The healthcare flap

[jducoeur]

It occurs to me that I really haven't talked about this mess. Not to get too deeply into it, but here's an opinion from the armchair economist.

First: the various proposals from the Democrats would all, to greater or lesser degrees (mostly greater), be subject to the Law of Unintended Consequences. There will be lots of problems, and it will take a fair number of years to iron them out. Let's be clear that nobody's got a panacea here.

That said, the current system for health management is very close to the *worst* model I can envision. So I'm pretty strongly pro-reform, because I'm pretty sure that any of the proposals seriously on offer would be improvements. Not perfect -- but improvements.

As for the objections from the Republicans, let's talk briefly about a few of them. (I'm going to ignore Palin's "death panels" idiocy and other distractions, and only talk about the objections that are actually substantive and based on the proposals.)

First, there's the point that this will cost the government more. Absolutely true. Even if it doesn't provide universal coverage, it *will* cost the government more. That said, most of the serious proposals will likely cost the *public* less, at least in the long run. Yes, more of that money will be funneled through taxes, so it will be more obvious, but that money is already coming out of your pocket -- it's just being deducted from your salary now instead. I don't have much respect for the notion that taxes are somehow more evil than other forms of taking my money, and I think having it all be more overt and straightforward is far better (and much less economically distorting) than the slapdash system of hidden subsidies and invisible taxes that we have now.

Then there's the public option, and the notion that it would cause the death of the private insurance industry. Again possibly true, but a far weaker argument than they'd like to make it sound. This argument is predicated on the notion that monopolies are fundamentally less efficient than non-monopolies, so this will in the long run necessarily be a disaster. I'm sorry, but that just ain't true. It's true that it's a statistical danger, but oligopolies (which is more or less what we have now) are also pretty good at being inefficient. We don't actually have a competitive market in health insurance now, because of the indirection between payment and provision of services: nobody has any real *incentive* to be competitive. And a decently-run regulated monopoly (which is approximately what we're talking about) is capable of certain efficiencies that the current model can't get. Put all that together, and I'm afraid that my reaction is mostly, "Yes, it might kill private insurance eventually, because it works better than private insurance does. So?"

Finally, there's the "creeping socialism" argument. This one really is just plain weak. It's economics as religion, and I refuse to play that game. Anyone who fails to grasp that the US *is* a socialist country (as are most developed Western economies), and has been for fifty years, hasn't been paying attention. This is one of the instances where centralization likely works better, based on the evidence we have from pretty much every other country in the developed world. I may prefer markets when they work, but I'm not very interested in the idea that they are *morally* better, which is essentially what the Republicans are predicating their arguments on.

It is possible that there is a market-based solution that would work better than either the current model or what the Democrats have proposed. But the Republicans really haven't offered that: at best, they've offered very slight tinkering, that does nothing to address the underlying economic foulups of the current system. So far, we have the current system (possibly slightly tweaked), and the various Democratic proposals. Of those proposals, the more extreme ones, that include a *strong* public option, are the more plausible ones economically, and they're the ones I would most like to see implemented. They make sense, they're conceptually *far* more straightforward and workable than what we have now, and they're overall much realer than the fantasies that the Republicans have been cooking up.

(And I should be clear here: IMO, simple single-payer *is* probably the best approach of the ones that have been discussed. But I'm not spending a lot of time on it, because I don't think there's politically any chance of it happening any time soon. We make do with what we can get...)

Comments

[hugh-mannity.livejournal.com]

The thing that bothers me most about the current democrat plan is the amount of control over health care that it will give to the government.

Now, I appreciate that the HMOs etc. already have a huge amount of control over who gets what, but you can sometimes do an end run round them. You can sue them, you can shift to a different company, it takes time and money, but it can be done.

However, it looks as if the way things are being written that there's be no alternative to doing what the government tells you. Especially as they seem to be setting things up so that if you don't do what you're told the IRS can come after you.

I've got a huge post on this issue in the works... one of these days I'll finish it.

[jducoeur]

I'm awfully skeptical about this line of thinking. Yes, it is *sometimes* possible to win *some* of that battle. But they have an extremely easy response: freeze you out of the system, at which point you pretty much lose. Again, this is normal oligopolistic thinking.

