Ben Smith Doesn’t Understand How Insurance Works

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Tod Kelly

Tod is a writer from the Pacific Northwest. He is also serves as Executive Producer and host of both the 7 Deadly Sins Show at Portland's historic Mission Theatre and 7DS: Pants On Fire! at the White Eagle Hotel & Saloon. He is  a regular inactive for Marie Claire International and the Daily Beast, and is currently writing a book on the sudden rise of exorcisms in the United States. Follow him on Twitter.

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280 Responses

  1. Avatar Morat20 says:

    I guess Ben Smith doesn’t realize that the young man today will be old tomorrow. (Metaphorically speaking). Paying higher rates in my 20s so I can have vaguely affordable rates in my 60s sounds pretty good.

    Lifetime averaging of health-care costs seems…common sense.Report

  2. Avatar Murali says:

    it’s the very definition of insurance.

    Except this definition may only work in the US. In Singapore, they adjust your premium for health insurance to your health status prior to signing up. At least in Singapore if not in other functioning markets, health insurance AFAIK is less about risk pooling and more about transforming risk. i.e. you turn rare but catastrophic events into more regular manageable events. Which is why young people can sign on for a decent plan at $50 a month. Though AVIVA offers pretty cheap ones at $8 – $16/mth which still manage to cover the kinds of catastrophes that young people are most likely to get into. i.e. auto accidents, training incidents, death, disability etc. Not cancer or diabetes.Report

  3. It’s Ben Smith.

    Out of your two possibilities, I’d say his editors think 1. while the reality is 2.Report

  4. Start smoking in bed and leave your stove on when you go to work.

    I’m waaaaaaaay ahead of you.Report

    • Avatar Stillwater in reply to Russell Saunders says:

      Heh. I’m curious about this: Do any of our libertarian minded friends think that insurance itself sets up improper incentives? The idea came up on a previous thread and now I’m wondering if anyone takes that idea seriously. (Certainly not Roger, I would guess.)Report

      • Avatar Murali in reply to Stillwater says:

        Yes I do. Certain kinds of insurance especially those which have low deductibles and cover almost any amount of treatment for whichever conditions it covers encourages a buffet mentality. Having paid their premiums, the incentives are in favour of consuming even if the marginal benefit is really small.I’m sure Roger feels the same way too which is why his preferred model is of HSAs and not health insurance as primary model of payment.Report

        • Avatar Jason Kuznicki in reply to Murali says:

          This. It’s always possible to set up an insurance system of any kind that creates perverse incentives.

          The pre-Obamacare U.S. system certainly did so, and I expect the post-Obamacare will do likewise, only that it will cost a great deal more.Report

      • Avatar RTod in reply to Stillwater says:

        I’m not a libertarian, of course, but insurance can absolutely set up negative incentives.

        I think you can make an argument that health insurance added to our society being willing to move to a far less healthy diet, for example. Or on the flip side of that coin, people are far more likely (for example) to OK costly and potentially damaging back surgeries rather than go the slower (but longer and harder) route of exercise, strengthening, change in diet and PT.

        More indirectly, the prevalence of auto and home & renter insurance has led to most metropolitan police departments doing little or nothing to investigate or prevent theft; mostly those departments now simply act as an administrative arm of the claims process.

        And I think one can make a fairly good argument that professional liability insurance (and therefore, a greater spread of deep pockets) has led to increased lawsuits – including silly ones.Report

      • Avatar James Hanley in reply to Stillwater says:

        Do any of our libertarian minded friends think that insurance itself sets up improper incentives?

        Of course it creates perverse incentives. The only meaningful question is how big the effect is.Report

      • Avatar Stillwater in reply to Stillwater says:

        Murali and Tod: that’s certainly what libertarians mean when they argue against certain types of incentive structures within insurance policies or programs. And I readily admit those types of things. The question I was wondering about was at a little bit deeper level: that the mere existence of insurance – not certain aspects of insurance – creates improper incentives.

        I’m sure part what I’m wondering about is motivated by the premise of Tod’s post: that insurance only works because the people who don’t get paid on claims (because they haven’t filed them) are effectively subsidizing those who do. If so, then isn’t there an incentive on any individual to file a claim? And if so, then isn’t the very concept insurance based on an improper understanding of incentives?

        Granted, the view sounds sorta ridiculous when stated like that, but it seems to follow from the premises. (I think anyway)Report

        • Avatar James Hanley in reply to Stillwater says:

          that the mere existence of insurance – not certain aspects of insurance – creates improper incentives.

          It’s the “certain aspects” that both make it insurance, rather than something else, and that creates the perverse incentives. I think you’re trying to split something that can’t be split–like divorcing the concept of bicycle from the presence of two wheels.Report

          • Avatar Stillwater in reply to James Hanley says:

            Does insuring your vehicle pervert the incentive to drive safely?

            I’m asking seriously.Report

            • Avatar James Hanley in reply to Stillwater says:

              Yes. Again, the question is to what extent, and I don’t know the answer to that. In the case of someone like me, the effect is probably overwhelmed by getting older and having children.

              So how can I say “yes,” so definitively? Because people respond to incentives. If I had the ever-present realization that I was going to bear all the costs of an accident myself, I’d surely be even more careful than I am, or even more likely, I would probably drive less than I do.Report

              • Avatar Morat20 in reply to James Hanley says:

                Really? Because, you know, I have car insurance and I have, never once, thought “Hey, let’s speed and drive badly! I have insurance! No big!”

                When it comes to health care, I also don’t think: “Hey, let’s do something dangerous because I have insurance!” because, you know, health care is at best unpleasant and at worst painful.

                The mere fact that I have insurance does not make a broken bone, for instance, any less excruitingly painful, nor the recovery any easier.Report

              • Avatar Kazzy in reply to Morat20 says:

                Morat20,

                A lot of it happens subconsciously. For instance, I engage in a lot of athletics. Basketball, running, weight lifting, and obstacles runs. I’ve suffered many minor injuries which required various amounts of expenditures, all covered primarily through insurance. If I had to pay out of pocket for these services, I’m sure my recreational hobbies would change. Why would I spend 3 hours running through cold water, climbing over walls, and doing other stupidly dangerous stuff if it could end up costing me thousands of dollars?Report

              • Avatar Stillwater in reply to Kazzy says:

                Why would I spend 3 hours running through cold water, climbing over walls, and doing other stupidly dangerous stuff if it could end up costing me thousands of dollars?

                If you have a catastrophic plan, injuries from those activities could still cost you many thousands of dollars…Report

              • Avatar Kazzy in reply to Stillwater says:

                Oh, sure. My point is only that my behavior IS impacted by the fact that I have insurance, even if it isn’t a conscious decision. I don’t say, “Oh yea, I’ve got Blue Cross/Blue Shield… I’ll go running on a bad ankle because what’s the worst that can happen?”

                But when I was without dental insurance for a few years? You can bet your ass I stopped opening beer bottles with my teeth.Report

              • Avatar Morat20 in reply to Kazzy says:

                I know many people without insurance who do all of those things and never consider health care costs.

                Because people generally don’t. We are, as a race, eternal optimists. Especially while young.

                It never crossed my mind, for instance. I never thought “I shouldn’t do this sport because [unlikely even X] will [cost me Y] that I don’t have”.

                I did the sport because it was fun.Report

              • Avatar Kazzy in reply to Morat20 says:

                But once you suffer injuries, and start to see the bills and have a brief panic and then realize you’re only on the hook for 10%?

                Or when you don’t have dental insurance and need a crown and have to pay $2,000 out of pocket?

                I could imagine not having a change in thought if nothing happens. But as soon as something does? It will change how a lot of folks behave.Report

              • Avatar James Hanley in reply to Morat20 says:

                Morat,

                It’s about marginal changes in behavior as much or more than big ones. No, you’re not going to consciously think, “I have insurance, now I can be afford to drive recklessly,” but at the same time you’re also going to be less conscious about the real cost of an accident because you won’t be bearing all of it. (The fact that you bear some of it, through pain of broken limbs, etc., is why this is a decision that happens at the margin, rather than being an all-or-nothing type of choice.)

                For example, as I noted, I might drive less often if I didn’t have insurance. Do I really need to drive the 5 blocks to Walgreens to get a tub of ice cream? I don’t worry about it too much, even though I know every time I get in the car and drive there’s a risk. Absent insurance, I might be a little less inclined to do it. That doesn’t mean I wouldn’t ever do it, but I might do it less often.

                The key is in thinking about behavior at the margins, not about big changes in behavior.Report

              • Avatar greginak in reply to James Hanley says:

                Also at the margins might be a choice between going to get that regular check up since its mostly covered by health insurance or using that spare cash to take the wife and kids out to dinner. Insurance can create incentives to make positive choices around the margins.

                I do agree that these discussions are often about behavior at the margins. To many people way oversell moral hazard, incentives, etc.Report

              • Avatar James Hanley in reply to greginak says:

                Too many people way undersell moral hazard and incentives, imo.

                And who ever implied that all the incentives were bad ones?Report

              • Avatar greginak in reply to greginak says:

                People tend to talk far more about negative incentives in my experience. They seem to be one of the more prominent and convenient criticisms of liberal type ideas. Doesn’t mean they are wrong but just negative incentives seem to be far more common to discuss. I commented in another part of the thread on this, but lots of people seem to feel positive incentives are often “nanny state” gov intrusions.Report

              • Avatar Murali in reply to greginak says:

                And the benefits of regular medical checkups are over-ratedReport

              • Avatar James Hanley in reply to greginak says:

                People tend to talk far more about negative incentives in my experience.

                Very true, imo. Whatever the ideological disposition, my casual observation is that most people, when they perceive a social problem, immediately think about creating negative incentives (punishments/sticks) rather than positive incentives (rewards/carrots). So if that’s an indicator of an innate human disposition, as I suspect, it would fit right in with people being more likely to notice, and worry about, negative incentives than to notice, and approve of, positive incentives.Report

              • Avatar Shazbot5 in reply to James Hanley says:

                I have had health insurance, lived under the despotic rule of socialized medicine, and lived without insurance and my behavior was not changed.

                Interestingly, if insurance distorts people to behave less healthishly (should be a word), and smoking is the one of the least healthy things you can do, shouldn’t low per capita rates of health insurance (by state or by country) yield higher rates of smoking by creating a perverted (much better than “perverse”) incentive to smoke?Report

              • Avatar Stillwater in reply to Shazbot5 says:

                You’re not thinking about this right ND. It’s the constant stress of not having insurance makes people want to light one up.Report

              • Avatar Aidian in reply to Shazbot5 says:

                They do. They’re just likely overwhelmed by other forces.Report

              • Avatar Dan Miller in reply to Shazbot5 says:

                Smoking is unhealthy in the long term, but unlikely to have terrible effects immediately. A better analogy is probably BASE jumping.Report

            • Avatar Jason Kuznicki in reply to Stillwater says:

              The research has been done, and the answer is yes. People will drive less safely whenever they perceive that the risks of driving unsafely have been mitigated.

              Here’s a key theoretical paper about moral hazard, with special attention to compulsory health insurance.

              Here’s an empirical investigation of bodily injury liability insurance for drivers. Here is the abstract:

              This article provides new evidence on moral hazard in insurance markets by analyzing the frequency of automobile bodily injury liability (BIL) claims. We conduct cross-sectional regressions of statewide BIL claims frequency rates on variables representing state economic, demographic, and legal characteristics that affect the marginal costs and benefits of filing claims. As an indicator of moral hazard, we use survey data on consumer attitudes toward various types of dishonest behavior relating to insurance claims. The results provide strong support for the hypothesis that attitudes toward dishonest behavior are related to BIL claims frequency, and thus provide evidence of significant moral hazard in automobile insurance markets.

              Report

              • Avatar Stillwater in reply to Jason Kuznicki says:

                Jason, thanks for the links. I just want to note, tho, that the “dishonest behavior” referred to in the abstract appears to be falsified and exaggerated claims during the settlement process, not that people are driving more recklessly.Report

              • Avatar greginak in reply to Jason Kuznicki says:

                Jason- This article seems to be looking more at “dishonest behaviors” in filing claims then ” i got insurance so watch me t-bone that prius.”Report

              • Avatar James Hanley in reply to greginak says:

                i got insurance so watch me t-bone that prius

                Yeah, that’s marginal behavior. That’s precisely what we’re talking about.

                You know, if you want to have a serious argument that we’re over-stating the effects at the margin, it really doesn’t help to engage in wild exaggerations and straw manning. It just makes a person wonder if you actually grasp the concept of marginalism.Report

              • Avatar greginak in reply to James Hanley says:

                Well i only have a marginal grasp of the topic.Report

              • Avatar greginak in reply to greginak says:

                But slightly more seriously, i was exaggerating for humorous effect. I didn’t actually suggest Jason believed people were going to do that. We can all take a sip from our favorite chill inducing beverage.Report

              • You are right, and I was wrong.

                But you want “watch me t-bone that Prius”?

                Well… I got “watch me t-bone that Prius”:

                This paper investigates the incentive effects of automobile
                insurance, compulsory insurance laws, and no-fault liability laws on
                driver behavior and traffic fatalities. We analyze a panel of 50 U.S.
                states and the District of Columbia from 1970-1998, a period in which
                many states adopted compulsory insurance regulations and/or no-fault
                laws. Using an instrumental variables approach, we find evidence that
                automobile insurance has moral hazard costs, leading to an increase in
                traffic fatalities
                .

                You may quibble that Priuses weren’t available in 1998, and I’ll concede the point. But it’s exactly the effect you were looking for, and that even free-market fan James Hanley thought was perhaps a strawman. But no, it’s real.Report

              • Avatar James Hanley in reply to Jason Kuznicki says:

                Oh, I don’t think increases in accidents and fatalities are the strawman. Just by driving more often, even I remain very careful each time I drive, I increase the chances of a traffic fatality. That’s the marginal effect I’m arguing for.

                It’s the “I have insurance so I’ve stopped caring about accidents, or even want to cause them on purpose” that is the strawman.Report

              • Avatar greginak in reply to Jason Kuznicki says:

                Well firstly let me state that i now feel an incentive for more quick jokey quips than writing 7 thoughtful paragraphs since i’ve received more response from my t-bone/prius line than stuff i’ve put more thought into. I hope you are happy now.

