It’s Time to Unbundle Health Insurance and Health Care

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Tim Kowal

Tim Kowal is a husband, father, and attorney in Orange County, California, Vice President of the Orange County Federalist Society, commissioner on the OC Human Relations Commission, and Treasurer of Huntington Beach Tomorrow. The views expressed on this blog are his own. You can follow this blog via RSS, Facebook, or Twitter. Email is welcome at timkowal at gmail.com.

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196 Responses

  1. Avatar Kazzy says:

    Still digesting this, but I think there are a lot of good points in here. However, unless I missed it or misread it, I didn’t see you address one potential solution: single payer.Report

    • Avatar Tim Kowal in reply to Kazzy says:

      I wouldn’t propose single-payer as a potential solution just as I wouldn’t propose a gas station as a potential solution to a drained electric vehicle. Not that gasoline doesn’t make cars go, just that it doesn’t make this particular kind of car go. This is obviously off-topic, but I believe it can be persuasively argued that America has never had the intellectual apparatus to implement a single-payer healthcare model. The conclusion is suggested by the fact that we have to employ the euphemism “single payer” for what is essentially socialized health care, something Americans could never (in our lifetime) embrace outright. The conclusion is further suggested by the fact that even today, New Deal legacy programs are justified as part of a “constitutional moment,” i.e., a window in time when the normal rules of free enterprise, limited government, and separation of powers, were temporarily suspended only, not permanently denied.

      The shorter answer is, that’s a topic for another post. 😉Report

      • Avatar Kazzy in reply to Tim Kowal says:

        I will totally confess to being woefully ignorant on many of these topics. Which sometimes makes me look like a doof, but also sometimes means I’m not burdened by prior ideas.

        I’ve always wondered why our health care system didn’t mirror our education system. Have a public option that is available to all. And private options for those who elect for more/different/other.

        Yes, yes, I know about all the handwringing over our education system, some of it legitimate and some of it sky-is-falling exaggerations. But, we do pretty much have every kid in school and our populace is more and better educated than most (especially when you account for our approach).

        Not perfect, I know, but whatever we call that (and it might well be socialized), I think it is better than the status quo.

        All that said, your point about decoupling insurance from employment couldn’t be more spot on. Though the job ultimately fell through, Zazzy would have considered turning down a great opportunity for a new job because it would have either meant ceasing insurance (not an option with the little one) or paying several thousand dollars out of pocket while she waited for her new employer’s waiting period to end. That can’t be good for the economy.Report

      • Avatar zic in reply to Tim Kowal says:

        This is obviously off-topic, but I believe it can be persuasively argued that America has never had the intellectual apparatus to implement a single-payer healthcare model.

        As I recall, folks happiest with their insurance in the US are seniors on Medicare and Veterans. Single payer, government-run socialized medicine.Report

      • Avatar Kim in reply to Tim Kowal says:

        Socialized insurance ought to sound very familiar to you, Tim.
        Don’t we call it flood insurance these days?Report

      • Avatar Brandon Berg in reply to Tim Kowal says:

        Socialized insurance ought to sound very familiar to you, Tim.
        Don’t we call it flood insurance these days?

        Libertarians have been objecting to this subsidy for years, and getting crap from the left about it. If people choose to live in areas at high risk of flooding, they should pay the full cost of insuring against it.Report

      • Avatar LeeEsq in reply to Tim Kowal says:

        I’m going to quibble with this. The reason why we don’t have government-provided universal healthcare is because our political system gives the opponents of government-provided healthcare lots of opportunities to kill it. There has been a plurality of Americans that wanted universal healthcare since the Progressive Era. The model looked to at the time was the German model but WWI made looking to the German Empire as model for anything politically toxic. FDR wanted health insurance to be part of Social Security but decided to take it because he didn’t want the entire bill held up by the AMA. Truman also wanted to implement universal healthcare but was met with opposition from the GOP and the AMA.

        The Democratic Party has officially advocated for universal healthcare since the 1948 convention I think and millions of American liberals wanted it. If we had a less veto-prone political system it probably could have been achieved under LBJ, at about the same time Canada starte to implement single-payer.Report

      • Avatar Mad Rocket Scientist in reply to Tim Kowal says:

        @zic As a disabled veteran who gets VA care for the rest of my life, you may want to check that a bit.

        Veterans are generally thankful for VA care, but are rarely happy with it (& the wait times, & the hassles, & the constant threat of cuts, etc.), and they will avoid using the VA if any other option exists.Report

      • Avatar dragonfrog in reply to Tim Kowal says:

        @Kazzy – here in Canada, there is tremendous hand-wringing over anything that if you squint at it just so could look like dual-stream healthcare – any private clinic that offers, for a fee to the user, services also covered in the public health system.

        The concern, and I think it’s a reasonable one, is that we must force the wealthy and powerful to use the same health system as everyone else, so it doesn’t become a neglected wasteland. If the only people who have to deal with the socialized health system are the 99% of us who have no power or leverage to do anything about it, then why wouldn’t the plutocrats gut it to give themselves a tax break?Report

      • Avatar zic in reply to Tim Kowal says:

        MRS, I looked for the pol I was referring to, haven’t found it yet. But, it was a series of questions about satisfaction with health insurance, and while there were frustrations with all insurance by all respondents, seniors and veterans were, in general, happier than people with private insurance.

        Now here’s another thing: this was about insurance; not to be confused with care through VA medical facilities. A lot of veterans get care outside VA facilities, in part due to locality. But it’s really easy to conflate the two — mechanism to pay for care vs. actual care, isn’t it?Report

      • Avatar BlaiseP in reply to Tim Kowal says:

        Do you understand how the Law of Large Numbers works, Tim? Let’s just start there. If we insure people on a one-off basis, there’s no possible way to calculate probabilities. But thankfully, Bernoulli and a few other mathematicians have demonstrated, to everyone’s satisfaction (but yours and people like you), that insuring the largest number of people will produce the best possible outcomes, both in pricing insurance and health care.

        Socialism! It’s goddamn socialism, to think a mathematical proof, used by every actuary since Columbus “discovered” America, might be applicable to this sort of problem.Report

      • Avatar zic in reply to Tim Kowal says:

        Still cannot find the original pol I was looking for, but here’s some stuff on Seniors being happier with Medicare than younger folks are with private insurance:
        http://www.kaiserhealthnews.org/Daily-Reports/2012/July/19/medicare-popularity.aspxReport

      • Avatar Kazzy in reply to Tim Kowal says:

        @dragonfrog

        I think there are merits to that argument. Some of what plagues our education system is that those who make the decisions are not impacted by the consequences of those decisions. I think there are solutions to this that don’t require people to sacrifice choice.

        In the education system, there are people who opt out of public schools for reasons beyond they are filthy rich and don’t want to mingle with the masses. Some children have needs (diagnosed or otherwise) that are better met in independent schools. Some are working class families who have really poor quality local schools and scrimp and save to send their children elsewhere.

        And, having worked exclusively in independent schools, they ain’t all they’re cracked up to be. Most parents are needlessly pissing away money on them for one bad reason or another.

        Back to healthcare, I think you could resolve many of your legitimate concerns by not having major decision-makers subject to election and offering as much local control as possible without sacrificing basic standards of care.Report

      • Avatar Brandon Berg in reply to Tim Kowal says:

        The concern, and I think it’s a reasonable one, is that we must force the wealthy and powerful to use the same health system as everyone else, so it doesn’t become a neglected wasteland. If the only people who have to deal with the socialized health system are the 99% of us who have no power or leverage to do anything about it, then why wouldn’t the plutocrats gut it to give themselves a tax break?

        So, basically, you have to stop people from buying medical care that they need so that you can continue taking their money.

        Jesus, but that’s despicable. And pointless, since rich people can just head south of the border and get their health care in the US.Report

      • Avatar Mad Rocket Scientist in reply to Tim Kowal says:

        @zic

        Fair point. I generally like having TriCare (or HealthNet, or whatever it is these days) as a backup insurance, as long as I am not required to go to the VA hospital itself. I also never have to worry about my service-connected injuries being a pre-existing condition, because if my private insurance won’t cover it, the VA will. So in that regard, I am satisfied with it.

        As a backup, NOT as a primary.Report

      • Avatar James K in reply to Tim Kowal says:

        @blaisep

        It’s true that diversification works better in large numbers, and it is true that this can be proven mathematically (I remember seeing the math in my finance classes at university). But the power of diversification isn’t the only consideration in working out the optimum size for an insurance company.

        For one thing, smaller insurance company can use reinsurance to spread their risks out further. Reinsurance effectively lets the risk be spread over the entire industry, lessening the net benefit of having all insurance premiums be held by one company.

        For another thing, firms tend to become less administratively efficient as they get larger. More staff means more layers of management to manage them, and the difficulty of coordinating a large organisation leads to more paperwork and more stringent policies. Bureaucracy may the best known method of managing a large organisation, but it has its costs.

        Furthermore, monopolists tend to become complacent. Finding better ways to manage themselves and delvier value to their customers. This is especially true when the monopoly is statutory, a non-profit and buying its goods is compulsory.Report

      • Avatar BlaiseP in reply to Tim Kowal says:

        We do have someone here who knows a lot more about the creation of the front end of such things than I do: Roger. He’s a property and casualty guy. Spent his whole career doing it, too, if memory serves.

        I’ve seen inefficiencies in firms both small and large. Some of that’s engineered into place, some of it is just bad process management. That part I do know, rather better than I want to know. If there’s a consistent policy, large firms can outperform small ones.

        I don’t fear monopoly in this space. I fear collusion and price fixing. Two sides to the problem: the Conservatives correctly despise Gummint Health Care for its price fixing by fiat. On the other side, where’s the price data? Where are the stats which would drive the pricing down?

        I believe we must empower the physician and get these insurance apes out of his office. The physician has no interest in doing stupid, unnecessary things unless there’s a payoff for him. If his services were driven by market pressures, he could, like any competent mechanic, give his patients and the insurers a proper accounting of his services. And there isn’t any at present, Medicare fraud is rampant, that’s in the open. The private insurers have people like me poring over their version of the same data, looking for fraudulent billing. In many ways, the private sector is better at detecting fraud than the government. But government is more efficient. Both have things to teach the other.

        And I’ll always back a market solution over any government solution. The bureaucrats should be providing the security, consistency and necessary regulation, just as they do in many another sector, clearing checks, regulating banks and suchlike. Health insurance is wildly inefficient — by design.Report

      • Libertarians have been objecting to this subsidy [flood insurance] for years, and getting crap from the left about it. If people choose to live in areas at high risk of flooding, they should pay the full cost of insuring against it.

        As I recall my father the long-time property and casualty insurance instructor explain it, the National Flood Insurance Program was passed because private insurance companies had stopped writing flood insurance, period. (Just as Medicare passed because the private insurance companies were moving rapidly in the direction of not writing coverage for the elderly at any price.) Having no flood insurance available might not be a bad thing; just clarifying that “pay the full cost of insuring against it” might well mean self-insuring, which very few can afford to do. Florida and the Gulf Coast would be very different places.Report

      • The conclusion is suggested by the fact that we have to employ the euphemism “single payer” for what is essentially socialized health care, something Americans could never (in our lifetime) embrace outright.

        I dissent in part. Single payer is a form of socialized health care, but it’s different from other forms of even more socialized health care, such as the national health care system of the UK. Also, pre-Obamacare, we had socialized health care, not just medicaid and medicare, but the rent-seeker-inducing regulations that permitted/encouraged/required/tolerate insurance companies to do what they did: ban on interstate purchases of policies (if I understand that ban correctly), the antitrust exemption, and the tax exemption for employer-provided plans. These are ways government structured and controlled (indirectly) the health provision system.Report

      • Avatar Brandon Berg in reply to Tim Kowal says:

        As I recall my father the long-time property and casualty insurance instructor explain it, the National Flood Insurance Program was passed because private insurance companies had stopped writing flood insurance, period.

        Why would they stop selling it? My guess would be that virtually nobody was willing to buy it at a price that accurately reflected the risk of living there. Which is another way of saying that people shouldn’t be building there.Report

      • Brandon- the thing is, flood insurance is only partly subsidized, yet it is mandatory to purchase it if you live in an area that the Feds deem to be in a flood zone. The option to just assume the risk doesn’t even exist.

        Then – as too many people in this state have discovered- when it comes time to pay out, the politicians in Washington, especially the ones who have Rs next to their name who don’t seem to think the government is supposed to honor its commitments and contract, make sure that they get nickel and dimed on the payouts.

        See: http://blog.nj.com/njv_paul_mulshine/2013/02/four_months_after_sandy_flood.htmlReport

      • Avatar Stillwater in reply to Tim Kowal says:

        Brandon and Mark,

        There’s also this:

        A new federal flood-insurance reform law requires maps to take account of projected sea level rise in designating flood zones, as federal subsidies for properties in flood zones fade to zero.Report

      • Avatar Brandon Berg in reply to Tim Kowal says:

        Mark:
        I didn’t say “assume the risk.” I said pay the full cost, by which I meant purchase unsubsidized insurance. Even if the government didn’t require them to buy insurance, it seems very likely that mortgage lenders would.

        If the economics don’t support it, then they don’t support it, and people shouldn’t be building (or rebuilding) there.Report

      • Avatar Brandon Berg in reply to Tim Kowal says:

        I would add, of course, that my preferred solution is for homeowners, lenders, and insurers to work it out among themselves. The government requiring the purchase of insurance has potential for abuse, whereas mortgage lenders have no particular incentive to require unnecessary insurance and are vulnerable to competition from lenders who don’t require it.Report

      • Avatar Just Me in reply to Tim Kowal says:

        @mark-thompson. Re: flood insurance being mandatory. That’s only if you are financed on the home isn’t it? I mean if you own outright they don’t require you to have flood insurance.Report

      • Avatar Brandon Berg in reply to Tim Kowal says:

        JustMe:
        I don’t know .But I could definitely see the government requiring homeowners to buy flood insurance, regardless of mortgage status, on the grounds that FEMA will bail them out anyway in the event of a flood. Much like they claim the right to pass laws regarding helmets, seatbelts, sodas, etc. on the grounds that they pay for many people’s health care.Report

      • Avatar just me in reply to Tim Kowal says:

        I will second MRS. My family has many former and current military members in it. Some are retired military, some did their enlistments and got out. About 50% served in and during war or major conflict times. Many of us are eligible to go to the VA hospital but don’t. We choose to use other insurance as it is easier to navigate, more convenient, and because there are vets who need medical care through the VA and if we can provide for our own medical care we are doing our part to alleviate the congestion at a VA hospital or clinic for those who can’t go somewhere else.

        Now that my dad has more medical problems he is getting waivers to have more of his medical care at the local private hospitals so he doesn’t have to make the journey to the VA hospital nearly as much as he used to. He can now do his ear and eye tests locally and then send the results to the VA, they then send him back hearing aids and eye glasses all without having to make the trip to the VA. He was extremely ecstatic about that a few weeks back. As he always says, a good trip to the VA is the one you don’t have to make.Report

      • Avatar just me in reply to Tim Kowal says:

        @brandon-berg I could see if you get federal assistance that a requirement to get federal assistance is then that you have flood insurance in the future. I don’t think though that if you haven’t taken FEMA funds and if you are not financed that you are required to buy flood insurance. Just like if you don’t have a car you aren’t required to buy car insurance.