I'm a moderate skeptic about big institutions. I have a fair dislike of Statism, but I've got a pretty equal one of Corporatism, so I see the changes as largely a wash in that regard. Again, if there was a genuinely competitive market I might feel differently, but I see little sign that that's true, largely because of the disconnect in the way payment and provision of services works. (The check on Corporatism is competition. But that only works if the market works, and health insurance is the single best example of market failure I know.)

And while it's *certainly* true that the government could wickedly and bureaucratically control our lives, let's get real: that's already true. But we have a *lot* more control, collectively, over the government than we do over the corporations.

Indeed, let me be clear: I am not at all seriously worried that the government will start denying people needed services. Get real: that's political suicide. I am *far* more worried that they will fail to come to grips with the cost-cutting measures needed, precisely because of those politics. I *do* think they might reduce the amount of junk medicine (especially the "tests and pills" reflex) being practiced, though, and I don't have any problem with that: much of the problem is the way the current system is structured around a three-year-old's "I Want It!" reflex, with little sanity-checking about what makes any sense at all.

Ultimately, I'm an empiricist here. The plain fact is that, by almost every reasonable measure, our system is a flat failure compared with the, yes, more socialist approaches taken in most other Western nations. I can believe that a system better than theirs exists, but I see little reason to hold onto ours when it is so clear that theirs work better...

[hudebnik.livejournal.com]

it looks as if the way things are being written that there's be no alternative to doing what the government tells you

Well, that is sorta what governments and laws are about: if you don't do what the government tells you, they lock you up or fine you or whatever. The question is how much is being made compulsory in the plans currently under discussion.

A few Democrats are still pushing for single-payer, on the (reasonable) grounds that a lot of other countries have tried it and gotten it to work cost-effectively, but Obama and most of the party have dropped that, on the (also reasonable) grounds that it would put insurance companies out of business, so those companies will say and spend whatever it takes to defeat it.

The leading plan(s) leave the current insurance industry intact, with one more (big) competitor in the market. If the insurance companies offer what the public wants, at a price the public is willing and able to pay, the public won't switch to the government plan, and you won't lose any of the choices you currently have. Indeed, you'd have more choice, because all the current plans would make it easier to switch companies than it is now.

If the insurance companies don't offer what the public wants at a reasonable price, and the government does, people will switch to the plan they like better, and it will gain market share; that's the way a free market works. The only way to get from this plan to "no alternative to the government plan" is if the government plan works well and the private sector is unwilling or unable to adapt and compete -- exactly what free-marketeers say can't happen.

The "public option" would have one competitive advantage and one disadvantage relative to (most) private insurers. The advantage: it's non-profit and run by civil servants, so it doesn't have to pay dividends or multi-million-dollar executive salaries. But the private sector could do those things too, if it chose. The disadvantage: a big insurer or retailer can negotiate with drug companies for better prices, and the government is currently forbidden to do that. Whether that anti-competitive rule is incorporated into the final bill, we won't know for a while.

One thing is likely to be made compulsory that isn't now: you must have some form of health insurance, just as if you drive a car, you must have car insurance. There are two reasons for mandatory health insurance. First, the people who would choose to opt out of the system would be the healthiest ones, and the system would be financially unsustainable. The whole idea of insurance (health or otherwise) is that a lot of people who don't turn out to need it pay a little bit so the few who do are covered.

But that argument by itself doesn't mean health insurance should be mandatory and universal, only that (like any other insurance) it'll work better the more people are included. What makes health insurance different from other kinds of insurance is that you already have it, in the sense that if you were in a car accident and were taken unconscious to an emergency room, they would treat you (at least minimally) regardless of whether you could pay for it. Since this only applies in emergencies, any Econ 101 student can predict the result: people choose not to buy insurance, and postpone routine medical care until their problems become emergencies. The U.S. has the worst of both worlds: we've socialized the most expensive, least efficient part of the system, and left the rest to the free market. If you want a "free market" approach to health insurance, you have to ensure that people who don't pay for it don't get it, e.g. with an indelible tattoo that says "Do not treat me for medical emergencies." I don't think I want to live in that world.

I look forward to seeing your "huge post on the issue."

[dsrtao]

The line of opposition I have seen goes as follows:

- I don't want the government taking more of my money.
- The government can't be more efficient than the market.
- People will commit fraud and waste the money.
- The health care system isn't broken because I've got insurance.
- I feel no obligation to help other people.
- Nobody deserves health care unless they had the foresight to earn it and pay for it.


When it got to "I suppose we could let people have health care if they are sterilized first" I left the argument.