                I scanned the paper. I’d really want to see a lot more control for age and population and miles driven myself.Report

              • Avatar greginak in reply to greginak says:

                Oh yeah. Even if people have car insurance there is a cost to getting in accidents. Peoples costs go up if they are bad drivers, so wouldn’t that mitigate some of the moral hazard. They do get punished by doing bad it isn’t “free” just because they have insurance.Report

              • Avatar MikeSchilling in reply to greginak says:

                I thought you were channeling a right-wing talk show host. They really have it in for Priuses.Report

              • Avatar James Hanley in reply to greginak says:

                i now feel an incentive for more quick jokey quips than writing 7 thoughtful paragraphs since i’ve received more response from my t-bone/prius line than stuff i’ve put more thought into. I hope you are happy now.

                Damn. See, this perverse incentives stuff is a very serious concern.

                . Even if people have car insurance there is a cost to getting in accidents. Peoples costs go up if they are bad drivers, so wouldn’t that mitigate some of the moral hazard.

                Yes, absolutely. Marginal effects doesn’t mean there aren’t some other mitigating factors. It just means that this factor, by itself, holding all other factors constant, has a tendency to increase the behavior of interest by some amount. Other factors can overwhelm that particular factor, but at the same time, in the absence of that particular factor, the other factors might have an even greater effect.

                E.g., My age and the fact that I have kids undoubtedly have a greater (positive) effect on the safety of my driving than my having insurance has a (negative) effect. So on net, having aged, begotten children, and bought insurance has resulted in me being a safer driver now than I was 20 years ago. But still, in the absence of insurance I would probably be even a little bit safer, if only because I chose to put myself and others at risk less frequently by driving less often.

                It’s analytically necessary to consider each factor in isolation, so we can understand its independent effects, but it’s also necessary then to not assume only that factor has effects. It’s like taking a piece of machinery apart so you can understand all the individual pieces, but then putting them back together so you can see how they work together.Report

              • Avatar Stillwater in reply to Jason Kuznicki says:

                Jason, what’s interesting about the paper, to me anyway, is that compulsory insurance had very little effect on driving habits (on their own admission but especially given the other papers cited), but no fault did. And I say that as a person who is (or was, until this paper) a big fan of no-fault insurance. It’s a bit of a bummer.Report

              • Avatar Shazbot5 in reply to Stillwater says:

                Yeah, the paper (and there are others, as I search) suggests that “no fault” rules and perhaps more importantly a lack of torts in auto acidents weakens the incentive to drive safely, leading to between 6-10% more highway fatalities per year.

                (I also like no fault in the abstract, sadly, and maybe the pros outweight the cons of no fault, and maybe some more research needs to be done, but there is a problem with no fault here no doubt that needs be explored, and maybe they should be scrapped or revised to allow for torts and penalties -criminal negligence and civil fines- beyond what is insured in more circumstances.)

                But the existence of mandatory insurance is not shown to be a problem.

                But James is right that it is sort of obvious that insurance will make people feel safer (that’s what all the ads are about) which at least could make them behave more recklessly.

                Put simply,mwe need to insure people, but also incentivize them, which requires good policy, which requires us to be improving policy all the time. No fault might need to be modified (in a public way so that drivers kmow it) so as to allow more law suits against reckless drivers beyond what they are covered for to create more incentive to good driving. Something like that. Insurance companies will use that to try to screw people who weren’t reckless, but we have to fight those battles and legislate smartly to prevent insurance companies from doing so. (No fault might not be that smart legislation.)Report

        • Avatar Jaybird in reply to Stillwater says:

          Well, the problem, as I see it, is the transformation of insurance from making a bet with your bookie that something bad will happen to you (e.g., Major Medical) to first-dollar-coverage for pretty much everything more complicated than Mucinex.Report

          • Avatar Stillwater in reply to Jaybird says:

            Jaybird, that’s a nice summation of the problem. From my pov I think viewing insurance on the bet-with-a-bookie model means that some people won’t be able to afford to make the bet since the odds are so stacked against them. On the other hand, anticipated cost needs to be priced in and the market does a good job of that.Report

  5. Avatar Sam says:

    Tod, slow down. I can’t follow you here. Ben Smith said something was bad, but you’re saying that something is by design? And that all insurance for the entirety of time has worked this way? And that any idiot ought to recognize that fact, especially an idiot who reports on this stuff regularly?

    I need an aspirin.Report

  6. Avatar James Hanley says:

    I get this same reaction sometimes when listening to NPR’s Marketplace. In my more generous moments I chalk it up to the pressure of deadlines.Report

  7. Avatar Major Zed says:

    Life insurance rates vary by age. Auto insurance rates vary by age. Homeowners insurance rates vary by distance from hydrants or fire stations. Ignoring obvious risk factors is a political decision, not an actuarial one.Report

    • Avatar Stillwater in reply to Major Zed says:

      Sure. But I think Tod’s point about what constitutes a pool. Taking the concept of risk assessment in a pool its logical limit, insurance could be issued on the basis of a pool of one: each person constitutes their own “risk pool” and insurance companies determine a premium by an untrafinegrained analysis of risks factors. Insurance on that model would entail that old people would pay exponentially higher premiums than young people; folks with preexisting conditions would be effectively uninsurable (since the premium price would be prohibitively high); and folks who require expensive treatments could be dropped or see their premiums rise (correlated to the now determined risk) beyond their ability to pay.

      The concept of a pool is what makes the whole system work in any event. Obama’s proposal is to expand the pool to attain the benefits mentioned above.Report

      • Avatar Roger in reply to Stillwater says:

        Major Zed is 100% correct. The concept of insurance depends upon establishing actuarial rating groups based upon expected loss payouts. In a freed insurance market, it would make no sense to get younger insureds to subsidize older. It would actually lead to extremely perverse results, which I can elaborate if people are interested.

        And I won’t speak for Major Zed, but I am a subject matter expert (albeit in P&C, not health), having contributed to the design of millions of policies sold over the past few decades.Report

        • Avatar Morat20 in reply to Roger says:

          In a free insurance market, sick people and the elderly couldn’t GET insurance.

          The only people that could afford it would be the rich, and people who didn’t need it.

          Which leads to certain problems for society.Report

          • Avatar Don Zeko in reply to Morat20 says:

            The trouble is that there are too many people for whom medical costs are very easy to predict. If the country consisted entirely of healthy 20-somethings that only went to the hospital when they suffered accidents and the like, the free market would have no problem insuring them. But here in the real world, we have to insure diabetics and 70-year-olds too.Report

            • Avatar MikeSchilling in reply to Don Zeko says:

              Quibble: we need to treat them, not insure them. Roger’s right that using insurance as the paradigm for achieving universal coverage is a political decision, not a practical one. The Heritage Foundation has a lot to answer for.Report

              • Avatar Don Zeko in reply to MikeSchilling says:

                True, and I think that explains most of the talking-past-people going on in this thread. I suppose another way to put it would be that the free market can’t “insure” somebody who has 95% or 100% probability of making a claim in the next year for (insert large number of dollars here). Insurers can’t reasonable insure people with a 50% or 40% of major medical expenses either. But we, as a society want to have those people get some level of care without being impoverished, so we subsidize them. But because of path dependency and Heritage, we subsidize them by subsidizing insurance, rather than simply subsidizing care.Report

              • Avatar Stillwater in reply to Don Zeko says:

                One thing the market didn’t solve – and I think can’t solve – is the problem of preexisting conditions (and its corollary, rescission). From for-profit private insurance pov, old age is a preexisting condition. Not to mention lots and lots of other medical conditions. There’s just no money it.Report

              • Avatar Roger in reply to Stillwater says:

                It is a moot point now but there are recommendations for market solutions to pre existing conditions.Report

              • Avatar Stillwater in reply to Roger says:

                Don’t leave me hangin, Rog. What are they?Report

              • Avatar Roger in reply to Roger says:

                Sorry, I have been kind of living at the hospital last three or four days. Tending to a sick loved one.

                The basic idea is to include a feature that insures against deterioration in insurability. John Goodman has written lots of ideas on this issue.

                Or we could just follow my recommendations cut and pasted from the last time we talked health care last year:

                “1) I would recommend exploring ways to establish catastrophic care for extremely serious and expensive medical conditions. I would allow people to opt out of this with some very onerous requirements. This would be paid for via payroll taxes unless the fool opted out.
                2) I would recommend people buy their own insurance that meets their needs for routine, non catastrophic care. I would choose a high deductible and low premiums and few frills. Others can get low deductibles, high premiums and all the frills they would like. I would allow any company to sell any policy that people will buy as long as the company is honest and has proper reserves.
                3). I would encourage experimentation with guaranteed insurability and portability, so that people would not be harmed on their routine care premiums if their health status changed.
                4). I would subsidize the poor and elderly and possibly the sickly so that they could purchase the underlying coverage policy and pay their deductibles. Catastrophe coverage would be free or cheap as this segment does not work much or at all.

                I would add choice, competition, experimentation and all that wherever possible, and if this doesn’t work, I would just follow Singapore’s model.”Report

          • Avatar Roger in reply to Morat20 says:

            Not exactly. I could explain if you are ever interested.Report

          • Avatar Murali in reply to Morat20 says:

            We have the welfare state for a reason: to take care of sick people unable to care for themselves. I don’t really see the need to subsidise elderly care so much. IMHO people in the US consume way too much end of life care. If you want to look at one of the major sources of inefficiency in healthcare consumption in the US (and also one of the largest contributor to costs) look at elderly healthcare consumption.Report

            • Avatar Stillwater in reply to Murali says:

              Do we consume more actual end of life healthcare than the French or British or Canadians? One reason end of life care is so high in the US is because front end provider costs are so high. That’s certainly something that could change. But it’s cultural, ya know?Report

              • Avatar James Hanley in reply to Stillwater says:

                Do we consume more actual end of life healthcare than the French or British or Canadians?

                Only until the death panels kick in.Report

              • Avatar Murali in reply to Stillwater says:

                I don’t have the data on me, but I suspect that it is so. I suspect that doctors are faster to declare that a patient cannot be saved and just let them go. In the US they try as hard as they can to keep the patient going until they get to the bleeding edge of medical tech. I can’t remember where I read this, but my parents, who are physicians, may have mentioned differences in treatment philosophies between countries like UK, Canada or Australia and the US. AFAIK the NHS just will not subsidise some treatments (or maybe not even provide them. I can’t remember exactly which) because they cost too much to extend life by too little.Report

              • Avatar Shazbot5 in reply to Murali says:

                This isn’t about spending, but apparently, the U.S. fares badly on end of life quality metrics, and those commie Brits kick butt:

                http://www.eiu.com/site_info.asp?info_name=qualityofdeath_lienfoundation&page=noadsReport

              • Avatar Will Truman in reply to Shazbot5 says:

                Actually, according to that, we fare “okay” (tied with Canada in the top 10) while the UK is #1. The criteria, though, is somewhat subjective in nature. I think a fair amount of it can be chalked up to the different treatment philosophies that Murali refers to: we focus more on curative care than palliative care, which automatically is going to hurt our score in comparison to the UK. But that’s as much a value judgement as it is a difference in how health care is funded or markets vs. government.

                Palliative care is cheaper than curative care, so one would actually expect an inverse relationship between spending and how well a place would score on a metric that values palliative care.Report

              • For what it’s worth, I think the UK has the better of this argument. I think we should focus more on palliative care, or accept it. But that’s a cultural issue more than it is a systems issue (unless we tried to use the system to change the culture).Report

              • Avatar Brandon Berg in reply to Shazbot5 says:

                These kinds of indices should not be taken at face value. You need to understand which factors make up the composite and how they’re weighted, as the selection and weighting of factors typically reflects the authors’ own biases and preferences.

                Often these types of indices are constructed such that a country gets a higher score for having a more socialized health care system, not because socialization produces superior outcomes, but because degree of socialization is actually one of the metrics making up the composite. This was the case with those WHO rankings that were going around several years back, and it appears to be the case here as well.Report

              • Avatar Shazbot3 in reply to Brandon Berg says:

                “These kinds of indices should not be taken at face value.”

                Agreed. I just meant that there is not much evidence that we get much for end of life care. I am also unsure if the evidence says that we spend a higher percentage of total healthcare dollars on end of life care. (Am interested if you have the data.)

                BTW, What about international standardized test scores as an “indices”? (Sorry to sound snarky. Just food for thought.)Report

              • Avatar Shazbot5 in reply to Murali says:

                Indeed, I think it is hard for us to get our minds around this, but it is likely true that we spend two to three times more than we need to be on healthcare, i.e. we could get the same thing, including paying doctor’s and nurses similar (down a bit, of course) salaries. The health insurance system has become as inefficient and wasteful as the pentagon at its worst or some old command-style monstrosity from the old Soviet Union. Complete breakdown.Report

              • Anecdote alert: The head of Clancy’s residency was a Brit. He said he was astonished at the “heroic measures” we take at the beginning and end of life, compared to the UK.Report

              • Avatar dhex in reply to Will Truman says:

                that would take quite a bit of cultural change, both at the tail end and especially in the nicu.

                i don’t actually see it happening in this go-around. would probably take a situation far more intense than the current turbulence we’re experiencing.Report

  8. Avatar Damon says:

    First, I’d say that going from not having to pay for health insurance, because it was optional, to having to pay for it, is, in essence, being screwed. That being said, anyone one of those “young invincibles” that wanted Obamacare and didn’t think this thing through is getting what they deserved.

    This leads to my main point: The widespread lack of understanding about economics, risk, insurance, and other financial-ey things”. There are some damn ignorant folks out there.Report

  9. Avatar James K says:

    I can’t say I agree Tod, risk pooling (or diversification, to use the technical term) doesn’t require everyone to pay in the same amount. After all getting old isn’t a risk, it’s a certainty. Therefore insurance premiums should take age and other known risk factors into account.

