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Obama's Health Care Myths

John Lott has this interesting post about President Obama's health care myths. Here is the lead:

Two claims are made all the time in the health care debate: 1) that there is little competition among those providing health insurance and 2) that it is important to take the profit motive out of providing health insurance. Both are myths. It turns out that claims about too little competition are based on a misinterpretation of the data and that non-profit insurers are so abundant that the largest insurer in virtually every state is a non-profit.

einhverfr (mail) (www):
How can the second example classify under the pejorative classification of myth? It is a value judgement, not a statement of fact.
9.17.2009 3:49pm
Mark N. (www):
I think one thing driving the widespread believe in #1 is that the market, whatever its state of competition, appears opaque and confusing to the customer, which is often interpreted as noncompetitive (because it's not clear who is competing, on which qualities). There's no central exchange, terms vary considerably in hard-to-compare ways, etc. One might compare it to attempting to buy options prior to the emergence of standardized, exchange-traded options.
9.17.2009 3:50pm
ruuffles (mail) (www):
Let me guess. Lott wants to increase the use of HSAs. Give me a break. You put money in those things, and you don't use it, how do you get it back?
9.17.2009 3:53pm
Dilan Esper (mail) (www):
Well, (1) depends on the market (there certainly are markets where there is a lot of competition but there are also markets where there isn't) and (2) is a strawman-- the argument isn't that non-profit corporations are superior, but that the GOVERNMENT is superior at health care delivery. And the statistics that supporters use to support that argument are statistics from other countries that have single payer or government-run healthcare systems.

But hey, I hear Mary Rosh likes the article.
9.17.2009 3:53pm
J. Aldridge:
Dems are sure in a hurry to pass a health care bill they have no idea how much will cost or how it will be paid.

Putting them on suicide watch.
9.17.2009 3:57pm
Andrew J. Lazarus (mail):
My understanding (admittedly superficial) is that non-profit insurers have to adopt practices similar to for-profit insurers against whom they compete, such as attempting to cherry-pick customers, if they wish to stay in business.

Of course, with Lott, it's also possible (perhaps likely) that he created the data in the article himself out of thin air.
9.17.2009 3:59pm
martinned (mail) (www):

the market, whatever its state of competition, appears opaque and confusing to the customer, which is often interpreted as noncompetitive (because it's not clear who is competing, on which qualities).

Basic micro-economics: the less competitive a market is, the more the suppliers have an incentive to make their pricing schemes intransparent. Insurance all over the world, of various types, is a case in point.
9.17.2009 4:02pm
rmd:

Let me guess. Lott wants to increase the use of HSAs. Give me a break. You put money in those things, and you don't use it, how do you get it back?

Same applies to insurance, whether from a private or "public option" provider. Buy insurance, don't use it, how do you get that money back? At least with the HSA, it's still there if I need it next year.
9.17.2009 4:04pm
peterepeat (mail):
Non profit companies are allowed to pay exhorbitant salaries, and they do. They are non profits in the same way universities are non profits. That is say, they are for profit institutions in which the profits are directed to a bloated, overpaid bureaucracy instead of stockholders.

The fact that some employers dont rely on insurance companies is interesting. It doesnt change the fact that as the article itself acknowledges, the insurance market in many states is monopolized by one or two entities. If and when we ever move to separate medical care and employment, more Americans will be buying insurance from health insur companies directly, and the presence of their near monopoly will be even more problematic.
9.17.2009 4:08pm
SeaDrive:
Profit-making vs. non-profit. A lot of the appeal of this claim is based on the assumption that this particular aspect of the corporate charter has wide-ranging effects in how the company does business. False assumption, I think.
9.17.2009 4:09pm
John Lott (mail) (www):
Dear Andrew J. Lazarus:

The data from the Department of Health &Human Services and the AMA is linked to in the piece. All the data in the piece is referenced.

Dear Dilan Esper:

(1) if you actually look at the article, you will see that I provide the breakdown for the 15 most concentrated state markets.

(2) President Obama in his address to Congress specifically referenced the desirability of being "non-profit." We can discuss the other aspects of the debate, but the point was that as a result of various tax subsidies, there are already a lot of non-profit insurance providers in health insurance. You might want to actually read the piece.
9.17.2009 4:09pm
ruuffles (mail) (www):

Buy insurance, don't use it, how do you get that money back? At least with the HSA, it's still there if I need it next year.

Not true. With insurance, you can visit an unlimited amount of times (perhaps a small copay). I've taken much advantage of mine this way.

You must tell me about your magical HSA. I was told I had to spend mine by X date or it would go to the HSA fairies.
9.17.2009 4:17pm
SeaDrive:

You must tell me about your magical HSA. I was told I had to spend mine by X date or it would go to the HSA fairies.



I think yours is a Flexible Spending Account, and the FSA fairy is your employer.
9.17.2009 4:26pm
Pon Raul's Son Pand Raul:
ruuffles,

You are confusing HSA and the pre-tax medical money that your employer withholds from your pay check. They are different things.

Regards,

Geoff
9.17.2009 4:26pm
John Lott (mail) (www):
Dear ruuffles:

(first post) "Let me guess. Lott wants to increase the use of HSAs." I make no such argument here. The question involves two of the many incorrect claims that the president made during his talk. Others have pointed out the large number of other mistakes in the speech (e.g., the two examples of people whose insurance was supposedly dropped once they became sick and "the extraordinary hardships that are placed on the uninsured"). How concentrated the insurance market is has been a frequent claim of the president's.

(second post) You are confusing a flexible spending account with a HSA. The HSA lets you keep the money that isn't used.
9.17.2009 4:26pm
rmd:

Not true. With insurance, you can visit an unlimited amount of times (perhaps a small copay). I've taken much advantage of mine this way.

You must tell me about your magical HSA. I was told I had to spend mine by X date or it would go to the HSA fairies.

As to your first point, you're now talking about using it, whereas your initial premise was "don't use it." As far as I know (and of course someone can correct me on this if I'm mistaken,) HSAs, either as currently available or as proposed for a greater number of people, are not mutually exclusive with conventional insurance.

As to your second point, I think perhaps you're confusing HSAs with FSAs. See http://en.wikipedia.org/wiki/Health_savings_account for more details.
9.17.2009 4:29pm
Curt Fischer:

Two claims are made all the time in the health care debate: 1) that there is little competition among those providing health insurance.



MarginalRevolution reported on a paper published in December 2008 that seems to be saying the opposite. Quoting from the abstract of the linked-to paper:



Although the vast majority of Americans have private health insurance, researchers focus almost exclusively on public provision. Data on the private insurance sector is extremely difficult to obtain because health insurance contracts are complex, renegotiated annually, and not subject to reporting requirements. This study makes use of a privately-gathered national database of insurance contracts agreed upon by a sample of large, multisite employers between 1998 and 2005. To gauge the competitiveness of the group health insurance industry, I investigate whether health insurers charge higher premiums, ceteris paribus, to more profitable firms. I find they do, and this result is not driven by cross-sectional differences across firms or plans: firms with positive profit shocks subsequently face higher premium growth, even for the same healthplans. Moreover, this relationship is strongest in geographic markets served by a small number of insurance carriers. Further analysis suggests profits act to increase employers' switching costs, and insurers exploit this inelasticity where they have sufficient bargaining power. Given the rapid industry consolidation during the study period, these findings suggest healthcare insurers possess and exercise market power in an increasing number of geographic markets.



Emphases added by me.
9.17.2009 4:30pm
Suzy (mail):
I'm quite confused by this discussion of self-insured companies. Are those figures then being used to determine whether non-profits or for-profits are the largest insurance providers? Because I know Blue Cross often provides specialized plans for "self-insuring" employers, which would increase the non-profit numbers considerably.

I'm also very confused by the idea that self-insuring companies increase the competitiveness of the market. The argument seems to be that they decrease, as a percentage of the total, the number of individual insurers, but that says little about whether the market is actually competitive. Employers may compete for employees by offering benefits packages, but the employees of those self-insurers only occasionally have individual choices about their insurance plans. For example, I think I work for a self-insuring employer, yet I have a choice of two plans both administered by the same insurance company. That external company also dictates a number of things, like physicians and hospitals who are considered in-network, the amounts that providers will be reimbursed for different services, and so on. As a result, even if the costs are distributed differently among my employer and the insurance company, the insurer still has a huge impact on how much my health care costs / how much I pay for insurance. And I have zero choice in that matter. If I quit my job, odds are high that other employers work with this same insurance company, so they do indeed control most of the market in the state. How is that more competitive, just because of the presence of many self-insuring companies?
9.17.2009 4:32pm
Daniel San:
einhverfr,
Good call. However, number 2 rests on the myth that the insurance market consists of for-profit entities and would benefit from the addition of a not-for-profit entity. So while it is not a myth, there is a myth in there.
9.17.2009 4:35pm
eyesay:
That a free market generates an efficient allocation of resources requires assumptions that are not applicable in health care.

When I want a new television, I can go to several stores and compare several models, and research on the Internet. In this way, stores and manufacturers compete on price, features, attractiveness, and other product qualities.

But, for reasons including emergency and lack of transparency, many or most health care decisions are made where it's impossible for the consumer or his fiduciaries to make rational decisions based on cost and quality. So, a free market does not function properly.

Health insurance companies therefore have nasty habits, including
- accepting premiums for years, and then denying coverage for preposterous reasons.
- paying only if a doctor is enrolled in their network, even if the un-enrolled doctor charges no more than doctors who are enrolled in their network.
- having random, arbitrary, and illogical rules about covering one procedure and not another.
- spending large amounts of money in an effort to deny valid claims.
- delaying coverage, which means the patient may die, which escapes the company from further obligation.
- raising premiums after a diagnosis.

It is odd that liability insurance covers an interval of time for which the liability event occurs, but health insurance covers the interval of time for which treatment occurs. This is bizarre and has perverse consequences. If I have liability insurance company A in 2008 and in 2009, I switch to liability insurance company B in 2009 (or drop coverage altogether) and I'm sued for something I did in 2008, I'm covered by company A. Company A could not attempt to escape from its obligations by canceling the policy or raising my premiums.

