Thoughts from Megan McArdle. One of the big problems with health care is that people have come to see every-day costs as an entitlement that someone else should pay, instead of the old days (and not that old — within my lifetime) when you paid for doctor’s visits (and they would even make house calls) out of pocket, with insurance reserved for catastrophe. We’ll take our car to the shop, our pet to the vet, but the current mess has accustomed many of us to thinking that we somehow shouldn’t have to pay for a doctor visit. As Megan notes, when you’re not spending your own money, you’re going to use the service a lot more, and you won’t care about the price. This is the key point of how screwed up the market is as a result of employer-provided insurance:
With all the layers in between consumers and the providers in the ordinary market, the natural battle between consumers seeking better value and producers seeking higher prices is terribly distorted in ways that don’t make us healthier.
That market disconnect is what we need to fix, rather than finding some other peoples’ money to keep doing the same crazy things. And the way to fix it is to end the preferential tax treatment of employer-provided insurance versus personally purchased policies, and to allow purchase across state lines for real competition. If I hear one more moron saying that the way to provide competition for private insurers is with a government option, I’m going to plotz. Just make them compete with each other.
Megan makes some good points. I have an HSA so I do see all of my first dollar costs, and it is an adjustment.
But what she doesn’t address is what is are the two biggest problems:
1) Transition costs. If you don’t have a high income, that first period of time before you accumulate cash in your HSA can be very problematic, especially for families. Changing the tax codes on insurance deductibility doesn’t bridge that gap.
2) Chronic conditions. Again for the lower income segments, telling them to spend 20% of their income for health care translates to deciding whether to eat or see the doctor. So they don’t see the doc until it’s catastrophic. Guess what – we the taxpayers pay more (more expensive treatment) and they can’t work, reducing the tax base.
Although I agree in general with the policy prescriptions you set out, I have to say that Megan has a lot of unacknowledged observer bias in her analysis. Specifically, she is single and without kids. The patterns of medical care usage are quite different for families with kids than for single professionals, and a large block of opinion is motivated by the needs of the former, rather than the latter. Although the system still needs fixing, MSA-type solutions as most people envision them don’t work well for families with kids, especially small kids. What does work well as a private option for such users is providers like Kaiser Medical, which I used for a while in California and in generally liked pretty well, although it has its own frustrations. It’s kind of like paying a monthly fee to use the British National Health Service, but with consistently better quality service and not much queueing. I’d like to see more Kaiser-like systems available in the US — it’s not an option everywhere.
Also, she keeps talking about “first-dollar coverage”. Who the hell has first-dollar coverage, except for Obama and members of Congress? Every plan I’ve seen has substantial deductibles.
1) Mandate that the evil insurance companies rebate 5% of each individual’s yearly payments into the individual’s HSA. This account is yours, inheritable, giftable, tax-free for medical purposes.
2) Mandate that every ‘level of service’ cover the entire range of plausible deductibles (at different prices, naturally.)
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If you posit a $10k/year policy with a zero deductible, that’s $500 after one year. The second year, you should be able to switch to a $100 deductible. Who knows what that would actually cost yearly – but it should be reasonably less than $10k. Say: $9k. Second year – your account goes to $950….
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This (like most everything) has a difficulties dealing with people who are already in their prime medical-spending-years. And this doesn’t preclude a Medicaid-like safety net for people that are flat-broke and unlucky.
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But think how it would work for the vast majority of people from birth. Actual medical expenditures from birth to around 40 are generally pretty minimal. This is exactly what’s indicated by the low buy-in from the twenty-somethings – “Hey, WTH do I even want that?”
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By making accounts widespread, you have a framework into which programs can contribute that is more “food-stamp-like” than “bureaucratic Nirvanna.”
The notion of “first dollar coverage” refers to people going for a doctor visit and expecting all or even most of the cost to be covered by insurance. I’ve heard a lot of complaints about having to make even a modest ($10-20) copayment. When the military instituted small copayments many years ago, the number of office visits dropped substancially. When everything was “free”, the demand was much higher.
If you visit a typical doctor’s office, you’ll find one or more employees whose full time job is fighting with the insurance companies and/or the government for payment. That adds substancially to the doctor’s overhead and of course, that gets passed on.
If we treated auto insurance like health insurance, we’d be wanting coverage of fill-ups, oil changes, new tires, etc. Imagine how expensive the insurance would be with that kind of coverage. It’s crazy to expect health insurance to cover all but the most discretionary expenses (e.g. plastic surgury or LASIC) and for the coverage to have such low deductables.