        I’m not sure how good of an example flood insurance is as a comparison with health insurance. Unless we want to make it a law that you aren’t required to buy health insurance unless you have a medical bill that the government picks up the tab for. I mean, when someone defaults on a medical payment they are defaulting to the hospital not the government. Maybe instead of the hospital eating the cost the federal government should and then as a consequence of the government doing so they can then require you to from now on carry health insurance as you have shown that you are unable to afford an unexpected medical bill.Report

      • Why would they stop selling it [flood insurance]?

        Some references say it’s because that line of business was unprofitable under the state-level regulations in place. My father said it was because it had become a bet-the-business line: due to growing populations in flood-prone areas, no company was willing to even try to accumulate the reserves necessary to stay solvent in the case of a widespread event (eg, a 100-year flood on the lower Mississippi, or a Hurricane Katrina).

        Claims payouts in most insurance lines are remarkably stable from year to year, so reserves to cover losses in excess of premium revenues are small. Claims payouts for flood insurance vary enormously from year to year, so the reserves needed to cover a bad year have to be very large. Even more so for two bad years close together: Hurricane Katrina in 2005 was a 500-year event; Hurricane Sandy, less than 10 years later in 2012, was a 100-year event. If a line of business requires the insurance industry to maintain $100B in reserves in anticipation of a bad year, they’re simply not going to write that type of insurance.Report

      • Avatar Mike Schilling in reply to Tim Kowal says:

        A new federal flood-insurance reform law requires maps to take account of projected sea level rise

        Which is zero, because AGW is a liberal myth.Report

      • Avatar Stillwater in reply to Tim Kowal says:

        Hey, thanks for noticing that Mike There are two interesting claims made in the linked article. The first is that projections based on anticipated rises in sea levels are mandated when determining the issuance of flood insurance. The other is that the Feds are eliminating the flood insurance subsidy over a four year time line in any event.Report

  2. Avatar Dan Miller says:

    One problem with your analogy is that before-the-fact, there are no “non-homeowners” who don’t need insurance. I’m a healthy 29-year-old who hasn’t seen a physician in years (over a decade, unless you count one trip to the ER for a twisted ankle). And yet, I could break my leg tomorrow. Everyone should pay for health insurance, because everyone could require medical care (unless we go down the path of letting the sick or injured suffer in the street, but that doesn’t seem very Christian of us, and we’ve rejected it as a society). If not everyone can afford the premiums, well, that’s what subsidies are for. The subsidies, not the mandate, are the most important and best part of Obamacare.Report

    • Avatar Tim Kowal in reply to Dan Miller says:

      That nibbles at the rhetorical force of the metaphor, perhaps. But the point is that the law is conscripting healthy people not just into buying health insurance (I agree they should have this anyway), but into buying the “bundle” of insurance and pre-paid services. It’s the latter that they don’t need and won’t use, i.e., they’re not “homeowners.”Report

      • Avatar Kim in reply to Tim Kowal says:

        You don’t know a single thing about what you’re talking about.
        http://www.forbes.com/sites/merrillmatthews/2013/03/27/health-savings-accounts-will-survive-obamacare-at-least-for-now/

        Catastrophic Insurance, and nearly nothing beneath.

        How is this not what you’re asking for? As a bonus, the chap gets to keep his money, and drag it around with him.

        (again, you’re not upset about the catastrophic insurance I think…?)Report

      • Avatar J@m3z Aitch in reply to Tim Kowal says:

        And as former president Clinton pretty explicitly noted the other day, the young are necessary to subsidize the elderly. Given the difficulty the young are having in finding good jobs these days, that doesn’t seem like a very good deal for them.Report

      • Avatar Kim in reply to Tim Kowal says:

        James,
        on the contrary: 15% of GDP spent on health care is a poor deal for everyone.
        If we actually do manage to reduce costs, that’s tons of money that can go
        into new science/technology/other products/restaurants. You know,
        the rest of the economy.Report

      • Avatar Dan Miller in reply to Tim Kowal says:

        First of all, I’d say that even for 29-year-olds, my experience is atypical–most people need to go to the doctor more than I do (and this distinction is in part gender-driven–women need regular medical exams more than men, in my experience–so any subsidy of regular medical care helps gender equity as well). And secondly, having the healthy pay for more health care than they need, while the sick pay for less than they receive, doesn’t strike me as obviously morally objectionable.Report

      • Avatar Brandon Berg in reply to Tim Kowal says:

        And secondly, having the healthy pay for more health care than they need, while the sick pay for less than they receive, doesn’t strike me as obviously morally objectionable.

        The healthy more than the less healthy, sure, maybe, though to the extent that health is a product of lifestyle that creates moral hazard. But forcing the lowest-earning age group subsidize the highest-earning age groups is pretty lame.Report

      • Avatar Dan Miller in reply to Tim Kowal says:

        @brandon-berg Isn’t this problem mitigated by the fact that high-earners subsidize low-earners, just as healthier people subsidize sick ones?Report

      • Avatar Dan Miller in reply to Tim Kowal says:

        @brandon-berg As for the moral hazard question, I don’t think it’s a huge issue. Getting into a motorcycle crash (or substitute your lifestyle-based medical issue of choice here) sucks even when you’re fully insured.Report

      • Avatar Morat20 in reply to Tim Kowal says:

        And as former president Clinton pretty explicitly noted the other day, the young are necessary to subsidize the elderly. Given the difficulty the young are having in finding good jobs these days, that doesn’t seem like a very good deal for them

        One could just as easily — and honestly — state that the young are subsidizing their own old age.

        I was young and healthy in my twenties, and undoubtedly overpaid for the insurance I got and so rarely used. As I get older, I will become sicker and more frail, have more health problems, and consume more health resources. I will gradually go from paying “too much” to “about as much as I use” to “paying too little”.

        Why should I view the overpayments in my youth as “subsidizing random old people” rather than spreading my lifetime costs more evenly? Sure, I can keel over and die tomorrow, having paid more in health care dollars than i spent — but I could crash a car the day after I bought full auto insurance, or keel over dead the day after buying life insurance. Nobody makes a huge fuss about that.Report

      • Avatar J@m3z Aitch in reply to Tim Kowal says:

        Morat,

        Well, that’s not how Clinton explained it.

        But if the purpose is just to spread one’s health care payments across one’s life, why not require young people to start paying into health savings accounts?Report

      • Avatar BlaiseP in reply to Tim Kowal says:

        Here’s the way to think about it, sensibly. Everyone will eventually need health care. Let’s compose a sum of every dollar spent on health care in the USA. It’s a finite number. How many people in the USA? 314 million. How many physicians in the USA? 789,788 MDs at last count.

        If we could account for every dollar, assigning it to a HCPCS code. They’re a bit arbitrary and the same dollar might be spent treating multiple simultaneous conditions, but we’d be able to see three things immediately:

        1. How much are we spending per HCPCS code? Max, min, 1stdev, covariance
        2. Which physicians are using which codes? (this points to specificity of treatment)
        3. Which patients are being treated with which HCPCS code.

        Remember, HCPCS details a treatment, not an illness or condition. HCPCS drives billing. In our current predicament, it doesn’t drive pricing. Medicare is constantly trying to drive down the price per procedure but there are all sorts of games to play on this front. Here’s one.

        A non-emergency transport vehicle picks up a patient, that’s 15 dollars, just to open the door. It goes twenty miles, billing at 55 cents a mile. The first HCPCS code will get you five miles. If you file it as two separate HCPCS codes, you get $15,00 plus ($0.55 * 15 miles) for a sum of $23.25. Works a bit like a taxi, so much to hit the flag, so much per mile. The taxi driver makes money opening and closing the door.

        An elderly woman needs to go from the nursing home to the dentist, less than 100 yards away. This is real world, here. Fifteen dollars each way. To go 100 yards. They could push the woman down there in a wheelchair.

        That’s just the most trivial case I can think of, which wouldn’t impinge on anyone’s privacy or my non-dis agreements. Real numbers, though.

        Sorting through this stuff is just mind-boggling. It takes years to learn the intricacies of this minefield. File one HCPCS code wrong and you won’t get paid. Get the whole claim rejected. Mostly manual, too. Form 1500, you’d think that would suffice. It doesn’t. Every insurer has an eeeensie-weeeensie little difference from every other one, HIPAA notwithstanding.

        Forcing these claims through a standard interface, making the insurers use that interface. Save billions of dollars and millions of hours of preparation and paperwork time. Just give the USA that much, the law’s already there. HIPAA ought to have made this process trivial but the insurers are still playing skeevy games with this standardisation process.Report

      • Avatar Dan Miller in reply to Tim Kowal says:

        The problem is that some people will encounter health problems that they’d never be able to pay for, so HSAs just aren’t a realistic option without a backstop from insurance. The goal isn’t only to smooth out individual payment for health care, it’s also to redistribute from the sick to the healthy, and from the wealthy to the less-wealthy, so that everyone is guaranteed a minimum level of healthcare. The mandate hurts the young, it’s true; but the subsidies help the young, who are usually less well-off. The ones who are really getting hurt by the system are people who are both young, healthy and rich–but I’ve got no problem with taxing them to pay for benefits for those who are less fortunate.Report

      • Avatar BlaiseP in reply to Tim Kowal says:

        The mechanics of the money don’t go from Young to Old. If everyone’s in the pool, the probabilities take over. A young person is more likely to require expensive and rare treatment than an older person. Trauma is expensive and the bills rack up quick.

        Take a market where we do have enough external information to drive meaningful market prices. Auto insurance prices. Most 18 year old boys are reasonably safe drivers — but that’s irrelevant — the statistics show they cause the most severe auto accidents. Incident magnitude, that’s why they pay so much more for their coverage than some gent in his 60s, driving back and forth to work and the grocery store.

        But their dollars are as welcome as anyone else’s. And nobody whines about employers not offering auto insurance.Report

      • “But if the purpose is just to spread one’s health care payments across one’s life, why not require young people to start paying into health savings accounts?”

        I probably misunderstand something here. Aren’t hsa’s a use-it-or-lose-it proposition? If you don’t use it in a given calendar year, you lose the money? Or am I thinking of something else altogether?Report

      • Avatar Troublesome Frog in reply to Tim Kowal says:

        But if the purpose is just to spread one’s health care payments across one’s life, why not require young people to start paying into health savings accounts?

        That only works if people wait until they’re old before they have a major medical expense. It’s much more flexible just to make the whole thing into an insurance scheme. Same total cash input and cash output without the time dependency.Report

      • Avatar Brandon Berg in reply to Tim Kowal says:

        I probably misunderstand something here. Aren’t hsa’s a use-it-or-lose-it proposition? If you don’t use it in a given calendar year, you lose the money? Or am I thinking of something else altogether?

        Something else altogether, namely Flexible Spending Accounts (FSAs). A Health Savings Account is essentially a traditional IRA, with one modification: You can make tax-free withdrawals for medical expenses at any time. Aside from that, it’s just like an IRA. The money is yours to keep, forever, and after retirement you can make withdrawals for non-medical expenses as long as you pay income taxes on them.Report

      • Avatar Morat20 in reply to Tim Kowal says:

        Well, that’s not how Clinton explained it.

        Why do I give a crap how Clinton explained it? Did we elect Clinton god? Is Clinton the world’s foremost expert on health insurance? What’s that got to do with the price of tea in China?

        But if the purpose is just to spread one’s health care payments across one’s life, why not require young people to start paying into health savings accounts?

        Because they’re insufficient for catastrophic care, likely to be unfunded by youth (and people in general — see how well the 401k experiment has worked) — I mean, what happens if you’re 8 or 18 and come down with a fun case of cancer? Your HSA isn’t gonna cover it.

        And assuming you survive, and owe your HSA 250,000 dollars for your chemo, if you’re as healthy as a horse you’ll be lucky to get back to zero dollars by the you’re 60.

        This relatively small chance can, of course, be insured against. But you need a really large and diverse pool to do so, or else no one will offer you genuine coverage. Which should sound familiar — words like “mandate” and “preventing death spiral” should spring to mind.Report

      • Avatar Jaybird in reply to Tim Kowal says:

        A young person is more likely to require expensive and rare treatment than an older person. Trauma is expensive and the bills rack up quick.

        From what I understand it, the vast (VAST!) majority of health care is used on people in the last year of their life (young, old, whatever).

        How much money might be saved with less psychotic attitudes toward pain management?Report

  3. Avatar Ethan Gach says:

    More and more I’m convinced that Obamacare was, intentionally not, an artful way of moving us toward nationalized healthcare. People will like the benefits it provides, and be angry about the costs it imposes, and will prefer going full-steam ahead into socialized medicine rather than try to repeal both the good and the bad.Report

    • Avatar zic in reply to Ethan Gach says:

      I suspect that the ‘penalty’ will evolve into a Medicaid premium; and that people will opt for this over private insurance over time.

      Which would be just fine with me.

      Some interesting man-on-the-street reporting on ACA: http://www.washingtonpost.com/wp-srv/special/national/health-care-profiles/index.html?wpmk=MK0000203&clsrd, h/t to Jonathan Bernstein.Report

    • Avatar J@m3z Aitch in reply to Ethan Gach says:

      I’m very sympathetic to this view, but do you see any mechanism for overcoming the entrenched strength of the insurance firms?Report

      • Avatar Kim in reply to J@m3z Aitch says:

        James,
        The ones in our area are fleeing into the hospital scene.
        If they’re smart, they’ll be less evil, and then we won’t have the
        political will to dismantle them.
        (note: yes, this is Obamacare. it’s what the insurance companies
        wanted in order to not be so evil.)Report

      • Avatar Tim Kowal in reply to J@m3z Aitch says:

        Tea party and occupy join forces!Report

      • Avatar BlaiseP in reply to J@m3z Aitch says:

        I’ve said this before: a passthrough mechanism, akin to VISA/MasterCard, which would standardise the claims process, making the health insurance firms pay on time.Report

      • Avatar Kim in reply to J@m3z Aitch says:

        Blaise’s right. Simplify and standardize.
        Just like electronic health records.Report

      • Avatar zic in reply to J@m3z Aitch says:

        but do you see any mechanism for overcoming the entrenched strength of the insurance firms

        What do you think those entrenched strengths are, @jm3z-aitch?

        They can negotiate prices; but so could the government if Congress allowed it.

        They have tremendous cash flow, and play floats, so they have a lot of money spread through other parts of the economy.

        But the real biggie, I suspect, is the information in their files. All the stuff we need access to to make better/more affordable decisions about medical care.Report

      • Avatar BlaiseP in reply to J@m3z Aitch says:

        To make any market work, going right back to the most Libertarian-ish Wild West paradigm, which is a great place to start — price discovery and liquidity are the only meaningful measures of a market.

        PPACA is just now starting up. Market prices aren’t in effect, not just yet. It’s coming. It’s not a real market, not yet anyway, not until customers can compare prices. We can trust the market to expose prices.

