a lot of the restrictions on pre-existing conditions? Something about maintaining insurance continuously.)
FWIW, I live in Massachusetts, and I am a no-benefits software contractor (consultant, job-shopper), so this is all very real and explicit for me. I pay about $10,000 a year, through the state, for what they consider top-tier insurance, for myself and three kids. Add another middle-aged adult and it would go up to about $16,000. I could pay all of my kids’ medical expenses out of my own pocket very easily, but I take enough expensive pills that I’m better off insured. I should look into dropping them and paying the penalty on them, but it wouldn’t lower my premiums much. Didn’t figure out if they can buy their own low-tier plans.
March 10, 2010, 3:36 pmneurodoc says:
Yes, there’s that one, but there’s also the one about taxing “Cadillac” plans. When John McCain proposed that in the later stages of the campaign as a revenue-raising measure that would also “bend the curve” on health care costs, Candidate Obama attacked him vigorously for even suggesting such a thing. Then, with no apologies for the turnabout, President Obama urged exactly that same measure, only backing off when interest groups, especially unions, objected, and now wants such a change but not until 2018!? That is change we should believe in?
March 10, 2010, 3:45 pmtherut says:
The reason physician do not charge self pay patients less is because by LAW we can not charge anyone less than we charge a Medicare patient. If we do we can be penalized and all our Medicare payments will be dropped to that level. That we can not afford. Just as I suspect alot of physicians are going to opt out of Medicare and Medicaid more cause we can not pay the overhead it costs to pay the employees we must have to do the massive paper work required. I suspect this to get worse not better.
March 10, 2010, 3:51 pmneurodoc says:
Yes, the “non-allowed” charges are stated on the EOB, but do you think most people pay it any attention, understand the significance and appreciate the implications, i.e., that someone without insurance is expected to pay a huge amount more for the same goods or services. You can say it’s a “volume” thing, but I see it as a reflection of insurance carriers’ muscle power vis-a-vis providers.
I think people understand little of what is involved, and thus they are easily spun by the empty rhetoric of the politicians, including Obama. I wasn’t uncynical before we got into this healthcare reform debate, but I’m more cynical than ever now about the political process we are seeing. I have never been a sausage eater, but I am even less likely now to ever become one given this look at what goes into them.
March 10, 2010, 3:54 pmLior says:
@zuch:
Fire extinguishers are used in case of an immediate emergency. Most health insurance on the other hand is not used for emergency medicine. The need for expensive arthritis drugs / chemo and surgery / organ transplant rarely appears so suddenly that there is no time to buy “insurance” for it, assuming the compancy cannot decline to cover your pre-existing condition.
Tatil: Since the new laws will mandate coverages that do not exist under current plans, prices will go up. But the point we are debating is probably the biggest: if the company must cover pre-existing conditions then people can bias their purchase of insurance. If people are more likely to buy insurance when ill, then people who buy insurance are more likely to be ill (basic Bayesian inference). This means that insurance premiums must rise.
March 10, 2010, 3:55 pmHerb Spencer says:
What I find both amazing and aggravating is that those who insist on what they euphemistically call “single payer healthcare” refuse to even discuss the propriety of those who have preexisting conditions, or persist in the negative behaviors that lead to diseased conditions, paying higher premiums in exchange for their not being denied coverage.
March 10, 2010, 4:59 pmFloridan says:
Regarding tort reforms: When, a few years ago, insurance executives testified under oath before the Florida Legislature, they were asked what weould happen to insurance premiums if a cap on lawsuit awards was put in place. When shading the truth could lead to perjury charges, the execs admitted the effect would negligible.
March 10, 2010, 5:04 pmCognitive Dissonance says:
What’s the difference between a hockey mom without affordable access to healthcare and a pit bull without affordable access to healthcare?
Lipstick.
March 10, 2010, 5:05 pmzuch says:
Oh. So I should just have paid out-of-pocket for that cardio-ICU trip?