But, if I have health insurance company A in 2008 and I am diagnosed with cancer in 2008, and I switch to heath insurance company B (or drop coverage altogether) in 2009, Company A's coverage ends, even though logically, Company A's obligation to cover my cancer should last until the cancer is cured, since it happened while I was covered by Company A. But instead, Company A can attempt to escape its obligations in many creative ways that are detrimental to the health and well-being of the American people, let along their prosperity.

Every civilized nation on earth has national health care.
9.17.2009 4:44pm
A. Zarkov (mail):
What would be the consequences of "taking the profit out of medicine?" Depends on what you mean by "profit" and who makes the profit. If "profit" refers to rent seeking behavior then I agree-- take that out. But if there's no profit in developing new medical technology and pharmaceuticals, who is going to do that? Does anyone think the CAT and MRI scanners got developed as an act of charity? With no profit capital will flow away from medical technology, and we will all suffer.

Right now other countries get a free ride on our pharmaceutical research. Companies are are willing to sell at their marginal cost abroad and recoup their development costs by charging a high price to Americans. This has got to stop.
9.17.2009 4:45pm
trotsky (mail):
The discussion of self-insured firms is interesting. Obviously that's something that only companies of a certain critical mass can sensibly do. So smaller businesses and individuals suffer the most in the un-competitive markets.

As an aside, my own company self-insures, but over the past several years I've been told that the premiums collected by the third-party manager exceed are actual medical costs. The split is something like 60-40.

I might be misunderstanding something in the contract. Covering some medical bills might be part of the deal. That said, on its face our insurance plan is 60 percent overhead and 40 percent actual medical costs. It's baffling.
9.17.2009 4:45pm
Suzy (mail):
trotsky, I don't know what percentage of my premiums go to medical costs vs. overhead paid to the external insurance company that administers the plan. However, I know that our medical costs have risen dramatically over the past few years, and I don't know how much of this is due to insurance company increases, and how much is due to providers charging more, or employees simply seeking more medical care.
9.17.2009 4:56pm
zuch (mail) (www):
I understand that Mary Rosh concurs with his analysis.

Cheers,
9.17.2009 4:57pm
Tom B (www):
An individual can self-insure. Instead of paying premiums to an insurance company, save the money. If you start when you are young, you will be putting $2K-4K per year into an account and your annual health expenses likely will be low. After a few years, you should have a decent sized account for emergencies.

Small businesses likely cannot self-insure because they would have to comply with ugly state regulations. The minimal coverages and overhead would likely make it uneconomical.


Also, I think Lott may have mis-stated the second myth. I am guessing that he meant something like "the only way to effectively reduce costs is to take the profit motive out of providing health insurance," which is what Pres Obama has said. Also, I did not read the piece so I really am guessing.

Also, it may appear that there is no competition because most people must choose the one plan or between the few plans offered by their company. Rather, the employer tax credit makes it stupid to buy on the market rather than through the employer.
9.17.2009 4:59pm
maryrosh (mail):
I do concur. John Lott's analysis is brilliant. He made up the most beautiful data to support his conclusion.
9.17.2009 5:03pm
zuch (mail) (www):
Mark N.:
I think one thing driving the widespread believe in #1 is that the market, whatever its state of competition, appears opaque and confusing to the customer, which is often interpreted as noncompetitive (because it's not clear who is competing, on which qualities).
It certainly is "non-competitive" in one respect: many times, your choices are what your employer offers you (if anything) and .... A veritable Hobson's choice. You may "shop" for insurance yourself, but you will find that the prices then are astronomical and with all kinds of conditions and exemptions.

Your employer may shop amongst different companies for plans (or not), but their interests and yours may not coincide.

Cheers,
9.17.2009 5:04pm
Tom952 (mail):
John Lott is right on both counts.

Insurance is not an appropriate solution for all risks. Due to moral hazard, insurers cannot accept all applicants. A voluntary risk pool has intrinsic incentives for individuals with known or probable health problems to join and pay, and healthy individuals to opt out and avoid the cost of participating in the pool. Forcing people to join is a poor solution, as forcing people to do something they really do not want to do is difficult. Therefore, health insurance is a poor method to provide uniform access to health care. We have a working government-run program that serves the elderly. Proposals to expand Medicare run into objections that it is socialist and the debate stops, regardless of the fact that it is in many ways the best option.
9.17.2009 5:07pm
yankee (mail):
Once you fabricate data, you lose all credibility regarding any empirical claims about it. Lott should go into some field like novels or advertising where you're allowed to make stuff up.
9.17.2009 5:07pm
Steve:
I wonder who is commenting as "John Lott"? It's so hard to tell who's who on the Internet.
9.17.2009 5:14pm
Dilan Esper (mail) (www):
President Obama in his address to Congress specifically referenced the desirability of being "non-profit."

Thanks for responding. However, this is seriously misleading. The non-profit co-ops in the Baucus bill are NOT being advocated by any serious liberal healthcare analyst as anything other than a compromise of the public option.

The argument has never been that non-profit status magically solves the problems of the private sector, but that the government does it better than the private sector. And as a result, the relevant comparables are other countries with more socialized systems. I suspect you know this and were just looking for a hook for your strawman argument, and therefore you seized on Obama's speech.

And how's Mary Rosh doing these days?
9.17.2009 5:14pm
Bruce Hayden (mail):
Health insurance companies therefore have nasty habits, including
- accepting premiums for years, and then denying coverage for preposterous reasons.
- paying only if a doctor is enrolled in their network, even if the un-enrolled doctor charges no more than doctors who are enrolled in their network.
- having random, arbitrary, and illogical rules about covering one procedure and not another.
- spending large amounts of money in an effort to deny valid claims.
- delaying coverage, which means the patient may die, which escapes the company from further obligation.
- raising premiums after a diagnosis.
Oh, come on. I doubt that you could document even one of those claims with statistical data, as opposed to anecdotal evidence.

Here is an example of what really happens: Insurance Company Must Pay $10 Million For Revoking Policy Of Teen With HIV
9.17.2009 5:16pm
einhverfr (mail) (www):
Martinned:

Basic micro-economics: the less competitive a market is, the more the suppliers have an incentive to make their pricing schemes intransparent. Insurance all over the world, of various types, is a case in point.


On the other hand, I think the pricing schemes are quite transparent. Where transparency is lacking is in benefits. In short medical insurance is governed by the phrase "let the buyer beware."

BTW, I am an opponent of current healthcare reform plans, but I think there are important lessons that can be learned from single payer systems. I just dont think the US is capable of putting together a single payer system that will work right the first time.

We do need modest reforms to encourage transparency of benefit, ensure proper disclosure when insurance will not pay for something ahead of time, and so forth. I don't think the market ALONE is a solution-- there is a place for state regulation. We require auto mechanics to disclose estimated prices before they do work so why not require doctors to disclose this, along with billing codes, and require insurance companies to publish maximum rates per billing code too. Those two steps would be tremendously helpful.
9.17.2009 5:16pm
David Schwartz (mail):
My understanding (admittedly superficial) is that non-profit insurers have to adopt practices similar to for-profit insurers against whom they compete, such as attempting to cherry-pick customers, if they wish to stay in business.
But precisely the same thing would happen if they competed against other non-profit insurers as well. The need to provide what the customers are willing to pay for at a competitive price will occur in any competitive market, whether the competing providers are for-profit or not-for-profit.

Either not-for-profit insurers will try to cover as many people as possible or they wont. If the former, they'll have to compete for those insureds (using the same techniques for-profits do). If the latter, they won't cover very many people.
9.17.2009 5:18pm
Dilan Esper (mail) (www):
Also, I don't buy the self-insurance argument as a substitute for market competition. Self-insurance only works for large firms (who would also have more bargaining power even with a monopolist health insurance firm anyway). But for small businesses-- whom conservatives are always claiming they care about-- their only option is the monopolist, and without a competitor, the monopolist can charge THEM high rates (indeed, they have an incentive to charge them higher rates than they would if there were a competitor because they need to lower rates on large firms to compete with the self-insurers and charging high rates to segments they monopolize makes up the difference).
9.17.2009 5:18pm
Uh_Clem (mail):
Watch out, yankee. He just might sue you like he sued the Freakonomics authors.
9.17.2009 5:18pm
trotsky (mail):
Bruce Hayden,

You seem to be suggesting that insurance companies that practice recission are harshly punished. But the link refers to a case that took seven years to be decided by the state Supreme Court. The kid could easily have died while waiting for justice.

I'm not sure it proves what you think it does.
9.17.2009 5:21pm
zuch (mail) (www):
Tom952 says:
Therefore, health insurance is a poor method to provide uniform access to health care.
On the other side of the argument, Tom952 says (in his next sentence):
We have a working government-run program that serves the elderly.
Who is right? FauxSnooze reports, you decide.

Cheers,
9.17.2009 5:22pm
zuch (mail) (www):
John Lott:
(e.g., the two examples of people whose insurance was supposedly dropped once they became sick ....
Does Mary Rosh concur with this "two" as well, John?

But I'd note that in the ... ummm <*hrrrmmph*> one ... case reported on here by FauxSnooze, the insurance company did in fact drop the insurance once he became sick, and only reversed the rescission under pressure from the Illinois AG's office.

Cheers,
9.17.2009 5:27pm
Steve:
Oh, come on. I doubt that you could document even one of those claims with statistical data, as opposed to anecdotal evidence. Here is an example of what really happens: Insurance Company Must Pay $10 Million For Revoking Policy Of Teen With HIV

Bruce, I'm afraid I wasn't able to find the statistical data, as opposed to anecdotal evidence, at your link. Could you clarify?
9.17.2009 5:28pm
Tom952 (mail):
zuch,

Medicare part A and B are not insurance plans. Original Medicare is a fee-for-service plan managed by the Federal Government.

Medicare add-ons such as Medigap and Medicare Advantage plans are insurance plans sold by insurance companies.
9.17.2009 5:30pm
Andrew J. Lazarus (mail):
Talk about unclear on the concept.
[With self-insurance] your annual health expenses likely will be low
Emphasis added.

Health insurance is not like saving up for the down payment on your first house. Sure, if you are young, your annual health expenses are likely to be low. Except, say, if some nut case brings a gun to your aerobics class. Then you are reduced to asking friends to throw a charity car wash for you, while the same glibertarians think you are a stupid, undeserving doofus for not having either health insurance or the vast savings needed to pay for emergency surgery after someone has tried to murder you.