        It’s the height of idiocy and innumeracy, to see the GOP, which loudly bills itself as the Party of Free Markets, opposed to the formation of such markets. The louder Ted Cruz et al. rattle on about Obamacare, the higher the monkey climbs and the better we can see that monkey’s ass. They don’t want free markets. They like things just the way they are, with everyone getting screwed over, physicians, hospitals, caregivers, patients, everyone, EVERYONE, that is, but their pimps.Report

      • Avatar NoPublic in reply to J@m3z Aitch says:

        Blaise’s right. Simplify and standardize.
        Just like electronic health records.

        I agree wholeheartedly, but there are legions upon legions of people who make a living out of doing the paperwork involved in even the most basic of healthcare transactions. The job loss would be staggering. Though I suppose a career in red tape and obfuscating forms has good mobility.Report

      • Avatar BlaiseP in reply to J@m3z Aitch says:

        there are legions upon legions of people who make a living out of doing the paperwork involved in even the most basic of healthcare

        Oh, that’s just the tip of the iceberg. There are people at work right now, people I know, who are engineering obfuscation into the process. It’s why so many physicians have gone to PPO, cuts down on their paperwork costs. The insurer can capture the provider, building a vertical market, making insurance even more profitable, undermining the authority of the provider himself.

        This the the part that angers me the most, that we’re supposed to think it’s time to unbundle health insurance and health care — they are bundled in ways the poster never even addresses.

        One good Chesterton chestnut deserves another: The big commercial concerns of to-day are quite exceptionally incompetent. They will be even more incompetent when they are omnipotent. Report

      • Avatar J@m3z Aitch in reply to J@m3z Aitch says:

        Zic,
        Their entrenched strengths are their wealth and lobbying power. I’m not makin an argument about whether they’re valuable contributors to the economic structure of health care in the U.S., but about their political clout. I may not have made that clear before.Report

      • Avatar Mike Schilling in reply to J@m3z Aitch says:

        Their entrenched strengths are their wealth and lobbying power.

        And their fanatical devotion to the Pope.Report

      • Avatar zic in reply to J@m3z Aitch says:

        @jm3z-aitch, I thought you might have meant that, but I think it’s somewhat balanced out by other interests; pharma, for instance, though there are complicated dynamics at work there.

        Beyond that, however, the value of the cost and outcomes of medicine in practice must have gotten them on oversized seat at the table in the ACA debate. We have a lot of information about balancing cost and desirable outcomes from Medicare, but this is mostly reflective of an older population. To do real analysis of the practices that actually deliver better care for less money, the data owned by health insurers is essential. The only other way to get that information is digitizing paper medical records; expensive, that. This will happen with digital medical records, but it would take several decades to build up the kind of data needed for mining that insurance already owns.Report

      • Avatar BlaiseP in reply to J@m3z Aitch says:

        To do real analysis of the practices that actually deliver better care for less money, the data owned by health insurers is essential.

        It’s also the most jealously-guarded and proprietary information in any insurance firm. They’d spend billions to protect it from exposure. You’re right, of course, we’d need some meaningful statistics, the sort which drives vehicle or home insurance, though these aren’t perfect parallels. The point being, with vehicles, drivers, buildings and other insurable entities, external information is available — and demanded — by the marketplace.Report

      • Avatar Kim in reply to J@m3z Aitch says:

        zic,
        We have decades of data right here. Kept by hospitals, in fact.

        NoPublic,
        To electronicize the data, you hire MORE data entry folks, not less.
        Create jobs, then downsize.great idea for a jobs-recession.Report

      • Avatar J@m3z Aitch in reply to J@m3z Aitch says:

        Zic,
        I am not making any arguments about anything like that. I am only asking a practical question about political strategy. Nobody has addresed that question. If nobody has because they don’t know the answer, that’s fine: it just highlights the rekevance of my question. But I am not making any claims about whay type of structure is better, however better is defined, and I would like my question to not get referenced in those types of comments as though it had any relevance to them.Report

      • Avatar zic in reply to J@m3z Aitch says:

        @jm3z-aitch, I am, in fact, addressing a political strategy, specifically trying to identify the entrenched power that health insurers hold in this debate.

        The real goal here is to deliver a balance of quality health care are reasonable cost. That’s a planning problem. To adequately plan how to do that, you need information. And the insurance companies own that information. As @blaisep said, It’s also the most jealously-guarded and proprietary information in any insurance firm. They’d spend billions to protect it from exposure.

        And @kim echoed what I said, that information does exist in paper medical records. But retrieving it from that source is itself a problem, it’s private, first of all. Imagine the outrage were it to be turned over to central planners. It would make the NSA scuffle seem like a walk in the park. It’s already the reason to delay ACA in Florida, where ACA Navigators might get access to people’s personal information.

        Converting paper medical records is also prohibitively expensive, and it would take a long time; too long. But the insurance companies, they’ve been tending that data for decades. They’ve own it in highly functional format. The question here is the price they’re asking for that information, they know it’s the most cost effective source of information needed to bend the cost-curve of health care down while delivering better quality health care to more people. That last is probably the rub; perhaps Blaisep can shed some light on just how much quality figures into their thinking.

        That seems pretty highly political to me, and something people should be paying more attention to.Report

      • Avatar Kim in reply to J@m3z Aitch says:

        zic,
        We’ve got 20 years electronic medical records here. From the hospitals.Report

      • Avatar BlaiseP in reply to J@m3z Aitch says:

        @zic : there’s an old joke in my corner of the cubicle farm: “Health Care is where IT goes to die.”

        HC data security is a problem but hardly an insurmountable problem. The real problem is bandwidth, classification and residency.

        Bandwidth: A full body CAT scan is a prodigious amount of data.
        Classification: How do you notate a suspicious scratchy noise heard in a stethoscope?
        Residency: Who’s sposta be guarding the data?

        The answer is pretty obvious. We put one physician in touch with another. That’s how you do proper information transmission in health care. Sure, we might want to have them both looking at the same frame from the CAT scan, some hideous glioblastoma, but we’re not going to improve on the model of human communication for a good long while.Report

  4. Avatar Kim says:

    Kristof’s friend is getting the care he needs.
    My friends are dead, or fled the country.

    You expect me to agree that Androes is the
    “problem child”?

    No. Different Example. Nate Silver.
    Freelance writer (probably entitled to some
    crappy insurance through whatever guild he’s in).
    Costs an arm and a leg, and no guarantee that if
    he gets sick he’ll even get care.

    America is a fairly poor choice for him. In other
    countries he could guarantee his health
    (which is necessary for his work) — and he’s not
    losing all that much from leaving this country.

    America’s health care system is costing us in
    competition with other countries.

    But I needn’t choose someone small. I could use
    Detroit instead. Nissan doesn’t need to pay
    buckets for health insurance.

    America’s health care system is costing American
    companies an arm and a leg. Why do you think
    they were so pro-Obamacare?Report

  5. Avatar BlaiseP says:

    BCBS and its franchises are my clients. Health insurance has been my stock in trade for well over a decade. You are absolutely dead wrong about BCBS. The remainder is one long artfully-begged question. Distressingly awful.Report

    • Avatar Tim Kowal in reply to BlaiseP says:

      Congratulations! You’ve been nominated for a Conor P Williams award in commenting.Report

      • Avatar BlaiseP in reply to Tim Kowal says:

        It’s not as if I haven’t made my point elsewhere. The employer health insurance paradigm arose from Kaiser Permanente giving its workers a raise-by-proxy, paying for their health insurance.

        Tired of repeating myself, Tim. The statistics of health insurance are clearly beyond you. The practical realities of a hugely inefficient mechanism where these firms earn more on the float than they do from actual market action — these outfits are essentially unregulated banks.

        Do your homework. What you’re asking for, without even realising it, is for even more inefficiencies. Until the pool of lives is large enough to drive down rates, things will get worse, not better.Report

      • Avatar zic in reply to Tim Kowal says:

        The practical realities of a hugely inefficient mechanism where these firms earn more on the float than they do from actual market action — these outfits are essentially unregulated banks.

        This is an important and not-well understood part of how insurance functions. Almost every venture fund I’ve ever seen, for instance, had substantial backing from insurance companies; big bucks in really high-risk investments.Report

      • Avatar BlaiseP in reply to Tim Kowal says:

        There is no telling such as Tim anything about the financial realities of either health insurance or health care.Report

      • The practical realities of a hugely inefficient mechanism where these firms earn more on the float than they do from actual market action…

        Yep. My dad worked for one of Warren Buffett’s insurance companies. Why did Warren own insurance companies? Because premiums are due on the first, claims are paid on the 31st, and on average you get to hold the whole cash flow for 30 days. Who was the highest paid person (including officers) at the company? The “hedge fund” guy who traded with all that cash. Warren spent considerable money buying up little insurance companies so that his best traders had more cash to play with. The underwriting goal for the company was to break even, or at least not lose too much; profits came from trading.Report

  6. Avatar Kim says:

    Tim,
    A read of this seems to suggest that you are not in favor of the first revolution in American patient care.
    I find it rather more likely that you are ignorant of the quality of care (and training) that existed before the AMA.
    Might I suggest you investigate further?Report

  7. Avatar Kim says:

    Premiums staying with the patient doesn’t seem to address one of the real issues here,
    which is patients being able to choose their insurance.

    Strangely enough, the health care exchanges do address this.Report

  8. Avatar Francis says:

    Austin Frakt, who blogs at The Incidental Economist and knows more about financing health care than just about anyone, had a multi-post review of Priceless (both critical and complimentary) that can be found here.

    “What we need, says Goodman, is to … give individuals more control over their choices.” Only a conservative or a libertarian could believe that consumer choice is the solution to providing health care to poor people. Or even the middle class. Who really cares about choice when they’re sick? And what happens when people can’t afford their deductible? Either needed care isn’t delivered, or another round of cost-shifting occurs.

    What we really need is efficient, effective cost-pooling and subsidizing mechanisms that separate health care financing from employment. Like Medicare for all, or a National Health Service. Or non-profit “insurance companies” that are much more like regulated utilities (like France, Switzerland and, just barely, the US).Report

  9. Avatar clawback says:

    I don’t understand how you think the Androes example supports your case for separating health care from health insurance. Making that distinction would obviously only incentivize everyone to behave the way he did; i.e., ignore basic health care until a condition worsens to the point that insurance kicks in.Report

  10. Avatar Patrick says:

    Thus the solution presents itself: Unbundle health insurance and health care. Employers can continue to provide health care packages if they like. But health insurance—and all the down payments patients make to cover their pre-existing conditions—must stay with the patients. Neither private carriers nor the government has any business “bundling” patients’ future health care security with any other product or service. Health insurance should be bundled with the patient, full stop.

    I’m unclear on how this model would work in practice. There are also some significant problems with it.

    In a world with multiple insurers, I still have no reason to accept your business if your existing bundle is insufficient to cover your costs.

    Insurer A has me as a client. I’ve paid them premiums for 20 years. This has resulted in a pool of money.

    I want to (or need to) change insurers. But I just found out I have Incredibly Rare Syndrome, such that the pool of money Insurer A has collected for me would still be insufficient to cover my care.

    This reveals the flaw in your approach, Tim. Insurer A sets their premiums based upon the actuarial information of the body of people in their coverage pool. My risk, as an individual, is amortized across Insurer A’s risk pool. Not across the populace.

    I don’t know how you can force Insurer A to bundle my payments with me, as a customer, to transfer to Insurer B without also coupling Insurer A and Insurer B’s respective risk pools.

    This will either result in a pretty massive regulatory framework… or it will devolve to single payer… or we’ll wind up pretty much where we are now, just with different exception scenarios and different coverage holes.

    I think.Report

    • Avatar greginak in reply to Patrick says:

      To add on, Tim’s idea also removes the incentive from insurance providers to promote good health. If an insurance company/provider is pretty darn sure they won’t be covering you in 1 or 3 or 5 years they have little reason to care about your long term health or costs. If a HC payer knows they will be covering you for the long term they have a strong incentive to pay for things like preventative care or regular doc visits since they have a monetary interest in your health care.Report

      • Avatar zic in reply to greginak says:

        (or your untimely death)Report

      • Avatar Morat20 in reply to greginak says:

        Anecdotally: You actually see this behavior now, with employer coupled insurance. My father spent 18 months fighting to get an MRI. Everyone — his doctor and the insurance company — knew the cause of his problem was a bone spur in a cervical vertebra. (Places pressure on a nerve, causes all sorts of fun problems and pain).

        Getting the MRI would confirm the problem, requiring insurance to pay for an expensive surgery.

        So his insurance company (and it was a sizable one, with a name you’d recognize), required him to undergo first six months — then another six months — of physical therapy and much cheaper treatment (which, fyi, did nothing for a bone spur. They treated him for a condition he didn’t have, because it was cheaper).

        Why did they spend all this money — a year’s worth of physical therapy and treatments for a problem he didn’t have — to put off a test to determine the actual problem and the surgery to fix it? A test and surgery he ultimately had a year later?

        Because by then it’s likely he would have switched to a new insurance company when he chose his yearly benefits. Or his employer would have contracted with another firm.

        Which, in fact, happened. Kicking the can down the road a year saved them several thousand dollars at the cost of my father spending a year in pain and giving him permanent nerve damage (minor, thankfully — slightly reduced mobility in one arm and numb spots).Report

    • Avatar Tim Kowal in reply to Patrick says:

      @patrick How is the problem you described solved by bundling care and insurance? Seems to me that doubles it. I’ve proposed only a narrow conceptual proposal here in decoupling. That doesn’t make all problems go away, but it makes the system more legible, and I think it will make the remaining problems amenable to more intuitive solutions.Report

      • Avatar Patrick in reply to Tim Kowal says:

        How is the problem you described solved by bundling care and insurance?

        It’s not. That’s not what I’m saying.

        I’m saying your solution is just moving from problem A to problem B, and I don’t see problem B as being particularly smaller than problem A.

        Different. Impacting different people in different ways. For a number of people currently impacted by problem A, your approach will be better, yes.

        For the number of people impacted by problem A who actually have the big problem, I don’t see how it helps, and think that it arguably will make it worse.

        I don’t see that as a useful tradeoff.Report

  11. Avatar Robert Greer says:

    Hi Tim, nice article. I have a question.

    Why do you think patients will be able to accurately compare medical services? If a patient were savvy enough to know what the costs of an accurate diagnosis and treatment would be, he wouldn’t need to go to the doctor in the first place. The theoretical case for free markets breaks down when there are strong information asymmetries like this, because consumers are effectively prevented from shopping around, and the price mechanism doesn’t work. How would a free market in health care overcome this problem?Report

    • @robert-greer These are good questions to which I do not have a satisfactory answer. But I would like to refer you to my response to Tod, below, that I am a conservative, not a libertarian, and thus I have a different perspective about markets and the role of government — i.e., I’m willing to entertain more government intervention than a libertarian would. For another thing, I’m not a wonk. This kind of piece is not typical for me — I posted it because I had started a review of Goodman’s book last year, and with all the noises in Washington about Obamacare this week, I was finally inspired to finish it. But my point is narrow and conceptual. That said, I imagine that not all medical costs would be made entirely transparent were my proposal implemented, though some would. At the very least, one key institutional cause for the opacity would be eliminated, and that’s progress. I also imagine that many varieties of insurance plans could be devised, from carriers that are very involved with providing health care, to carriers who are only minimally involved; and plans that include pre-paid services, to plans that include no pre-paid services.