    A large part of the reason the American healthcare system is so broken is precisely that insurance companies are prevented from properly pricing for risk.Report

    • Avatar greginak in reply to James K says:

      I see a lot of conservatives and libertarians point to creeping nanny statism/gov intrusion into our lives as a potential problem with uni health care. If the Ins Comp could price risk better that would entail a lot more poking around in our lives and judgments of what is best for us be those darn experts and elites. Certainly, to pick a well trodden topic recently, having a gun in the home might suggest some higher premiums. Being overweight also.Report

      • Avatar trumwill mobile in reply to greginak says:

        The insurance companies and government have different ways of dealing with it, though. The insurance companies can deny you insurance or charge you more for it, the government forces you to pay more whether you want insuranceor not . Or threatens to send you to jail. This is entirely centered around how we view health care and insurance. I am actually more sympathetic to the liberal side of this argument than the libertarian, but from an actuarial standpoint Zed and Roger are right. From a political standpoint it’s muddied and much more philosophical, ideological, and subjective.Report

        • Avatar Stillwater in reply to trumwill mobile says:

          but from an actuarial standpoint Zed and Roger are right.

          Well sure, because they’re viewing the problem from an actuarial standpoint. If the problem is insuring people who are otherwise uninsurable due to poverty or pre-existing conditions or the natural progression of life towards old agethen you get a different answer regarding what’s right (or wrong). There is no actuarial analysis under which the risk pool defined by “preexisting conditions” are going to be able to afford insurance.

          And that leaves out subtleties about young people paying into the system at a “young person’s rate” – or not at all – even as they receive the subsidized “old person’s rate” that they haven’t contributed to.Report

          • Avatar Murali in reply to Stillwater says:

            There is no actuarial analysis under which the risk pool defined by “preexisting conditions” are going to be able to afford insurance.

            I hate to sound like a stuck record, bu we should be subsidising their healthcare directly, not their health insurance.Report

            • Avatar Stillwater in reply to Murali says:

              Isn’t the cleanest way of accomplishing that to go single payer?Report

              • Avatar Murali in reply to Stillwater says:

                Not necessarily. It’s the simplest if you look at it one way. Government just has to step up and pay for everyone’s care. But cost containment is still a problem (though not necessarily as much of one as the US is currently facing) and can be improved. If you’re subsidising everything or almost everything, government decisions to restrict provision are going to be more politically divisive. Also single payer describes a wide range of systems. Technically, Singapore’s healthcare system is single payer at certain levels but not all the way while UK’s is a more fully subsidised system.

                That’s why you have to separate basic care from extraordinary care. Directly subsidise basic care. But don’t fully subsidise it. Make sure that people still pay a bit for any single item. This is administratively more difficult to setup initially, but pays dividends later in terms of cost savings due to incentivised behaviour. What fuels poor consumption decisions under your current system is the extremely low marginal cost for each item on one’s medical bill. Full subsidy does not change that. Cover 80-90%* of basic routine maintenance stuff. And preferrably, only cover 20yr* old technology. Newer stuff should be less subsidised or not at all.

                For rare stuff that has expensive costs, catastrophic insurance will work. Hell, even for this you can have subsidies for a basic package and then a non-subsidised advanced catastrophic insurance.

                And, if you want to add a bit of paternalism to the mix, setup a HSA that takes a percentage of a person’s income. This can be managed on the income side or the payroll side or both.

                *the numbers are a bit arbitrary. A health economist should go through the data to see what numbers will effect the desired changes in behaviour.Report

              • Avatar Shazbot5 in reply to Stillwater says:

                Murali,

                Does the Simgapore system have price controls?

                Yglesias says so here: http://www.slate.com/blogs/moneybox/2012/07/30/you_contain_health_care_spending_with_price_controls.html

                I am fine with private health insurance, subsidized for the poor, with heavy price controls. But I doubt that will be more acceptable to libertarians, conseervatives or the Republican party than a Canadian style, Medicare for all system. At any rate, price controls are pretty much the epitome of anti-market, and they’re needed to keep healthcare costs down, as Yglesias claims too. So we might as well not talk about Singapore as a libertarian alternative to Obamacare, because it involves price controls that people won’t accept.Report

              • Avatar Murali in reply to Shazbot5 says:

                I don’t think the price controls are still there or as stringent as they used to be before the restructuring. From what I understand, the government adjusts policies to regulate the supply side and lets the market price adjust on its own. It does not directly set a price for medical supplies. (Because primary medical suppliers still come here to sell stuff to our hospitals for profit. We don’t have a an industrial base to effect a command and control system)Report

              • Avatar Brandon Berg in reply to Shazbot5 says:

                I am fine with private health insurance, subsidized for the poor, with heavy price controls. But I doubt that will be more acceptable to libertarians, conseervatives or the Republican party than a Canadian style, Medicare for all system.

                Or, you know, anyone who would like to see any further progress in medical technology.Report

              • Avatar Stillwater in reply to Brandon Berg says:

                You’d still see lots of progress in technology: finding ways to encheapen the same services. And once cost is reduced, you’d see incentives for innovative technologies. Just standard stuff, yeah?

                But healthcare isn’t like other markets. I think that’s pretty uncontroversial at this point, isn’t it? So the same market principles that apply to other retail markets aren’t gonna map onto healthcare 1 to 1.Report

              • Avatar Murali in reply to Brandon Berg says:

                Not necessarily. It seems that medical technology suppliers still sell to government hospitals in Singapore at market rates. What prices the hospitals charge for the use of said technology is constrained AFAICT by tight budgets and subsidy guidelines (percentage-wise rather than dollar-wise).

                But perhaps what they don’t lose in margins they lose in volume. But that is unavoidable. The biggest reason that medical costs are so high is that there is over-use. Why is there over-use? because the marginal cost of purchacing additional healthcare on the consumer end is very low. Basically any reduction in medical costs is going to require a systemic reduction in medical spending whichever level such reduction occurs at. If level of investment is driven by profit volume instead of margins, then level of investment will fall. No solution to high medical costs would not cause it to fall. Objecting to one quasi-statist solution to rising medical costs by saying that it will cause investment levels and thus medical technological progress to fall is thus besides the point.

                Now, maybe you think that current medical costs are not too high. That even if it is currently expensive, that is just forgoing current consumption for future gains. But arguably, there is a limit to how much current consumption you forgo in order to realise future gains to future generations.Report

              • Avatar Brandon Berg in reply to Brandon Berg says:

                No solution to high medical costs would not cause [investment] to fall.

                I don’t think this is true. Reducing expenditures on patented drugs and devices will reduce investment in those areas. But reducing expenditures on labor-intensive medicine is unlikely to have much of an impact on future investment in R&D.

                Of course, the former is much more popular, because big corporations bear the cost in the short run, and democracies can’t see past the next election.Report

              • Avatar Brandon Berg in reply to Brandon Berg says:

                It’s worth noting that the economics of this are very different for small countries and large countries. Small countries can stick it to pharmaceutical companies at virtually no cost to themselves, because they make up a very small percentage of the market for patented drugs, and imposing price controls will have only a very small effect on the profitability of R&D. If the US were to impose price controls, though, it would dramatically impact the profitability of pharmaceutical R&D.Report

              • Avatar Murali in reply to Brandon Berg says:

                Its also worth noting that Singapore doesn’t dictate to companies AFAIK what their prices will be. It just keeps hospitals* on a tight budget which depresses demand. Hospitals still negotiate with med-tech companies in a standard market setting.

                *It is also worth noting that 80% of medical care in Singapore is primary care which is not handled in the hospitals. Most of primary care is handled in privately owned and run clinics. Individual clinics have their own negotiations with drug companies.Report

              • Avatar Shazbot3 in reply to Brandon Berg says:

                “I don’t think this is true.”

                No evidence either way.

                At any rate the possible savings in the U.S. that could be gotten by switching to a Canadian (or price control) system are so great that you could save lots of money and increase investment in R and D and still lower the cost of medicine. That much is obvious; not all of the waste in the U.S. system goes to R and D.Report

              • Avatar Shazbot5 in reply to Stillwater says:

                I also wonder about whether Singapore’s system can be scaled up, which has never been tried. After all, Singapore is small enough that it only has, for example, one psychiatric hospital (according to Wikipedia) and only 5.5 million people.

                By contrast, Canadian, German, and U.K style systems are proven to work in larger places. (Also, there are lots of local success stories in the U.S. system where costs are kept down, but the problem is scaling them up. Canadian style systems are easy to scale up and proven extremely effective.)Report

          • Avatar trumwill mobile in reply to Stillwater says:

            Stillwater, I don’t think I disagree with anything you said. My main point was that it is all dependant on how you look at it. I don’t understand the vale of looking at it from the actuarial standpoint because I think we are, asa dsociety, beyond that. But if someone is insistent on treating it like comprehensive breakdown auto insurance, then there ya go. It has its own logic undeterred by nannystatism wanting to take your cigarettes because they are responsiblefor your care . The one thing I do agree with them about is that denial of insurance isn’t the same as taxing and/or putting someone in prison, so the comparison I was responding to seemed off base. I have probably been as clear as mud here.Report

          • Avatar trumwill mobile in reply to Stillwater says:

            In other words, the preexisting condition problem is only a problem if you ideologically or morally see it as one. And not necessarily related to soda taxes or cigarette bans on the part of the government. Still mud, probably, but I thought I would try one more time.Report

            • Avatar Stillwater in reply to trumwill mobile says:

              Not muddy. More like really strong coffee. Four shot espresso, actually. I can see stuff floating just under the surface. Like, maybe, slippery slopes?Report

              • Well, the original comment was in response to people (like me!) expressing concern when government-funded health care is used as a rationale to alter our behavior, which then lends credence to the notion that government-supplied health care does at least have an anti-freedom element. But it’s not some hypothetical slope discussing something that could happen. It’s a rationale that has already been used*.

                Perhaps not important to you. Not sufficiently important to me to go with an actuarial analysis. But not irrelevant, in my view. Also not really applicable to what insurance companies do to my rate, at least not on an ideological level, if one accepts insurance as optional in comparison to not-optional taxes.

                * – In fact, the strongest counter-argument to these concerns is “We’re already doing that and we’re going to continue to use that rationale to try to get you to modify your behavior in ways that we would prefer. So give it up. You lost.”Report

      • Avatar Jim Heffman in reply to greginak says:

        “If the Ins Comp could price risk better that would entail a lot more poking around in our lives and judgments of what is best for us be those darn experts and elites. ”

        Or maybe I could pick a different company that charges higher premiums overall but does less of the poking around and the judging. Or one that charges very high premiums but covers anything I need with no questions asked.

        But that’s just shockingly inefficient, isn’t it? Better to have just one company that does everything for everybody.Report

    • Avatar Morat20 in reply to James K says:

      Again: If I pay higher rates in my 20s but lower rates in my 60s, how am I getting screwed?

      No matter how young and healthy I am NOW, I will one day be old and frail. (Or might find I have cancer tomorrow).

      Given a friend of mine is still in ICU from a car crash (she’s lucky. She’s likely to keep her spleen and they’re hoping they don’t have to do more surgery, and that a back brace for several months will be sufficient to let her spine heal. And she can walk, thank god) — she went from ‘young and healthy’ to ‘6 figures of medical bills’ in less than 30 seconds.

      I sincerly doubt the man who caused the accident has the cash to pay for her medical bills, much less his own and the others involved.Report

      • Avatar Wardsmith in reply to Morat20 says:

        From an economics perspective we’re spending vastly too much to keep seriously old people alive and it is almost all on the government.

        Why is Medicare so Expensive? Never say Die

        One percent of the population accounts for 30 percent of the nation’s health care expenditures. Nearly half of those people are elderly. More than 25% of Medicare’s budget gets spent in the last year of a patient’s life and half of that is the last 2 months.

        In terms of perverse incentives, I personally know older people who have changed doctors because they have diabetes and their (previous) physician kept pestering them to eat properly, stop drinking and get more exercise. How DARE he! Instead they go to the new one who just keeps upping their prescriptions and dealing with the fallout. No biggie right? The tab is getting picked up by the taxpayers anyway.

        Looked at from a cost benefit analysis viewpoint and taking the emotion and politics out of it (impossible I know), the ideal scenario would be a complete reverse. Medicare for the young with constant and legitimate health maintenance and observation for baseline purposes of the young that STOPS once they reach 65. If people were regularly dealing with problems while they’re still young and healthy they’d be better able to deal with them once they were old. Depending on insurance and other factors (availability of time off) people ignore and postpone needed procedures until the damage is far more severe and expensive. Why they could even be saving money in HSA type accounts the whole time so they could purchase insurance for their old age. Pipe dream I know.

        But let’s face it, no one wants grandma to die.Report

        • Avatar Stillwater in reply to Wardsmith says:

          Ward, I agree with a bunch of this, but you can’t say

          From an economics perspective we’re spending vastly too much to keep seriously old people alive and it is almost all on the government.

          followed by

          I personally know older people who have changed doctors because they have diabetes and their (previous) physician kept pestering them to eat properly, stop drinking and get more exercise.

          and

          But let’s face it, no one wants grandma to die.Report

          • Avatar Jaybird in reply to Stillwater says:

            The war on drugs has done its most harm when it comes to the elderly.

            Those are the folks who deserve to spend all day, every day, baked.Report

            • Avatar Stillwater in reply to Jaybird says:

              It’d keep em from getting diabetes.Report

              • Avatar Jaybird in reply to Stillwater says:

                I suppose I’ll actually try to be a little bit serious:

                We have *SERIOUS* issues when it comes to pain management in this country. Specifically, we worry more about the thought of someone getting addicted to drugs than someone living in great pain. So we hear stories far too often about people who develop ulcers or blow out their kidneys or ruin their livers because they take aspirin with breakfast, acetaminophen an hour after that, naproxin an hour after that, and ibuprofen with lunch before starting the regimen again. (Because real pain relief might be habit-forming.)

                So the only accepted pain relief is “making everything better”… and, if making everything better isn’t an option, well, maybe we can do a replacement. Maybe we can have an operation. Maybe we can get acupuncture. Maybe we can go to a quack doctor.

                We’ve got old people in great pain that are being kept in great pain and the only thing they have to look forward to is yet another surgery with inadequate pain meds afterwards because we don’t want 77-year olds getting hooked on Percodan.Report

              • Avatar MikeSchilling in reply to Jaybird says:

                As true as it is insane.Report

              • Avatar Major Zed in reply to Jaybird says:

                + 10 Jaybird. How about the right to suicide as a “solution” to pain? It makes me sick how insane it is to offer death with dignity instead of a Brompton Cocktail.Report

              • Avatar Jaybird in reply to Major Zed says:

                You know, I suspect that if pain management, serious pain management, was on the table, that suicide wouldn’t have to be an option.