[jducoeur]

Yep -- very primal and often very selfish. It's a sad parody of the Republican party's heyday, which (while never perfect) had a pretty optimistic and expansive tone to it...

[meranthi.livejournal.com]

- The health care system isn't broken because I've got insurance.

I think this is probably the biggest issue. So many people just don't see that there's a problem because they don't have one.

[qarylla.livejournal.com]

Except there are plenty of people who have insurance who still can't afford the care they need (or feel they need).

One of the things I remember from some of the Canadian blogs I read is that while there is the government health care system there is also health insurance available for people who want it. If it lowers costs for most of the people without unduly making it harder on the population as a whole, then it can't be any worse than it is now. I just started a new job when I broke my knee, and my insurance paperwork wasn't all filed yet. I needed free care, but my temping before hand put me just outside of the bracket.

I feel that health care is one of those issues where people put their heads in the sand. Just because I don't have a problem doesn't mean there isn't a problem that should be solved.

[doubleplus.livejournal.com]

I think you're close, but it's not just heads in the sand. The polls that show that most people are satisfied with their health coverage also generally show that satisfaction goes down in proportion to how much they've had to use it. That is, people who never have to deal with their insurance company are likely to see horror stories as aberrations which won't happen to them because they're covered.

This is head-in-the-sand, but not obviously so -- for example, if you hear about other people having terrible problems with your car model, but you love yours and have never had trouble, you're likely to assume they've just had bad luck, and you could be right. Until you have the experience, it's hard to know which is the typical experience.

The overall data for health care satisfaction pretty clearly illustrate that the problem is real, but without that, it can still be hard to recognize from your piece of the elephant until it's too late.

[jducoeur]

To be fair, we've had largely the opposite: we got very good service from our insurer when it mattered most. (Assisted by a doctor's office that was well experienced in negotiating the ins and outs, who cut through the red tape for us quite effectively.)

But that was a relatively expensive policy (perhaps not quite the "Cadillac plans" being railed about, but well above average -- we got lucky in our timing), and an exceptional doctor. I'm under no illusions that this is the norm, and am currently experiencing the pain of a somewhat high-deductible plan, and the way it makes one pause before doing stuff that ought to be routine...

[paquerette.livejournal.com]

You forgot about the loss of personal freedom. If I choose not to receive prenatal care from an obstetrician, or a yearly mammogram, or to wean my baby so I can take RA drugs that will stave off the progress of the disease, what will my punishment be?

[doubleplus.livejournal.com]

Do you have any evidence there will any punishment? The mandates in the bills that I have read are that providers must cover certain set of things and that you must have coverage. There's nothing I've seen that requires you to use it.

[paquerette.livejournal.com]

There's nothing in there about "non-compliant" patients? I thought that I read a quote about that somewhere. Can't find it now, anyway.

[doubleplus.livejournal.com]

There's one mention of "patient noncompliance," but it specifically refers to followup with patients discharged from hospitals to try to make sure they're following discharge instructions that will help them avoid ending up back in the hospital. And it's only about funding to hospitals for such efforts, not government enforcement. (From what I've read, this is one of the many areas where our current system perversely doesn't encourage cost-saving -- hospitals get reimbursed for procedures, not for good outcomes, so it's hard for them to get reimbursed for post-discharge followup, but easy to get reimbursed if the patient has trouble following their instructions and ends up back in the hospital.)

[jducoeur]

I'd be careful about out-of-context quotes: there is a *vast* amount of disinformation out there about the proposals. (And no, I don't mean "misinformation", I mean blatant distortions, sometimes outright lies. It's one of the most depressingly cynical bits of politics I've seen in some time...)

[alexx-kay.livejournal.com]

Have you read Charles Stross's take on this?

[jducoeur]

Interesting article. I don't entirely agree -- IMO, the crux of the problem is simple selfishness, which has been raised more or less to the position of religious principle by the right wing's strange variant of libertarianism. But he's right that mercy as a concept gets all-too-often treated as a quaint luxury that has no place in modern politics, and that's somewhat between "damned shame" and "criminal abuse of the body politic"...

[dlevey.livejournal.com]

The current model isn't woefully inefficient, just moderately so. The problem is that this line of efficiency is in accordance with their goal, which is to make money and NOT to keep you healthy (except as how that enhances goal #1). They make money by NOT paying, or by paying less. What we as customers are looking for is in direct opposition to their goal. Since it's something that most people decide we need, it's not as if we'll decide to do without or be able to shop around for a better deal (which can't be had), especially in MA. Currently, they have us where they want us, and they know it.

