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Why is competition between health insurance companies useful?
Kevin Drum (and Matt Yglesias) asks an excellent and important question:
Tyler is arguing for keeping the insurance industry competitive. But I simply don't see what that buys us. Even if the health insurance industry were dramatically improved, this wouldn't especially make healthcare any more efficient. It would only make the insurance industry more efficient. That would be nice, but hardly earthshaking...
Let me be clear: the incentives today are screwy. Let me also tell you my ideal world. Insurance companies are judged by honest third party intermediaries. Insurance companies compete like heck to make customers satisfied. Insurance companies monitor doctors, read Robin Hanson, and require evidence-based medicine. Insurance companies which fail at these pursuits either go bankrupt or they must abide by an ex ante contract to permit the exile of their CEOs to Greenland. Every year prices would fall in real terms, quality would improve, and coverage would be expanded. Imagine the whole health care sector working like laser eye surgery or cosmetic surgery.
This is not the world we live in, but it is the world we should aim for and I am more than willing to consider how government might get us there. (Mandating greater price transparency is but one step.) But if we institute a single-payer system, or highly regulated mandates, we will never have much chance of arriving in that world. Ever. We will have a fairly static sector with high coverage levels but rising costs long term and less innovation.
I believe we know why insurance companies don't work this way, namely monitoring problems; they screw you over instead of serving you and they can get away with it. Go ahead, call me a pollyanna, but modern information technology and measurement can indeed resolve many monitoring problems. We can now monitor central bank performance quite well or show up in Sicily with a credit card and rent a car. Neither was the case forty years ago.
Here is one summary of how health insurance companies are improving information technology for claims processing, medicine itself, and promoting evidence-based medicine. I don't mean this industry-supplied link to be a good summary of the current truth; take it as one vision of what might be possible. To put the point another way, insurance companies are not just risk assessors or dollar transfer mechanisms; they also can be monitors and buyer agents and that is why competition is potentially so useful.
The policy point is not: "you must die today so that the reign of Milton Friedman can arrive in forty years' time." It is more like: "whatever transfers we wish to do today, let us proceed so that such a future remains someday possible."
Medical care is just starting to cure human beings, so don't think the future will look like the past. I know that preaching the virtues of insurance company competition is not a popular position in the blogosphere but like Arnold Kling, I see the single-payer advocates and mandate advocates as the conservatives, not the visionaries.
Addendum: A month or two ago, one MR reader left a long and very good comment about all the innovations provided by private health insurance companies. I can't find it, can any of you? Please let us know in the comments or email me.
Addendum: Kevin Drum responds.
Posted by Tyler Cowen on February 12, 2008 at 06:39 AM in Medicine | Permalink
Comments
Who are the "honest third party intermediaries?" (If it's not rude to ask, are you voting today?)
Posted by: Craig at Feb 12, 2008 7:59:30 AM
It seems a single-payer system, with vouchers each of us take to our HMO of choice, would give that kind of good competition, perhaps with less of the bad kind of competition (where insurance companies exercise control over the quality of their patient pool).
Posted by: odograph at Feb 12, 2008 7:59:46 AM
It's not clear that IT will help when combined with competition. It could easily make insurance much worse.
Consider that an important and highly profitable task IT has done is radically improve companies' ability to identify customers and accurately price their products. E.g. Airline's yield management systems save a seat for the last minute business traveler and charge her $2000 instead of $200. Credit card companies, retailers, manufacturers, hotels, banks, etc have all benefitted from such IT systems.
How would this apply to health insurance? Better information and technology could enable them to more accurately price their services, but the price differential could be 100x or more. That's how much more a person with certain cancer risks, or even diabetes, might cost to treat than a similar, but healthier person.
As systems get better, the accuracy of pricing and customer selection improves. A perfect system would charge each customer exactly that customer's expected medical costs (plus a profit).
Ironically, that would defeat the whole purpose of insurance!
Competition would only make things worse, as companies raced to identify good and bad risks before their competitors -- a race to avoid the "lemons".
Perhaps the enormous success of the VA in using IT is a better model to consider.
Posted by: A student of economics at Feb 12, 2008 8:01:28 AM
That raises the question of what the purpose of health insurance is. Is it supposed to be a wealth transfer from those who have low expected costs to those who have high expected costs, a sort of health care handicapper general? Many people seem to think that it is, since health care is a right and never mind that you can spend unlimited amounts with diminishing returns for various levels of this right. If that is so, shouldn't we write checks to those with high expected costs rather than force companies to charge fixed amounts? Right now the primary competition amoung companies is likely to end up being finding ways to attract the profitable (healthy) customer without attracting the unprofitable (sick) customer through whatever means are legal, since you can't price discriminate. Your skill at doing that will dwarf any efficiency competition that's going on in the background since the stakes are so much bigger.