      Much beyond that I feel it impossible to speculate. You have to implement my proposal to find out what is in it.Report

      • Avatar Lyle in reply to Tim Kowal says:

        Beyond just the costs gather data on the effectiveness of various treatments, and provide the odds of success to patients when considering treatment options. One wonders how much truly informed consent occurs today. Do this even in some cases before the illness strikes such as the odds of CPR leading to good lifestyle afterwords. Besides just costs folks do need to know that for example that a treatment has a 20% chance of long term success and a bunch of downsides during the treatment versus doing nothing, so they can make a choice before treatment starts.
        Indeed the general issue of how heroic treatment should be given should be considered and discussed before there is an issue, let folks decide when they are still healthy. (For example if an elderly person has pneumonia, do you go the icu and respirator route?Report

    • Avatar LeeEsq in reply to Robert Greer says:

      People won’t even know whats wrong with themselves in many cases unless its something like a broken bone. Trying to use the internet and making an educated guess based on your symptoms is problematic at best.Report

      • Avatar Tim Kowal in reply to LeeEsq says:

        That’s the point of the Androes anecdote, further confirmed by Dan Miller’s 10-year sabbatical from the doctor’s office. People who don’t want to go to the doctor won’t, and thus if buying insurance means paying for pre-paid care they are committed to not using, they’re less likely to buy it, esp. because it’ll be way more expensive. Unbundle it and the Androeses and the Dan Millers are much more likely to buy insurance, at least. And after about five years now of relatively sustained political discourse on health care, that’s about the #1 issue: making sure people are insured in case of a health catastrophe. That’s not the only issue, of course, but it’s the first sally in about every hcr debate.Report

      • Avatar Dan Miller in reply to LeeEsq says:

        I don’t think my anecdote reaches as far as you think it does–the main reason I’ve stayed out of the doctor’s office is because there’s been nothing wrong me (so far, although I could stand to lose a little weight). If I were experiencing severe pain while urinating, you bet I’d go right to the doctor.

        This also ignores the fact that for women, especially sexually-active women, regular gynecological care is quite necessary. Few people can, will or should completely avoid a doctor.Report

      • Avatar Tim Kowal in reply to LeeEsq says:

        @dan-miller Didn’t mean to use your name in vain there. Just making the point that many people don’t make as much use of preventative care, thus those of them who are rational economic actors won’t want to pay for pre-paid services. And if paying for pre-paid health services is the only way to get health insurance, that means they’re less likely to get insurance, too.Report

      • Avatar Kim in reply to LeeEsq says:

        Tim,
        Humans are not rational actors.

        If you made an insurance without preventing treatments for gangrene, it would cost a HELL of a lot more than one with the appropriate preventative care. (Did you play guess the disease? It’s diabetes).Report

      • Avatar Kim in reply to LeeEsq says:

        Depends on who you know on the internet.
        (and your equipment at home.)Report

  12. Avatar Tod Kelly says:

    An excellent piece, Tim – though I do have some professional pushback.

    All of your criticisms about the problems that occur with our healthcare system being employer-based are spot on. However, you also have to recognize the single benefit that such a system brings to the table: It forces large, healthy segments of a user universe to pay premiums into the system. This is no small thing. Very few people who are young and healthy buy health insurance.

    You are correct that BC/BS’s first clients were hospitals (they actually started out as single-hospital revenue devices), but you’re wrong that they were the first health insurers. The first health insurance programs actually were sold to potential patients by hospitals – unsuccessfully. The problem with that system, by itself, is that it the premiums end up being more expensive than healthcare over time. This is because by and large, only individuals that need treatment that is more expensive than premiums choose to purchase it, so eventually you’re not only not spreading the risk, you’re adding administrative costs as well as a new and separate profit margin.

    Simply moving to a healthcare-patient bundle – with no mechanisms to force some or all healthy people to put money in the kitty – will fix some problems , but it will also make the cost of health insurance unaffordable to most.Report

    • Avatar Tim Kowal in reply to Tod Kelly says:

      @tod-kelly Understood. Respectfully, this makes the system seem not a little underhanded. And so perhaps I can be forgiven if, like Ethan, I am suspicious the current doubling-down on this Rube-Goldbergian system has yet another underhanded objective.

      Burke said that bad laws are the worst form of tyranny. This is a good example. If politicians are trying to control an entire market, I’d quite rather they come right out and say it.

      Also, as everyone should know, I’m a conservative, not a libertarian. I believe the government should be limited, not unconscious. I am wide open to considering necessary and proper ways in which the government can address health care and insurance. I obviously don’t think its proper to link the two for the purpose of tricking some people into subsidizing others in the guise of a market-based system, and I also obviously don’t think single-payer is a fit. Many proposals are offered in Goodman’s book, which I cut from my already long review. But again, I think proposals to fix the system will be made clearer once care and insurance are decoupled. Yes, I concede this will make it harder to get people to pay two dollars for a dollar of health care. But to the extent they are doing so because the system essentially fools them into it, I consider it a feature, not a bug.Report

    • Avatar Kazzy in reply to Tod Kelly says:

      @tod-kelly

      Is the value of healthy young people having insurance because it serves them or it serves unhealthy old people through cost sharing? Because if it is the former, I find that problematic regardless of the mechanism used to make it happen.Report

      • Avatar Morat20 in reply to Kazzy says:

        Is the value of healthy young people having insurance because it serves them or it serves unhealthy old people through cost sharing?

        Again: I am young and healthy today. Tomorrow I shall be old and sickly. It is equally valid to state I am subsidizing my own old age as to say I am subsidizing someone else’s.Report

      • Avatar LeeEsq in reply to Kazzy says:

        Basically, yes. Like Morat20 said, you can see this as a way to ensure that your medical costs when you get sick or hold aren’t to high rather than subsidizing the sick and old. In order for insurance to work you need a pool of people that won’t need the services and just contribute the money. If people only got health insurance when they needed it, it would be ridiculously expensive.

        People also don’t know when bad things can happen to them healthwise and its better to be prepared for it.Report

      • Avatar Will Truman in reply to Kazzy says:

        It is equally valid to state I am subsidizing my own old age as to say I am subsidizing someone else’s.

        Not equally valid. Your money is going to other people right now. So that is pretty clear. Whether it goes to you depends on whether or not you live to be old and whether or not the program exists in its current form when you are old (whether there are young people paying for yours then). It’s more accurate to say that we’re paying for the older people now on the (realistic, likely) hope that these things are true. Which is different than it being true.Report

      • Avatar Mal Blue in reply to Kazzy says:

        You’re only “paying for your future self” until you try to collect. Then you’re practically a welfare recipient who needs to shut up if you actually use Medicare. Deadbeat.Report

      • Avatar Kazzy in reply to Kazzy says:

        Well then, wouldn’t some form of individualized system work better? Something more akin to homeowners or auto insurance? There is still pooling but it seems less like a giant con.Report

      • Avatar Kim in reply to Kazzy says:

        Kazzy,
        the difference between health insurance
        and house/auto insurance is that
        house auto insurance is bounded.
        Limited amount of money that you can/will
        pay out.Report

      • Avatar Brandon Berg in reply to Kazzy says:

        You’re only “paying for your future self” until you try to collect. Then you’re practically a welfare recipient who needs to shut up if you actually use Medicare. Deadbeat.

        Again, Medicare is funded primarily by a flat tax on wages and general revenues (i.e., progressive income taxes). There are also means-tested premiums for part B. There are order-of-magnitude differences in what different people pay for essentially the same coverage level. It really is welfare for many if not most beneficiaries.Report

      • Avatar Brandon Berg in reply to Kazzy says:

        Tomorrow I shall be old and sickly. It is equally valid to state I am subsidizing my own old age as to say I am subsidizing someone else’s.

        Well, gee. When you put it that way, it’s a wonder no one ever thought of it before. I wonder if there’s some other way people could transfer resources to older versions of themselves. Maybe we could just stuff cash in a time capsules and dig it up forty years later. That sounds kind of risky, though. Maybe we could have businesses that specialize in holding cash. They could even lend it out and earn interest on it for us.Report

      • Avatar Mike Schilling in reply to Kazzy says:

        And when they fall apart due to greed-fueled reckless incompetence, we could all give them buttloads of money. With no strings attached, of course. This is America.Report

      • Avatar Morat20 in reply to Kazzy says:

        Not equally valid. Your money is going to other people right now. So that is pretty clear.
        By your logic, car insurance is a scam.

        I mean, I pay my premiums year after year! And each year, that money goes to some crappy driver who gets into a wreck. What a con!

        Sure, I might get in a wreck down the line, but that won’t be MY hard earned insurance money paying for it. I’ll be free loading off some “good driver” who didn’t get into a wreck.

        I don’t get it. The concepts here aren’t hard. Health insurance is just like, well, auto insurance. Except everyone — EVERYONE — is in the health care market and you have a heck of a lot less personal control over how risky you are. Oh, and a case of cancer costs far, far, FAR more than a car wreck.

        And yet concepts people can easily grasp applied to “cars” they can’t grasp applied to “health care”. Honestly, it’s like there’s some sort of ideological blinder here — like people literally can’t admit “There is an actual possibility that I will run up health care bills I can’t afford, due to no fault of my own.” and then therefore draw the conclusion that “So I should therefore carry insurance to prevent this catastrophe from occuring, like I carry car insurance so I am not bankrupted if I happen to cause a three-car pileup”.

        I’ve been driving for two decades now,. I’ve got enough time behind the wheel to be qualified as “expert” by the actual, studied, “time-spent doing” metric (10,000+ hours). I am an expert driver. I have not been in an at-fault wreck since I was 22, and even then the damages were 300 dollars for a paint scratch.

        And yet the state of Texas does not let me drive without car insurance. They’re really firm on that. (And indeed, when they instituted that rule, they had to make a special, government-subsidized pool for drivers who were too bad a risk for regular insurers to handle — yet no one is screaming about their heavy-handed, evil, intervention of the car insurance market).

        Is it the fact that you can “choose” (HA! Like that’s a choice for many people) not to drive a car, but can’t opt out of health care? Is that why it’s impossible to take standard, actuarial concepts that have been in place and used for a century or more and apply it to health insurance? Because you don’t want to admit that if you take “let you die from lack of funds for something easily fixed” off the table, the next cheapest and most efficient systems all involve universal coverage and insurance, with mandatory payment? (Whether it’s ‘insurance’ or ‘single payer’ or ‘nationalized system’)Report

      • Avatar Will Truman in reply to Kazzy says:

        Morat20, there is a difference between auto insurance and what you’re describing. With auto insurance, if I get into an accident tomorrow, I am covered. That gives me value today. And I am paying for that at rates commensurate with my liability of getting into an accident right now (or over the next year).

        What you’re talking about, though, is my paying above and beyond what is required to insure me today (unlike auto insurance) on the basis that it will be cheaper and more possible to insure me years from now. Except that the program may not be in effect years from now. I may not be alive years from now.

        To use Medicare as an example… my wife is not paying for our own future health care retirement. She is paying into a system that is right now paying retirees. That may pay us back down the line, but it may not. But it’s not equally valid to say that our retirement health care will be taken care of as someone else’s retirement is being taken care of today. There is a sliding scale of likelihood that the program will be around, and we will be around for it, when we retire. It’s 100% for people retired right now. It’s less than 100% for us.

        To get back to insurance, we pay for insurance for our own health care right now. We know that it’s not 100% that we will need it, but it gives us value even if we don’t need it. Paying now for insurance we’ll need later is not the same thing. The value it gives us is less, because not only do we not know we will be needing the health care, we don’t know if we’ll be needing the insurance (we could have single-payer by then!), and we don’t know if the insurance will even be available to us. We do know that for what we’re paying in insurance right now is available to us. At least, we can believe it with a higher degree of certainty than what we’re talking about here.

        There is a difference between paying for insurance right now, and paying into a system that will theoretically insure you in the future. If it’s around, and if you are still around.Report

      • Avatar Will Truman in reply to Kazzy says:

        Or, put more simply: It is speculative to say that the payment/insurance regime young people will pay into next year will still be in place upon their retirement. It is not nearly as speculative to say that the payment/insurance regime young people will pay into next year will still be in place next year, while they are paying it.

        So it is not “equally valid” to say that what is paid by young people right now is just as much for their own later years as it is to say that they are helping to pay someone else for their later years.

        It’s not a bad point that you’re making. There is a reasonable likelihood that having these structures in place will indeed help us out later on. But you’re overstating it. But what we think and hope will be the case later on is not as valuable (or “valid”) as what is the case right now. Which is why I think you’re overstating it.Report

      • Avatar Will Truman in reply to Kazzy says:

        On the other hand, it’s possible that I am getting hung up on the word “equally.” I think the “paying for my future self” argument is valid. So if we’re viewing it as a binary, then perhaps it is “equal” in the sense that they are both “1”.

        What I am mostly curious about is how easy or difficult it would have been to avoid this by simply segregating the “community rating” by age. And, for that matter, why we didn’t go that route. Too complicated? Or because of the voting rates of the different age groups, making it not-worthwhile to even things out for younger people.Report

      • Avatar Morat20 in reply to Kazzy says:

        What I am mostly curious about is how easy or difficult it would have been to avoid this by simply segregating the “community rating” by age. And, for that matter, why we didn’t go that route.
        Pretty sure we did.Yep, yep it did. Only three bands (under 20, 21-63, 63+) and a limit to to the medical ratio there.

        As to your other point: Actually, no. I pay for insurance to pay for all medical issues. Technically I get a “new” policy yearly, but what I have effectively is continuous coverage. Everyone working for an employer with medical benefits has, basically, continuous coverage for the length of their job.

        Honest to God, I think the actual problem you’re having here is that health insurance makes sense for life-time coverage, and doesn’t as a yearly purchase. Except, this being America and the Land of the Free and Brave and Apple Pie, we can’t actually do it that way because Socialism.

        So, because Socialism, we break it into discrete, year-long “contracts” and pretend it’s somehow different that we buy a different product yearly when the end result is entirely the same. Just more complicated and less efficient.

        And then people sit there and say “Why am I paying this much a year for coverage? I’m 20 and healthy!” and don’t connect the person “now” with the person at 40 or 60 paying a lot less in year-long chunks than they cost because “I’m only buying it for a year!”.

        But they don’t, really. They buy it year after year, keeping coverage continuous (well, the ones who can afford it and aren’t idiots — or so narcissistic that they’ll happily avoid coverage and free-ride if they run up a bill they can’t pay).Report

      • Avatar Will Truman in reply to Kazzy says:

        You cannot seriously think that when I talked about age groupings, I was talking about 21-63 in a single bucket.

        As for the rest. Well, no. I mean, you’re right that we typically do buy insurance one year after the next in perpetuity. But we don’t always because sometimes we die young. And of course this policy takes effect when some people are 22 and some people are 58. Given that our ability to pay tends to get better as we get older, it seems to make more sense to allow rates to rise over time rather than stabilizing rates so that the young generally overpay and old generally underpay.