The only way I can see to deal with such a conflict is to bring the two goals more closely in line. I don't foresee the American public lining up to simply hand money over to large corporations for no return, so the other alternative is to reduce the drive for the profit so that the goal #2 can take precedence. I don't see any modern corporation intentionally and significantly cutting its long-term profit out of charity.

If this were coupled with some form of tort reform, wherein doctors within the program were protected to a greater degree, we might see more buy-in.

[jducoeur]

Yep, all correct. That's the political Catch-22 to the situation: the Democrats are decently motivated to fix *most* of the problem, except the tort-reform one. The definition of a good compromise is often that it's painful to all parties: this is the piece of pain that I rather wish they could be forced to swallow...

how inefficient are we?

[hudebnik.livejournal.com]

The current model isn't woefully inefficient, just moderately so.

Are you sure? Last I checked, the U.S. spent not only more money per capita on health care than any other country on Earth, but over twice as much as the second-place runner-up (which I think was Canada). Research needed....

Re: how inefficient are we?

[dlevey.livejournal.com]

Hmm... Just how inefficient is it - at transferring money to insurance companies (and, to a degree, practitioners)? I'm not saying at all that it's efficient at delivering healthcare, but that isn't the goal of the current system.

Re: how inefficient are we?

[hudebnik.livejournal.com]

Good point :-)

Single-payer

[hudebnik.livejournal.com]

I've heard one (to me) good argument against single-payer: I can easily imagine Executive Order 1 by each Republican President being "Abortion is no longer covered," and Executive Order 1 by each Democratic President being "Oh yes it is." Abortion isn't the only issue, of course: stem cells, fertility treatment, addiction treatment, and any number of things (some of which we haven't heard of yet) could easily be political footballs.

I don't know how other countries that have single-payer have handled this issue: perhaps medical ethics are just less politically charged in most of those countries.

Re: Single-payer

[jducoeur]

Yep, fair point. The decision of what gets covered would need to be depoliticized as much as possible, probably by moving it out to a slow-moving bureaucracy. (Which would impose its own costs, and wouldn't be 100% successful, but would at least make this sort of tit-for-tat abuse harder...)

Re: Single-payer

[cellio]

This is my big concern too. Think of all the trouble caused now by pharmacists who refuse to do their jobs because they don't approve of those drugs for those people and multiply it. I can find another pharmacist more easily than I can find another country.

Back to the original post:
Our current system is broken -- no doubt about that. I think we get one chance to fix it; screw it up and the response to trying again will be "you screwed it up last time; why should we let you try again?". So while a lot of the arguments against are vapor, I'm not sure that the advocates of this proposal actually have a solid plan. That most Congressfolk haven't even read it does not instill confidence.

We need to neither sit on it nor rush it. I wish I had something more specific to say.

[rickthefightguy.livejournal.com]

If you haven't read it, this article is essential reading in my opinion:

http://www.newyorker.com/reporting/2009/06/01/090601fa_fact_gawande

Of course, single-payer probably doesn't actually solve this problem, though socialized medicine could, as could complete elimination of insurance and going straight to 'person receiving the care pays for it out of pocket'. Interestingly, complete opposite end ideas.

And for all those folks who rail against the mere mention of socialized medicine, I am pretty happy with my socialized:
1) National Defense
2) Garbage Pickup
3) Law Enforcement
4) Firefighting
(well, not in that order, maybe, but on the whole I don't want any of those privatized.)

[jducoeur]

Yeah, that's pretty much the essence of my point. "Socialism" is a bogeyman that gets invoked rather arbitrarily by the right wing, but the reality is that government centralization is not *inherently* a bad thing. It carries definite costs and risks, and those costs and risks need to be weighed carefully, but they are not infinite. In many cases, the government-based solution is the least-bad one, and in those cases it is appropriate to run things that way. And so far, I haven't seen a good counter-argument to the notion that healthcare is one of these cases -- all the available evidence says that it is.

(As for the opposite-ends solutions: yep. What they share in common is more straightforward economics. The heart of the problem is those nasty indirections in the current scheme, with too much distance between payment and provision...)