                They could be pain-free. Who wouldn’t want to read a book under those circumstances? Listen to an album? Watch a box set of television shows or seven? See friends, family, and even a handful of strangers?

                If stuff didn’t hurt, it might be nice to do something as simple as sit in the sunshine.Report

              • Avatar MikeSchilling in reply to Jaybird says:

                True if the problem is physical pain. Not much help with looming dementia or ALS.Report

              • Avatar Jaybird in reply to Jaybird says:

                In those cases, I find “assisted suicide” to be really, really creepy.Report

              • Avatar Glyph in reply to Jaybird says:

                I believe cannabinoids have shown promise for both dementia and ALS, actually. Too soon to say for sure but there have been a few small studies IIRC.Report

              • Avatar Stillwater in reply to Jaybird says:

                “It’s most harm”?

                Well, I agree with the sentiment, Jaybird, but I think you’re playing a bit of politics here. well. I don’t think a person spending 25 years behind bars for possession of the Devil’s Weed is at all comparable to an old person being deprived yet another form of pain relief. I don’t think you do either. It’s true that old folks – or any folks – desiring pain relief is another reason to legalize marijuana. But it’s certainly not the most important one. And “the elderly” are not the most harmed group in the WoD.Report

              • Avatar Jaybird in reply to Stillwater says:

                *MY* quote was “its most harm”.

                Not “it is most harm”.

                And, sure, maybe “the poor” are harmed more than “the elderly” in the WoD. So we have a large group of folks who are seriously screwed over in the WoD. And we establish that there is another group getting even more screwed over than that.Report

              • Avatar Stillwater in reply to Jaybird says:

                Nice recovery. I mean that.

                IT WAS A NICE RECOVERY.Report

              • Avatar Jaybird in reply to Jaybird says:

                Thank you. This is, after all, my pet issue.

                When I think about how there is a group of people out there who not only want people to not feel good for chemical reasons, but want them to not stop feeling pain for chemical reasons… and they are willing to destroy countless lives to make sure that if people feel good or stop feeling pain, it’s for *APPROVED* reasons?

                That pisses me OFF.Report

              • Avatar Stillwater in reply to Jaybird says:

                I get that. And all the virtual ink you’ve spilled isn’t in vain, either. It’s definitely changed the order of my preferences.

                {{Insipient libertarianism creeping in…}}Report

              • Avatar Shazbot5 in reply to Jaybird says:

                The overuse and misuse of pain meds is a big story that isn’t fully told, yet, IMO. It is probably also part of our cost problem.Report

              • Avatar Will Truman in reply to Shazbot5 says:

                At some point I may finally write my post on “The other war on drugs.” The one my wife has been enlisted in with regard to narcotics and pain medicine. It’s a fascinating side to the whole “being a physician” thing that I’d never considered, but actually saps up a surprising amount of my wife’s time and energy.Report

              • Avatar Stillwater in reply to Will Truman says:

                My wife works at a medical clinic and she has to continually and constantly remind the docs of “seeking” behavior. She’s the only one who seems to see it in the first pass, tho once it’s pointed out all the prescribers agree with her. “Yeah, that patient was just seeking narcotics… Huh.”Report

              • Avatar Glyph in reply to Will Truman says:

                Is there a reason narcotics should require a prescription to begin with? Wouldn’t it be better to put all the onus on the seeker and let ppl who really “need” narcotics, whatever that may mean to them, have them easily and relatively cheaply?

                It’s not like ppl shouldn’t know the risks – in fact, there’s a school of thought that says ppl abuse Oxy b/c as a prescription med, they assume it’s “safe”. They make no such assumptions about heroin.

                Why not just plaster the bottles with warning labels like cigs, and keep them behind the counter so minors can’t get ’em, but otherwise sell ’em like cigs or Everclear?

                As libertarian as I lean, I am OK with prescriptions for antibiotics; because if those are overused, I get hurt via the development of drug-resistant bacteria.

                But someone who overuses narcotics hurts only themselves – I mean, they CAN hurt me, but only in the same ways that someone who overuses alcohol also can, like via DUI.Report

              • Avatar Stillwater in reply to Will Truman says:

                They make no such assumptions about heroin.

                Well, once upon a time heroin was regarded as safe and legal. It wasn’t. That gave rise to methadone. That wasn’t either. I think folks got smarter after that.Report

              • Avatar Glyph in reply to Will Truman says:

                The crazy thing is they developed heroin thinking it less addictive than morphine.

                Oops.

                Wiki:
                “From 1898 through to 1910, diacetylmorphine was marketed under the trademark name Heroin as a non-addictive morphine substitute and cough suppressant. Bayer marketed the drug as a cure for morphine addiction before it was discovered that it rapidly metabolizes into morphine. As such, diacetylmorphine is in essence a quicker-acting form of morphine. The company was embarrassed by the new finding, which became a historic blunder for Bayer.”Report

              • Avatar greginak in reply to Will Truman says:

                I’ve worked with a few prescription pill addicts in my time. I never heard they thought it was safe because they were prescriptions. Sounds more like an addict rationalization to me.Report

              • Avatar Glyph in reply to Will Truman says:

                But that doesn’t really affect my point though. We know now what it is, and what it does. I see it as similar to Everclear. A little bit might help you. A lot may kill you. Use with caution.Report

              • Avatar Jaybird in reply to Will Truman says:

                There are former Oxy addicts who are switching to the white horse because it’s easier to get.

                I understand the music is better as well.Report

              • Avatar Glyph in reply to Will Truman says:

                Dammit Jaybird, you knew I would have no choice:

                Report

              • Avatar Shazbot3 in reply to Will Truman says:

                Yeah, I should add that I think pain meds are over used and underused and the whole thing is made worse by the law (and by the incentives created by private insurance and defensive medicine). The whole system needs a 21st century overhaul that has happened to varying degrees in other places.Report

            • Avatar greginak in reply to Jaybird says:

              If you’ll note the crawl at the bottom of the pic up top does say “chasing the buzz”
              hmmmReport

          • Avatar Morat20 in reply to Stillwater says:

            So what we’re saying here is that Medicaid has the most expensive demographic to ensure, right?

            Like, literally, no other demographic of any real size is going to be nearly as costly as Medicaid per capita.

            So how’s Medicaid’s spending and rate of growth compare to everyone else? All those healthy youngin’s? That should give you a darn good rule of thumb on whether the private market is more efficient than government on this issue.Report

          • Avatar Wardsmith in reply to Stillwater says:

            I think I meant that except for /politics/ (ie grandma can’t die) much of this disconnect would be self-healing. I can’t go to my HMO and demand a new doctor because my current one keeps giving me advice on how to survive longer with less health problems. Doctors who (still) see medicare patients lose about $5 per patient but (somehow) make it up in volume. 😉

            My problem with these posts is I’ll type a sentence, go away for a while (often hours), write another one or so, put in a link, leave again and (sometimes) hit submit. I’ll readily admit to losing my train of thought often.Report

  10. Avatar Wiseguy says:

    Yes, insurance is designed to partly subsidize those who incur expenses with the contributions of those who incur fewer expenses. But that only applies to other subscribers’ money. If I don’t have insurance and pay premiums, my money is not being used by the insurance company.

    I thought the whole point of the quote was that people who might not have opted to subscribe are now forced to. It wasn’t a complaint about how insurance works.Report

    • Avatar Stillwater in reply to Wiseguy says:

      I thought the point of the quote was that by forcing young people to pay premiums Obama is orchestrating a “transfer [of] wealth to his worst enemies”, the AARP (otherwise known as old people). Tod’s point is that there’s already, necessarily, a transfer of wealth to old people (since they’re health care is subsidized in any event).Report

      • Avatar Wiseguy in reply to Stillwater says:

        And my point is that yes, that transfer already inherently exists, but not from people who do not subscribe to insurance. Forcing the addition of more young subscribers would force an increase in the number from whom to transfer. That’s what I thought it was getting at.

        The original quote did not deny this transfer already exists, but it did seem to overstate the effect. I figure many young people already have insurance. Its sensationalist tone made it sound like there are tons more young people out there who will be forced to get insurance against their will. I don’t know the exact numbers, but I’m guessing it’s lower than the quote made it sound.Report

    • Avatar zic in reply to Wiseguy says:

      In health care, this isn’t true. Because the price of delivering health care includes covering the cost for those without insurance who cannot pay, who are free riding on the system. Your money isn’t being used by the insurance company; their money is being used by you if you have medical costs that aren’t insured and you cannot pay.Report

      • Avatar Wiseguy in reply to zic says:

        What isn’t true?

        > “Your money isn’t being used by the insurance company”

        This sounds like exactly what I’m saying.Report

        • Avatar Stillwater in reply to Wiseguy says:

          I think the problem zic’s talking about is that even tho it’s rational to not get insurance when your young and healthy, someday you’ll be old, decrepit and in need of joint repair. What’s the premium for an old guy who needs a new hip?Report

        • Avatar zic in reply to Wiseguy says:

          I’m saying the problem isn’t that those who have insurance are paying for others who have insurance but cost more, the problem is that everybody who pays for insurances is also paying for those who don’t pay. It’s not the rational of who uses the insurance, it’s that free-riders without drive the cost of the whole system up.

          (But the other theory is that insurance makes you get more medical care, presumably unnecessary care, and also drives the costs up.)Report

          • Avatar Wiseguy in reply to zic says:

            Okay, I completely get that, but it’s an unrelated argument. You haven’t contradicted what I said; rather, you’ve raised an additional topic of discussion. “What problems should be addressed” or “how insurance -should- work” are entirely separate questions from simply “how insurance works”. I am not repudiating the situation you describe.Report

            • Avatar zic in reply to Wiseguy says:

              No, it is the argument of health care costs being astronomical because of some people using other people’s money. Making sure that everyone who enters the system for the most expensive care has that care covered should, the theory goes, mean that cost shouldn’t be built into the cost the insurance company’s billed, and so everybody’s premiums should go down.

              Until ACA passed; the folks without insurance who drove the costs up were the young who were uninsured and the ill with pre-existing conditions.Report

              • Avatar Wiseguy in reply to zic says:

                I was never talking about why costs are so high. Again, I am not disagreeing with you. You are making a separate point.Report

              • Avatar zic in reply to Wiseguy says:

                Let’s try one more time.

                You said: Yes, insurance is designed to partly subsidize those who incur expenses with the contributions of those who incur fewer expenses. But that only applies to other subscribers’ money. If I don’t have insurance and pay premiums, my money is not being used by the insurance company.

                And I’m saying (waa wa waa wa waaaa, I know,) that insurance subsidizes non-contributors who incur large expenses; and this applies to all subscribers who do pay for their insurance. If you don’t get insurance, other people aren’t simply playing a money redistributing game amongst themselves using insurance premiums, you’re taking their money if you get sick and cannot pay; and you’re taking that money with every single insurance premium payment they make. You’re also taking other’s money with every bill that does get paid by someone who doesn’t have insurance and pay out of pocket.Report

              • Avatar Wiseguy in reply to zic says:

                I understand that, and I do not disagree. I’m only talking about who pays; you’re talking about who receives. I said that the paying is only limited to subscribers. You said that the receiving is not necessarily limited to subscribers. I never said that only subscribers do the receiving. Our points do not conflict; they are different (though related).


                FYI, by saying “some posts elsewhere” below, I tried to convey that my “waa waa waa” comment was not referring to you. My apologies if that was not clear, as implicating you was not my intention.Report

              • Avatar zic in reply to Wiseguy says:

                Thank you for that; but I do sometimes feel like I’m saying wawawawa; a side effect of having raised children. I asked my sweetie to make a cell phone app that does that to people’s voices, if there isn’t one already.Report

            • Avatar James Hanley in reply to Wiseguy says:

              Wiseguy,

              I love the gravatar, but I find myself reading your comments and hearing them in Charlie Brown’s voice.Report

  11. Avatar Major Zed says:

    Insurance is supposed to pool risks together, true, but that does not mean it needs to price all risks equally. The statement that one group is “supposed to subsidize another” is definitely not the “definition of insurance”; it is the definition of transfer payments.

    Insurance must of necessity attempt to price for expected losses. This means carving up the population into homogenous groups as best as possible, to assign those in each group the same premiums. Lacking perfect information (cf. Lybertopia) this will never be done perfectly and there will always be some degree of cross-subsidization. If the risk distribution within the group is too heterogeneous, and if persons buying insurance have more knowledge than the actuaries setting the premiums have (or are allowed to use), then there will be a tendency for higher-risk people to opt into the group and lower-risk people to opt out. In the extreme, this can cause a vicious cycle of increasing premiums and opt-outs until there is no one left in the group.

    This is well-known, and that is why actuaries try to create relatively homogeneous groups in markets where people are free to buy or not to buy. When groups are very heterogeneous, the only other solution, as in ACA, is a mandate that everyone must opt in.

    Insurance regulation, based on the logic of equity and public interest, sometimes forces the exclusion of certain types of information for risk classification, but without providing for mandates. The resulting cross-subsidization does two things. (1) It implements transfer payments that could otherwise be done directly (and more transparently) by government action, and (2) it threatens the integrity and solvency of the insurance system.

    As to perverse incentives from insurance per se, this too is well-known. Look up “moral hazard” and “morale hazard” in the irmi.com online insurance dictionary. Coinsurance, deductibles, underwriting, and claim adjusting are all features of insurance that combat these phenomena. But the good of having insurance outweighs the bad incentives, so insurance is on net considered to be in the public interest.Report

    • Avatar Roger in reply to Major Zed says:

      I will repeat myself. Major Zed is the person within this post and thread who is speaking intelligently. Many of the comments are absolutely incoherent nonsense.

      Sorry, but if it almost comical.Report

    • Avatar Stillwater in reply to Major Zed says:

      The statement that one group is “supposed to subsidize another” is definitely not the “definition of insurance”; it is the definition of transfer payments.

      Given that members of one risk pool – the elderly – cannot afford to pay premiums as they would be determined from an assessment of risk from within their own risk pool, we face two options. One is to subsidize them. The other is to limit their care commensurate with their ability to pay.

      I’ll concede that one risk pool subsidizing another risk pool amounts to transfer payments. I think of it more along these lines: if an individual could purchase a lifetime contract for insurance at a determined price, they’re younger self would be effectively subsidizing their older self’s premium price. Given that no one is seriously proposing such a model – for very good reasons I think – we’re left with other options.