        Fortunately for me, though, I’m getting old enough to be on the winning end of this arrangement.Report

      • Avatar Brandon Berg in reply to Kazzy says:

        Except sometimes people die young. Or emigrate. Government programs change; people who are in their fifties now will be getting a subsidy without having had to do the subsidizing when they were younger.

        In a simplistic Econ 102 steady-state model, you’re right. It makes no difference. But in the real world, intergenerational transfers create winners and losers. Sure, they’re the exception rather than the rule, so on average it’s fine. But there’s no compelling reason to have intergenerational transfers from a low-earning age group to a high-earning age group. The generational income differences are smaller than the differences in health insurance premiums. Why have a system that screws some people over when you don’t have to?

        Yeah, that’s right. I played the Econ 102 card. I’m taking sophomoric condescension to the next semester.Report

      • Avatar Morat20 in reply to Kazzy says:

        And wow, some people pay into Social Security and Medicare and die young. So what? That’s basically like claiming the odds against winning the lottery aren’t millions to one, because several people win it a year. Insurance is all about risk — probability.

        You’re continuing to look at it from the perspective of an individual instead of a pool. “But I paid into it every year for my whole life, and lived and died healthy! That’s not fair! I paid far more than I got!”. (Or you died young). Well yes. But you could JUST as well have been the guy who got cancer. The one who had a premature baby. The one who got into a nasty car accident at 22.

        You weren’t that guy. But you could have been. You’re coming out the end of a lifetime of risk and saying “I got through fine, you overcharged me”. That’s exactly like me telling you the odds against flipping four heads in a row, you doing it, and then telling me I must have be wrong because you just did it in ONE try not hundreds.

        Yeah, NO insurance works that way. State Farm isn’t gonna give me a rebate the day I turn in my license due to old age because I overpaid them on car insurance. They’re not gonna give me a huge check when I sell my house, because it never caught on fire or got robbed.Report

      • Avatar Will Truman in reply to Kazzy says:

        Morat, I am not talking about overpaying to the extent that you need less in medical care than the amount you pay into the system. I am talking about overpaying to the extent that you are paying more into the system than your actual level of risk would indicate.

        It is unlikely that my auto insurance will pay back what I pay into it for collision insurance. But that’s okay, because the fact that I am insured has its own value. It means that I need to worry less than I otherwise would.

        I’m not even talking about the value of payouts, I’m talking about what it costs to provide me with that security. The younger I am, the more it costs. And as a young person, I was charged for that even though I would presumably be driving later at a reduced insurance rate. That makes a lot more sense to me than saying “But you’re not looking at it like pooooools…”

        Now, PPACA doesn’t just say “People of the different risk levels due to age should pay the same amount” but rather “People of different risk levels generally should pay the same amount.” Others would argue that’s unfair, but I totally get why we chose to do that. You don’t really choose to have a risk of heart failure that runs in your family, or a heart attack five years ago. And the previous system didn’t account for that.

        The age thing? I could dig it if we were talking about transferring from wealth to people who are struggling. But we’re doing the opposite. In a way that we could completely sidestep, if we wanted to. But we don’t want to.

        You talk of pools, then let’s talk of pools. Aging is a pretty consistent phenomenon. Which is to say that if we had it bracketed off by age, it would all come out to about the same for most people. And so for most people, it would theoretically be about the same. Except that for others it wouldn’t*. Bracketing it off by age would be more fair in these cases and no less fair in the other cases.

        So why not do it? Other than a touch of simplification and the fact that the 58 year old votes with much greater regularity than the 23 year old?

        * – Like, you know, pretty much everybody right now. When the system starts, it won’t even out for the 58 year old and 23 year old, because the latter has only been a part of the winning end of community rating while the former is – at a time in his life when he least likely to be able to afford it – starting out on the losing end. And it’s not for-sure that he will actually end up on the winning end in the future because the current system may not even exist at that point.Report

      • Avatar DavidTC in reply to Kazzy says:

        @will-truman
        So why not do it? Other than a touch of simplification and the fact that the 58 year old votes with much greater regularity than the 23 year old?

        Are you asking if it would be _better_ if we did it that way, or _why_ we did the other way?

        The reason _why_ we did it the way we did, is because otherwise then we’d need much higher subsidies for elderly people, and we couldn’t manage that, politically. People nearing Medicare age are running up against the problem that Medicare solves, that no one wants to insure them, at all.

        That’s _why_ we did it that way, politically.

        So we were unfair to young people, just like we were unfair to people without preexisting conditions. The difference, as you note, is that in those particular circumstances, we’re ‘overcharging’ the poor, which makes much less sense than ‘overcharging’ healthy people.

        If you want to know if that’s the best solution, or if your idea would be better…of course it would be better if we didn’t transfer money from the young (usually poor) to the old (often wealthy). And an even better idea would have been to just _tax_ everyone (Using our _already_ progressive tax system) and provide ‘single payer’ for everyone, in a single pool, with no opting in or out.

        We couldn’t do either of those, politically. (We did almost get a Medicare expansion downward to 55 or so, IIRC. Which would have helped a bit.)Report

      • Avatar Will Truman in reply to Kazzy says:

        People nearing Medicare age are running up against the problem that Medicare solves, that no one wants to insure them, at all.

        I don’t think this is true, though. If it is, that does indeed provide a good counterargument. However, the reason that the uninsurable are uninsurable is because of pre-existing conditions, which CR-GI takes care of. What reason do I believe that a community rating for 56-60 would be prohibitive or prohibitively-costly?

        Convince me of that, and we’re getting somewhere.

        Otherwise, I can think of a few reasons why age-bracketing would make for better policy:

        1) It would be more fair to people who are young now in comparison to those who are older now. The latter being on the receiving end of the distribution despite never having been on the costly end.

        1b) It only evens out if our health insurance regime is the same thirty years from now that it is at present. I’d venture to say that nobody really wants that to be the case. Even supporters of PPACA hope to replace it with something else someday.

        2) We’re trying to convince young people to insure themselves. Higher prices is a disincentive. It pushes more people towards “It’s cheaper just to pay the penalty.” So lower prices for young people that we want to buy insurance is better.Report

      • Avatar Will Truman in reply to Kazzy says:

        To expand: if it’s the case that this is necessary to keep insurance available and affordable for people in their fifties and early sixties, then I am on board. Our disagreement may be simply over whether or not this is the case.

        I did some poking around and PPACA allows some variance in pricing to take things like age and smoking into account. You can charge some people three times more than other people. I’d forgotten about this and it makes me feel somewhat better about this. Though it might be better if age was kept on a different track than smoking.

        The average difference in health care costs is roughly 6:1, which is where the redistribution comes into play. The question is what the premiums would look like with and without the caps. But I’m closer to being okay with it.

        As a sorta-smoker, I still look to gain advantage from this. If I were to start up smoking again, or if they count my ecigarettes as smoking, the ceiling for me ten or twenty years from now still seems kind of low.

        This could be addressed by saying that the 3:1 applies solely to age, and that some different ratio applies on account of the smoking.

        To answer the question of “why” they chose the way they did, apparently the AARP lobbied pretty heavily to prevent age bracketing. They didn’t get the 2:1 they were after, but were still influential in getting 3:1. Allegedly, anyway.Report

      • Avatar Stillwater in reply to Kazzy says:

        What reason do I believe that a community rating for 56-60 would be prohibitive or prohibitively-costly?

        Will, I take it you’re not asking whether the premium price for that age group is higher than the 26-30 age group.

        So, are you asking for evidence that the premium price to income/savings ratio is in fact higher than the lower age groups? Or are you asking for evidence the ratio in that pool would be so high that lots of people would be priced out of the market?

        I’m assuming you agree that a 60 year old will pay a higher premium than a younger person, so it seems to me that community rating isn’t a compelling factor in your question.Report

      • Avatar Will Truman in reply to Kazzy says:

        I’m assuming you agree that a 60 year old will pay a higher premium than a younger person, so it seems to me that community rating isn’t a compelling factor in your question.

        Community rating is a factor insofar as that without it, age plus specific PECs does indeed make insurance prohibitive for some. But I am less sure that age, minus specific PECs, would in fact be cost-prohibitive.

        Without CR-GI, it is easy for insurance companies to look at someone and say “His is business we can do without.” With CR, however, that would require that they say “Everyone age 56-60 is someone whose business we can do without.” I don’t think that would happen. Nor do I think they would charge so much that it would become cost-prohibitive.

        If I’m wrong on that, though, that would modify my views. Basically, I’d prefer that we don’t redistribute upwards if we can avoid it. I think there is a good chance we could, if we wanted to. But if we can’t, then we can’t and life goes on with the redistribution.Report

      • Avatar dand in reply to Kazzy says:

        can i point that while older people do make more than younger people older people today are doing worse than younger workers 30 years ago:

        http://www.advisorperspectives.com/dshort/updates/Household-Incomes-by-Age-Brackets.php

        people between 45-55 are doing worse than people in the same age group were 30 years ago it’s not quite as bad for people between 55-65 but some of that is do to postponed retirement.Report

      • Avatar Stillwater in reply to Kazzy says:

        Will,

        If I’m wrong on that, though, that would modify my views.

        I’m not sure how to answer the question, one way or the other except to actually try it out. We probably agree that as the age of the pool increases so does premium price, so it seems pretty uncontroversial that there is a point at which premium price is prohibitive for consumers and lowering it isn’t profitable for firms.

        I guess you’re wondering if an unsubsidized premium price for individuals in the 56-60 pool with GI would constitute the tipping point. I looked around for some data relating to the question couldn’t find anything pertinent. (Doesn’t mean it isn’t out there, acourse.) So I don’t know how to answer the question.

        On another level, I’m not sure it’s really relevant since my arguments in favor of the PPACA don’t weight the “harm to young people” aspects nearly as much as your more skeptical arguments do.Report

      • Avatar Will Truman in reply to Kazzy says:

        On another level, I’m not sure it’s really relevant since my arguments in favor of the PPACA don’t weight the “harm to young people” aspects nearly as much as your more skeptical arguments do.

        This is a relatively minor factor in my view of PPACA, positive and negative. I talk about it because it came up, not because it is of super high importance. The greater part of my skepticism of PPACA is cost, concern that the Mandate won’t do its job, and the perpetuation of a system that’s broken without fixing it. Even with all of that, my opposition to it is very low-key. I would not be surprised to be wrong. I hope I am. And even if I am not, I recognize that we could have done much, much worse.

        I’m not sure how to answer the question, either. My preference would be to have tried age-bracketing and then re-evaluating it in the future. Maybe there is some analysis out there that will semi-settle the issue. Or maybe one will pop up five years from now when the dust settles on the effects that PPACA as-is has on the market.Report

      • Avatar Rod Engelsman in reply to Kazzy says:

        Will, we could have easily done the kind of age-bracketing you talk about here, but it would have been at the expense of much greater direct government subsidization of policies for the non-quite-Medicare-eligible crowd.

        Personally, I would prefer that approach, but it wasn’t politically feasible.Report

      • Avatar Will Truman in reply to Kazzy says:

        Rod, that is perhaps true. It seems like subsidies either way, though. It’s not clear to me that the younger are more equipped to pay what they’re being asked to pay, than the older set would be equipped to pay the higher premiums that would result in age-bracketing. As has been mentioned, as it stands we’re placing the burden on the generation least equipped to be able to handle it.Report

      • Avatar DavidTC in reply to Kazzy says:

        Will, it’s perhaps worth pointing out that the elderly are about to start getting a _lot_ poorer, thanks to the completely failed experiment of replacing pensions with 401ks. And note that a lot of those pensions used to include some sort of health care. While the elderly still tend to have more assets than the young, and little debt, they aren’t going to have anywhere near the retirement money people 20 years ago did. dand mentioned this, but it’s easy to overlook. It’s the exact age we’re talking about, 50+, that is the result of this little ‘experiment’ of blindly handing our retirement money over to the market, which then proceeds to lose it.

        Of course, perhaps that is canceled out by the fact that young people are now all unemployed and deep in debt, so the money gap is still there. (It’s the new way to not increase inequality of ages…make everyone poorer by the same amount!)

        But, anyway, Will, I think everyone agrees with you, the current situation is not ideal. It basically was made this way so the AARP would not fight the law.

        Incidentally, I’m not _entirely_ sure that premiums would be quite as low as you think. The young tend to healthier in general, but they can have some _really_ expensive things happen to them, and spend four decades fighting it. Whereas the elderly, even if something expensive does happen, they tend to just live a few years and then die from it.

        And of course, it’s the young people who get pregnant, and the young people who get in car accidents, and the young people who get in fights, and the young people who skydive, etc. When I look at my own family, I have myself, with a pre-existing heart condition, and my brothers, one of which shattered his kneecap while kayaking, and another who was seriously injured in a car accident, all of which were rather expensive, and all which cost tens of thousands of dollars in medical expenses before we were thirty.Report

      • Avatar Brandon Berg in reply to Kazzy says:

        Will, it’s perhaps worth pointing out that the elderly are about to start getting a _lot_ poorer,

        Yup. Any day now that 45-year trend is going to turn right around.

        thanks to the completely failed experiment of replacing the completely failed experiment of pensions with 401ks.

        Fixed that for you. If you hadn’t noticed, traditional pensions are in pretty lousy shape. Not surprisingly, since they’re invested in broadly the same underlying assets as 401(k)s. Government pensions are able to continue paying out by bleeding the taxpayers, but that’s hardly to their credit.Report

      • Avatar Michael Cain in reply to Kazzy says:

        The young tend to healthier in general, but they can have some _really_ expensive things happen to them, and spend four decades fighting it. Whereas the elderly, even if something expensive does happen, they tend to just live a few years and then die from it.

        This article provides a look at the distribution of health care costs over a typical lifetime (which is what community-rated premiums should reflect). One-half of lifetime expenditures during senior years (≥65); one-third of lifetime expenditures during middle age; one-sixth for childhood and young adult years. This quote sums it up nicely: “After the first year of life, health care costs are lowest for children, rise slowly throughout adult life, and increase exponentially after age 50”. It’s all about frequency of occurrence. A young adult with a shattered kneecap is expensive, but it’s a rare event. An elderly woman with a broken hip is at least similarly expensive, and is distressingly common.Report

      • Avatar dand in reply to Kazzy says:

        Yup. Any day now that 45-year trend is going to turn right around.

        I’m not completely sure but it wouldn’t be a surprise if it gets worse once large numbers of baby boomers turn 65. My parents and many of their peers are less secure financially than their parents were at a similar age. I think the cause is that the changing age structure of the population meant that there were fewer senor level positions available to workers in their 50s.Report

      • Avatar DavidTC in reply to Kazzy says:

        @brandon-berg
        Yup. Any day now that 45-year trend is going to turn right around.

        Yeah, it will. Look at the link you provided. Specifically, look at what happened to the 45-54 year old income. Or click on ‘Peak Earning Age Group’.

        We weren’t talking about 65 or older, those are on Medicare. (And on Social Security, which is why their income hasn’t gone down.)

        We were talking about pre-Medicare, whose income has managed to recently drop down to a level last seen in 1985 (Everyone else’s just dropped to the mid-90s…except young people, which I also mentioned in my post.)…and remember, back then, people had pensions they could live on after they retire, _and_ health care was a lot cheaper.