There are some great ideas here, and that’s the key. There is no single “best” solution. The market should be allowed to innovate its way towards a “best”solution, as opposed to having a solution forced on us by government.
For example, to take the auto repair analogy a step further. You see more and more dealerships offering “free” oil changes for a period of time after purchase. They know that you are more likely to do preventative maintenance if it doesn’t come out of pocket, resulting in a more reliable vehicle and a happier customer. Similarly, my health insurance (I have one of those evil cadilac plans) covers my yearly “preventative maintenance” and I pay a deductible on other visits. I’m sure that by encouraging yearly checkups and other healthy choices (a colonoscopy is covered 100% after age fifty, for example) they lower their overall cost risk.
As an aside, I am also eligible for Tricare through my military retirement. I choose to pay for insurance because I got completely fed up with dealing with that particular form of government sponsored health care. Hopefully, I will retain that choice.
What is cheaper? LASIK or buying prescription glasses/lenses for several years?
You say people wanted to see the doctor more often when coverage was cheaper. What you did not say was what was the outcome from them not going to that doctor’s visit. Perhaps they could have prevented some disease on time, which was much more expensive to treat later, but they did not.
Godzilla, I am not sure what you are trying to say. Lazik is something that typically has not been covered by insurance, and as a result over the past two decades the cost has dropped dramatically while the process has seen amazing improvements. Had insurance covered this process I am certain that the lack of free market competition would never have driven the prices down nor driven the technological advances.
Back in the 1980s before the military introduced a small copay for medical service, it was very common for mothers to bring in their kids for every set of sniffles. After the copay went into effect, they were a bit more selective with their visits.
Back when Teddy Kennedy was pushing HMOs on the country, the idea that preventive care would catch a lot of diseases early and result in cheaper/better outcomes was a central theme. I don’t have any links available but I’ve seen several studies in recent years that show the promise didn’t materialize, or at least not enough to justify the costs.
My wife got tired of wearing glasses, and since insurance wouldn’t cover LASIK she found a way to pay for it.
That’s what free people do.
But it is really not “insurance” is it? More like belonging to a club. You pay your monthly dues for having the club there, with facilities for when you need them. The nicer the club you want to belong to, the nicer the facilities you expect, and the higher the dues. If you can afford it, you belong to a really nice “cadillac” club. If not, you get the “Y”. Now the government is stepping in and telling you, not only do you have to belong to a club, but that if you belong to the really nice cadillac clubs they want to take part of your dues and give to those that can’t afford the nice club. For some, this will mean dropping the cadillac club membership and moving toward the “Y”. Some cadillac clubs will no longer be able to afford the good equipment and will have to lower their amenities. Pretty soon we all belong to the “Y”, with “Y” level facilities.
Oh, and those dues you were paying came right out of your paycheck so you never really saw them unless you were paying attention.
I’m generally in favor of catastrophic coverage with routine stuff being paid for out-of-pocket; it will reduce paperwork burdens at the primary care providers and result in lower costs, with some price competition. However, health care is quite a bit different than a traditional market in a fundamental way: rational decision making is very difficult to do when it’s YOUR spouse or child that is really sick. You aren’t shopping around for the best cost/benefit; you want the BEST CARE YOU CAN FIND, goddamit, and you’ll figure out how to pay for it (or not) later. This is the kind of thing that behavioral economics is trying to figure out, and I have strong doubts that purely free-market solutions to health care will work all that well until we figure out how to account for the non-rational actions of many health-care consumers in many situations. Still way better than gov’t bureaucrats running the show, but not any kind of panacea.
You americans are so hilarious. You shouldn’t *need* to think about the cost of going to see a doctor. When you’re sick, the only thing you should need to think about is getting well. And at least once a year, more for elderly people, you should go see a doctor and not have to think “why did I just pay someone to tell me I was fine?”
The other thing I hear about is that apparently your doctors get kickbacks from pharmaceutical companies for prescribing their particular drug? How can you possibly allow such an obviously unethical system?
And, ya know what, there was once a time when a doctor would get shamed for refusing to provide care.. now it’s considered the norm for anyone who can’t pay. That’s sickening behavior from people who are supposed to do no harm.
Yes, Trent, you may also be delighted to know that our doctors also eat babies and torture puppies. It’s all true because I read it on the internet. It’s hilariously sickening, no?