      Now I know Roger is gonna come in saying something about progressive this and that, but I just want to remind him that he also believes in subsidizing healthcare for the poor and the elderly. So the wrt the only point under discussion, he and I appear to agree.Report

      • Avatar Roger in reply to Stillwater says:

        SW

        I basically agree. Let me just add on.

        I do agree to the value of medical care to the poor. I also agree that this cannot be solved in any practical way today via free markets. I would argue thoug that there are ways to do so which are not destructive to the underlying insurance and health care markets.

        I am still not sure if obamacare was intended to destroy markets or not. Honestly I kind of doubt it. Lets just say that I would recommend a different solution set to ensure universal coverage.Report

      • Avatar Patrick Cahalan in reply to Stillwater says:

        Given that members of one risk pool – the elderly – cannot afford to pay premiums as they would be determined from an assessment of risk from within their own risk pool, we face two options. One is to subsidize them. The other is to limit their care commensurate with their ability to pay.

        This kind of assumes the problem with looking at insurance via a snapshot vs. a longitudinal standpoint.

        Major Zed is looking at insurance primarily as a snapshot, so risk pooling is segregated from risk transfer. Tod, being the risk analysis guy, is looking at it from a longitudinal standpoint where it’s risk pooling and risk transfer, but not as much transfer from one part of the pool to the other, but risk amortization, really.

        In a universal coverage scenario you’re not doing much risk transfer from group to group, you’re doing risk transfer from your elderly self to your younger self. You’re amortizing the total cost of your medical care over your lifespan into a monthly payment that begins at year X and ends at year Y, really. Optimally, you want this cost spread out by earning potential, so you pay less during your formative years where you don’t make much, more in your middle years when you make a lot, and less at retirement, when you’re on fixed income.Report

        • Avatar Stillwater in reply to Patrick Cahalan says:

          Damnit Patrick, I wish I was smart enough to understand what you’re talking about. It’d be good for both of us, I think. Me more than you.Report

          • Avatar Patrick Cahalan in reply to Stillwater says:

            Let’s look at an insurance pool, right now, today.

            Let’s say I run an insurance company, and I cover 100 young people and 10 old people. The old people generally cost 10x more than the young people.

            Now, if I’m generally not covering these people forever, generally I need to come up with a way to reasonably assign risk factors to subgroups, otherwise I can’t compete: if I charge the old people 10x as much as the young people, they can’t afford it and they die (or drop my coverage, which is the same thing as far as my business is concerned), and if I don’t charge the old people 10x as much as the young people, I’m essentially doing what Roger is talking about: I’m effectively “taxing” the young to pay for the health care costs of the old, because they’re not paying the true cost of their insurance… they’re paying the true cost of their insurance plus a bit extra to cover the costs of the old people. This ups my cost for young people coverage, so the young people will *also* exit my coverage pool if they can find a competitor that has a coverage pool that doesn’t have old people, because my competitors’ costs will be lower.

            In a totally free market for insurance coverage, this is what happens: eventually, everybody is priced out of insurance coverage if they need insurance, or they are paying a very low cost charge for a very unlikely set of things and no maintenance tasks are covered.

            This is fine for car insurance or homeowners insurance or any other type of insurance, really… because (a) usually you’re only looking for catastrophic coverage of some sort or another and (b) the risk doesn’t change dynamically all that much over a customer’s lifetime.

            Back to health insurance (which isn’t catastrophic, in most cases): if I ‘m not mandated by law to cover old people, well, then screw them, I jack up their premiums up to the true cost of their insurance, so they exit my coverage pool, and as a result I can charge a more competitive insurance rate to the young people, who are the more desirable candidates anyway.

            If you’re looking at insurance as a snapshot in time – which is how insurance companies in most markets historically look at insurance, simply because they *aren’t* required to cover everybody – I do what Major Zed is talking about here… I cut the risks up into as finely-grained a collection of subpools as I can and I get really good actuaries, so that I can ultimately keep as many of the mostly-healthy people as I can while exiting as many of the less-healthy people as I can to my competitors. If I have better actuaries, I make more money than my competitors.

            I keep the most desirable customers and shove off the less desirable ones to my competitors.

            But widespread insurance is a terrible problem space for market based solutions because it runs counter to the whole general idea of a market, really (again, it works fine for catastrophic insurance coverage); universal coverage is much more like a commons than a market.

            In the universal coverage scenario, I’m typically *mandated* to cover everybody (maybe not “I”, a company, but “I”, the whole system), and rather than doing risk transference, I should be doing risk amortization.

            Because I’m going to cover those 100 people until they’re old. They’re going to be my customers forever. I no longer have an incentive to exit them from my pool, because I can’t. Now instead of looking at Joe as a customer who is a particular collection of risk factors, right now today… I’m looking at Joe as a lifelong customer, who will be less risky at some times and more risky at others (but who will also have less/more income at various times), and I have my actuaries doing something else entirely: trying to figure out what the average Joe is going to cost me, lifetime, adding a small profit percentage, and splitting up the cost and assigning it to various stages of Joe’s lifetime by his earning capacity.

            Thus, I’m charging Joe only as much as he can optimally afford at any given time given that he’s going to be paying for my service until he dies.

            But, of course PPACA doesn’t get us from there (the health insurance market prior to 2010) to here (risk amortization across your lifetime). It gets us from there to somewhere else (likely just as crappy as where we came from, but that’s why I didn’t like PPACA).

            Ultimately, if you want universal insurance coverage and you don’t want just catastrophic coverage, you have to have a public option or you’re screwed (and if you have a public option, you really need to be ruthless about cost containment). Because all of the incentives are still wonky-ass.

            We’re going to get all sorts of Too Big To Fail problems with insurance companies in 10 years, you bet.

            If you want a market-based solution for insurance, you need catastrophic coverage, period, and maintenance isn’t in the insurance model at all, it’s something else entirely.

            Which really would have been a fine alternative.Report

            • Avatar Stillwater in reply to Patrick Cahalan says:

              I think I’ve recovered enough to make an intelligent response. {{Maybe.}}

              The specific topic is the elderly, yes? Given that, when you say If you want a market-based solution for insurance, you need catastrophic coverage, period, and maintenance isn’t in the insurance model at all, it’s something else entirely.

              are you viewing condition of old age as catastrophic or part of nornal maintenance? It doesn’t seem to fall cleanly in either category. It’s just an … eventuality.Report

              • Avatar Patrick Cahalan in reply to Stillwater says:

                Most expenditures fall into four categories: basic maintenance (checkups, well visits, dental cleanings, vision correction, etc.), advanced maintenance/”routine” emergency care (broken bones, getting your wisdom teeth out, whatever), catastrophic coverage/”advanced” emergency care (chronic illness, disability), and end-of-life care.

                The first three are all pretty susceptible to standard cost/benefit analysis. You can make pretty utilitarian models and they work more or less okay. There’s problems on the edge cases, but generally, you’d get a workable system out of it.

                End-of-life care isn’t like the others, because you’re usually not looking at a substantive upside. You’re not making the patient “better”, they’re not going to return to the status of “productive member of the workforce”, they’re still going to be old tomorrow, and they’re still going to be dead “real soon now”. All the stuff that Ward points out is true.

                You’ve got a really good point here… whatever you want to call this, it maybe doesn’t belong in the same systemic model as the others. Even in a longitudinal model, there still has to be a standard of care that’s reasonable, and “reasonable” is usually “don’t let Gramma die” even though Gramma needs a new liver, heart, and spleen (really) to go with her pneumonia treatment if you really want Gramma’s life expectancy to be more than 5 years from the time of treatment (because Gramma’s already 3 years past the average EOL).

                You can do it, but sympathy doesn’t belong here.Report

              • I think you’ve put your finger on an important point (and caused me to throw away at least half of what I was going to post). Forget about the squabble over who is subsidizing whom. The real problem with the US healthcare/health insurance system is the disconnect between the decision to consume and the payment of it. Imagine this model applied to other areas:

                * You and your mechanic decide together how much and what kind of repairs your car needs, regardless of cost, because it is covered.

                * You and your grocer decide together how much and what kind of food you take home for dinner, regardless of cost, because it is covered.

                * You and your college professors decide together how many and what kind of courses you take, regardless of cost, because it is covered.

                A person I know recently went to talk to his specialist about the possibility of getting a certain type of diagnostic test related to a chronic condition. The doctor said, “Well, you really don’t meet the criteria for needing the test, but we can just say that you do.” Neither brought up the question “How much does this test cost?” And I wonder if the doctor could even have answered that if it had come up.

                Patients need to have some skin in the game, somehow. They are in the best position (with knowledge input from the doctor and elsewhere) to perceive and weigh the value of the care they are considering receiving.Report

              • Avatar Patrick Cahalan in reply to Major Zed says:

                Unfortunately, medical care is one of those things where utility functions and real cost of care don’t match up very well, across populations of people.

                If I break my leg in two places, and the difference in medical care is $300 for a plaster cast, and don’t get it wet, and get your wife to drive you to work, and use crutches, and deal with the inconvenience for six weeks vs. a fancy-ass cast where I can get it wet, maybe, some, but it doesn’t itch as much because it’s better at getting moisture out or something and it costs $1500 and the new Zap It technique that heals the bone in a day and costs $20K… I’m taking the cheap ass plaster cast. Somebody who makes $500K a year is probably taking the $20K option.

                Somebody who works in a garage and needs to stand in order to work is not anywhere near the same utility calculus that either of the other two of us are working off of, and they’re also the least likely to be able to pay the 20K.

                I agree that from an efficiency standpoint, if you want market forces to work, you need people to have skin in the game.

                I’m highly dubious that we can come up with a measure for skin in the game that isn’t taking dead skin flakes from one guy and a pound of flesh with it from another.

                Not for a systemic model. I suspect that the only really workable way to solve this is to have a fairly complicated system, transferring some sorts of medical problems to a commons and some to a market.

                But that’s a solution that everybody is going to freak out about, because it violates everybody’s first principles, really.Report

              • Avatar zic in reply to Patrick Cahalan says:

                Patrick, comments like this are what keep me reading this site. And I notice that many are yours.

                Thanks, I’m grateful for both the insight and the even-handedness; particularly of this: Somebody who works in a garage and needs to stand in order to work is not anywhere near the same utility calculus that either of the other two of us are working off of, and they’re also the least likely to be able to pay the 20K.
                Report

              • Avatar Patrick Cahalan in reply to Patrick Cahalan says:

                Aw, thanks, Zic. Farm Wuzzies!Report

              • Avatar Stillwater in reply to Patrick Cahalan says:

                But that’s a solution that everybody is going to freak out about, because it violates everybody’s first principles, really.

                Maybe you’re right about that. Part of the problem is each side insisting that a concession needs to me made contrary to ideological lines, and that reinforces the oppositions ideological affinities. That’s just politics. But I do think that lots of liberals would be open to a hybrid scheme if it was easy enough to implement and yielded good results.

                What are liberals main concerns at this point? Well, cost isn’t at the top of the list. Constraining cost isn’t even at the top of the list, I don’t think. It is – well, was to a certain extent – establishing an institutional structure where people weren’t denied healthcare because of pre-existing conditions, income, age or the exigencies of private insurance companies bottom lines. How those goals were accomplished was determined by several factors, the most important of which was the overall character of the US Senate.Report

              • Avatar Stillwater in reply to Patrick Cahalan says:

                Actually, what I wrote isn’t quite fair to Democrats in Congress. One of the main motivations behind the ACA – not the sole motivation to be sure – was to maintain the solvency of Medicare for the foreseeable future. The next ten years or so. THere were also measure taken to bend the cost curve that may (or may not) achieve their goals.Report

              • Avatar Brandon Berg in reply to Patrick Cahalan says:

                Somebody who works in a garage and needs to stand in order to work is not anywhere near the same utility calculus that either of the other two of us are working off of, and they’re also the least likely to be able to pay the 20K.

                This really isn’t the problem that people make it out to be. In fact, this is the market system working exactly how it’s supposed to work. People with more money get to spend more money to buy more expensive stuff, because otherwise there’s no point in having money, and nobody’s going to expend the effort necessary to make it. Ultimately, the ability to consume more is what drives the vast majority of production.

                We can set up the economy such that the preferences of the rich and the poor are weighed the same when deciding what to produce, and that will maximize aggregate utility in the current period, but then aggregate production tanks in all future periods once people realize there’s no reason to work.Report

              • Avatar Brandon Berg in reply to Patrick Cahalan says:

                It’s also worth noting that the lost labor of an auto mechanic over six weeks probably isn’t even worth the $20k that it costs for the instant fix. If you just gave him the $20k outright, there’s a good chance that he wouldn’t even use it to fix his leg, but maybe just negotiate something with his boss so that he gets his job back in six weeks.Report

              • Avatar Brandon Berg in reply to Patrick Cahalan says:

                THere were also measure taken to bend the cost curve that may (or may not) achieve their goals.

                From what I’ve heard, it’s starting to look like they’ve done a first-rate job of bending the cost curve.

                Would have been nice if they’d bent it downwards, though.Report

              • Avatar Patrick Cahalan in reply to Patrick Cahalan says:

                Brandon: you know that money is just a proxy for utility, right?

                In fact, this is the market system working exactly how it’s supposed to work.

                Yes. But there’s an implicit assumption here that Pareto efficiency is the goal of social policy. Not everything can be monetized that way. Indeed, you’re apparently confusing my observation that “social policy and market forces aren’t always aligned” with a lack of understanding on my part about what the market does. I know what the market does. The market doesn’t always do what everyone thinks that social policy ought to do. Whether or not you or I agree with them or not on particular cases isn’t really the point.

                Lots of people think that you shouldn’t be screwed out of access to a medical procedure that is very important to you, when it is largely cosmetic to someone else, because the cost of that procedure is such that it is well outside of your price range and well within their chump change bucket.

                Granted, in time, the Zap It technique will get cheaper (largely due to market forces) and fifteen years from now (largely due to market forces) it may very well be a cheap alternative for the auto worker of the future precisely because of market forces. Awesome. Go market.

                The problem, for the auto worker today, is that they don’t have time for the market to achieve that lower equilibrium price.

                It’s also worth noting that the lost labor of an auto mechanic over six weeks probably isn’t even worth the $20k that it costs for the instant fix. If you just gave him the $20k outright, there’s a good chance that he wouldn’t even use it to fix his leg, but maybe just negotiate something with his boss so that he gets his job back in six weeks.