        And it’s not so much that their income has dropped, it’s that because of that they’ve been eating into their retirement money the entire last decade. This is the time they’re _supposed_ to be funneling money directly into retirement, their peak earning time, and instead it’s 1985 for them.

        Of course, the 55-64 seem to be okay, not dropping as much…until you realize that what probably happening there is that _less people retired_ during that time than they used to. Probably because less of them _could_ retire without social security.

        If you hadn’t noticed, traditional pensions are in pretty lousy shape. Not surprisingly, since they’re invested in broadly the same underlying assets as 401(k)s.

        Well, that’s a fair enough point. I wasn’t really arguing we should go back to traditional pensions, those wouldn’t work in today’s society anyway. (Not to mention corporations robbing them blind.) 401k failed, but pensions would also have failed…if any of them existed anymore.Report

      • Avatar DavidTC in reply to Kazzy says:

        @michael-cain
        One-half of lifetime expenditures during senior years (?65); one-third of lifetime expenditures during middle age; one-sixth for childhood and young adult years.

        When I said ‘I’m not _entirely_ sure that premiums would be quite as low as you think.’, I was talking about the mentioned hypothetical 6x difference cap on based on age, and how the law settled on 3x.

        I wasn’t trying to argue that there were _no_ differences, I was trying to argue that I actually don’t think the differences are as high as Will Truman was thinking they are, or even as high as the _law_ thinking they were. Also, we weren’t actually talking about people over 65, who are covered by Medicare.

        While this document is incredibly confusing and hence completely useless to actually try to figure anything from, the chart seems to imply that 20 year olds_cost $1,448, 40 year-olds cost $2,601, and 65 year-olds cost $10,245. Per year, per capita.

        That looks like it’s about a 7x difference between 20 and 65…which logically means that the average difference for (hypothetical) age bands between 20-29 and 55-64 are less than that. Because a 29 year-old is halfway to 40, so logically they should cost around $2000, and a 55 year-old is 2/5th the way to 40, so they should cost around $5500. So the average for 20-29 should be around $1700, and the average for 55-64 should be $7200, which is only 4.2x difference.

        And that 4.2x is assuming that the cost progression from 40-65 is linear, which I suspect it is not. And it’s also pretending that it’s a 64 year-old that costs $10,245, not a 65 year-old. Fixing either of those in the calculation would make that 4.2x even lower. I’d be startled if it was really as high as 4x.

        I suspect the only way to get get an age band that is 6x times the lowest age band would be if insurance companies made an age band that was 60-64 or something. Or if they decided to rate each year separately. It’s really the very trailing minority of ages where costs explode…which is exactly why we _have_ Medicare, and why we should drop the entire age band cap thing and just fricking expand Medicare down five years or a decade.Report

  13. Avatar roger says:

    Fantastic post, Tim. Interesting and educational.Report

  14. Avatar Marchmaine says:

    I Appreciate Tim’s framework distinctions and am sympathetic to them.

    I freely admit, however, that I don’t really have any idea of what constitutes my Disaster Insurance vs. my Health Care Insurance.

    I assume, perhaps mistakenly, that my Term Life Insurance is an annual bet that I make with my Insurer that I will die… the bet is calculated on big number factors that most of the time (so far) I’m giving them money to cover the poor sot that, well, “won” his bet.

    My question/point is that I’m not sure what portion of the $20k I and my employer annually pay for health insurance (of which we thankfully use very little) is “insurance” vs. “healthcare”

    Simply knowing those numbers would dis-entangle some of the politics from this.

    Like Tim, I would very happily see Insurance and Health Maintenance detached from Employment… I’m perfectly agnostic on the way to do it – which I see as purely a pragmatic discussion on means.Report

  15. It began a century ago, when the doctors’ union—the American Medical Association (AMA)—lobbied for occupational licensing laws and gained the power to certify medical schools.

    I’ve been enjoying the post so far, but needed to comment on this. (Sorry if someone has already done so upthread.)

    The AMA does not certify (or, more precisely, accredit) medical schools. Its Council on Medical Education is one of two sponsors of the Liaison Committee on Medical Education, which is the accrediting body. (The other is the Association of American Medical Colleges.)

    And the AMA is not a union. Physicians are not, by and large, unionized.Report

    • Goodman’s book provides only a rough sketch, and I did not do much other digging beyond a few trips to wikipedia. His characterization is that the AMA “essentially gained the power to certify medical schools.” I should have included that qualifier. Beyond that I will defer.

      I’ve always understood the AMA, like the ABA, to be a trade union. Here’s the definition from Black’s Law Dictionary: “A union composed of workers of the same or of several allied trades.” Again, I should have included the qualifier for the sake of precision.Report

      • I can’t really comment on the ABA, since I know nothing of its function.

        But the AMA is, for the most part, a lobbying organization. It publishes a journal, does some academic work, but in large part it functions as a lobbying body for member physicians.

        Membership is not required for doctors, and confers no particular prestige. I am not a member, as I object to some of its policies.Report

      • Avatar Will Truman in reply to Tim Kowal says:

        To add on to what Russell is saying, the AMA is half of the LCME, but also overlooked is that the LCME is not the only accrediting body that can creates medical schools. They do have sole province over MDs, but instead of getting an MD you can also get a DO. The AOA (which handles DO schools) would, I am sure, love for there to be more DO schools.

        Further, there’s no reason that the LCME to be the only accrediting body.

        If it were the case that there were a bunch of universities that could start medical schools and wanted to, they could go to the AOA or they could create pressure for a new accrediting body. But medical schools are really, really expensive to set up and administer.

        And on top of all of this, as I have said before, medical schools aren’t actually the bottleneck when it comes to creating doctors. More med school graduates won’t do much of anything without more residency slots. This part goes beyond the scope of Tim’s post, and should not be considered a critique, but it’s something that comes up a lot when people talk about the detrimental effect the AMA has on the number of doctors.Report

    • Avatar Lyle in reply to Russell Saunders says:

      Actually it was the Rockefeller foundation that pushed a lot of the tightening up of medical school standards, after Johns Hopkins demonstrated the new model In one sense this is ironic since John D Rockefellers dad was a seller of tonics in the 1860s for whatever might ail you. (Basically disguised booze).Report

  16. Avatar LWA says:

    We need to question why we choose to deliver medical care via the market.

    Health care doesn’t conform to the market the way consumer goods do, people’s behavior isn’t the same as it is with consumer goods.

    What benefits does the American style market deliver that European style socialized medicine doesn’t?

    We live in a society that has, as its first principles, the notion that human dignity is sacred, and anyone who needs lifesaving treatment will get it. No one in Americva is going to select a system that allows zero-benefits to happen in health care.

    So all the various proposals to engineer the health care marketplace to deliver universal health care regardless of ability to pay, are just Rube Goldberg schemes to make the market do what it can’t.Report

    • Avatar Patrick in reply to LWA says:

      Health care doesn’t conform to the market the way consumer goods do, people’s behavior isn’t the same as it is with consumer goods.

      Well, it is, it’s just that health care is a member of a very particular subclass of consumer goods. Markets cover all sorts of goods, from the most elastic to the least.

      It just happens that a certain subset of “health care services” is comparable in inelasticity to “clean water”, “enough calories to survive until tomorrow” and “protection from deadly environmental conditions”.

      Health care services != insurance, which further complicates things.Report

      • Avatar KatherineMW in reply to Patrick says:

        And clean water and protection from deadly environmental conditions are provided by the government in the form of water and sanitation systems and environmental regulations. So doesn’t this support the idea that health care is another thing best provided by government?Report

      • Avatar Brandon Berg in reply to Patrick says:

        Clean water is provided by private firms as well, of course. The reason the government provides protection from pollution is that it’s nonrivalrous and non-excludable, i.e. a true public good. This should not be confused with a “public good,” which is to say something that the person using the term would personally like the government to provide.

        Health care is both rivalrous and excludable. It’s a “public good,” not a public good.Report

      • Avatar Brandon Berg in reply to Patrick says:

        It just happens that a certain subset of “health care services” is comparable in inelasticity to “clean water”, “enough calories to survive until tomorrow” and “protection from deadly environmental conditions”.

        Demand for another, possibly larger, subset of health care is very elastic. That is, treatments which are expensive, of dubious efficacy, and whose best-case outcome is a few more years of low-quality life.

        There’s a very wide gulf between letting the poor go unvaccinated or die for lack of low marginal-cost medicine on the one hand, and on the other hand saying that extremely expensive medical treatments of dubious benefit should be reserved for those who are willing and able to pay for them.Report

      • Avatar Rod Engelsman in reply to Patrick says:

        There’s a very wide gulf between letting the poor go unvaccinated or die for lack of low marginal-cost medicine on the one hand, and on the other hand saying that extremely expensive medical treatments of dubious benefit should be reserved for those who are willing and able to pay for them.

        Absolutely correct. And you may recall that one provision of Obamacare is the establishment of… I forget what they’re called exactly… but basically cost/benefit review boards to look at this kind of thing. The Teabillies hollered about “death panels”. So there’s that…Report

      • Avatar Brandon Berg in reply to Patrick says:

        Yeah, that was lame. “Death panels” are exactly what we need to control government spending on health care, as long as people are free to buy add-on insurance. IMO, the government should flat-out refuse to spend taxpayer money on any treatment that hasn’t been shown to meet a fairly strict cost/QALY standard.Report

      • Avatar Mike Schilling in reply to Patrick says:

        The death panels are exactly like the atheism panels that forbid people from following their faith by limiting religious monuments on government property.Report

      • Avatar DavidTC in reply to Patrick says:

        @brandon-berg
        Health care is both rivalrous and excludable. It’s a “public good,” not a public good.

        While health care is mostly _technically_ excludable, we, as a society, have decided that it is not. We have decided that we will refuse to exclude people from a certain level of it. And certain aspects of it aren’t excludable at all, aka, fighting contagious diseases.

        It is mostly rivalous, although I would argue it is not so in emergency situations, and a lot of that is an illusion, as regional healthcare is often very very consolidated. I’m not entirely sure this is a legitimate objection to something not being a public good. Even clean air _technically_ has alternatives. (People could walk around with breath masks.) Health care is often the same way…you can either go to the heart specialist who covers your town and the three nearby towns, or drive 45 minutes to another one. Health care is not rivalous in the same way that most goods and services are.

        Anyway, my point is, there’s a difference between ‘I would like the government to provide this, so I will call it a public good’, and ‘We as a society have made it illegal, for decades, for people to be denied this thing.’ While neither may _technically_ be a public good, if we’re going to keep treating something as a thing that can’t be denied, we need to pass laws _as if_ it’s a public good.

        For an example…providing restroom facilities is not technically a public good. We’d be okay if the government didn’t provide those…but it does, simply because we, as society have sorta unconsciously decided it _is_ a public good. And we’ve passed laws where certain businesses must provide them for free, and keep them clean and whatnot, despite the fact there’s no reason the free market couldn’t provide those at a cost. No reason except society said ‘No. We’re not going to pay to pee.’.

        At some point, we have to say ‘If we are going to say that people cannot be kept from a thing…we need to actually start treating it as a public good under the law. It makes no sense to do things in this half-assed manner, where people just get stabilized and then thrown out the door again despite the fact they need real treatment.’.

        Either we should attempt to distribute health care in some sort of reasonable manner where most people can get most of the care they need…or we should change our mind and say that people should be left to die if they can’t pay for treatment. We really have to pick a side, because the current system is utterly stupid. (People can, of course, disagree with any specific proposal to do the first.)

        Of course, there’s a rather large difference between ‘health care’ and ‘health insurance’. Health insurance is both rivalrous and excludable, and utterly unneeded in any sane system of health care.Report

      • Avatar Patrick in reply to Patrick says:

        @brandon-berg

        Demand for another, possibly larger, subset of health care is very elastic.

        Yes, and this is a very, very good point. You can even take the “possibly” out, if you include things that we don’t currently provide insurance coverage for, but people still consider health care.

        @davidtc

        While health care is mostly _technically_ excludable, we, as a society, have decided that it is not. We have decided that we will refuse to exclude people from a certain level of it. And certain aspects of it aren’t excludable at all, aka, fighting contagious diseases.

        This is also a very good point.

        I’ll note that there is a very small intersection between the two things you guys are talking about. The vast majority of health care operations are both elastic and effectively rivalrous.Report

      • Avatar Brandon Berg in reply to Patrick says:

        Mike:
        I can’t tell whether this was clear to you, but my comment about “death panels” was not at all sarcastic.

        DavidTC:
        Health care is often the same way…you can either go to the heart specialist who covers your town and the three nearby towns, or drive 45 minutes to another one. Health care is not rivalous in the same way that most goods and services are.

        I may be wrong, but you seem to be confusing “rivalrous” with “competitive.” A rivalrous good is a good which has the property that one person’s consumption reduces the ability of others to consume it. For example, food is rivalrous. If I eat a steak, no one else can eat that same steak. Medical care is rivalrous, because a doctor can only perform one procedure at a time, and only has so many hours in a day. Intellectual property is nonrivalrous, because you can make an arbitrary number of copies at essentially zero cost.

        Some goods are theoretically rivalrous, but nonrivalrous on the current margin. A road is rivalrous at rush hour, but nonrivalrous at three AM.Report

      • Avatar Brandon Berg in reply to Patrick says:

        Also, you’re correct that there’s a public good component to control of infectious diseases. Of course, the benefits are largely internalized, and the cost is usually fairly cheap; I’m pretty sure it’s a fairly small percentage of overall medical expenditures. I have no objection to government subsidizing vaccinations and treatment of infectious diseases for the poor on public health grounds, as they already do through Medicaid. Really, the greater threats to public health are from people avoiding vaccination for ideological reasons, not for economic reasons, and from overusing antibiotics, rather than from underusing them because they can’t afford them.

        Other than that, and maybe a few other corner cases, you’re simply wrong to say that medical care is a public good. It doesn’t matter that you think the government should provide it, or if other people agree with you, or even if you’re right and people who disagree with you are monsters. It has a specific technical meaning which is not met by the vast majority of medical expenditures.Report

      • Avatar DavidTC in reply to Patrick says:

        @brandon-berg
        I may be wrong, but you seem to be confusing “rivalrous” with “competitive.” A rivalrous good is a good which has the property that one person’s consumption reduces the ability of others to consume it. For example, food is rivalrous. If I eat a steak, no one else can eat that same steak. Medical care is rivalrous, because a doctor can only perform one procedure at a time, and only has so many hours in a day. Intellectual property is nonrivalrous, because you can make an arbitrary number of copies at essentially zero cost.

        No, that was indeed what I thought you meant by it, so that was how I was using it.

        And now I completely don’t understand what you mean in that a public good must be nonrivalrous. Only one person can consume any particular (polluted or non-polluted) resource at a time. That’s pretty much how every single good functions. (Barring IP, but that’s basically saying ‘We have created artificial scarcity here, but we can violate that artificial scarcity if we want’. Well, duh.)

        The entire premise of ‘tragedy of the commons’ is that public goods can be over-consumed and rendered unusable. It’s hard to see how public goods can be ‘over-consumed’ if they must be ‘nonrivalous’.