I know it fits a certain type of jejeune fantasy to believe that small businesses don't self-insure because of mean old government regulations, but it seems much more likely that they don't go into the insurance biz because they are small their self-insurance pool would be wiped out and then some by one employee's catastrophic injury or illness. I suppose you could blame the government for checking that a company that claims to be self-insured is in fact capitalized to be self-insured, but even most libertarians oppose fraud.
9.17.2009 5:33pm
zuch (mail) (www):
Bruce Hayden:
Here is an example of what really happens: Insurance Company Must Pay $10 Million For Revoking Policy Of Teen With HIV
Uhhhh, yes. They gladly forked over the money because that's what the policy (and common honest dealing) required, rather than being forced to do so by some silly judge and jury after a long and costly trial....

Cheers,
9.17.2009 5:34pm
myto:
Most Canadians listen in disbelief to the Health Care debate in the U.S.

I have yet to hear a Canadian THAT I KNOW complain about the health care they have received and surely have not heard anyone say that they would prefer the US style system.

My father had a heart attack, got double bypass surgery and a valve replacement last year, followed by a stay in a rehab facility.
My mother recently had a knee replaced; over the years has had eye surgery, kidney removed, etc, etc.

Our family moved to Canada in 1964 when my Dad got transferred. It was before that that my Mom injured her knee when she tripped over a low fence on a neighbor's properly. She had to sue to get the neighbor's insurance company to pay for the surgery. That kind of thing just doesn't happen here.

My wife has epilepsy. She sees a neurologist twice a year. We have 2 children. Because of my wife's epilepsy her pregnancies were deemed high risk - she was cared for by the high risk team at the hospital.

If she lost her job, she would not have to worry about not getting insurance or paying sky high prices because of her pre-existing condition.

My young son had a hernia diagnosed by his pediatrician and had it removed in the hospital. I can go on and on.
My wife and I have a family doctor - see her once a year for checkups or whenever necessary - usually the next day, my kids have a pediatrician - seen once a year for checkups or whenever necessary, I see an urologist once a year, my wife the neurologist. We chose those doctors, can see someone else if we aren't satisfied or get a second opinion. If we need a hospital, can go to anyone we wish to.

My sister-in-law in the travel industry works on contract. When - as is quite common in her industry - the contract gets dropped and she is suddenly unemployed, she has no worries about her health care.

This goes for everyone in Canada from the CEO of a company, to a student in university, to a contract worker or someone who has suddenly lost their job from the recession or any other reason, a drug addict, a hobo; everyone gets the same care - which is excellent.

We just don't get it - maybe someone on this blog can explain it to me.
9.17.2009 5:47pm
Thorley Winston (mail) (www):
If the goal is to increase competition, then just let consumers and employers buy health insurance policies across State lines. You know, like they already can with auto insurance, life insurance and pretty much every other legal good and service.
9.17.2009 5:54pm
shaker (mail):

Two claims are made all the time in the health care debate: 1) that there is little competition among those providing health insurance and 2) that it is important to take the profit motive out of providing health insurance.


If we took the profit motive out, what will the insurance companies be competing for?
9.17.2009 5:56pm
John Lott (mail) (www):
Dear zuch:

This piece from the WSJ goes into more detail about both cases.

Dear myto:

Canadians may be "satisfied" with their health care, but so to are Americans who are uninsured. Indeed a recent Canadian poll shows that Canadians under their government plan are about as happy with the quality of their health care as are uninsured Americans. Insured Americans are significantly happier than either Canadians or uninsured Americans. The Canadian survey was conducted by Harris/Decima TeleVox using 1,022 adults in Canada from May 8 to 13, 2008. It used the same questions that a USA Today, ABC News and the Kaiser Family Foundation poll conducted by TNS had used (U.S. 1,201 adults from September 7 to 12, 2006). More detailed information on those surveys can be found in the paper here.
9.17.2009 5:57pm
Dilan Esper (mail) (www):
If the goal is to increase competition, then just let consumers and employers buy health insurance policies across State lines. You know, like they already can with auto insurance, life insurance and pretty much every other legal good and service.

Well, some of the Democratic bills allow this by imposing national regulations.

But the Republican talking point is about allowing every insurance company to act like a credit card company, incorporate in Delaware or South Dakota, and do business nationally while not subject to meaningful regulation. And that would be really, really bad.
9.17.2009 6:03pm
Mark Buehner:

and do business nationally while not subject to meaningful regulation.

Every state has its own regulations, and undoubtedly the feds will lay on regulations. And what do you mean by meaningful? Requirements like the ones Obama listed? Forcing one size fits all policies on people will raise prices further. Ironic, considering Obama is ready to tax the much derided 'gold plated' policies, when these are exactly the features that MAKE them so expensive. If we all have 'gold plated' policies, think they might get A LOT more expensive?
9.17.2009 6:09pm
Tom952 (mail):
We just don't get it - maybe someone on this blog can explain it to me.

I don't get it either. The smart play is to assess Canada's experience and see how we can match it in the U.S., and begin migrating away from dependence on our piecemeal system of state-run Medicare for the poor, federal Medicare for the elderly, and health insurance if you are lucky enough to work for a large employer. Entrepreneurs bring your credit card and get in line at the doctors office behind grandma, corporate employees, and the welfare people.

It reminds me of a proposal Andrew Tobias once made to replace auto liability insurance. If an uninsured person runs into you, you are stuck with the bills unless the damage is large enough to sue and the culpable one has money. There is no way to be sure that all drivers, including illegal immigrants, have liability insurance. His proposal was a gas tax that funded a liability risk pool that covered everyone who drives a vehicle in the U.S. When you gas up, you pay into the pool. "Socialism, government run program, bad, bad, bad...." was the response and it died a quick death. So, we have no evil government program, but if an uninsured person runs into you, you pay for the damages.
9.17.2009 6:16pm
liberty or death:
myto:
There is also the fact that Canada and other countries around the world refuse to pay full price for drugs and technologies that never would have been developed but for the profit motive. The US is the last remaining place where developers can hope to turn a profit. Meanwhile, other countries are allowed to pay lower prices because the distributors figure some money is better than no money, which is what they would get if they refused to meet price demands. So in effect, America is subsidizing health care for countries around the world.
9.17.2009 6:17pm
liberty or death:

begin migrating away from dependence on our piecemeal system of state-run Medicare for the poor, federal Medicare for the elderly, and health insurance if you are lucky enough to work for a large employer.


Why not begin migrating toward everyone buying individual plans and no one getting it from their employer?
9.17.2009 6:20pm
Tom952 (mail):
If the goal is to increase competition, then just let consumers and employers buy health insurance policies across State lines...

If you have a health problem, insurers are not required, and may not be willing, to sell you a policy.
9.17.2009 6:21pm
Tom952 (mail):
Why not begin migrating toward everyone buying individual plans and no one getting it from their employer?

Why not begin migrating toward everyone buying into Medicare and paying a premium based on their age?
9.17.2009 6:23pm
Mary Rosh:

Here is an example of what really happens: Insurance Company Must Pay $10 Million For Revoking Policy Of Teen With HIV


Thanks for the laugh. Let's actually click on the link.


In the ruling, Chief Justice Jean Hoefer Toal wrote: "We find ample support in the record that Fortis' conduct was reprehensible ... Fortis demonstrated an indifference to Mitchell's life and a reckless disregard to his health and safety."

An investigation this summer by the House Energy and Commerce Committee, and earlier ones by state regulators in California, New York and Connecticut, found that thousands of vulnerable and seriously ill policyholders have had their coverage canceled by many of the nation's largest insurance companies without any legal basis. The congressional committee found that three insurance companies alone made at least $300 million over five years from rescission. One of those three companies was Assurant.

In Febuary 2008, a private arbitration judge in Los Angeles ordered Health Net Inc. to pay more than $9 million to a breast cancer patient whose health insurance it revoked shortly after her diagnosis and while she was undergoing chemotherapy. The plaintiff in that case, Patsy Bates, a then-52-year-old grandmother and hair-salon owner, was unable to continue her chemotherapy for several months.


And this article is linked to by someone arguing in favor of our private health insurers. Sheesh.
9.17.2009 6:26pm
frankcross (mail):
I don't understand the competition defense. Sure employers ensure, for them the employee functionally has a monopoly (if employees can't trade coverage for pay). For those who don't have employer insurance, they face a highly concentrated market.

It seems wrong to say these people are in one market. Those who don't have employer insurance can't choose it, they are stuck with concentrated private markets.

It looks to me like two separate highly concentrated markets (insured by employer and those not insured by employer). What am I missing?
9.17.2009 6:27pm
Mary Rosh:

So in effect, America is subsidizing health care for countries around the world.


Wow, that sounds a like a really good deal for America. I can see why American politicians are so averse to changing the status quo. I can see why libertarians don't want to alter our current system. You may be on to something here.
9.17.2009 6:28pm
Michelle Dulak Thomson (mail):
Andrew J. Lazarus,

I know it fits a certain type of jejeune fantasy to believe that small businesses don't self-insure because of mean old government regulations, but it seems much more likely that they don't go into the insurance biz because they are [so] small their self-insurance pool would be wiped out and then some by one employee's catastrophic injury or illness. I suppose you could blame the government for checking that a company that claims to be self-insured is in fact capitalized to be self-insured, but even most libertarians oppose fraud.

My understanding is that proposals to make possible co-operatives that would allow small businesses to pool their employees (and concomitant risk) aren't so popular on the left end of the political spectrum. I don't understand why not. Has it something to do with Dilan Esper's "incorporat[ing] in Delaware or South Dakota"?

If the danger is from huge, catastrophic expenses, why don't we do the obvious, and make sure that everyone has catastrophic insurance? I don't see any point to "insuring" against other than rare and expensive calamities. I mean, I understand that some might prefer to have a "health care plan" that dispenses any needed care at nominal rates in return for a flat monthly fee, just as some students living in college dorms prefer to pay for their meals up-front in the form of a meal card. But what earthly sense is there in making everyone buy their care this way?
9.17.2009 6:31pm
Richard Johnston (mail):
Bruce Hayden said:

Here is an example of what really happens: Insurance Company Must Pay $10 Million For Revoking Policy Of Teen With HIV


Hello again Bruce -- we seem to run into each other at certain blogs lately.