                Well, sure, but this is presupposing a lot of things that aren’t what I’m talking about.

                One: the specific figure of the 20K or the specific health problem of a busted leg isn’t as important to the illustrative example as the fact that utility doesn’t map directly onto economic ability to pay. Because unlike Econ 101 and even more complex economic pricing models, what I can pay vs. what Joe Schmoe can pay vs. what Donald Trump can pay for the same good are vastly disparate things. The lack of an ability to pay for health care isn’t like your lack of an ability to pay for an iPod.

                As far as the market is concerned, Brandon, if you’re a base service providing worker and something happens to you, the most efficient way of dealing with the problem, in many cases, is to shoot you and dump you out back (that’s not an entirely inaccurate historical approach, mind). This isn’t because the market is inherently evil or anything, just that the market doesn’t care about charity cases. That’s not what the market is good for.Report

              • Patrick, it is such a pleasure to trade thoughts with you and others in this post. Over 200 comments and no name calling!

                “Skin in the game” doesn’t mean “pay for everything.”

                I am indeed dividing the mess into multiple sub-problems. One is containing the explosive growth in health care expenditures. The traditional insurance solution is coinsurance – something like 20% is usually considered enough for consumers to pay attention to costs and make a difference. That brings your garage worker’s situation into the range where he will do some serious mulling. But before you go and multiply your example numbers by 5 and recycle it, let me continue.

                If you would like to provide means-tested government provided vouchers, so that out-of-pocket relative to income is more equalized across income groups, that would not hurt the cost-saving benefit of coinsurance (IMHO). Can we agree that some consumer out-of-pocket is necessary?

                But a transfer payment type of solution interacts with the other, completely different, sub-problem, the one of “fairness” as differently perceived by people of different political affiliations.

                Unless you want to go all the way to a “from each according to his means…” model, there will always be disparities in ability to pay for the essentials of life. And I would dispute that health care (except possibly for those catastrophic situations that market-based insurance is good at addressing) is essentially different from other basic-needs areas of life: food, clothing, shelter, transportation, and communication. The disparities are great in those areas, too. Trump can eat Kobe beef at an expensive restaurant every night and feel the cost less than your garage worker buying chicken at the supermarket. But except for a very few who truly can’t take care of themselves (signaling acceptance of the social safety net here), we all (in the US anyway) get enough to eat.

                So here’s how I prioritize the problems: first, rein in the explosive growth of health care expenditures, second figure out how to ensure everyone has some access to it. It is parallel to the general economic problem in my view. First, grow the pie, second make sure everyone can buy a slice.Report

              • Avatar Patrick Cahalan in reply to Patrick Cahalan says:

                I get the feeling Major Zed and I could work out a system that wouldn’t suck.Report

              • Avatar Patrick Cahalan in reply to Patrick Cahalan says:

                Can we agree that some consumer out-of-pocket is necessary?

                Probably?

                I’ll agree that some sort of consumer, or consumer proxy, awareness of costs is necessary, and we don’t have that now. Well, we have that (the insurance companies), but they’re at a level of abstraction that is too far away from the problem to solve it. That’s not quite the same thing as consumer-out-of-pocket, but it’s hard to imagine a system sufficiently large that can function with a feedback mechanism without putting money in there, somewhere. Principled consumption of limited resources hasn’t proven to be a long-term sustainable model unless you preselect the members of the community and police them for compliance.

                We use money for everything, we’re probably stuck with using it for this, too, until we come up with some other idea.

                I’m not sure that a means-tested voucher system will solve it, because consumption of medical care isn’t like consumption of other goods or services. Honestly, I think we’d probably wind up moving from one set of problems to another set of problems.

                However, I’m certainly willing to give it a try. The other set of problems may be easier to tackle than these ones.

                What we don’t need, though, is a universal voucher system because a good chunk of medical care… the vast majority of the process… is also the least expensive part. Well visits and basic setting of bones and vaccines and even the vast majority of illnesses. That compromises most of the work, and the least expensive work. Putting that chunk in its own container (some sort of single provider setup) is probably a better approach than trying to cover all the different types of care under the same pricing/providing model.Report

              • Avatar Jim Heffman in reply to Patrick Cahalan says:

                The problem with your system that doesn’t suck is that it will allow for people to not get the “best” (most expensive) care.

                And that means the USA is falling behind other countries in our treatment of the sick, why is this so difficult for the richest nation on earth, how can we possibly let people make money off the sick, let me tell you this horrible story about a person, blah blah blah.Report

              • Avatar Patrick Cahalan in reply to Patrick Cahalan says:

                The problem with your system that doesn’t suck is that it will allow for people to not get the “best” (most expensive) care.

                Er, that’s going to happen in any model.

                There are a handful of best transplant surgeons. There are a handful of available transplant organs. There are many more people that need both of these things.

                Some of them aren’t going to get the best medical care under any model of distributing the available resources.

                Granted, it’s perhaps possible to make certain types of treatments non-scarce, and provide them through a single provider. I think the list of this set of treatments is finite, and significantly smaller than the set of all possible treatments.

                I also think that we need to be aware that subsidizing or making some of these treatments available for free will create a huge barrier towards coming up with newer, better treatments. Why would we invent Zap It in the first place if everybody gets a free cast and six weeks off work?Report

              • Avatar Jim Heffman in reply to Patrick Cahalan says:

                “that’s going to happen in any model.”

                But if your model doesn’t at least put up the pretense that it will allow for people to get the “best” (most expensive) care–if you say flat out “there will be care options that will be denied to you because of cost”–then that means the USA is falling behind other countries in our treatment of the sick, etcetera.Report

              • Avatar Patrick Cahalan in reply to Patrick Cahalan says:

                Oh, you’re talking about a rhetorical objection.

                I’m not overly impressed with those, from either side of the political aisle.Report

            • Avatar Roger in reply to Patrick Cahalan says:

              Patrick,

              I too applaud your contributions to the discussion, along with those already responding to you.

              “If you’re looking at insurance as a snapshot in time – which is how insurance companies in most markets historically look at insurance, simply because they *aren’t* required to cover everybody – I do what Major Zed is talking about here… I cut the risks up into as finely-grained a collection of subpools as I can and I get really good actuaries, so that I can ultimately keep as many of the mostly-healthy people as I can while exiting as many of the less-healthy people as I can to my competitors. If I have better actuaries, I make more money than my competitors.”

              Yes! This gets to the heart of the matter. Companies will in effect be incentivized to do everything that is legally permitted to attract, market to and keep young, healthy people without pre existing conditions. This will create perverse market conditions. Even when prevented from underwriting or pricing, companies can usually still aim their advertising, their network facilities, their introduction of new products and so forth. The more forced subsidization, the more perverse the markets get.

              And (for those other than Patrick reading this) the problem with destroying markets isn’t that anyone cares about markets. Markets are problem solving systems. Destroying markets makes society worse at problem solving (like efficiently caring for the health of human beings) all else equal.Report

              • Avatar Patrick Cahalan in reply to Roger says:

                Companies will in effect be incentivized to do everything that is legally permitted to attract, market to and keep young, healthy people without pre existing conditions.

                This is what we had before, and what we still have to some degree now. Arguably not as “bad” in the sense that preexisting conditions (for some definition of “preexisting” and “condition”) are now no longer grounds for refusal of coverage.

                Markets are really good at solving efficiency problems for elastic goods that are scarce. They’re less good at solving efficiency problems for inelastic goods that are scarce. They’re downright poor at solving efficiency problems for inelastic goods where the lag of demand change between T1 and Tn is sufficiently large. They’re a mixed bag at best when elastic vs. inelastic isn’t a domain-wide property.Report

              • Avatar Roger in reply to Patrick Cahalan says:

                I’m not defending the pre Obamacare system. Which was FUBAR and already way beyond free and open.

                The new changes will, however, take a bad system and make this particular problem substantially worse. They will accentuate the perverse incentive for companies to avoid the sick and elderly and attract the young and healthy. The market battlefield will shift to which company manages to attract wildly overpriced segments and which best avoids wildly underpriced segments. This becomes the nature of the game, and instead of having a system which is trying to solve for more efficient care we will (even more so) have a system which is trying to solve for winning the game of superior selection of mis-priced risks. This effectively finishes off the already sickly system.

                Yes the system needed fixing. It should have been fixed though in a way which did not make it even worse. One alternative is as I wrote in comment 60. I am confident that you and/or Zed could offer other workable alternatives.Report

              • Avatar M.A. in reply to Roger says:

                The more forced subsidization, the more perverse the markets get.

                Except that a laissez-faire system like you champion develops exactly the same problems.

                In a laissez-faire system, who is possibly going to insure the elderly? NOBODY. They’re going to kick them off as soon as it looks like they might have a cost associated.

                Who’s going to insure someone with a preexisting condition who lost their previous coverage? Again, NOBODY.

                Parents whose kids have congenital illness are going to get kicked out of their insurance plan. Someone who was on an insurance plan but develops heart disease, or is injured in some form of work or auto accident, or – as happened to my mother – got bitten by a lyme tick and has had to face years of complications including symptoms of the inner ear? Kicked off the insurance plans.

                Laissez-faire is the problem. Your “forced subsidization” claim is malarkey, because the problem is treating health care as a fungible market in the first place and assuming that “marketplace solutions” can EVER function in that way.Report

              • Avatar Roger in reply to M.A. says:

                You are misreading my argument. I am suggesting government transfer payments for the poor and elderly for catastrophic coverage and to subsidize or fund underlying care. The comment is below.

                https://ordinary-times.com/blog/2013/02/ben-smith-doesnt-understand-how-insurance-works/#comment-480640

                The goal is to preserve underlying markets while acknowledging that markets will not subsidize the poor. The point in preserving underlying markets is that markets “solve” for the problem of more efficient and effective health care compared to alternative systems.Report

              • Avatar Kim in reply to Roger says:

                How does pay for service solve anything? Isn’t that just incentivizing folks to come up with bogus tests?
                (and yes, you can say “In an ideal world, we wouldnt’ afford those”… but that just incentivizes the fine and hallowed art of asskissing the rich).Report

              • Avatar Roger in reply to Kim says:

                ?? I have never intended to recommend a pay for service model.

                I recommend a catastrophic care for all model (with competing providers) paid for in a manner similar to SS or unemployment insurance. This would be combined with a voluntary market for routine care, with partial or full premium subsidy for the poor and market solutions for portability and changes in health status.

                Markets work greatly by XXkissing the rich. Companies are incentivized to solve problems for the rich, which then creates an incentive to solve the problem more efficiently, which then makes it available to mass market and so on.

                And yes I understand markets will not solve dhorter term for the poor. That is why I would not suggest them for that. For our grand kids sake though, it is imperative that we preserve the market based system that needs to underlying health care.

                It is really, really easy to design perverse insurance or transfer systems which undermine the market. I only argue against these.Report

              • Avatar Patrick Cahalan in reply to Roger says:

                When you remove so many of the cost drivers from the system, it’s tough to show that the remaining market is particularly efficient.

                That doesn’t mean that it isn’t, granted.

                The biggest efficiency gain I can see from a universal coverage standpoint, if you wind up with a single carrier, is that you can move to the more interesting efficiency gain.

                If I know that Bob is likely to live to be 80, and likely to cost Y, I can charge him (Y+C)/80 per year.

                But if I know Bob’s income function is going to look something like a bell, I can adjust payments along the same schedule. So when Bob is younger, he’s charged less (because he makes less), and when he’s middle aged he’s charged the most (because he makes the most), and when retired, he’s charged the least (because he’s on a fixed income).

                This actually enables you to spread the total expected cost of your medical care out through your lifetime… according to your means to pay. *That* is actually a new service, that isn’t possible under another model.Report

              • Avatar M.A. in reply to Patrick Cahalan says:

                Medicare exists because of discrimination against the elderly in health care was such a large problem. So, we “socialized” (basically created a single-payer minimum level) health care for the elderly, paid for by taxes.

                Take away Medicare, and you don’t get a more efficient market, you get a bunch of really sick old people in the emergency rooms with untreated, unmanaged conditions. And this is simply because the markets do not work as people like Roger imagine.

                A universal healthcare system like Canada’s is Medicare writ large. Everyone’s covered, and preventative care and management is emphasized to prevent the really costly stuff from coming up so much. My canadian coworkers stand appalled at the way that workers in the US are treated for healthcare coverage and rightly so.

                Obamacare is a stopgap, a half measure, that plays the game of “markets” with an industry of healthcare that cannot, by definition, function as a fair and equitable market. But at least it makes illegal the worst of the worst abuses and requires the insurance companies to handle all cases rather than picking and choosing and engaging in rank discrimination.Report

              • Avatar Patrick Cahalan in reply to Patrick Cahalan says:

                M.A., you’re reading Roger extremely uncharitably, especially given as he’s already conceded that the presence of something like Medicare is necessary.

                You’re arguing against somebody who isn’t arguing what you keep arguing against.Report

              • Avatar M.A. in reply to Patrick Cahalan says:

                No, Patrick. I am pointing out that Roger’s underlying assumption is completely flawed.

                He asserts that “the market” can somehow come up with a solution for medical care. But the truth is that “the market” is 100% of the problem. There are too many perverse incentives.

                We enacted Medicare because of discrimination against the elderly, but we set the age at 65, so now it’s the 55-and-up group with the problem of being discriminated against, them and anyone with an ongoing, congenital, or degenerative condition.

                Take it down to 55, and we’ll see discrimination against people in their 40s.

                The entire problem with the system IS the idea of the “market solution”, because a “market solution” can only result in perverse incentives.Report

              • Avatar Roger in reply to Patrick Cahalan says:

                No I am not. Not even slightly. You are not reading my link to comment 60.Report

              • Avatar Murali in reply to Patrick Cahalan says:

                MA, Roger is saying that an undistorted market can do a number of things that a healthcare system is supposed to do, but not everything. In particular, Roger acknowledges that even a functioning undistorted market alone will have difficulty providing healthcare to the poor. All he is saying is that if we are going to help the poor, we should modify the system without distorting the market structures.

                Medicare exists because of discrimination against the elderly in health care was such a large problem.