        It doesn’t even seem to include traditional ‘public goods’ like a village commons. It doesn’t even apply to the things you brought it up in relation to! Clean water is not a public good under that definition. (Seriously, go ask Utah and New Mexico how ‘nonrivalrous’ water is.)

        If that is what that term means in economics, it’s nearly completely useless, and I have no idea why you brought it into this discussion.

        Other than that, and maybe a few other corner cases, you’re simply wrong to say that medical care is a public good.

        I’m pretty certain you’re the one who brought up public goods at all, and started talking about “public goods” vs. public goods. Patrick just said it was extremely inelastic, not a ‘public good’, and KatherineMW pointed out that other extremely inelastic services were provided by the government, again not using that term.

        No one has claimed it’s a literal public good.

        I’m the only one beside you even using that term, and I said it _wasn’t_ a public good, because, as I pointed out, it is not non-excludable. It is trivially easy to exclude people from 99% of health care.

        I just pointed out that we probably should _treat it_ as if it’s a public good if we are going to demand that everyone has access to it. (Which is not the same as saying we should treat it as a public good because ‘I like it and want the government to provide it.’.)

        Although if ‘public good’ means what you’re saying, that makes very little sense, because then nothing the government provides is a ‘public good’ except maybe weather reports and street lights.

        So I guess I mean the government should treat health care just like they treat roads and postal service and clean water and other very inelastic things that people can’t possible afford to produce themselves.

        We can’t stay here in the middle, where we, as society, demand we spend ten of thousands of dollars to stabilize a poor heart attack victim in an ER, but won’t give someone with bronchitis $50 worth of antibiotics. (We will, however, spend a lot of money if they come in a week later with full-blown pneumonia.)Report

    • Avatar J@m3z Aitch in reply to LWA says:

      We need to question why we choose to deliver medical care via the market.

      Without getting into the question of how health care ought to be delivered, I’d argue that saying we deliver it via the market is misleading. Not only is much of it delivered via gov’t funding, that part of it that is not is not delivered vua a normal competitive market. In a nutshell, the user is not the purchaser. It’s as though our employers selected our houses and cars for us and then we talked about the housing market or auto market. They would bear precious little resemblance to the markets we actually have in those sectors–where the users are the purchasers.

      And let’s not forget that federal wage and tax policy led to this connection of health insurance to employment, so in that sense it is not wholly a “free” market development, either.

      Again, I am not arguing about how health care ought to be delivered, and I am not saying anything about what a real, normal, market in health cate would look like other than that it would look different from what we have.Report

      • Avatar Rod Engelsman in reply to J@m3z Aitch says:

        And let’s not forget that federal wage and tax policy led to this connection of health insurance to employment, so in that sense it is not wholly a “free” market development, either.

        While this is true from a path-dependency, how-we-got-from-there-to-here, viewpoint, I question how much relevance this has to the continuation of the practice.

        For example, I just looked at my last paystub and got out my calculator. I don’t know how much or even if the company subsidizes my insurance “behind the scenes”, but I pay about $8300/yr for medical/dental/vision in pre-tax funds to insure myself, my wife, and two daughters. (Note: that amount is exempt from Fed and state taxes but not SS or Medicare.) So that saves me maybe a grand or so a year in taxes. It should be noted that the tax exemption only directly benefits the employee, not the employer.

        But the real benefit to me is the group/individual distinction. Group plans, for whatever reason, are a hell of a lot cheaper and you don’t have to deal with the pre-existing condition issues, which would prevent me from purchasing health insurance for my wife for any price.

        So what I’m contending is that while the tax advantages to employer-provided insurance are a real thing, and your historical accounting of how this came to be standard practice is correct, I doubt that the tax treatment is really what’s keeping it in place or what people value in the practice. IOW, undo the tax advantage and I doubt that it would make a lot of difference in behaviors of employees in desiring employer-provided group plans or employers in offering same as a benefit.

        That’s what I see as the greatest benefit of Obamacare: It has the potential over time of breaking the linkage between employment and health insurance by offering the benefits of group health plans independent of employment through the state exchanges.

        On a personal note, Obamacare may finally open a path for me to move ahead with my (sort of) chosen career. I have the option with my company of leasing my own truck and being an owner/operator, basically owning my own business. But that means I can’t be on the company plan which has been the stopper to date. With Obamacare I can get health insurance–even for my otherwise uninsurable spouse–and actually pay less for that coverage due to the 11% limit on premiums vs. income.Report

      • Avatar Murali in reply to J@m3z Aitch says:

        In a nutshell, the user is not the purchaser.

        Interestingly, this seems to be a permanent fact about K-12 education just about anywhere. I wonder whether this creates a problem for market based mechanisms. In Singapore, there seems to be a huge shadow industry of private tuition services that many purchase in order to supplement what they see as an inadequate public school system. But since it is parents who do the purchasing and children who do the consuming, I wonder if there is any systematic misallocation of resources going on. What is your take on this?Report

      • Avatar Just Me in reply to J@m3z Aitch says:

        When considering whether to drop your employer provided insurance don’t just look at premiums. Look at copays and deductibles also.Report

      • Avatar Rod Engelsman in reply to J@m3z Aitch says:

        @just-me , I assume your response is aimed at me? If so, yeah, of course. That’s what makes the Marketplace so attractive; the ability to compare apples to apples across different plans. But I likely couldn’t just drop my plan and go to the Marketplace without changing anything else. I suspect my current insurance qualifies as “minimum essential coverage” under the ACA.

        The real deal for me is that I would like to go owner-operator. More money, at least potentially, more freedom and control over my day-to-day life, and the possibility of building an actual business of my own. The problem has always been though, that that would throw me off the company-provided plan and into the individual market. And given that my wife is a transplant patient (kidney) and a cancer survivor (tough girl!) there’s no way in hell I could get health insurance that would cover her. And even if I could find a company willing to write the policy there’s no way I could ever afford the premiums.

        Obamacare fixes that for me. For me, it’s a really, really, good thing. And I don’t think I can adequately express the contempt I feel for any politician with an -R behind their name. These selfish, opportunistic, ignorant fucks are fighting tooth and nail to hold my life back. At every turn they’re actively working as hard as possible to limit and generally screw with my future.Report

      • Avatar just me in reply to J@m3z Aitch says:

        Well I hope it works out for you. I’m kind of surprised that your company does not let you stay on their insurance as an owner operator. I know the company I worked for briefly let its owner operators have insurance through them. I know of others that do so also.Report

      • Avatar BlaiseP in reply to J@m3z Aitch says:

        The GOP is just representing their constituency, the guys in the ill-drawn cartoon featured on this post. We mustn’t hold their feet in the fire, too long, poor saps. The Democrats caved like a wet cardboard box when it came to genuine reforms insurance / health care costs, too.

        The big money came out with the big guns and nobody’s better represented on K Street than Big Insurance / Big Healthco. Karen Ignagni threatened President Obama — to his face — in the Oval Office — with a billion dollars of attack ads if he dared to present Single Payer as an option.

        Obama flinched. The GOP just went Lot Lizard on the whole thing, earnestly knocking on truck doors, huntin’ for tricks to feed their bad election funding habits. What emerged from the Obamacare sausage factory was not much of an improvement on the old system, though it’s demonstrably better, insofar as more people are covered.

        The GOP doesn’t give a shit either way. Really, they don’t. Look at them, holding up Mediscare as a big shield. Medicare could use some serious reforming, especially on the ability to do bulk purchasing, denied them at present. Canada has bulk purchasing. Look at the insurance pooling, we should have everyone in the same pool of lives — we don’t — because if we did, the insurance firms would have to compete on the basis of meaningful statistics and probabilities.

        But then, the GOP never got to Stats and Prob. The Democrats suffer from the same problem. All of them are pretty handy with addition and subtraction, though: meaningful reform means less campaign contributions. If Congress backed Market Reforms, like they’re always braying about, they’d call Health Insurance and Big Healthco out for the scams they are. But then, these are the people who are also noisily fellating Wall Street. Look at Dodd-Frank, half o’ this and none o’ that. Nobody’s gone to jail for the 2008 chicanery — malfeasance on a colossal scale — biggest in the history of the world — Obama’s DOJ has done nothing about it.

        But the door has been forced open, a sliver. The GOP is rushing to the gate, feverishly attempting to keep genuine markets from forming. Obama spent all his political capital on that breach. Yet, curiously, even in his reforms, there’s a sense of abstraction, a concession to political reality: Clinton had tried meaningful reforms and failed. So Obama settled for superficial reforms.Report

      • Avatar Morat20 in reply to J@m3z Aitch says:

        But the real benefit to me is the group/individual distinction. Group plans, for whatever reason, are a hell of a lot cheaper and you don’t have to deal with the pre-existing condition issues, which would prevent me from purchasing health insurance for my wife for any price.
        Because they have a large, diverse pool and can spread and forecasts risks accurately.

        It’s like mortgages, really. Give a mortgage to 10,000 people, and you can predict pretty darn accurately how many will fail. Give a mortgage to 10 people, and your forecast isn’t gonna be nearly as accurate — so you either have to charge more or get a lot more picky.

        The ACA basically uses the exchanges to create state-wide pools (giving individual purchasers the benefit of a large pool to spread risks). It also forbids discrimination based on pre-existing conditions and a few other things.

        The ironic thing about it all is the individual mandate is absolutely essential to make a free-market approach work. Otherwise you get a death-spiral. It’s the grown-up, adult, you have to take the nasty medicine part of it.

        And it’s the part the GOP fights the most — despite it being their own idea, and despite the fact that they endorsed it those many years ago because it WAS necessary. Otherwise the insurance companies will just go out of business as the sick sign up and the healthy don’t bother until they are sick.Report

      • Avatar Brandon Berg in reply to J@m3z Aitch says:

        It’s like mortgages, really. Give a mortgage to 10,000 people, and you can predict pretty darn accurately how many will fail. Give a mortgage to 10 people, and your forecast isn’t gonna be nearly as accurate — so you either have to charge more or get a lot more picky.

        That doesn’t make any sense. Insurance companies that sell individual policies don’t just insure ten people. They sell thousands of individual policies, and diversify that way.

        It’s possible that adverse selection may be more of an issue on the individual market. There’s also less overhead associated with selling a group insurance policy to one group of a thousand people versus selling a thousand individual policies.

        The ironic thing about it all is the individual mandate is absolutely essential to make a free-market approach work.

        Um…no. It’s required to make a heavily regulated, community-rating and guaranteed-issue approach work.

        And it’s the part the GOP fights the most — despite it being their own idea, and despite the fact that they endorsed it those many years ago because it WAS necessary.

        That was a strategic thing. The mandate was Obamacare’s achilles heel; it was extremely unpopular and more vulnerable to a constitutional challenge than any other part. The idea was that the Supreme Court would realize that the mandate was not severable and have to declare the whole thing null and void if they found the mandate unconstitutional.Report

      • Brandon, I think he’s trying to outline why group policies are less expensive than individual ones, not why 10,000 individual policies are less expensive than 10 individual policies. Assuming that I am reading him correctly, he is correct that it’s a factor. Not as big a factor as adverse selection, group negotiation leverage, and other things, though.Report

      • Avatar Brandon Berg in reply to J@m3z Aitch says:

        And given that my wife is a transplant patient (kidney) and a cancer survivor (tough girl!) there’s no way in hell I could get health insurance that would cover her. And even if I could find a company willing to write the policy there’s no way I could ever afford the premiums.

        Did you ever try? HIPAA was supposed to take care of this. When I applied for individual insurance, I didn’t even have to fill out a health questionnaire because I had maintained continuous coverage. Megan McArdle (see item 9) says that she just assumed she was uninsurable—and apparently never even bothered to check—until she learned that Virginia Postrel, a cancer survivor and live kidney donor, had been buying individual insurance.Report

      • Brandon, that might be specific to Washington State. I think I remember Avik Roy mentioning something about Washington having laws limiting PEC coverage-refusal.Report

      • Or having actually read the link, maybe not specific to Washington.Report

      • Hmmm. McArdle cites HIPAA ’96, except that as far as I know, that only applies to group plans. Group plans are pretty limited in what they can discount as pre-existing in ways that individual plans aren’t. Except in certain locations.Report

      • Avatar Mike Schilling in reply to J@m3z Aitch says:

        Give a mortgage to 10,000 people, and you can predict pretty darn accurately how many will fail.

        Though there’s a lot more money in lying about it.Report

      • Avatar Rod Engelsman in reply to J@m3z Aitch says:

        It’s like mortgages, really. Give a mortgage to 10,000 people, and you can predict pretty darn accurately how many will fail. Give a mortgage to 10 people, and your forecast isn’t gonna be nearly as accurate — so you either have to charge more or get a lot more picky. [Emphasis mine]

        It’s pure probability and statistics. Start with a base population and a measurable characteristic that follows a normal distribution* (bell curve). Draw a number of random samples of n=5, find the sample means, and plot on a histogram. Do the same thing for n=10, and n=20, and n=100, etc. All those histograms will have a normal distribution centered around a mean close to the population mean. The difference between the distributions will be that the larger sample sizes give you normal curves that are tighter (with lower variances approaching the population variance) and means that are closer to the population mean (IOW, more accurate). The worst case scenario is a sample size of one.

        Now assume that you’re in the insurance business and you have an underwriting standard that says something like; “You must set the premium for all policies such that 80% of all policies written will be profitable for the company.” For a group policy covering 10,000 employees of a company you can set that per capita premium at a figure only a little above the population average payout. For a small company with 100 employees that figure is going to be somewhat larger, and for individual plans it will have to be way out near just shy of two standard deviations.

        Of course practices such as recission, cherry picking and denial of coverage for PEC’s, slow pay (to take advantage of float), etc. are also perfectly rational and predictable behaviors from the standpoint of the profit-seeking insurance corporation.

        * This actually works with a population distribution of any shape; it doesn’t have to be normal. It just has to have a mean, which any distribution will have.Report

      • Avatar Rod Engelsman in reply to J@m3z Aitch says:

        That doesn’t make any sense. Insurance companies that sell individual policies don’t just insure ten people. They sell thousands of individual policies, and diversify that way.

        See my reply to Morat20, above. While it’s true that in general, the underlying statistics behind 10,000 individual plans and one group plan covering 10,000 people is identical, it’s also a lot easier–and perfectly rational!–to carve away the unprofitable portion of the individual market.

        It’s possible that adverse selection may be more of an issue on the individual market.

        I’m not following you here. The individual market is mostly the self-employed and folks that work for companies that don’t offer group plans, yes? Why, in general, would that cohort be worse or better risks?

        There’s also less overhead associated with selling a group insurance policy to one group of a thousand people versus selling a thousand individual policies.

        True, but I can’t imagine that difference accounting for more than a 10 or 20% premium differential.Report

      • Avatar Rod Engelsman in reply to J@m3z Aitch says:

        And given that my wife is a transplant patient (kidney) and a cancer survivor (tough girl!) there’s no way in hell I could get health insurance that would cover her. And even if I could find a company willing to write the policy there’s no way I could ever afford the premiums.