Cheers,
March 10, 2010, 5:12 pmDavid Chesler says:
That depends. How much would it have cost you if you weren’t insured for it (not the same as what the hospital billed the insurance company) and how many people similarly situated to you needed such care? (Obviously a postiori you can better know if insurance for anything, or bets on horses, were or weren’t such good moves.)
March 10, 2010, 5:21 pmLib says:
Introducing bills isn’t the job of the Administrative branch. Obama won’t introduce any HCR bills either.
March 10, 2010, 5:44 pmLior says:
zuch: did you read what I said? Some health insurance is certainly used for emergencies. But that’s a tiny fraction of the medical expenses that insurance is used for. In fact, the vast majority of medical expenses are for treatment that is anticipated quite a while in advance.
For example, in this study of coronary bypass surgeries, only 1% of the surgeries were performed under emergency conditions. A further 15% were urgent to some extend, but 84% were “elective”, i.e. scheduled well in advance. In other words, for every emergency surgery of this type, there were 5 non-emergency surgeries. And this a type of surgery that is most likely to be performed on an emergency basis. How many emergency hip replacements have you heard about? What about emergency chemotherapy?
March 10, 2010, 5:46 pmChrisTS says:
I was wondering the same. I concluded that s/he is dead. Of course, this leaves us with the problem of explaining the ability to comment on a website…
March 10, 2010, 6:25 pmDaveM says:
Now that Virginia is poised to nullify the individual mandate for citizens of the Commonwealth, we have an interesting third option:
1. Move to Virginia
2. Don’t pay for health care insurance
3. Don’t pay any penalties
4. If you get sick, then buy insurance
5. Profit!
(This is called “satire” for those of you who are unfamiliar with the art form.)
March 10, 2010, 6:35 pmChrisTS says:
Forgive me for responding to mutiple commenters in one post.
David Nieporent:
David, really? What does this mean?
My spouse lost his job last winter. A few months later, my college offered a new – and far cheaper – health plan. But, when I asked about switching the family to the new plan, I was told my spouse could not be included: he had (at 56) “somewhat elevated blood pressure.” For this we should be on welfare?
jab says:
I think this is a very interesting comment. Of course, most of us have ‘life insurance,’ but we think of it as a kind of investment for our survivors. Health insurance is more like accident/fire insurance: we treat illness as something unlikely, but it is not. Thanks for that insight.
Herb Spencer says:
The ‘propriety’ of those with existing conditions?? Do you mean their worthiness, status as citizens..what? I have rheumatoid arthritis. Am I improper?
If you want to distinguish between those whose health problems are readily attributed to their own conduct and those whose problems are not, do so – and then work out the implications.
March 10, 2010, 6:43 pmAlexia says:
I may have lost track of which bill is which, but I believe that our benevolent overlord’s pending pronouncement makes those high deductible policies illegal.
March 10, 2010, 6:48 pmzuch says:
My brother just had an “emergency” shoulder replacement. Imagine that.
As for my cardio-ICU visit, that little episode counted for a vast majority of my medical expenses that year.
Are you seriously suggesting [as Prof. Zywicki seemed to be] that we can just sign up for insurance once we know we need it?!?!? Either of these episodes might well have spelled bankruptcy for an average family. Or maybe you’re suggesting that we both should have waited to get treatment until after an emergency insurance application was made, approved, and all the paperwork completed….
Cheers,
March 10, 2010, 7:12 pmElliot says:
Suppose we have a healthy 23-year-old who does not now have health insurance, yet can afford it. It’s his choice. It is rational for him to continue without insurance, pay the penalty, then just sign up for a plan if he needs it.
March 10, 2010, 7:16 pmElliot says:
“Are you seriously suggesting [as Prof. Zywicki seemed to be] that we can just sign up for insurance once we know we need it?!?!?”
That’s not just a suggestion. That’s what it means to prevent companies from denying coverage for pre-existing conditions. That what the Senate bill does.