And thanks for the opening to say of course this result is not something which could ever happen wrt employment-based insurance thanks to ERISA.

For those who believe the free market will be the panacea for our health insurance problem, recall that the rule of law is an essential underpinning of a properly functioning free market. Regarding employment-based coverage ERISA guts the rule of law.
9.17.2009 6:45pm
seadrive:

If you have a health problem, insurers are not required, and may not be willing, to sell you a policy.


Which gets to another problem. Insurance works on an annual basis. Disease does not.
9.17.2009 6:48pm
Floridan:
Tom B: "An individual can self-insure. Instead of paying premiums to an insurance company, save the money. If you start when you are young, you will be putting $2K-4K per year into an account and your annual health expenses likely will be low. After a few years, you should have a decent sized account for emergencies."

Put away $3,000 a year at 7.5 percent interest for ten years (which may or may not be "a few") and you will have about $42,500.

That is unless you have an emergency appendectomy or ACL surgery, in which case you likely will have nothing.
9.17.2009 6:52pm
Richard Johnston (mail):
Actually to be fair and accurate I should note that rescission, as such, is not generally an issue in cases of employment-based group plans. OTOH there is no prohibition against simply amending group policies to exclude certain illnesses once someone gets sick, which amounts to much the same thing. The point remains in any case that under ERISA there is no prospect of any sort of meaningful damages such as in the case cited by Bruce Hayden, for any bad behavior, up to and including fraud.
9.17.2009 6:53pm
Perseus (mail):
Forcing people to join is a poor solution, as forcing people to do something they really do not want to do is difficult. Therefore, health insurance is a poor method to provide uniform access to health care. We have a working government-run program that serves the elderly.

If forcing people to do something they really don't want to do is a poor solution, then let us all opt out of government ponzi schemes like Medicare.
9.17.2009 6:55pm
John Lott (mail) (www):
Dear Frankcross:

Employers can compete on benefits just as they do on salary. Presumably it is your overall take home pay that you care about. Firms that use "full" insurance compete against firms that self insure for employees. In addition, firms with over 50 employees don't seem to have much problem going into self insurance themselves if they think that they are being charged too much by so-called "full" insurance companies. Whether it is the ability of employees to move between firms or the ability of firms to pick the type of insurance, there is obviously a lot of competition. Literally tens of thousands of firms self insure and they hire about 900 different firms to handle the paper work for this self insurance (see the discussion in my piece). Don't you believe that for vast majority of employees there isn't a great deal of substitutability here?

The point is that the President's claims about concentration are extremely misleading at best. His talking about the benefits from nonprofit firms ignores that the largest insurer in most states is a nonprofit.
9.17.2009 7:04pm
Michelle Dulak Thomson (mail):
Floridan,

Let's grant that people ought not to be bankrupted by sudden and enormous medical bills. Fine; so let's insure everyone against the emergency appendectomy and the ACL surgery, which is the sort of thing insurance is for. Design a high-deductible catastrophic plan and make everyone buy it (or equivalent). Catastrophes wouldn't be cost-free, but they'd be cost-limited. (You would have to do something about chronic and cumulatively expensive diagnoses like diabetes, where the expense would be large in toto but not all in one lump.)

But what sense is there in throwing in an eye exam every couple years and discounted drug prices and nominally-charged doctor visits and the like? I mean, I know what sense there was; it's obvious. Employers got to provide compensation in pre-tax dollars this way. But does it do any other good?
9.17.2009 7:07pm
/:
Regulated industries agitate for government monies, film at 11.
9.17.2009 7:15pm
frankcross (mail):
John, I really don't know much about employer self-insurance, but the employees themselve get a much lessened market choice. I'm not sure employees have a lot of options to choose new employers based on relative coverage at least today.

I guess my main point is that for the substantial minority without employer insurance, the concentration remains. I suppose you could say they could choose an employer that provides insurance, but I think you overestimate the ability of workers to pick and choose their employers. I don't think these people have typically chosen to work for companies that don't provide insurance.
9.17.2009 7:37pm
Dilan Esper (mail) (www):
Every state has its own regulations, and undoubtedly the feds will lay on regulations. And what do you mean by meaningful?

I gave you the example-- the credit card industry. Permitting "national" credit card companies that are subject to regulation only in their state of incorporation meant that South Dakota's and Delware's lax rules became the rules for the entire country.

Now, I realize that for some libertarians and conservatives, this is a feature, not a bug. But let's be clear here. The Democrats propose to allow insurance to be sold across state lines subject to strong regulation. The Republicans propose to exempt insurance companies from any regulation by allowing them to incorporate in a corporate-friendly state and sell nationally. The former is a serious policy proposal. The latter is pure ideology and corporatism.
9.17.2009 7:41pm
Angus:
Poor John Lott has blown his credibility for all time on the internet.
9.17.2009 7:41pm
zuch (mail) (www):
John Lott:
This piece from the WSJ goes into more detail about both cases.
Fair enough. Do you only provide correct and complete cites on request?

But I'd note that in both cases, insurance was reinstated by the insurers only after delay, and vigourous protest and outside pressure. The WSJ may suggest (or less politely, insinuate) that the Texas woman should have been dropped, but that is not what the insurance company did in the end. These are hardly cases of the system "working" ... more like "shuffling slowly ... at the point of a gun".

Cheers,
9.17.2009 7:48pm
wolfefan (mail):
Hi -

Bruce Hayden, I don't understand your initial comment. Maybe you could expand. What you seem to say is that among other claims, you don't believe this one is ever true:

- paying only if a doctor is enrolled in their network,
even if the un-enrolled doctor charges no more than
doctors who are enrolled in their network.


I can't speak for anyone else, but this matches my experience with every insurance company I have ever done business with.

An anecdote - when I was a pastor, our denominational insurance program for ministers charged the same price to all who were enrolled. This was a reflection of our ethical and religous beliefs regarding mutuality, community, and the responsibility of those who had been given the most from God to share with those who had less. In this case, it meant that younger, healthier members of the plan subsidized older and less healthy members.

Through the miracle of competition, other insurance companies cherry-picked the youngest and healthiest members of our plan until all that were left were the old and sick. The plan became unsustainable financially, went out of business, and some who were previously covered under our denominational plan have not been able to find affordable insurance from other companies. Competition surely helped some individuals, but it did not help the most needy or, on balance, the largest number of our members as those members subsidizing early in their careers would have benefited from being subsidized just ten or fifteen years down the road.

Others can and will find their own meaning in my former plan's experience, but it leaves me somewhat leery of the benefits of the free-market and competition when it comes to health insurance. It also leaves me convinced of the need for an insurer-of-last resort.
9.17.2009 7:49pm
Michelle Dulak Thomson (mail):
Dilan Esper,

The Democrats propose to allow insurance to be sold across state lines subject to strong regulation. The Republicans propose to exempt insurance companies from any regulation by allowing them to incorporate in a corporate-friendly state and sell nationally.

Can you (or anyone) explain why it's currently illegal for insurance companies to operate across state lines? I mean, when and in whose interest was the existing prohibition enacted? Who gains from this ban being in place, and who stands to gain if it's removed? (Besides, I mean, people who work for small businesses that have not formerly been able to pool their risks.)
9.17.2009 7:49pm
zuch (mail) (www):
Michelle Dulak Thomson:
Fine; so let's insure everyone against the emergency appendectomy and the ACL surgery, which is the sort of thing insurance is for. Design a high-deductible catastrophic plan and make everyone buy it (or equivalent).
Ahhhhh. The Republicans' answer to "choice". Call Boehner and DeMint and get them drafting!....

Cheers,
9.17.2009 8:00pm
Andrew J. Lazarus (mail):
But what sense is there in throwing in an eye exam every couple years
Eye exam, cheap. Treating advanced glaucoma, not so much. And glaucoma is painless.
9.17.2009 8:05pm
Richard Johnston (mail):
Michelle Dulak Thomson said:


Can you (or anyone) explain why it's currently illegal for insurance companies to operate across state lines?


It isn't. There's no "prohibition" as such. But as of now, to sell insurance in any given state you need to get that state's Insurance Commissioner (or functional equivalent thereof) to approve, which means a review of your policy forms and level of benefits, capitalization, reserves, and such. The 'pubs want to do away with all that and just let any insurer swoop in and start selling policies without checking with the Insurance Commissioner first (so that insurers would be regulated only by the state where they locate, hence the credit card/South Dakota analogy above); the dem proposal is to establish one overriding federal standard for everyone to meet. The concern I have with the 'pub alternative is that the state with the most lax regulation would be the de facto national regulator -- just like credit cards.
9.17.2009 8:19pm
Dilan Esper (mail) (www):
Richard Johnston got it exactly right.
9.17.2009 8:28pm
Michelle Dulak Thomson (mail):
zuch,

If we were talking about mandatory high-deductible catastrophic health insurance I doubt that we'd be arguing now, because most of the Republicans (I am not one, for the record) would have signed on. But, see, that isn't what's on the table. The stories that drive the narrative about how we need "reform" are all about people being bankrupted by huge, unanticipated costs, but no one seems interested in doing the obvious thing wrt huge, unanticipated costs, which is pooling risk and insuring against them. No, apparently what we need is "health care," and we need some intermediary to dispense all of it, whether it's six-figure surgery or someone to advise us about our bruised knee.

Andrew J. Lazarus,

150 million eye exams per year: not very cheap. Testing teenagers for glaucoma because that's what the insurance calls for: rather silly. Prospect of actually getting those at risk for glaucoma to take the eye exam even though it's "free": not so hot. I took it because I needed glasses, having broken mine, and it's impossible to get prescription glasses here without a current prescription. Had I not broken my glasses, I might easily have gone twenty years without a glaucoma test. Sure it's "free," but some people aren't keen to spend a couple of hours of transit and waiting-room time in order to undergo an unpleasant test only to be told that everything's fine.
9.17.2009 8:29pm
zuch (mail) (www):
Michelle Dulak Thomson:
Testing teenagers for glaucoma because that's what the insurance calls for: rather silly.
A good friend of mine is (like me) middle-age, and has had open-angle glaucoma for over a decade. Bad example. Particularly when glaucoma "puff" screening is cheap, particularly when done along with a comprehensive eye examination.