                Medicare exists because the elderly are a disproportionately large an active segment of the voting population. In a sane system medicare would be a lot smaller than it currently is.Report

              • Avatar Stillwater in reply to Patrick Cahalan says:

                Patrick, I just want to say I’ve been absolutely loving your comments in this thread. In particular the one just up above. What you’ve been saying is +/- exactly how I view the central problem in the provision of healthcare under a private insurance model. But you’re actually providing a detailed description and analysis of that problem (instead of what I do, just sorta point and say, “over there, see?, that’s the problem, Urk.” Those types of comments won’t take the discussion very far.)

                I also want to say that a clear articulation of the problem shouldn’t be viewed as advocacy for any particular solution to it. There are probably lots of potential solutions along a continuum between maximizing private insurance’ role in the system or eliminating it. But without a clear expression of the types of problems you’ve been clarifying, we wouldn’t have a guide as to what constitutes an effective solution.

                So, thanks for thinking and writing about this.Report

              • Avatar M.A. in reply to Patrick Cahalan says:

                Murali: No. In a truly sane system, Medicare would be a much larger system than it currently is in America.

                It is right now a mere band-aid over the problems the markets created, problems markets will never solve because there will never be a “market” that does not respond more to the perverse incentives inherent in the obligatory “buy it or die” field of health care and health insurance.Report

              • Avatar Roger in reply to Patrick Cahalan says:

                P,

                I agree completely that there was little left of an efficient market even prior to the latest changes. Shame that.

                I agree that lifetime insurance within a single insurance entity solves for this. I would however recommend it be done in a way which incentivizes institutional competition. This could occur by separating catastrophic from routine care and by establishing or allowing multiple entities which compete for “blocks” of the population. Failure to establish competition will stifle the incentives to experiment and avoid/offset the tendency toward bureaucratic sclerosis which is endemic in complex adaptive systems.Report

              • Avatar Chris in reply to Patrick Cahalan says:

                Murali/Roger, how do you so alter it without “distorting” the market?Report

              • Avatar Roger in reply to Patrick Cahalan says:

                1) I would recommend exploring ways to establish catastrophic care for extremely serious and expensive medical conditions. I would allow people to opt out of this with some very onerous requirements. This would be paid for via payroll taxes unless the fool opted out.

                2) I would recommend people buy their own insurance that meets their needs for routine, non catastrophic care. I would choose a high deductible and low premiums and few frills. Others can get low deductibles, high premiums and all the frills they would like. I would allow any company to sell any policy that people will buy as long as the company is honest and has proper reserves.

                3). I would encourage experimentation with guaranteed insurability and portability, so that people would not be harmed on their routine care premiums if their health status changed.

                4). I would subsidize the poor and elderly and possibly the sickly so that they could purchase the underlying coverage policy and pay their deductibles. Catastrophe coverage as above would be free or cheap for these folks as this segment does not work much (thus no payroll deductions).

                This would provide universal coverage. This would preserve market forces so as to encourage advances in care and efficiency. It would make health care substantially more efficient and affordable than today as it would reduce the problem of divorcing the person who pays from the person who benefits. And it would not destroy the experimental and learning functions which our descendants will depend upon.Report

              • Avatar Chris in reply to Patrick Cahalan says:

                Don’t subsidies generally affect markets?Report

              • Avatar Murali in reply to Patrick Cahalan says:

                Chris,

                The idea is that I directly subsidise the poor by giving them cash or vouchers. In a sense, it technically distorts the market as now the market is different than it otherwise would be. But hopefully, the consumption decisions of the non-poor are not significantly affected.

                Perhaps it is a poor choice of words. The idea is that a functioning market for healthcare should in general be keeping costs at a low enough rate where most people can afford some reasonable level of care. We don’t however want the marginal cost to be so low as to inadvertantly drive up consumption and thus the total costs.

                Now, if you are going to have a system with sufficiently large marginal costs to affect behaviour of most people at the right amount, we can perhaps arbitrarily term that an “undistorted” market. Though functioning market would be a better term. Of course, such a sytem sets prices which have sufficient bite to them that people are discouraged from consuming what they don’t need. But that means that the bite is going to be large enough to prevent the very poor from consuming healthcare that they do need. The solution is to directly subsidise the worst off so that the consumption decisions of the middle class don’t change significantly.Report

              • Avatar Patrick Cahalan in reply to Patrick Cahalan says:

                I also want to say that a clear articulation of the problem shouldn’t be viewed as advocacy for any particular solution to it. There are probably lots of potential solutions along a continuum between (doing this) in the system or (doing that). But without a clear expression of the types of problems you’ve been clarifying, we wouldn’t have a guide as to what constitutes an effective solution.

                I should probably make that my tag line for the blog.Report

              • Avatar Patrick Cahalan in reply to Patrick Cahalan says:

                I agree that lifetime insurance within a single insurance entity solves for this.

                Awesome!

                I would however recommend it be done in a way which incentivizes institutional competition.

                Yes, this is the very sticky widget. Here’s where all the ugly work would get done.

                This could occur by separating catastrophic from routine care and by establishing or allowing multiple entities which compete for “blocks” of the population.

                I think this is a pretty good design idea, but I’ve been trying to work out ways to do this that don’t have problems at the transfer points and it’s… difficult.

                If you have an entity that provides “basic” care and an entity that provides “catastrophic” care, the point where you decide where the patient belongs requires an active adjudicator. I see this as a good place for governmental intervention, between one/two/many private actors providing the care coverage domains, but I’m also seeing all sorts of potential problems there, too.

                Failure to establish competition will stifle the incentives to experiment and avoid/offset the tendency toward bureaucratic sclerosis which is endemic in complex adaptive systems.

                Well, the real “root” way to avoid bureaucratic sclerosis is to inject a mechanism for change.

                Market forces provide that, but they aren’t the only way to do it.

                I don’t know if they’d be the best way or not, in this particular problem.Report

              • Avatar Stillwater in reply to Patrick Cahalan says:

                Another terrific comment, Patrick. And Roger too! You guys are getting down to the brass tacks on this issue, it seems to me.

                Especially this from Roger: I agree that lifetime insurance within a single insurance entity solves for this.

                That’s one solution to the problem of building the true cost of an individual’s healthcare into a private insurance model. It requires a mandate, yes? Or some other form of coercion to require everyone to participate? (Or does it?)) (Not to mention problems of implementation and etc.)

                Are there any alternatives?Report

              • Avatar Roger in reply to Patrick Cahalan says:

                Yes, yes, and yes.

                I would say that the way to discover how to handle the transfer points is itself via experimentation. We should look at current institutional solutions for similar problems and explore competing variations on those.

                It is important to clarify that we are not just looking for a mechanism of change, but a mechanism for improving ability to solve problems in a changing world. Markets are one way to do this in one limited domain. science is another way to do this in another. Sports involve another limited domain playing field for a similar dynamic. Democracy is another, though not a particularly successful one, IMO.

                My point in stressing problem solving is different than change is similar to the point that progress is different than evolution or genetic drift. Progressive systems need the ability to generate variety (change), select better solutions and reject or eliminate worse solutions, preserve and amplify the successes and then build upon them. Politics is especially poor at eliminating bad variations and selecting good.Report

              • Avatar Stillwater in reply to Patrick Cahalan says:

                Please tell me I am imagining things but did Roger just post as Murali???

                After a while all the folks trumpeting individual values start to look the same.Report

              • Avatar MikeSchilling in reply to Patrick Cahalan says:

                I agree that lifetime insurance within a single insurance entity solves for this.

                Single payer is an example of lifetime insurance within a single insurance entity (admittedly, a limiting case.)Report

              • Avatar M.A. in reply to Patrick Cahalan says:

                Stillwater,

                I’m actually worried about this after taking a third look. Roger lays out a multipoint plan:

                Roger: 4). I would subsidize the poor and elderly and possibly the sickly so that they could purchase the underlying coverage policy and pay their deductibles.

                Chris asks for clarification and then:

                Murali: Chris, The idea is that I directly subsidise the poor by giving them cash or vouchers.

                I am really confused. I would expect to see an “I” if it were Roger responding there, but not if it were Murali referring to Roger’s plan?Report

              • Avatar Patrick Cahalan in reply to Patrick Cahalan says:

                That happens in threaded comments, from time to time.

                I can attest that Roger and Murali are definitely two different people.Report

              • Avatar Roger in reply to Patrick Cahalan says:

                After a certain point, we all look alike.Report

              • Avatar MikeSchilling in reply to Patrick Cahalan says:

                Since in either case it’s the government providing the subsidy, I conclude that Roger=Murali=Louis XIV.Report

              • Avatar Roger in reply to Patrick Cahalan says:

                Louis has better wigs.Report

              • Avatar Stillwater in reply to Patrick Cahalan says:

                Hmmm. I don’t know. I think they’re both adopting an “if I were king for a day” posture to simplify presentation and that’s why they’re both saying “I”. That Murali feels comfortable explaining Roger’s view isn’t surprising either since they’ve both pretty consistently argued for very similar solutions to US healthcare problems.Report

              • Avatar Roger in reply to Patrick Cahalan says:

                Not to say we shouldn’t start a conspiracy rumor. Wouldn’t it be a trip if every libertarian on the Internet was a different alter ego of some kind of Ayn Rand computerized consciousness?
                I could be like ARTHX1138, and Murali could be AR R2D2.

                Heck, maybe we are, and I just think I am someone else?Report

              • Avatar Roger in reply to Patrick Cahalan says:

                Just because a conspiracy seems unlikely doesn’t prove it isn’t true.Report

              • Avatar M.A. in reply to Patrick Cahalan says:

                Patrick, Stillwater, Mike Schilling, etc. – if you are satisfied they are two separate people, I’m satisfied.

                It just freaked me out and I hope you can see why.

                Roger, Murali, I apologize for having to ask the question to get my mind put at ease.Report

              • Avatar Roger in reply to Patrick Cahalan says:

                SW and Mike (who are also probably the same person),

                On the lifetime insurance entity questions….

                ” It requires a mandate, yes? Or some other form of coercion to require everyone to participate? (Or does it?))”

                My oft repeated prescription for reasonable health care reform is that we establish a large scale universal insurance program for catastrophic coverage paid similar to SS and unemployment insurance as deducted automatically from wages. It would not be coercive because I would allow Ayn Rand to opt out via an annual signed and notarized form saying she wants nothing to do with said program and is responsible for her own care.

                I would have competition within private entities for various blocks of customers. Non emergency health care would be handled in the free market with subsidies for the poor or as ARR2D2 calls them, “vouchers.”Report

              • Avatar Patrick Cahalan in reply to Patrick Cahalan says:

                It would not be coercive because I would allow Ayn Rand to opt out via an annual signed and notarized form saying she wants nothing to do with said program and is responsible for her own care.

                How does this work, in practice, for people who sign the form and then wind up in the ER?

                I think it’s reasonable to say that we don’t want the hospital to have to verify economic means before treating, but I also think it’s reasonable to say that we can’t allow the hospital to cost shift this burden to the other consumers of health care.

                My proposal was that if you showed up consuming lifesaving medical care (having already opted out of coverage), the hospital bills the feds and the feds pay the hospital (thus preventing cost-shifting) and transfer the debt obligation to the IRS to collect.

                This has some severe problems with it, but it’s the best I can come up with.Report

              • Avatar Roger in reply to Patrick Cahalan says:

                I am fine with the IRS idea, or a combo of both.

                The other good thing about automatic withdrawal is that it costs less when young and unskilled and costs more as earnings potential increases. And of course it costs nothing to the unemployed, students and retired.Report

              • Avatar Murali in reply to Patrick Cahalan says:

                Holy crap, when I go to sleep and wake up, I find that I was mistaken for someone else. I always thought that I had a different writing style than Roger. Hell, I think I’ve had a disagreement or 2 with Roger before, but then hey that might just be schizophrenia. But I think that the biggest tell is that we live in different timezones….

                But, I get how it may seem like I responded to Chris when he was addressing Roger as though I might have been Roger. I was actually responding to Chris’s previous comment which was addressed to both myself and Roger. It just so happened that his subsequent comment was very familiar.Report

              • Avatar Roger in reply to Patrick Cahalan says:

                There is no sense pretending any more. We (or is it I?) have been discovered. Anyone can pretend to argue with themself.

                Seriously though, I am pretty sure Patrick can tell which address we are transmitting from.Report

              • Avatar M.A. in reply to Roger says:

                The goal is to preserve underlying markets

                When underlying markets are the entirety of the problem, this goal is antithetical to solution.Report

              • Avatar James Hanley in reply to M.A. says:

                M.A.,

                If I may, I think you are misunderstanding the concept of efficiency. Efficiency does not mean everyone gets served well by a particular market. In fact efficiency often means that many people are effectively excluded from a particular market.

                That doesn’t mean the issue of exclusion isn’t a legitimate policy concern. What it means is that sometimes the legitimate policy concern about exclusion conflicts with the legitimate policy concern about efficiency.

                But exclusion of people who want or even need something, but are unable to effectively demand it, does not equate to inefficiency, because inefficiency isn’t about whether the benefits of a market are widely distributed. It’s an entirely different type of calculation.Report

              • Avatar BlaiseP in reply to M.A. says:

                Health care in the USA is not a market, as such. Check this out.

                There are no viable market pressures being applied in this market space at all. I wish everyone would just quit pretending health care is a working market in this country.Report

              • Avatar James Hanley in reply to M.A. says:

                I don’t think anybody is claiming there’s a working health care market in this country. I think Roger’s bemoaning the fact that there isn’t, and M.A.’s cheering the fact that there isn’t, and Patrick is just pondering why things are the way they are and what things would be like if they weren’t.

                But if anybody is in fact thinking there’s actually a functioning health care market, then I agree with you they need to disillusion themselves.Report

              • Avatar BlaiseP in reply to M.A. says:

                Then let’s all just quit blethering about how we’re going to fix it, eh, James? Without price information, no market can work. I made that point earlier, not that it seems to have sunk in.Report

              • Avatar Roger in reply to M.A. says:

                Agreed. We are moving from an almost dead market to a pretty much completely dead market. We make not get the Christmas we deserve, but we are definitely getting the Christmas we designed.Report

              • Avatar BlaiseP in reply to M.A. says:

                No. We didn’t design this. It was designed for us, aided and abetted by the health insurance industry and Big Pharma and a host of price fixers who have grown enormously rich because they’ve been able to obfuscate the true cost of health care. And the physicians are waist-deep in it, too.