        Did you ever try? HIPAA was supposed to take care of this. When I applied for individual insurance, I didn’t even have to fill out a health questionnaire because I had maintained continuous coverage. Megan McArdle (see item 9) says that she just assumed she was uninsurable—and apparently never even bothered to check—until she learned that Virginia Postrel, a cancer survivor and live kidney donor, had been buying individual insurance.

        To be perfectly honest, no, not really. I had coverage with my employer up to January, ’03. At that point I took a Hail Mary shot at life and enrolled in grad school using my VA benefits. I could have signed up for what amounts to the State employee plan through the University, but I couldn’t afford the premiums on all the money I wasn’t making at the time. Even without PEC being an issue it was sort of pricey with no subsidy. And then my subsequent employer before this one didn’t offer any health insurance (but I was home every weekend and several times during the week, unlike now).

        BTW, I’m pretty sure you taking about ERISA and not HIPAA. The latter is the patient privacy thing.Report

      • Avatar zic in reply to J@m3z Aitch says:

        @brandon-berg

        HIPAA was supposed to take care of this. When I applied for individual insurance, I didn’t even have to fill out a health questionnaire because I had maintained continuous coverage.

        Insurers are exempt from HIPAA, as I understand it. The reason for continuous coverage is so that they know what your problems are, that you haven’t any new health issues that are causing you to repurchase insurance.

        HIPAA was to protect your medical privacy from everybody else, but not from insurers.Report

      • HIPAA had provisions for the privacy of medical data, but also did establish limitations on non-coverage of PEC’s. That part is right. Where I think the misunderstanding lies is that the limitations apply to group coverage but I do not think they apply in the individual market.Report

      • Avatar Rod Engelsman in reply to J@m3z Aitch says:

        HIPAA had provisions for the privacy of medical data, but also did establish limitations on non-coverage of PEC’s. That part is right. Where I think the misunderstanding lies is that the limitations apply to group coverage but I do not think they apply in the individual market.

        Ahhh… Thanks, Will! I had always just heard of HIPAA in reference to patient privacy. Where does COBRA fit into this?

        And as a side-note, although to my liberalish brain it seems pretty darn central to the whole discussion… These “confounded, distorting, unconscionable” interferences in the private marketplace for healthcare–HIPAA, ERISA, EMTALA, Medicare, Medicaid, PPACA, etc.–didn’t just spring fully-formed from the belly of the beast for no other reason than to make life miserable for good, honest, capitalist saints. They’re responses to the fairly predictable behaviors of rational, profit-seeking entities operating in the health care market bumping up against normal moral sensibilities.Report

      • COBRA is a different law entirely. I think it was actually passed as part of a budget resolution, though the health care aspect is what everyone remembers about it.

        We actually had to make a big decision on COBRA this year. The rates were extremely high ($1600 a month, for an insurance plan that didn’t actually seem to pay for anything), and we’re entering financial strappage.

        Where the two intersect, as it did for us, is that COBRA is often used as a way to avoid a lapse in coverage. As it happened for us, we were without coverage for 61 days, just a day or two shy of a “lapse in coverage.”Report

      • Avatar Patrick in reply to J@m3z Aitch says:

        Group plans, for whatever reason, are a hell of a lot cheaper and you don’t have to deal with the pre-existing condition issues, which would prevent me from purchasing health insurance for my wife for any price.

        Point of fact, they don’t. They just spread the pre-existing condition issues to the group.

        A long time ago in a galaxy far, far away I worked for a mediumish sized organization where one of the employees had a son with very expensive recurring treatment requirements.

        We changed health insurance companies pretty much every year, because after our first year we always had an enormous rate hike.

        Which, I’ll note, is what @morat20 is talking about up above: the system is subtly engineered to encourage employers to get rid of people like this (I’m not one to use “engineered” when I mean “organically evolved”, I mean “engineered” in this case). We had a rather substantial financial incentive, as an organization, to find an excuse to get rid of that guy for four years (he’s still there, and has been for about twenty-five years now, so good on the org for doin’ the right thing). The insurance companies accepted a small loss each year to accept us as a new client, dumped us and handed us off to another insurance company the following year, etc.

        It would surprise me not at all to find that usually this results in small-to-medium sized organizations finding a reason not to continue to employ the person who futzes their group rate, at which point the musical chairs setup halts and whichever insurance company ends up with your business at that point has a steady profit stream.

        It would shock and astonish me if industry trade groups weren’t fully aware of this as a consequence of their pricing models and business practices. Actuaries are the original Big Data folk.Report

      • Avatar Brandon Berg in reply to J@m3z Aitch says:

        @will-truman: See the very last question here. I guess not having to fill out a questionnaire at all is indeed part of Washington state law. I wouldn’t be surprised if at least some other states had additional restrictions on who and what insurance companies could exclude, though.

        The rates were extremely high ($1600 a month, for an insurance plan that didn’t actually seem to pay for anything), and we’re entering financial strappage.

        Seriously? I’m not that much younger than you, and I was getting my insurance for that much per year. Granted, I don’t smoke, and I’m single, and I think you mentioned something about your wife having a preexisting condition, but that seems way too high. Did you try shopping on the individual market and getting a high-deductible plan?

        @rod-engelsman: See the link above. The P in HIPAA stands for Portability. And I’m not following your logic about the statistics. Sure, I guess if you say that 80% of policies must be profitable then you’ll have to charge higher premiums for individual policies than for group policies, but it’s not clear that it makes sense to apply the same 80% standard to individual and group policies. The bottom line is that, all else being equal, 10,000 people are going to have the same expected distribution of health care costs regardless of whether they apply as a single group or as 10,000 individuals. So if the insurance company charges, say, $5000 per person, they have the same expected profit distribution either way.

        The reason I think that adverse selection would be a bigger problem on the individual market is that people have a stronger incentive to opt out of insurance when they’re paying the full premium as opposed to having it heavily subsidized or paid in full by an employer. So I’d expect to see more healthy people opting out of the individual market.Report

  17. Avatar Shazbot8 says:

    I don’t understand your recommended plan.

    Would there be guaranteed issue under your proposal of unbundling something from something?

    A simple way of stating the problem is this: without guaranteed issue, insurance companies will charge more with the goal of dump people with preexisting conditions out of their coverage (or let them pay a fortune that many can’t afford).

    Without guaranteed issue you don’t have universal or near-universal coverage, which is immoral. And those without coverage will use emergency rooms, creating expensive inefficient care, which will also not save and improve as many lives.Report

  18. Avatar KatherineMW says:

    And to make up for the insurance company’s loss, the government creates huge new pools of customers by requiring all citizens, even non-homeowners, to pay fire insurance premiums.

    That hardly seems like an accurate comparison. Anyone can become sick or injured.Report

  19. Avatar Michael Drew says:

    I can’t fully assess this take on health care finance right now due to personal circumstances (assuming I ever could…), but I’ve read enough that want to take time to recognize it as constructive thinking on the subject, wherever I end up coming down on the approach it outlines. It’s an important the people come to the table with their earnest assessments of where health care has to go from here to the extent they hold that Obama’s reforms will usher in an undesirable state of affairs in family and business health care financing. Kudos to Tim for freely offering up a vision to be reviewed and assessed by sympathetic and critical interlocutors alike.

    In my view, the advance Obamacare represents above all is simply movement off of the long-term status quo. I don’t really agree with other commenters that it was intended to be a kickstarter for an eventually fully governmentalized health-care financing system, but I think it was meant to be something that would move the ball in a way that would spur further adjustment – to potentially include anything from moves toward single-payer to moves in the direction of a personal-finance model that this post suggests. The key point about Obamacare is that an uber-kludge like it was almost certainly necessary just to get us off of the established system that was slowly imploding. However Obamacare implementation unfolds, what’s important to keep in mind is that the system it implements doesn’t have to be seen as an end-state. But for it (or a politically hobbled version of it) not to in fact be an end-state for better or worse will require all good-faith thinkers on the subject to come to the table with their considered thoughts on the direction that would be best to go in. That’s why I’m taking time to acknowledge tim for doing so.Report

  20. Avatar Jim Heffman says:

    “Assuming fire insurance were structured like health insurance, in which the obligation to provide continued services for covered events depends on the continued receipt of premiums, the loss of your job and fire insurance means the work stops on restoring your home. ”

    You forgot the converse, which is that if fire insurance were structured like health insurance, there’d be subsidized monthly sprinkler inspections (with a full system discharge test), subsidized inspection of all crawlspaces and heating ducts and wiring pathways, subsidized installation of fire-retardent foam into all enclosed areas; there’d also be a government organisation that could outright prevent–not “order a recall”, but “prevent from ever being sold”–household items which the manufacturer could not prove to the organization’s satisfaction were not flammable; and so on.Report

    • Avatar Patrick in reply to Jim Heffman says:

      I doubt there’s a single person in the country that has that sort of coverage, Jim.Report

      • Avatar Jim Heffman in reply to Patrick says:

        …I get subsidized physical checkups every year (in fact, the health insurance service gives me money to do them), bloodwork and labs that the coverage pays for (in part, sure, but that’s why I said “subsidized” and not “free”), the coverage pays (again, in part) for whatever treatments those labs uncover, and the FDA is on the job making sure that no medical device or pharmaceutical treatment can be sold without extensive safety review at the manufacturer’s cost. And I am not some unique special gold-plated platinum-package snowflake.Report

      • Avatar Patrick in reply to Patrick says:

        Ah, I see. You think your (basic blood work and physical) is basically the equivalent procedure to (subsidized monthly sprinkler inspections (with a full system discharge test), subsidized inspection of all crawlspaces and heating ducts and wiring pathways, subsidized installation of fire-retardent foam into all enclosed areas; there’d also be a government organisation that could outright prevent–not “order a recall”, but “prevent from ever being sold”–household items which the manufacturer could not prove to the organization’s satisfaction were not flammable; and so on.) – a physical plant procedure that doesn’t take place at any physical plant I’ve ever heard of.

        Okay, your analogy is just incredibly off base, then.

        Note that the basic physical and the tests are paid for by your insurance company as a cost reduction measure, whereas the sort of massive intrusion into a physical building that you describe in your analogy wouldn’t be underwritten by any insurance company for just about any type of physical facility on the planet. I don’t think they do that sort of monthly inspection at a freakin’ nuclear power plant.

        I’ve been kinda stuck dealing with facilities guys for a while now, and the sort of “inspection” you’re drawing analogous lines to a “yearly physical” has happened precisely never. A monthly discharge test of a sprinkler system?

        Do you know how often normal building sprinkler systems are tested in the gloriously over-regulated state of California? Every fifty years. IIRC, buildings are generally considered depreciated after 30 years, so basically if the building lasts 1.66 times it’s predicted lifespan, you test the sprinklers with a full discharge test.

        So, for your analogy to be closer to accurate, common practice would be you’d have a physical once when you turn, ah, 120 or so.Report

      • Avatar Jim Heffman in reply to Patrick says:

        You do not have an answer. You have “nuh-uh!

        “there’d also be a government organisation that could outright prevent–not “order a recall”, but “prevent from ever being sold”–household items which the manufacturer could not prove to the organization’s satisfaction were not flammable; and so on.) – a physical plant procedure that doesn’t take place at any physical plant I’ve ever heard of. ”

        Here’s the thing: You agree with me, and you understand what I mean, but you’re so sure I’m wrong that you can’t even see how you’re agreeing with me. Because you just said what I mean–that outside the healthcare industry, it would be insane to think that a manufacturer would be required to develop the fully-featured retail version of its product, including its full mass-production line, and only then go to a regulatory body and ask for a test plan to get permission to sell its product to the public.

        “[T]he basic physical and the tests are paid for by your insurance company as a cost reduction measure…”

        So too would basic maintenance–tire rotation, oil changes, brake inspection–be a cost-reduction measure for automobile insurance companies, through prevention of major repairs due to long-term uncorrected issues (or outright accidents due to sudden failures.)

        ” the sort of massive intrusion into a physical building that you describe in your analogy wouldn’t be underwritten by any insurance company for just about any type of physical facility on the planet. ”

        You really need to learn how the pharmaceutical industry works because it would blow your mind the degree to which the FDA “massively intrudes” on manufacturers.Report

  21. Avatar Rod Engelsman says:

    Tim, isn’t this really just restating the standard bleat that health coverage, as currently constituted, covers too much? That it’s like your auto insurance covering basic maintenance like oil changes?

    If so, I think it’s instructive to compare health insurance to other lines of coverage to see where the issues lie. As Kim correctly points out at September 27, 2013 at 4:11 pm, for any other line of business the payout insurers are facing is bounded. If you die, your life insurance pays out the benefit and they walk away. If you get in a wreck, your car insurance pays to repair/replace your car and then they’re done. If your house catches fire, the insurer pays to rebuild and they’re done. The amount of money the insurer has on the line is contractually specified (life), known (value of your car), or at least relatively knowable ahead of time.

    But most importantly, they’re insuring you against an event, a singular occurrence. Either your death (can only happen once!), or something infrequent (hopefully!) like car wrecks or house fires. But in the realm of medicine you have both events, such as accidents and infectious illnesses, and conditions, such as diabetes, heart disease, obesity, or asthma. Furthermore, often an event can trigger an ongoing condition such as an accident or illness that leads to ongoing pain and disability; the dreaded pre-existing condition.

    The standard insurance model is fine for dealing with events. I once purchased coverage for accidents that would pay out $100/day for up to some number of weeks (I forget exactly how long now) in the event of an accidental injury, either at home or work. It cost me something like $6/month. Why so little? Because it was a bounded payout triggered by an infrequent event. And also there is no such animal as a pre-existing accident. (Well, maybe Fukishima…)

    I guess my point here is that while I see where you’re coming from, I don’t see any way to cleanly separate health insurance from health care. To do so you would have to cleanly separate medical events from medical conditions and since the former can often lead to the latter, I’m not sure how that would even work. And that’s before you even get into the moral issues of some people not being able to afford to pay for one or the other or both.Report

  22. Avatar ktward says:

    I genuinely appreciate your weigh-in here, Mr. Kowal.
    But there are commenters on this thread who are much more fully informed than you (or me) who have concisely outlined the flaws in your thinking. Nevertheless, near as I can tell, you’re still clinging to the basis of your ideals. Regardless of facts or any wider perspective. This is, more or less, the problem I have with today’s Cons: heavy on ideology-reinforcing positions, light on position-reinforcing facts.

    Clearly, you feel it’s important to clarify your position as distinctly Conservative vs. Libertarian, but I’m having a tough time seeing much daylight between y’all wrt healthcare reform.Report

  23. Avatar Bill Swann says:

    My understanding is that care paid for on an individual basis is dramatically more expensive than the same care provided to those on an insurance plan. So if you show up at the ER with a kidney stone and no insurance, as a relative of mine once did, you get a bill for $8,000 for a couple hours of care and one test — to then be told to go home and wait for it to pass.

    The reason for that is that individuals have little ability to bargain for their care, while a large employer has the heft to ask for lower prices for each procedure and service.

    So, presumably, we now have health care exchanges, a pooling of those who don’t have insurance, and (in most states) multiple plans/companies vying for that business. I’m not convinced that it will work, but it seems more logical than the “pay individually except for catastrophic care” plan.Report

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