[kiya]

My cynical theory: as long as we're talking about getting people health insurance (which is axiomatically a money drain for everyone who isn't in insurance*) as opposed to health care, we'll be woefully inefficient.

* Insurance theory: everyone puts some money in the pot against the chance of $HORRIBLETHING, so that when $HORRIBLETHING happens to the couple of people from the pool that will be unlucky enough to get hit with it, there's a supply of dedicated resources to help them out. The costs of $HORRIBLETHING mitigation are spread out around this pool so nobody has to risk the full financial brunt of the action.

Health insurance practice: you pay money against the chance that you get sick, injured, or frail. You will get sick, injured, or frail eventually by the basic actions of physics and biology. There is no risk distribution available; flu season exists in cyclical time. You may not get cancer, but that's not the only medical care that exists - and if you do get cancer, the insurance companies will work really damn hard to get you off the rolls - I read this story recently about the shit they pull and got even more pissy about it.

The only way of making an insurance model that actually addresses risk distribution is one in which at least basic inevitable care, preventative medicine, and maintenance medicine (which reduces costs overall, and which many people skip because of no insurance/inadequate insurance) is handled without (significant, likely) out-of-pocket cost, and insurance coverage is only dealing with medical $HORRIBLETHINGs or additional perks. Which is a fairly common system in the civilised world....

End *.

I'm not even getting into the way tying insurance coverage to employment stifles innovation and economic growth right now ....

The public option: the good and the bad

[pryder]

One reason we really need a public option is that without it, there will be people who will fall through the cracks and not get adequate coverage. It will ALWAYS be in the best interest of a private insurer to somehow get out of covering the people who are most likely to have expensive health problems and/or somehow get out of paying for those expensive problems. As things stand now, there are people who either can't get any insurance at all, can only get insurance at ruinous rates, or can only get insurance that won't pay for the main things that they want the coverage for in the first place.

The big problem with having a mixed system is that the public option will become a dumping ground for all the undesirable customers. The private insurers will skim the cream of the insurance pool by offering good rates and/or plans for the people they want to cover, and reject the others. We could easily end up with a scenario where we are subsidizing big profits for the insurance industry (with a scenario where they could undercut the public option by 10% to attract customers, but only take the customers that will cost 25% less to insure) and at the same time incur big costs in the public system.

So, you ask, why won't the private insurers compete and thus end up offering the people who cost 25% less to insure a 25% lower rate? Because health insurance is an oligopoly market; there are too few sellers for a really free market to exist.

And none of this addresses the problems of tying health coverage to employment. As things stand now, it's a prime reason for age discrimination in employment; all else being equal, employers prefer to hire younger workers who are cheaper to insure. We could see further effects in the future: employers imposing severe restrictions on employee lifestyle to try to keep down insurance costs, employers refusing to hire people who seem likely to be costly to insure (maybe even based on surreptitious DNA tests at interviews!).

I think a single-payer system is what we will ultimately have to have. I am saddened by the fact that it isn't even on the table in the current debate.

Re: The public option: the good and the bad

[jducoeur]

The big problem with having a mixed system is that the public option will become a dumping ground for all the undesirable customers.

True, although a well-designed public option ought to also have some compensating competitive advantages. Exactly how *much* advantage depends very strongly on how it's set up: the Medicare vs. Co-ops debate matters more than most people think, I suspect, since it probably affects the legal status of the option and therefore how much CYA overhead it incurs. (There was an article on NPR the other day about this: IIRC, it cited Medicare as having administrative overhead of only about 20% that of a private insurer, because it doesn't need to spend as much time dealing with legal complexities.)

But yes, you're right that selection biases in who gets insured by whom could make things messy here.

I think a single-payer system is what we will ultimately have to have. I am saddened by the fact that it isn't even on the table in the current debate.

Yeah, but it's really not surprising. The centrists (which include Obama, for all the "most liberal Senator" claims about him) are pretty clearly of the opinion that single-payer is politically untenable, and are probably right: it faces over half a century of the "socialized medicine" bogeyman. So they have no incentive to talk about it -- it would simply be a distraction. And anybody who *does* talk about it is destined to draw the full fire of the right wing for doing so (and get blamed by the centrists for inducing that distraction), so no practical politician will.

Truth to tell, I suspect that some folks on the left are hoping for precisely the "doomsday scenario" that the right wing is predicting: that the public option will put the private insurers out of business, and we'll wind up with single-payer via the back door. I'd say that's plausible, if far from a certainty...