                It’s a completely rigged game. It’s been rigged since WW2. And every time someone tries to do something about it, we may count on assorted maniacs from every camp to rise up to oppose any such legislation. All you Free Marketeers out there, with your interesting plans for reform — you forget your own gospel. If this shit had a price tag on it, you’d be outraged. The health insurance industry is not a free market — I don’t want to hear you ever say another word about Obamacare or Market Forces or anything else about health care reforms, not until you eat your own dog food and demand some transparency rules be applied to this problem.Report

              • Avatar James Hanley in reply to M.A. says:

                Then let’s all just quit blethering about how we’re going to fix it, eh, James?

                I don’t think that follows. “It” doesn’t necessarily refer to this non-existent market, but to “whatever the hell it is we have now that nobody seems satisfied with.” I think that’s the “it” that people mean.Report

              • Avatar BlaiseP in reply to M.A. says:

                @James: that wasn’t directed at you. I’ve been watching this post. When it comes to Perverse Incentives, such as you spoke of earlier, the first perverse incentive is the benefit of shutting down competition by price fixing and obfuscation. There hasn’t been any meaningful competition for health care dollars in this country since before any of us were born. My guess is, there won’t be any in my lifetime. We don’t even know what it would look like. I’m not so sure, given how bad things have gotten, that anyone could change things, even if the obvious was pointed out to them.Report

              • Avatar Roger in reply to M.A. says:

                And by designed I do not mean designed by the Grand Vizier of health care. I mean “designed” by the market, the crony distortions of the market, the various viziers, administrators and politicians. You know, the old camel is a race horse designed by committee joke.Report

              • Avatar James Hanley in reply to M.A. says:

                Blaise,

                Oh, I didn’t take it as directed at me. But do you really see anyone here that’s not on board with your arguments about lack of price information, price fixing, etc.? I mean I certainly would wholly agree, and I’d struggle to see Roger disagree or any of the more liberal folks involved here disagree. But maybe you and I are reading them a little differently.

                I can say for sure that I’m not in substantive disagreement about those particular criticisms, so I hope my response didn’t come across as arguing about that.Report

              • Avatar BlaiseP in reply to M.A. says:

                When M.A. said underlying markets are the entirety of the problem, you replied:

                Efficiency does not mean everyone gets served well by a particular market. In fact efficiency often means that many people are effectively excluded from a particular market.

                If, now, you’re willing to agree with M.A. that the underlying markets are indeed the entirety of the problem, that would indeed be a marvellous development. But let’s not indulge in little discursive whimsies about how some people are effectively excluded from Efficient Markets. Heath care is not efficient. It’s a racket.Report

              • Avatar James Hanley in reply to M.A. says:

                Blaise,

                Oh, my only point there was that a proper understanding of what market efficiency means would not lead us to conclude that an efficient market gives everyone what they want, or even need. I wasn’t saying there was a properly functioning health care market, just that if there was one, and if it was properly seen as efficient, that wouldn’t imply that everyone was getting the health care they needed.

                That doesn’t mean an efficient market is the “entirety” of the problem (because an efficient market wouldn’t have collusion and hiding of prices, as you are correctly pointing to as part of the problem). It just means an efficient market would eliminate all the problems, because the availability problem is separate and distinct from the efficiency problem.

                In a nutshell, I wasn’t making any claims about the market/non-market/perverted market/whatever-we-want-to-call-it in health care today. I was only noting that efficiency and broad availability are different metrics, not the same thing.Report

              • Avatar Stillwater in reply to M.A. says:

                If, now, you’re willing to agree with M.A. that the underlying markets are indeed the entirety of the problem, that would indeed be a marvellous development.

                There’s an equivocation in the word “markets” between this and James’ earlier comment, I think. James was suggesting that the current institutional structure called “the healthcare market” is dysfunctional, not that concept of markets as applied to healthcare provision is dysfunctional.Report

              • Avatar James Hanley in reply to M.A. says:

                Stillwater might be right, but I think I may have caused confusion by putting my comment in the wrong place and not making it clear what I was responding to.

                In fact my comment was meant as a response to M.A. from further above:
                Take away Medicare, and you don’t get a more efficient market, you get a bunch of really sick old people in the emergency rooms with untreated, unmanaged conditions.

                And my comment was that “sick old people” not getting health care is not necessarily related to efficiency, per se.

                Although to be fair, M.A. is right that simply taking away Medicare by itself wouldn’t mean the market was efficient. There’s a hell of a lot of other factors that prevent anything approaching efficiency in the health care market, ones that probably play a far larger distortionary role than Medicare.

                But I think my comment was unclear in its intent, may not have been well-focused on what M.A. was saying there, and was placed in the wrong spot, leading to a fairly pointless side-track argument. My apologies to all. (For some reason I’m very un-focused and distracted today; I’ll try to do better.)Report

          • Avatar RTod in reply to Stillwater says:

            This is an amazingly smart comment by Pat that followed another amazingly smart comment by Pat.Report

        • Avatar Jim Heffman in reply to Patrick Cahalan says:

          But is risk pooling the intent of insurance, or merely the characteristic that allows it to work at all?Report

    • Avatar zic in reply to Major Zed says:

      Sounds like a good argument for single payer.Report

      • Avatar b-psycho in reply to zic says:

        Makes more sense than the ACA mandate-then-subsidize racket at least.Report

        • Avatar greginak in reply to b-psycho says:

          FWIW…mandates + subsidies + heavy regulation of insurance companies works well in several Euro countries like Germany. I know, I know…i’ve committed the sin of mentioning what works in other places, but just try to sue me over it.

          Yes i also know we are certainly not doing things all that close to what other countries have done in terms of regulations and such.Report

          • Avatar Stillwater in reply to greginak says:

            but just try to sue me over it.

            Tort reform!Report

          • Avatar b-psycho in reply to greginak says:

            It’s a situation where the more controls & subsidies you put in with the goal of making private insurance as we know it work the closer you get to “why bother? Just pay for the care then”.

            Not that I think single-payer is some kind of blanket positive here. Especially since I fear the impulse whenever the state administers something via taxes of people using that as reason to further micromanage our lives. Just that if we’re going to be forced to pay anyway better to skip the middlemen.Report

            • Avatar Morat20 in reply to b-psycho says:

              It certainly seems to be cheaper and work better than what we’ve got.

              I mean you can look around the world — we’ve got the worst system, hands down. For all the British griping about the NHS, they still get better results for half the cost per person, and they’re the next most pricey.

              I don’t get all the hand-waving about it — the US is, as far as these things go, in a ridiculously enviable position. Our setup is ridiculously bad, expensive, and doesn’t cover everyone. We have at least two dozen alternative systems to chose from, with detailed track records, and all give better results for a lot less.

              While everyone else is biting medical inflation (and in the end, let’s face it — health care is pretty darn inelastic. As long as you can get results, people are gonna shove money at it because everyone wants to be healthier and live longer), we have so much inefficiency in the system that we can make deep cuts in our spending and still improve results.

              But we don’t. Instead we went with the 1994 GOP plan, also known as “The most socialist plan ever” aka “Death Panels” AKA “The end of freedom in America”. (Seriously, the hyperbole over the ACA is annoying).Report

              • Avatar Stillwater in reply to Morat20 says:

                Granting everything you said up there, the argumentative disconnect is with libertarians, not conservatives. Conservatives just oppose Democrats and nothing else. That’s their job. Libertarians are more inclined to go with single payer than either Obamacare or the status quo. They wanted to go in a completely different direction.Report

              • Avatar Shazbot5 in reply to Stillwater says:

                “Libertarians are more inclined to go with single payer than either Obamacare or the status quo.”

                That seems like a big generalization. Maybe the libertarians here wanted single payer, but I’d guess most want some kind of system loosely based on Singapore, but without the price controls. (Or just health insurance across states…)

                These more libertarian, more markety plans have the benefit (ha!) of having never been tried.Report

              • Avatar Jaybird in reply to Shazbot5 says:

                One of the main things I wanted (and still want) is to divorce health insurance from employment.

                There are so very many wacky and downright perverse incentives that that setup created.Report

              • Avatar Patrick Cahalan in reply to Jaybird says:

                I cannot possibly say enough to support this statement (which is another reason I don’t like PPACA).

                Intertwining medical care with employment was seriously, like, the dumbest thing America has done from a public policy standpoint since the advent of the assemblyline. (Wars don’t count).Report

              • Avatar greginak in reply to Jaybird says:

                Lots of us want to separate employment and HI. I’m sure any public suggestion by a D pol to do will be greeted with calm reasoned thoughtful discussion of the various alternatives. That is certainly what i have come to expect.Report

              • Avatar b-psycho in reply to Jaybird says:

                Ideally, if I could divorce health insurance from both employer AND government while simultaneously collectivizing it MORE than currently I would do that. The socialist element of it I see as inevitable due to the definition of insurance itself (I’ve even argued in a way that insurance is Marxist in principle), it’s the state & corporate for profit elements I question.

                I figure that isn’t the question here though. Within the parameters set, being single-payer v the current system…fish it, single-payer.Report

              • Avatar Patrick Cahalan in reply to Jaybird says:

                b-psycho:

                Write a guest post.

                I think I like what you’re saying here, but I want to see it come out the other end.Report

              • Avatar Stillwater in reply to Shazbot5 says:

                Maybe the libertarians here wanted single payer,

                Yeah, that’d be somethin wouldn’t it?

                I wrote the earlier comment poorly. It’s not that libertarians want single-payer – they don’t. It’s that they’d prefer single payer over the PPACA.Report

              • Avatar Russell M in reply to Morat20 says:

                hey forgetting that the ACA is romneycare is grinchcare is the Heritage Plan is how we talk about health insurance now. admitting that the right is angry and pissed because the president got their fake plan passed and implemented shows that the republicans do not want to actually solve the problem. they want to obstruct and hamper wile pointing to their “PLAN” and when said plan gets passed howl at the moon about death panels and socialism.

                so yeah i would rather have medicare for all citizens paid for by payroll taxes(on all income) that kills the “business” of health care because profiting off of medical care that people must have is not an area i want the free market to be in.Report

              • Avatar zic in reply to Russell M says:

                My guess is that the super-secret plan-within-a-plan cooked up by Obama the chess master poker playing community organizer ninja is:

                1. Get the mandate.

                2. Get the SC to approve the mandate as a tax.

                3. Make folks who don’t enroll pay a fine, and then in return, flip them onto Medicaid.

                4. When the masses realize that the fine/medicare is cheaper then the fees charged by their for-profit companies, they’ll drop their premiums for the fine.

                5. And we slide right down the slippery slope to medicare for all, aka single payer.

                /and this comment is snark. Serious snark. No heads popping, please.Report

              • Avatar Patrick Cahalan in reply to zic says:

                What you’ll see instead is an ever-increasing cycle of subsidies to the private market to keep those premium costs down, with those large increases in capital leading to increasingly risky behavior on the part of the insurers, and then all of the insurance companies will face a domain-wide failure and we’ll have to bail them out.Report

              • Avatar zic in reply to Patrick Cahalan says:

                Are you protecting the insurance bubble already?

                Sweet.Report

              • Avatar zic in reply to Patrick Cahalan says:

                meh, meant predicting, not protecting. How did those words get to be so similar?Report

              • Avatar Patrick Cahalan in reply to Patrick Cahalan says:

                I predicted the insurance bubble back during the whole wrangling about PPACA on the site here. I’ve brought it up a few times.

                I stand by that prediction. I think it’s worth betting on. Not sure I’m going to get the timeframe right, though, so I won’t bet the farm.

                A beer, though. I’ll bet a beer.Report

              • Avatar zic in reply to Patrick Cahalan says:

                Is it moral/ethical to bet more then a beer? To bet the farm? An empire? To rake it in with the strong feeling everyone will have to pay later?Report

              • Avatar Patrick Cahalan in reply to Patrick Cahalan says:

                Is it ethical? Depends on the wager and the participants. Is it moral? We’ll let Kyle start a thread on that one.Report

              • Avatar Kim in reply to Patrick Cahalan says:

                zic,
                people make bets every day, some for grand things some for tiny things.
                I think, as a society, we believe that it’s moral (and possibly superrogatory) to bet the farm. Wizards of wall street and all that…Report

  12. I don’t know anything about Ben Smith other than what’s reprinted here in this post, but it seems like he’s more concerned about “forcing” young people into the insurance pool. He does not seem to be making the claim that the PPACA is somehow super-different from “insurance” or “the way insurance is supposed to work.”

    In other words, I don’t quite understand Tod’s criticism here (maybe I would if I clicked on the link or knew more about the context in which Ben Smith is writing). It doesn’t seem that Smith is complaining so much that in “Obamacare” the young are subsidizing the older as that they are forced to subsidize the older in a way that they weren’t forced to before.Report

  13. Avatar Brandon Berg says:

    They’re supposed to subsidize the elderly and the infirm.

    What the Major said. Insurance is an ex post subsidy from the lucky to the unlucky. True insurance has no ex ante subsidies where someone pays more than the actuarial cost of his own insurance so that someone else can pay less than the actuarial cost of his own insurance. That’s welfare.

    Forcing the young to subsidize the old is especially bad, because it has the effect of forcing the worst off (those who die young) to subsidize those who are lucky enough to live into old age.Report

  14. Avatar BlaiseP says:

    I’ll defer to Roger on P&C but in terms of health insurance, straightening out that market space will require a better dataset, such as we have for the auto, marine and P&C sectors. All the health insurers have their own datasets but they’re jealously guarded. Obama put forward some legislation which would connect one physician to one patient, a good start in my opinion, but I’m on several lists right now (NAIC, HIX, H2R. CBC) and it’s not going anywhere.

    At some point, as a society, we will have to shove all the health care data through a common portal so we could get a better picture of what’s going on, who’s getting treated for what and how much it costs. It will require a national ID system and open all sorts of privacy considerations. Putting aside those considerations, without such a common portal and dataset, with grantable/revocable health care provider certs, such as we see in the credit card industry, all this talk about Who Understands What about the health care and the concomitant health insurance industry is so much pointless babbling. I have access to huge datasets and I know I don’t know.Report

  15. Avatar Keith says:

    You can take the writer out of (GO)Politico but you can’t take the (GO)Politico out of the writer.Report

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