March 10, 2010, 7:19 pmbyomtov says:
The problem with the pre-existing condition issue is that there is no way to insure against getting one. That is, if you have employer-based insurance, you can’t pay an extra amount to guarantee you can retain coverage at the same rate if lose your job and get sick. One might almost call it a market failure, if one believed in such things.
One more point for those railing against the unfairness of letting those lucky bastards with health problems off the hook on insurance premiums. Most employer-based plans do just that. The marathon runners pay the same as the overweight diabetics.
March 10, 2010, 7:58 pmChristopher Cooke says:
To David Chesler: You ask: “Didn’t Kennedy and the original Health Insurance Portability Act eliminate a lot of the restrictions on pre-existing conditions? Something about maintaining insurance continuously.”
This is a tremendously confusing law, but essentially you have to maintain insurance coverage after you lose or quit a job –e.g. through COBRA–and, just before that runs out, you can elect to “do a HIPPA” –buy insurance on your own and obtain coverage at a higher rate under HIPPA. However, you have to purchase this insurance before your other insurance runs out, but effective when the other insurance lapses. My wife and I used an insurance broker to figure this out, even though I am an attorney comfortable with researching statutes and regulations.
By the way, our previous health insurer, United Healthcare, was pathologically deceitful when we asked about HIPPA, insisting it only had to do with privacy (which it does) and ignoring the “portability” portion of the law, even though we asked about this part of the law, specifically. Indeed, the insurer kept insisting that we should go through underwriting again if we wanted to purchase insurance directly after our COBRA-provided insurance plan was about to run out (pre 2008 recession). This was all false, and obviously intended by them to determine if there were any pre-existing conditions that would cause them to jack up our rates or cancel coverage. The whole experience soured me on that insurer. On the other hand, it is not surprising that a company whose CEO gave himself $750 million in backdated stock options was, to say the least, less than candid and ethical in its business practices.
March 10, 2010, 8:07 pmLaura(southernxyl) says:
My daughter was able to get catastrophic coverage to tide her over between graduation and the insurance on her job kicking in. But she looked into getting more conventional insurance, and was turned down, because at the end of her sophomore year of college she had a weeks-long migraine that prompted a trip to a neurologist. He ordered an MRI; when the results came back he muttered some stuff and said “probably nothing” and proceeded to treat her migraine. I didn’t pay a lot of attention b/c I knew it was migraine. Turned out the MRI showed “cerebellar infarct” according to the insurance company, so they turned her down. I called the neurologist then, fairly upset – did she have a stroke? Was she at risk for stroke? No, he said, her MRI result was consistent with that apocalyptic migraine. No implications for any further problems whatever. He offered to argue with the insurance company, but because we knew her insurance on her job would pick up before long, we didn’t bother with that.
So IMO it’s stupid to have the pre-existing condition exclusion for people who are proactive in taking care of their health. We could have waited until her migraine eventually cleared on its own – I suppose it would have, although it didn’t start to lift until he put her on a beta blocker – and then she could have gotten insurance. It’s enough to make you not want to go to the doctor and find out anything.
Maybe if they prevent exclusion for pre-existing conditions they could prevent that for everyone for an initial time period, say six to nine months; then after that, for everyone who can show creditable coverage with no significant gaps. That would avoid making healthy people pay for what they don’t want, and would avoid punishing people who maintain insurance when they can and who go to the doctor.
March 10, 2010, 8:15 pmLior says:
zuch: certainly the ER visit was a large percentage of your expenses — but for the public as a whole elective surgeries far outweigh emergency ones.
That’s not my suggestion. It’s a “suggestion” of the Senate — that’s what the “health care reform” bill they passed says. The topic of this thread is to debate the results of such reform. It seems to me that you would also agree that this provision is absurd.
March 10, 2010, 8:59 pmzuch says:
Which is why we need to ensure that the “free rider” problem (that Zywicki suggests as rational behaviour) is resolved. See my comment at the beginning of this thread. But I do note that such a “free rider” tactic doesn’t work for catastrophic/emergency conditions, unless you require InstantInsurance™ or retroactive coverage.