Posted by: Zvi Mowshowitz at Feb 12, 2008 8:31:17 AM
Student,
IT helps all businesses figure out who their profitable customers are and who their unprofitable ones are. Some insurers will use it to dump unprofitable risks while others will use it to pick up profitable ones that may have previously appeared hopeless. In a competitive environment, there would of course be insurers who specialized in low-cost solutions to otherwise terribly expensive health conditions. In most industries, this sort of competition is considered "good", and I'm confused why it wouldn't be good in medicine as well.
How would perfect forecasting of insured outcomes defeat the purpose? The purpose of insurance is to hedge against future health care costs, not to pass a lemon off as a profitable investment (although I do realize that is its purpose to many of the insured).
It seems to me that better forecasting by insurance agencies would place larger incentives on people to remain healthy; incentives which they don't have as much under employer-provided care. If charities and such fail, people could certainly suffer due to lack of health care. However, that is a problem of scarcity, not the model of the health care system, isn't it? Health care must be rationed somehow, would you prefer the government do it? Given the calculation problem, is that a good idea?
I think the answer to the insurer's incentives to screw their customers over can be answered by third parties. Consider an online market where the uninsured post (or have their doctor's post) their medical information. Insurers could bet on various ailments occurring, and patients (or doctors) could choose whether or not to accept those bets (i.e., its a prediction market). The market would have the incentives to attract both insurers and patients, so it would try to be as fair as possible to both. It could be possible for third-party arbiters (employees of the market) to decide whether or not a claim was paid out. The huge capital backing required to insure could be mitigated by allowing insurers to aggregate investments, which would attract many insurers to the system. Insurers could also highly specialize in predicting the outcome of only certain conditions, while ignoring others. The cost to develop a system like this would be minuscule compared to the amount spent on health care in this country. It of course does not touch on treatment, only insuring.
I've been told the market for insurance is too highly regulated to allow for competition and innovation like this, though. Whatever ends up happening, it seems absurd to me for economists to critique competition in health care or health insurance, when they don't have a damn clue what solutions a future market could bring (no one does). There are plenty of markets out there which have adjusted to larger asymmetric information and agent problems just fine.
Posted by: Grant at Feb 12, 2008 8:47:50 AM
I'm not sure about increased efficiency, but I do know the only time health care costs went down in the past 20 years was during the HMO boom of the '90s. That was ended by a combinaion of consumer complaints (despite a 90 percent procedure approval rate) and a flight to oligopoly by the providers. This is a case where anti-trust regulation could have been helpful, but the government failed to step in. What strikes me as interesting is most single-payer systems seem to bring the same complaints you heard about HMOs in the '90s (read today's posting on Newmark's Door). I guess the question becomes, "What does efficient really mean?" If it means doing the cold equations and allocating health care according to the most likely best results, people won't like the process. If it means providing the best services in the shortest time, people won't like the cost. If it means providing preventive services that stop small problems for becoming big problems (e.g., vaccinations, diabetes management), then we'll need to re-examine how we deliver medical services rather than how we pay for medical services.
By the way, watching "The Diving Bell and the Butterfly" made me think the French medical system was no more "efficient" than the U.S. system. How many resources were spent on the intensive care of a man who would never recover? In a truly efficient system, Jean-Dominique Bauby would have been given a lethal injection. So, once again I ask, What is an efficient health care system and do we really want it?
By the way, I apologize for the long post.
Posted by: Ted Craig at Feb 12, 2008 8:54:22 AM
"Ironically, that would defeat the whole purpose of insurance!"
Whoa, what? Isn't the purpose of insurance to hedge against unpredictable and unbearable risks? How is that incompatible with accurate pricing? Surely a person with a greater probability of a negative outcome (cancer) should pay more to hedge against that risk?
I don't get why people conflate insurance and free health care. They are not in any way similar, are they? If you want people to get free health care, just give it to them, right, why do you need insurance? It seems like so much is lost by lumping together free (or subsidized) health care and insurance in every debate. If you think we should redistribute money from the healthy to the sick, say that. If you think the best, most efficient insurance is run by the government, that's a different issue.
What's also strange to me is low deductibles. THAT defeats the purpose of insurance. Why insure against routine and easily borne expenses, isn't that terribly inefficient? Is it just a web of confusion where consumers think they're getting health care for free when in reality their employer is paying for it instead of paying them an amount of money worth more to them than the insurance?
Posted by: Cliff at Feb 12, 2008 9:06:44 AM
Ted, how about efficiency is a system consumers are happy with?