Cheers,
9.17.2009 8:50pm
Michelle Dulak Thomson (mail):
Richard Johnston,

What Dilan Esper wrote was this:

The Democrats propose to allow insurance to be sold across state lines subject to strong regulation. The Republicans propose to exempt insurance companies from any regulation by allowing them to incorporate in a corporate-friendly state and sell nationally.

What you seem to say (and Dilan concurs) is that this is the status quo. If that's so, how can the Democrats be "proposing" what's already there? And if all that's needed to comply is a plain, common-sense review to make sure no one is being outright swindled, why isn't there a market in place?

Maybe it has to do with this bit:

a review of your policy forms and level of benefits, capitalization, reserves, and such.

Will states allow out-of-state plans that are basically catastrophic, high-deductible insurance only? Is there any reason such plans ought not to be allowed? Would the "strong regulation" Democrats want permit the sale of, well, health insurance that is actually insurance, in the safeguarding-against-catastrophes sense? Or would such plans be illegal?
9.17.2009 8:51pm
Michelle Dulak Thomson (mail):
zuch,

It doesn't matter how cheap it is if it's more bother to the alleged beneficiary than s/he thinks it's worth. I got my last eye exam because I'd broken my glasses and needed new ones, because I'm blind as a bat without. No broken glasses would've meant no eye exam, despite the fact that my insurance provides one free, every other year.

I really don't think I'm alone here, either. The expense of an optometrical appointment isn't the issue for most people; the hassle and the bother is. Getting the appointment "free" [i.e., prepaid] doesn't compensate you for the time you spend getting there and back, waiting, &c.
9.17.2009 9:00pm
Richard Johnston (mail):
Michelle Dulak Thomson said:
Richard Johnston,


"'The Democrats propose to allow insurance to be sold across state lines subject to strong regulation. The Republicans propose to exempt insurance companies from any regulation by allowing them to incorporate in a corporate-friendly state and sell nationally.'

What you seem to say (and Dilan concurs) is that this is the status quo. If that's so, how can the Democrats be "proposing" what's already there?"




The status quo is that if you want to sell insurance in, say, California, then the California Insurance Commissioner will vet you and make sure you comply with California law and regs. The dems would take California's rules out of the equation and replace them (along with the rules in the other 49 states) with a unified federal standard. That would be new. The benefit I discern about that relative to the 'pubs "South Dakota plan" is that the unified federal rules would almost have to be more consumer-friendly than whatever the South Dakota of the insurance industry comes up with.



"Maybe it has to do with this bit:

'a review of your policy forms and level of benefits, capitalization, reserves, and such.'

Will states allow out-of-state plans that are basically catastrophic, high-deductible insurance only?"




I honestly don't know. I presume some will and some won't. But the inquiry into capitalization, reserves etc. may well also impede significant numbers of insurers. I must admit I am not conversant with the particulars on this one.
9.17.2009 9:06pm
Dilan Esper (mail) (www):
What you seem to say (and Dilan concurs) is that this is the status quo. If that's so, how can the Democrats be "proposing" what's already there?

The status quo is that each insurer must qualify in each state. That deters insurance companies from crossing state lines.

The Democrats propose a set of national regulations. Comply and you can sell anywhere.

The Republicans propose the credit card system-- incorporate in whatever state lets you really screw over the public, and you can sell anywhere and not be subject to those other states' regulations.

Understand the difference now?

Will states allow out-of-state plans that are basically catastrophic, high-deductible insurance only? Is there any reason such plans ought not to be allowed? Would the "strong regulation" Democrats want permit the sale of, well, health insurance that is actually insurance, in the safeguarding-against-catastrophes sense?

Several questions there. The answers are as follows:

1. As of now, some states may have minimum benefits provisions. I don't know. But if they do, then insurers obviously would have to adjust what they sell in order to do business there.

2. There are, actually, good arguments against such policies, though I am not sure you will actually buy them. If your only care is making sure that some major hospitalization bankrupts someone, these can work. However, they don't cover preventative care, they discourage people from using medical care to stay healthy (because those expenses are out of pocket), and they don't work for poorer Americans who can't afford even the deductibles.

More broadly, there's a fundamental disconnect between two visions of health care, and this exists even among some of the liberals who support reform. One group basically sees the problem as you do, as an issue of middle class security which can be allieviated through a high deductible policy that protects against financial ruin.

But another group sees this as a right. Basically, you should be able to go to the doctor for free. You should be able to get prescription drugs for free. You should be able to go to the hospital for free. The costs of medical care should be socialized and borne by anyone, because health problems are usually a matter of bad luck and a civilized society doesn't condition medical treatment on income. Those in the second camp would point to the scene in Michael Moore's "Sicko" where he goes to the payment window at a clinic in Britain and it turns out the clinic pays him for needed health expenses rather than he having to pay the clinic for the cost of care.

If one is in the second group, high deductible policies are an awful idea because they don't provide health care as a matter of right for all Americans.

As for what the Democrats will allow in terms of minimum benefits, there truly is a problem with minimum benefits with an individual mandate. The last thing you want is to force Americans to pay for insurance that doesn't cover anything. But how far Democrats will go in mandating benefits is anyone's guess.
9.17.2009 9:19pm
Bruce Hayden (mail):
- paying only if a doctor is enrolled in their network, even if the un-enrolled doctor charges no more than
doctors who are enrolled in their network.
I should have deleted that one. But what you see in costs is not what the insurance company sees. Doctors are enticed into networks for volume, and typically give a discount to the insurance company as a result - a discount that you may not see.

I can see that this is an issue in some instances, and in some it is not. My kid managed to stay with the same pediatrician for 18 years, through maybe a half dozen different employers of her mother, and a couple of times on an individual policy of mine. Always, for the entire 18 years, the doctor was in-network. And her mother did the same with her ob/gyn.

But I have heard horror stories about people madly shopping for doctors in a specific network when their employer switched carriers - I think I remember my secretary and her husband doing that when I was in Phoenix.

But, this is all up front. We switched carriers and networks a year or so ago, got the book of health care providers (or they were also available on the Web), and in the few cases when people's doctors weren't in the new network, they got new doctors well before they needed them.

I am not sure how ObamaCare would help this, at all. Right now, I think it far more likely that a given physician isn't taking Medicare, or esp. Medicaid, patients, than that he/she isn't enrolled in one private network or another. And that, of course, is because those programs keep cramming down their reimbursement rates, in the face of increasing costs.

Keep in mind that these health care provider networks are a mechanism for keeping down medical costs, and, thus, insurance costs.
9.17.2009 9:33pm
Bruce Hayden (mail):
The Democrats propose a set of national regulations. Comply and you can sell anywhere.

The Republicans propose the credit card system-- incorporate in whatever state lets you really screw over the public, and you can sell anywhere and not be subject to those other states' regulations.
I am not sure what you mean by "screw over" the public. But a big part of the problem with rates between states are the state mandates. One state may require insurance to cover aroma therapy and acupuncture, while another does not. The Democratic plan seems to be to move these mandates to the national level. I am not sure why you think that would be better. There seems to be some evidence that some of the first things to go would be high deductible polices, co-pays, and lifetime limits. I have been on a high deductible policy for years, and like it because I am not paying for coverage that I don't use. And I think co-pays are a good idea for cutting down on doctor visits for minor stuff that really doesn't need such a visit. And, frankly, I would prefer a policy that doesn't cover either maternity or abortions. Both unlikely under ObamaCare.
9.17.2009 9:41pm
Martha:

And I think co-pays are a good idea for cutting down on doctor visits for minor stuff that really doesn't need such a visit. And, frankly, I would prefer a policy that doesn't cover either maternity or abortions.

I agree with you on the co-pays. But for me, I want maternity to be covered. I just don't want coverage for prostate cancer, vasectomies, or any other condition I don't have or am not going to have. Once regulations are lifted, I'm sure I'll have my choice of custom policies that cover only those treatments I'll need to pay for.

After that, I want my taxes adjusted so that I never pay for any government service I don't use, like road repair on the bad side of town.
9.17.2009 9:50pm
Dilan Esper (mail) (www):
I am not sure what you mean by "screw over" the public. But a big part of the problem with rates between states are the state mandates. One state may require insurance to cover aroma therapy and acupuncture, while another does not. The Democratic plan seems to be to move these mandates to the national level. I am not sure why you think that would be better.

Well, if you define the universe of "insurance regulations" as coverage mandates, you might have a point. (Although coverage mandates can also be very good ideas in some instances.)

Of course, the actual universe is much broader, and includes such things as protections against rescission, protections against unfair provisions in insurance contracts, protections against denials of coverage, community rating and preexisting condition rules, etc. And all those things require an effective regulator, not a race to the bottom of state regulations like we have with credit cards.
9.17.2009 10:04pm
Andrew J. Lazarus (mail):
Michelle, the first libertarian I ever met was blind. Unfortunately, it was years later that I learned literally tens of thousands of dollars of taxes—my taxes—had gone to train his seeing-eye dog[s], plus he got extra income tax benefits, tax-subsidized special postage rates, etc. Screening for glaucoma is probably worth it on a utilitarian basis for the government, just to save us from having to buy you a stupid dog later.
9.17.2009 11:53pm
Guy:
Lazarus,

Screening for glaucoma is probably worth it on a utilitarian basis for the government, just to save us from having to buy you a stupid dog later.

That's not fair, seeing-eye dogs are usually pretty intelligent.
9.18.2009 12:56am
David M. Nieporent (www):
More broadly, there's a fundamental disconnect between two visions of health care, and this exists even among some of the liberals who support reform. One group basically sees the problem as you do, as an issue of middle class security which can be allieviated through a high deductible policy that protects against financial ruin.