Cheers,
March 10, 2010, 9:08 pmzuch says:
The whole point of insurance is not to pay for the things you expect to need, but for those you don’t expect (or that are unlikely), and are unable to handle if they do occur. For the high-prevalence, expected expenses, self-insurance or MSPs may do the trick.
Cheers,
March 10, 2010, 9:11 pmElliot says:
Note neither Obama nor the Democrats in Congress have identified this as something to be fixed. In their deal with Obama, the insurance companies only accepted this because they were promised healthy 18-30 year-olds would be forced to buy coverage. But, the bill doesn’t force that. The only way to pay for the folks with pre-existing conditions who will be knocking at the insurance companies doors is to increase premiums for everyone else.
So, a healthy 23-year-old making $50K can pay a $1,250 fine while still having access to insurance if he gets sick. He is essentially buying a call option on insurance coverage. If he is one of the people who didn’t want insurance anyway, his decision is quite rational.
March 10, 2010, 9:45 pmLior says:
zuch: I understand what insurance is about; medical insurance precisely isn’t (otherwise we’d be paying for our annual check-ups out-of-pocket).
Under the proposed scheme it would make sense to buy true insurance that covers emergency medicine only and wait with the other kind (insurance against expensive conditions which aren’t emergencies) until you actually get sick. This is absurd.
The real solution should be to remove the selection effect by allowing policies to exclude coverage for pre-existing conditions except under continuity-of-coverage provisions. Separately, medical insurance should be as you decribe it — true insurance covering only very expensive and rare events, for example “high deductible” plans. Insuring myself against needing an annual checkup or cheap prescription medication is like insuring myself against the need to buy groceries.
But the Senate plan does none of these things. Note also that emergency care is available anyway — hospitals must treat you regardless of ability to pay. So, for a young healthy person the best plan seems to be to not buy insurance at all. If an emergency arises he can get emergency treatment and then file for bankruptcy. If a non-emergency medical issue arises he can buy into an insurance plan at that point.
March 10, 2010, 9:59 pmneurodoc says:
Someone covered under the Federal Employee Health Benefits Plan, which all current civilian employees of the federal government, including members of Congress, are eligible for and retirees can have so long as they were enrolled for the last 5 years of their federal careers, has their choice of a number of different insurance plans, including fee-for-service ones and HMOs. Once a year they can switch to a different plan if they think it will prove to be a better deal in view of their own needs, irrespective of their state of health at the time (“pre-existing conditions”). Younger employees, who are generally in better health, and hence are likely to avail themselves of less medical care, gravitate to the cheapest plans, figuring those are the ones that will give them the most bang for the buck. Older employees, who generally have more health problems and more expensive ones, gravitate to the plans which pay for more, and therefore charge more in premiums. Because the federal government pays on average 70+% of the total cost of the coverage, those who foresee big medical costs for themselves are economically incentivized to go with the more expensive policies, because though they are more expensive, the federal government subsidy means they won’t pay a commensurately greater amount in premium to match what they can expect to get back in benefits. In the past, the consequences of disparities between risk and premium were greatest in certain plans, especially the Blue Cross High Option, so naturally the older and sicker flocked there, until premiums were readjusted the following year, and they could move to another plan, joining a healthier cohort.
March 10, 2010, 10:02 pmLaura(southernxyl) says:
Please remember that “folks with pre-existing conditions” include my daughter who had a bad migraine 3 years ago and had the poor judgment to go to a doctor about it.
Pre-existing conditions aren’t always expensive. It’s a strange term.