Health insurance appears to have rather poor customer satisfaction rates (considerably lower than life insurance, for example), although they went up a bit in 2006:
http://www.theacsi.org/index.php?option=com_content&task=view&id=147&Itemid=155&i=Health+Insurance
Ironically, the USPS has higher ratings. The worst industry seems to be cable television providers.
Posted by: Grant at Feb 12, 2008 9:11:40 AM
It seems like so much is lost by lumping together free (or subsidized) health care and insurance in every debate.
This might be true from the perspective of insurance, which is possible without transfers from rich to poor, and without transfers from the healthy to the sick to the extend that these groups can be identified ahead of time.
But the opposite is not true: any transfer from the healthy to the sick will also act as an insurance system, and so does subsidized healthcare as tranfer from rich to poor. Any proposal with some of these aspects will have to discuss the more general health insurance system.
Posted by: greatzamfir at Feb 12, 2008 9:30:53 AM
1. Isn’t Kaiser Permanente already doing some of the stuff that you are calling for?
2. No matter what the insurance companies do with IT wouldn’t they still need more help from the insured than they currently get with low deductible and low co-pay policies?
How about much higher Co-pays or a system like term health insurance with an accompanying annuity?
BTW it almost seems that a person should buy a term health insurance policy with an annuity for their child while the child is still in the womb. This would be to avoid the problem of an expensive congenital condition.
Posted by: Floccina at Feb 12, 2008 9:48:36 AM
You write, "Every year prices would fall in real terms, quality would improve, and coverage would be expanded. Imagine the whole health care sector working like laser eye surgery or cosmetic surgery."
The nice thing about laser eye surgery is that it is not a life-or-death thing. People can do without it, which means that the demand can more or less match the supply, as regulated by the pricing policies of laser eye surgery providers and the purchasing decisions of potential clients.
But this is not true of health care in general. For the most part, people cannot do without it (or, in some cases, doing without it means the likelihood of much larger health care needs in the future). So there isn't an abatement of demand as a result of pricing policies. This means that, all things being equal, if the supply of health care is even slightly less than the demand, nothing prevents a price increase into infinity, except the premature deaths of those unable to pay. Which is the current situation in the private health care system.
Most advocates of private health care take an attitude something akin to "it's OK if the poor people die off prematurely." Usually it is couched in more diplomatic language, but the sentiment is nonetheless there. And, indeed, it is unavoidable. You cannot have free market health care otherwise. Any attempt to mitigate this effect is a step toward public healthcare, and the question at that point resolves to one of how best to deliver health care services to the entire population, rather than one debating whether or not health care should be subject to the free market.
The proposition in the post above is essentially that improvements in health care technology will make health care accessible and affordable for everyone. Only in this way would it be possible for market forces to be able to balance the production of and demand for health care services. The suggestion that we should plan for such a time is well taken. But the suggestion that our system should be currently structured as though such a time were already here is not.
You write, "But if we institute a single-payer system, or highly regulated mandates, we will never have much chance of arriving in that world. Ever." This is simply false.
Historically, when government has mediated distribution because of market failures, such as shortages in supply that lead to infinite demand, such mediation has persisted only so long as the shortages have prevailed. Food rationing during the war years evaporated once supplies expanded after the conflict. Public housing in many areas has gradually given way to rental and owned accommodations. In Canada, telephone companies and energy companies, both owned by the government, have been privatized. The mechanisms exist, and so long as there are people working for pofit, there will be at least some movement toward privatization.
An thus with health care as well. In Canada, the movement is strong and well-funded (from U.S. sources). Even so, Canadians en masse vote against such measures because the supply of health care services is not yet sufficient. We would not be able to depend on being able to access and to afford health care in a private system, so we preserve our public system. We have the example of the United States, the richest nation in the world, with a private system that leaves 50 million people uninsured, and which sees people financially ruined by illnesses that would be nothing more than an inconvenience in Canada.
I, too, hop for the day that health care will be as common and as accessible as grocery shopping, where I can choose which store I go to, where I can expect government regulations to monitor the quality and safety of the offering, and the marketplace to moderate the price. But while oranges go for a couple of dollars a dozen, quality health care is rather more expensive, and rather less accessible.
That said, people who are proponents of private health care can take concrete and useful initiatives today, to hasten the day when costs approach clients' ability to pay. Instead of trying to force a marketplace solution into a market that cannot sustain it, advocates should be lobbying for and working toward policies that will significantly lower the cost, ensure th quality, and increase the affordability, of health care.
- a major form of government intervention in the health care marketplace, patent protections on drugs, has been one of the most significant drivers of increased costs in recent years. Drug company lobbies have successfully convinced governments to extend periods of patent protection, with a corresponding rise in the price of the drugs protected.
This system actually slows innovation, as improved drugs will not be rolled out until the protection period for other drugs expires. This is especially the case for high-end and specialist drugs, where there is very little competition.