Hey Trent, you sound like you would be a successful politician if you were here in the US…they too decry the need to think about the costs of services while demogoging those evil rich folks in the medical industry. Let’s take money from these folks over here and give it to these deserving folks over there…this is being done with the best of intentions, so shame on anyone for considering long term sustainability!
Please please please provide some kind of evidence that a person in the US was denied necessary medical care because of an inability to pay. I can provide ample links to rebut your position to the point of absurdity…heart transplants for convicted felons paid by the state, illegal aliens getting transplants as well as priority placement on organ transplant lists ahead of citizens, and the list goes on. Your complaint that grandma might not pursue an annual wellness checkup because she fears she can’t afford it doesn’t stand up to casual scrutiny.
Regarding pharmaceutical kickbacks, I suppose if they are truly under-the-table-cigar-boxes-full-of-cash transactions they will be difficult to prove, but considering the staggering number of participants…pharma sales people, pharma accountants, hospital and clinic physicians, we’re talking hundreds of thousands of people here, the ability to keep such a conspiracy under wraps beggars belief. A far more likely scenario is that pharma sales provide physicians with drug samples, which in turn are given to patients instead of having the patient pay to have the first set of prescriptions filled at a pharmacy. Not quite so nefarious a scenario in my humble opinion.
Stop regurgitating the tripe you hear from the press and do some basic research. The press knows that bad news and fear mongering sells papers and generates viewers. You definitely took their bait…hook, line, and sinker
Speaking of starting over: one doctor’s recommendation for doing just that.
How exactly would I do this “basic research” folks? I’m not in your country. But let me tell you that in my country people avoid doctors who don’t “bulk bill” just so they don’t have to take a form into a government office, stand in line, and get back the money they had to pay out of pocket. That’s how terrible our medicare system is, some doctors make you pay up front! Shocking I know.
We also have some weird practices involving private medical insurance. If you have it, you can avoid paying a medicare tax. However, if you don’t get private medical insurance before you turn 31, you have to pay that tax forever. So, in effect, private medical insurance will eventually take over the public medicare system, and the burden of supporting it will fall on those who utilized it.
Trent, you’re asking me how to do basic research? it’s called the internet. In fact, you are using it now. There are some really awesome tools to help you search for information…one of the best ones is found at http://www.google.com, and there is a newer one from Microsoft found at http://www.bing.com. Even some of the “fun” services like Yahoo and AOL have basic search functionality.
And generally, you invite insults when you begin a post with something like “you Americans” or “you Jews” or “you Blacks”. I don’t know what label fits you best…are you a racist, are you an elitist, etc. So I will just keep it simple and say you are ignorant. That is MUCH kinder than calling you an idiot, since I assume that your ridiculous comments originate from being uninformed instead of being unteachable.
You sound like a younger person than me, with lots of passion about injustice in the world. That’s a good thing, but it is wasted if you are all sound and fury, signifying nothing (you might want to look up that one on Google).
As I got older and started earning my way through life I discovered that government is forcibly taking my hard earned money and giving it to others who are not so deserving. And yes, my money is forcibly taken…just try not paying your federal taxes and see what happens. All government programs are started with the best of intentions, and there are some very noble and necessary functions the government carries out, such as our justice system and our military. But when a person can choose not to work and receive government-paid housing, food, transportation, and entertainment, it is wrong. Because “government-paid” means “Jiminator-paid’ and “Trent-paid” as you will soon discover. It doesn’t matter if you are not an American, I can guarantee that your country’s tax laws are also rigorously and somewhat mercilessly enforced.
Government involved itself in health care with the best of intentions. But two generations later, after years of legislative tweaking and adding one well intentioned program after another, we find ourselves at the brink of an economic disaster, and because we have two generations of Americans now claiming that healthcare is their right and an elected body that has neither the common sense nor the spine to make the tough decisions necessary to fix the real problem, we are faced with sapping more hard earned tax dollars from the only class of people (the rich folks) who have the cash necessary to start new businesses and thereby employ more people!
We would have been better off had government never involved itself in healthcare beyond clean drinking water (at the local level), national epidemic management (polio, influenza), drug approval and physician licensing. If that had been the case I am certain that medical costs would not have seen the inflationary spiral, people would be using insurance for catastrophic care only, and doctors would be making the house calls you rightly expect in your original post.
The current program has taught people to depend on the government for healthcare and to not save their money.
Wow, I sure want my country to emulate whatever busted-up public system Trent lives under. Yep. Too bad we dodged that bullet. It’s a shame, really.