March 10, 2010, 10:54 pmeyesay says:
Can we talk about the system of paying for health care in the United States in a straightforward manner, without meaningless metaphors about face paint on porcine animals? “Putting Lipstick on the Health-Reform Pig,” indeed. If you have criticisms of the health care reform bill passed by the House of Representatives, or the health care reform bill passed by the Senate, or proposals to get a compromise bill passed by the House and Senate and on to the president for his signature, say so. But please, leave the lipstick in your cosmetics case and your pigs on the farm. If you think the House or Senate bills are not perfect, well, there’s a reason. Single-payer would have been better, but the Democrats sought bipartisan support. And whatever the shortcomings of the House and Senate bills, there’s something a lot worse: The current system, where we pay almost twice as much for health care per capita as some other industrialized democracies, with higher infant mortality, lower life expectancy, lower satisfaction with health care, and millions of citizens with no coverage.
March 10, 2010, 11:27 pmuberVU - social comments says:
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March 10, 2010, 11:36 pmzuch says:
In fact, because often insurance policies (or employee health programs) are not optional, they are in effect a means of coercing good behaviour, such as encouraging routine preventive health measures. Which is not really a bad thing, in my mind.
Cheers,
March 11, 2010, 12:32 amzuch says:
No. If they can’t safely send you somewhere else (in which case that is all the have to do), they must stabilize you (that is, prevent — if possible — your dying on the spot). This may often mean they have to treat you, but not always.
Cheers,
March 11, 2010, 12:35 amneurodoc says:
I’m not clear how thos insurance policies amount to “a means of coercing good behavior,” but what I’d really be interested in hearing is all the “routine preventive health measures” you think if more widely taken will effect big changes in health care costs and outcomes? Things like smoking cessation programs (only needed if you were foolish enough to have started smoking at some point); immunizations, periodic checks of fasting blood sugar, blood pressure, serum lipids, etc., which aren’t very expensive? Or more expensive screening procedures? What?
March 11, 2010, 3:01 amElliot says:
Under the Senate bill, your daughter can go without coverage until she needs it, whether it’s for migraines or cerebellar infarct. At that point, her treatment will be paid for by the increased premiums everyone else is paying. That’s what the bill says.
March 11, 2010, 11:02 amzuch says:
The policies are not optional, and include in many cases routine checkups, periodic screening, and such with no or minimum copay.
If one were to buy catastrophic health insurance only, and pay out-of-pocket for routine exams, one would be less likely to use the routine exams.
As I said, many employee health benefit packages already include such, so the effect of HCR on this won’t be large … but there will be some difference in such utilization between HCR changes that allow for “insurance” ex post facto for major unexpected expenses, and those that encourage strongly or enforce the procurement of routine health expense insurance. To be effective, I think that the penalty for “opting out” [until needed] needs to be large, if we don’t outright force people into adequate plans.
Cheers,
March 11, 2010, 11:25 amLaura(southernxyl) says:
Elliot, she’d rather have paid the premiums and had the dang insurance. In January my daughter had mono. Her insurance through her job paid for her doctor visit, minus copay, and her bloodwork. That insurance company has not been, and will not be, out any more money for things of that nature because she went to a doctor about a migraine a few years ago. It’s not that the private insurance didn’t want to cover migraine or even migraine and stroke; that would have been understandable and would have allowed them to cover her for unrelated issues without requiring anybody else’s premiums to potentially rise. They didn’t want to cover her at all, for anything.
March 11, 2010, 12:25 pmDavid Chesler says:
Indeed. Things are broken that way. I am a carrier for a deficiency found in Ashkenazim and Kerry Blue Terriers (and I don’t see any tail on you, boy) having to do with clotting factor XI that they don’t quite know what it does. There is no increased mortality in carriers, hardly any in folks who are homozygous for it. (My INR was slightly elevated. Now I take an aspirin a day to elevate it more, so where clots kill more than bleeds, it might be a benefit.) But because I’d checked, I was “rated” for life insurance, back when I was otherwise healthy.
A doctor told me there are foreign services that will test blood anonymously for such conditions, for just that reason.
Not sure the fix. Not sure why insurers do something that discourages testing for symptomless conditions. (In this case it’s doubly broken — not only wouldn’t I have been dinged if I’d never been tested, not sure why they want to discourage folks with Factor XI deficiency from buying from them.)