But another group sees this as a right. Basically, you should be able to go to the doctor for free. You should be able to get prescription drugs for free. You should be able to go to the hospital for free. The costs of medical care should be socialized and borne by anyone,
So, in other words, one group doesn't even understand the basic concept of TANSTAAFL?
9.18.2009 2:54am
David M. Nieporent (www):
Of course, the actual universe is much broader, and includes such things as protections against rescission, protections against unfair provisions in insurance contracts, protections against denials of coverage, community rating and preexisting condition rules, etc. And all those things require an effective regulator, not a race to the bottom of state regulations like we have with credit cards.
Where, of course, "race to the bottom" = "offer consumers what they want rather than what liberals think they should want."
9.18.2009 2:54am
Steve:
That's certainly the standard Republican argument: ignore all problems like inequality of bargaining power, predatory behavior, and incomplete information, and just call everything a choice! But in a country where "freedom" means that eight states allow insurers to treat victims of domestic violence as having a pre-existing condition, you're going to lose the "choice" argument and lose it badly.
9.18.2009 8:49am
Andrew J. Lazarus (mail):
Where, of course, "race to the bottom" = "offer consumers what they want rather than what liberals think they should want."
David, would you like to argue that very high penalty fees and default interest rates on credit cards are what consumers want (even though back when states had more power, they were outlawed in many places as usurious), or would you join the real, as opposed to libertarian-theoretical, world and agree those are what the banks want. Gee, companies flock to a place where lack of regulation allows them to make profits more easily with practices that were once considered criminal. What a surprise
9.18.2009 11:19am
dangerous lack of something something:
What I love is how the conservatives continued to move the goalposts of opposition as the liberals have compromised on what they want in the bill. The best joke is the one that any change from what we have now will decimate medical innovation. Please note that in the past 100 years or so, many of the greatest innovations in medicine have come from other countries outside the US.

Anti-Epileptic Drugs - Germany
HIV Retrovirals - Canada
Artificial Hip - Burma(!)/Australia
Penicillin - England
Oral Rehydration Treatment - India
Insulin Therapy - Canada
EEG - Germany
CT/MRI - EMI via the Beatles success (so maybe we can thank the British Invasion + American consumerism here)
Ultrasound - Austria/Germany
Evidence Based Medicine - Scotland.

It's not to say that the US system does or does not drive innovation, but to say that our system is the only thing keeping medicine moving forward is insulting to the other countries in the extreme...
9.18.2009 11:26am
zuch (mail) (www):
Michelle Dulak Thomson:
It doesn't matter how cheap it is if it's more bother to the alleged beneficiary than s/he thinks it's worth. I got my last eye exam because I'd broken my glasses and needed new ones, because I'm blind as a bat without. No broken glasses would've meant no eye exam, despite the fact that my insurance provides one free, every other year.

I really don't think I'm alone here, either. The expense of an optometrical appointment isn't the issue for most people; the hassle and the bother is. Getting the appointment "free" [i.e., prepaid] doesn't compensate you for the time you spend getting there and back, waiting, &c.
How you take care of your health is your business. May I suggest that if the glaucoma screening was too much bother, you should have just refused the appointment and gone around waving your hands in front of you. It is a free country. And you're free to be as careless as you want. Maybe Darwin will step up, and we won't have to pay for your carelessness in later years. Skip those mammograms too. They hurt, I'm told. And don't even mention that yucky sigmoidoscopy....

Cheers,
9.18.2009 11:42am
einhverfr (mail) (www):

If the goal is to increase competition, then just let consumers and employers buy health insurance policies across State lines. You know, like they already can with auto insurance, life insurance and pretty much every other legal good and service.


I think that is reasonable. The only caveat should be that to market or service claims in a state, I think one should be subject to the regulations of that state. Federalism and all that jazz.

In short, I am ALL FOR that solution as long as it doesn't supplant state regulatory power as it involves insurance for residents of the specific state in question.

Unfortunately I don't think those pushing that plan from either party are doing so out of Federalist ideals.
9.18.2009 12:05pm
Michelle Dulak Thomson (mail):
zuch,

You misunderstand me. My point was that offering glaucoma tests even for free to everyone is not necessarily going to result in everyone's being tested for glaucoma.

How you take care of your health is your business.

Um, but it isn't. Not any more. It's your business, because we are all going to be in the same risk pool (yes?), and the riskier I am, the more you'll have to pay.
9.18.2009 1:25pm
Dilan Esper (mail) (www):
So, in other words, one group doesn't even understand the basic concept of TANSTAAFL?

Is the defense department a free lunch? Social Security and Medicare? The Veterans Administration?

Lots of countries, FYI, socialize the payment of medical costs, so that citizens get "free" treatment (in the sense that it is paid out of tax revenues). This isn't a "free lunch", but rather a recognition that health insurance companies don't serve any socially useful purpose and that the government performs this function better.

That's right, you heard me. Libertarians are full of crap on health care. The government does it better.
9.18.2009 2:26pm
Dilan Esper (mail) (www):
Where, of course, "race to the bottom" = "offer consumers what they want rather than what liberals think they should want."

No, offer consumers fair treatment.

Again, David, the private sector SUCKS in the health insurance area. It doesn't deliver efficient care, it doesn't deliver cheap care, and it doesn't offer consumer protections.

That's why we need the government to do it. The government does a better job. I'm really sorry that your libertarian ideas are wrong with respect to health care, but they are.
9.18.2009 2:27pm
Connie:
Keep in mind that these health care provider networks are a mechanism for keeping down medical costs, and, thus, insurance costs

No, networks are a mechanism for keeping down the PRICE; they do nothing for the cost of delivering a service. E.g., an uninsured person is billed $10,000 for the same service an insurance company pays only $1,000 for.
9.18.2009 2:28pm
zuch (mail) (www):
Michelle Dulak Thomson:
[zuch]: How you take care of your health is your business.
Um, but it isn't. Not any more. It's your business, because we are all going to be in the same risk pool (yes?), and the riskier I am, the more you'll have to pay.
Well that is true (even today). But none of the reforms, nor current laws, require you to undergo any test you choose not to undergo (I just got a nice summary of my options WRT colon cancer screening, and one of them -- albeit unmentioned -- is "do nothing"). Which is a good thing in some respects ... but suffers from defects such as you mention. Same as motorcycle helmets or seatbelts (although there some states do mandate use). But I'll put up with the morons, ignerrent fools, and walking organ donors as need be as long as we get some reasonable insurance for all. Insurance breaks down when there's "free riders". As long as you (and everyone else) pay(s) for the increased risk (along with me) of the people refusing to get HPV vaccinations and mammograms, and the folks that think their cranium looks good spread down 200 feet of asphalt, things will generally work out OK ... and better than what we have now.

Cheers,
9.18.2009 5:11pm
Tom952 (mail):
OK, Suppose we do the following to provide access to health care for all of our citizens and legal residents.

1) All citizens and legal residents be given the option to buy into Medicare part A (hospital) and Part B (doctor visits). The cost to buy in will be established based on fair risk factors that predict an individual's demand for health care. Pre-existing conditions will be covered, but individuals will not be permitted to jump in and out of the plan.

2) Unhealthy products, such as tobacco, will be taxed to pay for the additional health care required by the consumers of those products.

3) Those who want it but cannot afford it will be subsidized through the existing state run Medicaid programs.

4) Everyone can choose to stay with their current health care solution.

5) Individuals will be allowed to buy add-on insurance policies to cover the health care products and services that are not fully covered by Medicare.

What is wrong with that?
9.18.2009 9:38pm
SG:
It's not to say that the US system does or does not drive innovation, but to say that our system is the only thing keeping medicine moving forward is insulting to the other countries in the extreme

You're misunderstanding the argument. The argument is not that innovation does not take place in other countries, the argument is that the US provides the dominant market for those innovations. If that market were to demcome dominated by a monopsonist purchaser whose mandate was to reduce costs, it will suck out the profit that spurs investment and innovation.

For example, as the US economy has crashed, Toyota posted it's first loss in 70 years. It doesn't matter that it's a Japanese company - it still has great exposure to the American market. Likewise in health care, it doesn't matter where the research is performed, it matters that they have the ability to turn a profit on that research. The argument is that the US currently provides the bulk of that profit irrespective of what nation the research originated in.

The argument should in no way be read as diminishing the activities of medical researchers world-wide, it only diminishes the ability of other markets to monetize that research.
9.19.2009 2:22pm
Dilan Esper (mail) (www):
You're misunderstanding the argument. The argument is not that innovation does not take place in other countries, the argument is that the US provides the dominant market for those innovations. If that market were to demcome dominated by a monopsonist purchaser whose mandate was to reduce costs, it will suck out the profit that spurs investment and innovation.

I support socialized medicine but I concede this is correct.

The problem is, it isn't very persuasive to me because basically what you are saying is that American consumers ought to continue indefinitely to support a gross free rider problem.

Why SHOULD America's consumers pay grossly inflated prices so the rest of the world can have better health care systems than we do?
9.19.2009 4:16pm
SG:
Why SHOULD America's consumers pay grossly inflated prices so the rest of the world can have better health care systems than we do?

So you're willing cut of your nose to spite your face, provided you can get someone else to pay the cost of the reconstructive surgery? :)

Seriously, I don't like the free rider problem any more than anyone else (and I'd love to hear some suggestions on ways to ameliorate it), but intentionally retarding innovation just to avoid free riders is not a rational response.

As a thought experiment, it you're willing to forsake future advancements in medical care to save costs today, why isn't acceptable to save costs today by only providing non-innovative care? That is, I suspect (without proof) that it wouldn't be too expensive to provide a universal 1980-era standard of care (pharmecuticals have become generic, equipment is all paid for, etc), while allowing (and encouraging) those who wish to purchase more modern care.

Sure, those people limited to the universal program would be deprived of more recent advancements, but as you're willing to write off future advancements to save money, I don't see a great moral difference. It only changes where you've drawn the line. Would you find such universal care satisfactory?

Now as a practical matter I don't think this is achievable. I foresee any floor for universal health care rapidly becoming a ceiling. This is why, while believing the current system needs reform, I'm compelled to oppose anything that moves us toward fully socializing health care. I believe that a well-run socialized medicine could (but not inevitably would) provide more cost-effective health care on a static basis, but it's my opinion that the loss of incentives for innovation will result in greater net human suffering over the long run due to delayed and lost drugs, devices, therapies and health care workers that will result from an inevitably cost-conscious single-payer. I oppose socializing medicine because I feel it will hurt more people, in both number and severity, than it helps
9.19.2009 5:41pm
Melancton Smith:
Kinda sick that some folks have to score their cheap shots. Grow up.
9.20.2009 12:11am
Dilan Esper (mail) (www):
Seriously, I don't like the free rider problem any more than anyone else (and I'd love to hear some suggestions on ways to ameliorate it), but intentionally retarding innovation just to avoid free riders is not a rational response.

That misunderstands the issue. The innovation issue is an OBJECTION to doing something we otherwise should do-- have the government provide health insurance to everyone.

But if innovation itself comes at a considerable cost-- free riding-- the question becomes, why shouldn't we do something we should do anyway just so we can preserve a free rider situation that is costing us a ton of money anyway?

And spoken that way, the question answers itself.

The free rider problem has many potential solutions, but even if it can't be solved without retarding innovation, that still doesn't mean that we should deny needed health care and security to our citizens, and leave them at the mercy of awful private insurance companies which often screw them over, so that we can preserve a status quo that involves massive free riding.
9.20.2009 1:44am
SG:
And spoken that way, the question answers itself.

Yes, when your question assumes the answer, it does answer itself. But since I don't share your assumption, I don't find it a compelling argument. I think people first and foremost should be responsible for the resources they consume, and that includes their health care. I don't have a problem with society providing assistance for those who can't provide for themselves, but I don't think the majority of the cost of consumption should come from someone else's pocket.

You didn't address my question. That innovation that you seem willing to dismiss has translated directly into improved quality and quantity of life. If you're willing to discard future innovations to reduce costs, why not discard (or more accurately, postpone providing universal access to) some existing innovations to reduce costs? In the former you are depriving everyone of the advancements (and the advancements enabled by those advancements, and so on and so on...), whereas in the latter only those who are dependent on others to pay are deprived. In both cases some people go without, but the number is smaller in the latter, and those are the people who need other to pay for them. The latter preserves the incentives for innovation as well as incentivizing individuals to provide for themselves. It seems more fair and better social policy to me.
9.20.2009 10:41am
SG:
BTW, I'm not sure if you're talking about socializing health care or health insurance. If it's insurance (true insurance - for catastrophic claims), I'm inclined to agree with you. The devil's in the details, but I'd like to see a reform proposal that required the equivalent of an HSA and, provided the HSA was fully funded (with contributions proportional to income), the government would cover expenses that that exceeded the HSA balance.

I don't want to see the current health "insurance" model socialized, though. Actually, I don't want to see the current health insurance model, period. Having 3rd-party payers involved so early in the chain is what's driving health care inflation, IMO. And I think advances in genetic screening is going to make private insurance be non-viable in the near future.
9.20.2009 10:53am
Dilan Esper (mail) (www):
Yes, when your question assumes the answer, it does answer itself. But since I don't share your assumption, I don't find it a compelling argument.

That's fine, but that concedes that "innovation" isn't the real issue here.

If libertarians and conservatives want to argue this on the ground of health insurance being something that one should receive only so long as one can afford it and provided by companies who may or may not deliver needed coverage, fine. That's what conservatives and libertarians actually believe, after all. And liberals can win that argument.

But the innovation objection is a different objection, based on the supposed need to preserve a state of affairs that is actually extremely unfair to American consumers.
9.20.2009 9:14pm
Dilan Esper (mail) (www):
If it's insurance (true insurance - for catastrophic claims), I'm inclined to agree with you. The devil's in the details, but I'd like to see a reform proposal that required the equivalent of an HSA and, provided the HSA was fully funded (with contributions proportional to income), the government would cover expenses that that exceeded the HSA balance.

The problem with HSA's is that they disincentivize preventative care and don't work for poor and working class folks.

It is, of course, possible to structure HSA's so they don't do this, but I get the feeling conservatives aren't really interested in providing preventative care through a system of NHS-style clinics or seeding the HSA's of poor and middle class workers with government money.
9.20.2009 9:16pm
SG:
Here I thought we were having a polite conversation, but you couldn't even be bothered to contemplate my response in your hurry to climb upon your moral high horse. Well, I don't find you even remotely moral. You don't care about others, you just feel superior to them. If you have your way, there will be less liberty, less prosperity and more unnecessary suffering and death (globally, no less), and the worst part is that you would congratulate yourself on that outcome.

There's global benefit from medical innovation. What kind of moral reasoning do you use to conclude that it's better that everyone suffer rather than have some people pay an outsized burden? After all, don't you presume that "the rich" will cover the majority of the medical costs under your preferred plan? How does that differ from Americans providing the engine for medical innovation? Or is it only important that you compel someone else to pay for your health care, and screw the rest of the world?

It's not the difference of opinion that offends me - it's the ignorance wrapped in smugness.
9.20.2009 11:56pm
Dilan Esper (mail) (www):
Here I thought we were having a polite conversation, but you couldn't even be bothered to contemplate my response in your hurry to climb upon your moral high horse. Well, I don't find you even remotely moral. You don't care about others, you just feel superior to them. If you have your way, there will be less liberty, less prosperity and more unnecessary suffering and death (globally, no less), and the worst part is that you would congratulate yourself on that outcome.

Look, essays on the beauty of liberty and the free market are fine; they just don't give people health care.

There's global benefit from medical innovation. What kind of moral reasoning do you use to conclude that it's better that everyone suffer rather than have some people pay an outsized burden?

The problem is that we are not debating a proposal to increase medical innovation. We are debating a proposal to give every American health care. The innovation issue arises as an OBJECTION to providing that health care. In other words, you are asking people to suffer to preserve innovation (which you rightly note can save lives).

Now that doesn't make you wrong. But the free rider argument makes your argument very problematic. Because instead of asking people to suffer to preserve innovation, you are actually asking people to suffer so that the rest of the world doesn't have to pay its fair share of innovation costs. Is that a fair trade-off?

Now, you can go back to first principles and say you just don't think that ensuring that people get health care without being subjected to the vicissitudes of the free market is a very good idea. And you have. But as I said, I can win that argument.

In the end, the innovation argument says that we can't even afford to try and figure out a way where US consumers don't bear humongous health care costs to pay for the rest of the world's medical innovations. You know, in most contexts, conservatives and libertarians are very concerned with free rider problems. It's strange that they aren't here-- I suspect that's because it's a seemingly convenient rationale for killing universal health care.
9.21.2009 2:55am
SG:
How many strawman have to die for you to make your argument? Are you even reading what I write, or simply responding to the stereotypes you carry? To restate: Innovation is not an objection to providing universal care, it's an objection to some mechanisms for universal health care. I didn't defend the free rider problem, I said the it was real and asked for ideas on how to address it. I explicitly said I would support some form of governmental provided catastrophic insurance for when expenses exceed an individual's ability to provide for themselves. And conservatives (and some libertarians) typically grit their teeth and endure the free rider problem in national defense (the Euro's don't pull their weight there either) because the alternative is worse than the admittedly non-ideal reality - it's hardly limited to health care.

If a group of people went to a restaurant and agree to split the bill evenly, they will order differently than if they agree to separate checks. They'll order appetizers, top shelf liquor, etc. If you tell them it's on an expense account they'll really go wild.

To carry the analogy further, I don't have a problem in having people pitch in to cover part of the check for somebody who's hit hard times. But 1) we can't all pass the check on to someone else and 2) the person getting comped has a moral obligation not to order the surf and turf.

Nor do I find the fact that people are unwilling to spend their own money on preventive care to be a compelling argument for them spending my (or your) money on preventative care. There will always be finite resources - letting people set their own priorities is not only more just, it generally provides better outcomes.

If you look at corrective eye surgery, having people be responsible for their own bills has spurred innovation, reduced costs and improved outcomes. I'd prefer to see that model extended to more of health care, with accommodations made for those who can't provide for themselves, or who have befallen hard times. You seem to want to put it all on the national credit card and leave future generations with the bill, while simultaneously depriving them of future advancements. That's fine as far as it goes - you want someone else to pay your bills. Just don't fool yourself into thinking that it makes you a better person.
9.21.2009 10:14am
Dilan Esper (mail) (www):
To restate: Innovation is not an objection to providing universal care, it's an objection to some mechanisms for universal health care. I didn't defend the free rider problem, I said the it was real and asked for ideas on how to address it.

Well, one observation I would make about this is that this is a strange line for a libertarian to take. Usually, the way you deal with free rider problems is to eliminate the cross-subsidy so the free riders have to figure out how they want to pay for something.

Don't you suspect that if the US went to a national health care system and stopped picking up the tab, the market (in the form of international relations) would produce some solutions for the problem?

And conservatives (and some libertarians) typically grit their teeth and endure the free rider problem in national defense (the Euro's don't pull their weight there either) because the alternative is worse than the admittedly non-ideal reality - it's hardly limited to health care.

That's a reasonable point. But it sort of makes mine, too. Because in areas where conservatives and libertarians DON'T care for the policy proposals-- such as global warming-- free ridership becomes an inexorable objection to the policy.

Which means that this really isn't a debate about innovation. It's a debate about whether government run healthcare is something we should do.

Nor do I find the fact that people are unwilling to spend their own money on preventive care to be a compelling argument for them spending my (or your) money on preventative care. There will always be finite resources - letting people set their own priorities is not only more just, it generally provides better outcomes.

The problem is that preventative care not only potentially controls catastrophic care costs, but it is also just as necessary to live. Let's personalize this a bit-- what you are talking about denying to people is stuff like taking their kid to the doctor when the kid gets a cold, or providing a breast cancer screening to a 50 year old working class woman.

Your position, in reality, means waiting until the kid requires hospitalization for pneumonia or the woman gets cancer. And that's a terrible idea which can't be justified by saying "let the people allocate resources the way they want to".

This is why naked HSA's are a very bad idea. It's terrible to say that someone should die of breast cancer in the name of efficient allocation of resources.

If you look at corrective eye surgery, having people be responsible for their own bills has spurred innovation, reduced costs and improved outcomes.

Don't oversell this. You are certainly correct that in general, innovation benefits from Americans overpaying for health care costs. But it isn't as though innovation can't happen in nonfree markets. Lots of care for older Americans has been socialized through Medicare for decades, and yet there is plenty of innovation in care for elders as well.

I suspect there will be a nontrivial cost in terms of lost innovation in a socialized system. But there will still be lots of innovation.
9.21.2009 11:35am
Dilan Esper (mail) (www):
To use an example from 60 Minutes last night, there has been tremendous innovation in prosthetics, driven mostly via the socialized systems by which active duty servicemembers and veterans receive their healthcare. Most of the research was done by DARPA working along with the private sector.