Employer group health and life insurance has always been open to all upon starting, in jobs I’ve had. If I didn’t have access to comparably-priced health insurance through Massachusetts, I’d be more inclined for find a job that pays in benefits instead of all cash. Other contractors work things out to be married to someone with good benefits. No matter what, there seem to be strange unintended consequences.
March 11, 2010, 12:35 pmzuch says:
If an insurance company (under present laws) finds out that you have not disclosed things that you (even if only privately) know about your health, they can (attempt to) deny coverage or reimbursement. Such anonymous testing may help prevent disclosure, but is not a complete solution. You might be asked, in court and under oath, if you had not disclosed such information. Then you’re on the horns of a dilemma.
Cheers,
March 11, 2010, 12:42 pmElliot says:
Didn’t you tell us the insurance problem was because a cerebral infarct was detected?
March 11, 2010, 1:26 pmDuracomm says:
The pre existing condition issue is a great example of having to fix a problem caused by earlier government action.
If it were not for government tax and regulatory action people would own their own insurance accounts. Individuals owning their own insurance would fix the vast majority of pre existing condition problems.
It would be nice if congress would work on some incremental fixes like promoting individual ownership of health insurance instead of trying to jam down a 2,000 page monstrosity of a bill.
I guarantee that several pages amongst the thousands in the current bill are going to create another government caused healthcare fiasco down the road.
March 11, 2010, 2:40 pmDavid Chesler says:
It may depend what “know” is. The test may be 95% accurate. Each of my kids knows, to a 48% certainty, that he or she is a carrier without any testing.
Also, if they don’t ask directly (are you a carrier of Factor XI deficiency) they might ask “any other health issues?” and in this case it’s not a health issue.
Either way, I will advise my children not to have this test done.
March 11, 2010, 3:13 pmLaura(southernxyl) says:
Yes. The cerebellar infarct, according to the neurologist, was due to the godawful migraine.
The migraine had absolutely zip to do with mononucleosis.
Therefore, the insurance company didn’t have to pay any more for her mono than it would have, had she not had the migraine three years ago. Nor would it if she went to the doctor for a broken leg, or a sinus infection, or a GI virus, or anything else that had zero relation to a migraine. She is not more expensive to cover, than she would have been had she not had that MRI. She’s not still taking the beta blocker. I wish she would, and have urged her to, because the doc said she should; but she’s grown and I can’t make her. Without invoking insurance, she could get it from Walmart for $4/month, which is cheaper than using the insurance and paying a copay. So even that is not an added expense for the insurance company.
The infarct is not making her more expensive for the insurance company. It was simply a reason for the insurance company she applied to for private coverage, to turn her down. I have to say that if I were an insurance company and I knew the gov’t was under a lot of pressure to micromanage me and possibly drive me out of business due to crap like this, I’d think twice about it. As I said, they could even have covered her for everything else and we’d have been happy.
March 11, 2010, 6:13 pmricky says:
“The infarct is not making her more expensive for the insurance company. It was simply a reason for the insurance company she applied to for private coverage, to turn her down.”
Ugh. This is what happens when the media villifies an industry. People start to assume that industry is evil and screws people over for fun. You might ask why an insurance company would be looking for excuses not to sell its product…
March 13, 2010, 4:13 amLaura(southernxyl) says:
Ricky, I’m not accusing evil, just stupidity. Do you have an alternative explanation?
March 13, 2010, 9:26 amPurple Koolaid says:
Let me use a local example of this very thing. Maternity care in this country is abysmally high. Midwives can do a majority of low-risk mom care, but NOOOO, ACOG won’t stand for it!! Their union wants to keep wages high and competition low so they have worked in every state legislature against midwifery. Some states have been more successful than others. In my state, midwives are illegal. And it is the DEMOCRATS opposing them. An illegal homebirth w/ a mw, in my state costs around $1600 and a hospital birth costs over $8,000. 48% of births in my state are covered under medicaid. With a cesarean rate at 31%, it is time to realize doctors are costing us money.
March 14, 2010, 2:45 pm