So it isn't as though innovation stops without a totally free market.
9.21.2009 11:37am
SG:
Which means that this really isn't a debate about innovation. It's a debate about whether government run healthcare is something we should do.

Of course we're debating whether government run health care is something we should do. Did you think this was a discussion about something else? And in the course of debating that, we have to consider not just the benefits of any given proposal but also the costs. Among the costs of a single payer scheme is the impact on innovation, the loss of price signals, misaligned incentives and the like. You have weigh those costs against broader access to health care.

Given the complexity, any system you pick will have some winners and some losers. It's my opinion that a single payer system (what I infer your preferred option to be) will have greater downside than upside - more people will be harmed due to lost innovation, misallocated resources, etc. than will be helped due to broader access. Other issues I have with a single payer system is that health care funding priorities will inevitably become politicized and it will greatly change the relationship between citizens and the state. Also that we're highly likely to leave future generations with a monumental debt load incurred to pay for our current consumption. It's highly unfair intergenerationally.

Don't you suspect that if the US went to a national health care system and stopped picking up the tab, the market (in the form of international relations) would produce some solutions for the problem?

No, I don't expect other nations to pick up the slack, nor would I actually expect costs to US consumers to drop (much) even if other nations did. Companies will charge what the market will bear. Rather, if other countries did have freer markets with proper incentives, I would expect more capital to flow into medical markets as returns would be greater. So while it is true that the US consumer subsidizes global innovation, it's not the case that the US consumer would see a cost reduction if the free rider problem were addressed. Instead we'd see more investment in innovation, with hopefully even more rapid advancement.

This is why I can't get worked up over the free rider issue in health care. If we think we're getting good value for our dollar, then it's worthwhile irrespective of what other countries might be doing. I think things would likely be even better if other nations were contributing, but that doesn't mean that we're getting screwed on the exchange.

Even if an international consortium were formed, I'd expect something more along the lines of the International Space Station, ITER, and the Large Hadron Collider than Medtronic and Merck. The track record of these sort of international science/engineering projects is not encouraging.

And also the issue with global warming isn't free ridership, it's that unilateral action simply doesn't help the problem - it likely makes it worse as more manufacturing would move from the relatively efficient US to highly inefficient China. Also it's not clear that any reasonably achievable emissions reduction (even globally) would have a meaningful impact. Unless you like wearing a hairshirt, there's no reason to pursue actions that make yourself poorer but don't meaningfully improve the situation.

what you are talking about denying to people is stuff like taking their kid to the doctor when the kid gets a cold, or providing a breast cancer screening to a 50 year old working class woman.


Do you actually know anyone with an HSA? I do, and I can assure you that they still take their kids to the doctor. I'm not talking about denying anyone anything. I don't support subsidizing routine care, but that's not even remotely denying anyone services.

Somebody ultimately has to pay for the health care that is consumed. I see no good argument for saying the person consuming the health care shouldn't be responsible for the cost of their consumption, at least up to some limit (especially given that the likely alternative is to stick future generations with the bill for our consumption.) We can't all shift the costs to someone else, and even trying to do is a recipe for overconsumption. Some people may not make the choices you think are best for them, but that is (or ought to be) their right as free people.

And for the record, it's generally accepted that preventive medicine, while improving quality and quantity of life, does not generally save money. Doesn't mean it's not worth doing, but I'm willing to trust people to make their own decision on when it's worthwhile to them. And if it's not worthwhile to them, how does it become imperative that someone else be made to pay for it? The reasoning needed to reach that conclusion completely eludes me.

So it isn't as though innovation stops without a totally free market.

I haven't claimed that it would stop completely. The US Military is still innovative, although it's innovation ungodly expense and remarkably slow compared to the private sector. And of course the military has an incentive (other nations) to innovative. But I'm not sure what incentives a single payer health plan would have other than reduce budget. I certainly don't see quality of life improvements getting much funding.
9.21.2009 1:02pm
Dilan Esper (mail) (www):
And for the record, it's generally accepted that preventive medicine, while improving quality and quantity of life, does not generally save money. Doesn't mean it's not worth doing, but I'm willing to trust people to make their own decision on when it's worthwhile to them.

I think we've aired most of it, but I want to focus on this. Part of the problem is that health care has collective effects.

Obvious ones include publicly funded care (and I take it that you don't, for instance, want to turn poor people away from emergency rooms) and communicable diseases. Less obvious ones include loss of GDP due to people getting sick, and competitive disadvantages for American employers who have to pay for health care benefits.

So you can't really say "I'm willing to trust people to make their own decision on when it's worthwhile to them". If people don't get preventative care, and they get sick, we all pay. We lose GDP. Your kids may get sick from them. And you may have to may higher taxes to pay for them at the emergency room.

This is why it is a really dumb idea to encourage people to consume less routine health care by making them pay the full cost of it out of an HSA, even if you decide that the health harms done to the patients shouldn't be considered because people ought to be able to bear the risk of their own decisions.

Health care really is a collective good as well as an individual good. And libertarian solutions don't do very well with collective goods unless you really can get the market to work to provide the good. And that doesn't work in health care, for all sorts of reasons.
9.21.2009 2:24pm
SG:
Your suggestion that we need to socialize individual health care consumption in order to improve GDP is, to put it politely, highly counter-intuitive.

With the exception of infectious disease control, health care is simply not a collective, or public good (it is neither non-exclusive nor non-rivalrous). Your definition of collective good (has collective effects) is rather idiosyncratic. Under that definition, everything is a collective good. The gas I purchased this morning? In addition to enabling me to get to work, it kept me from running out of gas and blocking a lane of traffic, which would have had untold impact during rush hour. Clearly gasoline must be a collective good, and therefore everyone's gas purchases should be subsidized. I think a $10 gas copay, regardless of how much any tank holds, would be appropriate. I can't see any negative effects from such a policy, can you?
9.21.2009 5:39pm
Dilan Esper (mail) (www):
With the exception of infectious disease control, health care is simply not a collective, or public good (it is neither non-exclusive nor non-rivalrous). Your definition of collective good (has collective effects) is rather idiosyncratic. Under that definition, everything is a collective good. The gas I purchased this morning? In addition to enabling me to get to work, it kept me from running out of gas and blocking a lane of traffic, which would have had untold impact during rush hour. Clearly gasoline must be a collective good, and therefore everyone's gas purchases should be subsidized.

It's a matter of degree. The number of people running out of gas and clogging up the roads is trivial. On the other hand, the pollutants that your car emits are not, and as a result there is a collective interest in that (and we have various pollution control regulations relating to cars).

We spend quite a lot of public money on emergency rooms, and there are studies that show that the loss of worker productivity due to employee sick days is not trivial. And most trade economists say that we lose a significant amount of jobs as a result of higher labor costs associated with employers bearing health care costs. (Indeed, one GOOD thing about conservative health care proposals is they do attempt to sever the relationship between employment and health care, and one BAD thing about Obama's plans is that they may entrench it with employer mandates.)

The point is, this really is a collective enterprise for all sorts of reasons, and to a much greater degree than someone running out of gas on the highway. Libertarianism sometimes has trouble with degree-vs.-type problems, and this may be an example of that. Two things may fall in the same formal category, and yet one may justify regulation whereas another may not due to degree. Health care exemplifies this.
9.21.2009 6:52pm
SG:
I'm afraid your definition of collective good is not consistent with my understanding. It's not simply a question of degree, it's whether it's rivalrous and exclusive. The type of health care you're talking about is not a collective good as I understand the term. I think the term you're looking for is externalities, but the existence of an externality does not imply a collective good.

But as far as someone choosing not to go to the doctor for preventative health care, that's pretty low on the list of externalities. My sense is that subsidizing all those visits will have greater externalities than the skipped visits.

Here's my argument: health care is expensive, therefore it must be somewhat scarce (supply and demand). Subsidizing usage will increase the demand. so it will become more scarce and harder to obtain (none of the reform bills up for debate actually provide more health care providers. Some may reduce the number...) Therefore, you've reduced people's in need's ability to receive health care in favor of those who, via revealed preferences, didn't feel they need it. That just doesn't seem like good policy.

To the extent that you're saying that our current health care financing model is non-ideal, we're in agreement. It's when you take the next step and conclude that we must socialize everyone's health care costs, even for people who have the means but don't find enough value in it to pay for it themselves that you take the argument into a very strange place. It's a place I just simply can't wrap my head around.
9.21.2009 10:20pm
Dilan Esper (mail) (www):
I'm afraid your definition of collective good is not consistent with my understanding. It's not simply a question of degree, it's whether it's rivalrous and exclusive.

You are way too obsessed with formal categories, and way too unconcerned with substantive realities.

In reality, the health care issue affects us collectively, for the reasons I pointed out. The fact that libertarian theory can't isolate the REASONS it affects us as important tells us a lot about the inadequacies of libertarian theory and very little about the health care issue.

Here's my argument: health care is expensive, therefore it must be somewhat scarce (supply and demand). Subsidizing usage will increase the demand. so it will become more scarce and harder to obtain (none of the reform bills up for debate actually provide more health care providers. Some may reduce the number...) Therefore, you've reduced people's in need's ability to receive health care in favor of those who, via revealed preferences, didn't feel they need it. That just doesn't seem like good policy.

You are assuming that health care works the same way that demand for widgets in an economic textbook works. It doesn't, for several reasons:

1. There is a baseline of care that everyone agrees should be socialized (i.e., not letting people die who go to the emergency room). This costs a lot of money and means that costs we control elsewhere in the system show up here.

2. Preventative care is a potential substitute for some catastrophic care; it also will make people's lives beter, even if their subjective preferences don't reveal this.

3. We have already distorted the market in various ways that make a totally free market contrary to the settled expectations of the middle class. You and I would probably agree, by the way, on the various ways in which this happened and how unfortunate they are (ahem, employer tax subsidy). But they are there, so now you have a middle class that expects to have decent health insurance and feels very insecure about losing it.

This is part of the case for socialized medicine. Socialized medicine addresses all three of these points, in addition to addressing the moral issue of people who can't afford basic health care and the collective aspects of health insurance. HSA's, in contrast, do not and in fact make some of the problems worse (although, again, I can imagine systems involving HSA's that would work extremely well-- I just haven't seen a lot of interest among conservatives to those sorts of systems).
9.22.2009 2:03pm

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