Patent protection also slows the research effort as laboratories try to keep their processes secret in order to maintain an effective monopoly on research. Ironically so, since most of the research is funded directly by government, or indirectly through the participation of university labs and professors.
- mandate open access of all government-funded research. This would ensure that any research that is funded by the taxpayer is available to all agencies, thus maximizing the propagation of that research. Thus, the same work could benefit a large number of companies, rather than the one or two it does now.
This stipulation should apply to raw data as well (and perhaps more importantly). The sorts of discoveries Kepler made from Tycho Brahe's observations would be impossible in today's environment, because Kepler would not have had access to Brahe's observations.
- voluntary patient-owned electronic health care record - creating an effective system of one-patient one-record would enormously streaming health care and reporting processes. However, clients quite naturally trust neither governments nor corporations to preserve the confidentiality of such records (in large part because such records would later be used to deny health care insurance).
Thus the mechanisms prescribed in the 'Innovations in Health Information Technology' booklet are, for the most part, a step forward in a positive direction, and merit consideration by public and private health care providers alike. That said, if our experience in other technological domains is any guide, care must be taken to ensure operators are willing to adhere to common and compatible standards for electronic services; a health care record that "doesn't run on Linux", for example, is unacceptable.
I'm sure there are other measures that could be considered, and of course I have an open mind aout them. My own stance regarding health care is not motivated by partisan politics, but rather, the conviction that it is wrong to allow people to die prematurely merely because they are poor.
When I see a willingness on the part of those people supporting private health care to genuinely improve access, increase quality, and lower costs, I am supportive and willing to work alongside them. But when the point of their advocacy is merely to create an environment in which they and their friends can take advantage of a market failure to enrich themselves at the expense of people' health, they lose my support, and frankly, my respect.
Posted by: Stephen Downes at Feb 12, 2008 10:12:26 AM
Well, we could also argue that the benefits are pretty meaningless, given that our healthcare system is expensive, has poorer outcomes than those in other countries, and spends a lot of money on advertising and rent-seeking instead of actual progress.
I feel like private market advocates consistently discount rent-seeking behaviours in their analysis of markets and in forming their normative policies. This vision of healthcare, with aggressive competition, requires numerous competitors, transparent and truthful information and other market ideals that never happen in the real world. It is easier for drug companies to spend money on worthless patents and advertising than R&D on new drugs, especially as the cost for such R&D escalates. The evidence based medicine you cite as being desirable only works if the studies are honest, which they often aren't, being co-opted by the pharma companies and by the pressure on physicians to only publish positive results. In addition, cheap therapies that are not profitable are often ignored or not studied because of the lack of profit-motivation (e.g. cheap steroids for shock lung).
It also ignores the fact that people are not rational consumers of health in any way. They ignore preventative care in favor of fixing problems at higher cost later.
In a single payer system, you do gain some advantages, such as the reduction of overhead and those behaviours listed above. You lose some of the aspects of innovation, but if those innovations aren't real or aren't actually improving morbidity and mortality in the real world, then perhaps they are actually worthless (e.g. statins improve the LDL numbers but do not actually treat the patient)? Or, if basic, cheap healthcare is being ignored in favor of hot technologies because of profit-motives, then how do we realign incentives in both the insurance and pharma industries?
Posted by: akatsuki at Feb 12, 2008 10:26:59 AM
Stephen,
That said, if our experience in other technological domains is any guide, care must be taken to ensure operators are willing to adhere to common and compatible standards for electronic services; a health care record that "doesn't run on Linux", for example, is unacceptable.
In almost all sectors of IT, standards emerge which take care of most compatibility problems. These standards (especially the successful ones, such as TCP/IP) are rarely owned by any one entity. There are often competing standards, which causes compatibility problems but is often the only way to rationally decide between different standards. I believe any regulation or intervention into this process would be a disaster. Heavy regulation of medical IT would keep open standards from being nearly as viable, due to the legal and IT costs of development. The result is that more standards would likely be closed, in my opinion. Most of the standards in communication which the world run on were not forced on anyone, but were simply the product of people agreeing to use them.
In every free market I can think of, products improve in cost and/or quality every year, and the poor increasingly get access to products only the rich could afford. In the meantime it is true that the poor would get worse service, but health care is a scarce resource and must be rationed somehow. Is it worthwhile to have an equal number of rich and poor people die, instead of more poor people dying? If so, why? What if those poor consciously traded wealth for something they valued more? Would the outcome of better health care for the poor be worth such massive externalities (and the future legislation they might lead to)?
akatsuki, why do you think for-profit enterprises are any better at rent-seeking than other groups? In America, unions are easily just as good at rent-seeking than businesses, especially unions of public employees. Socialism is just as for-profit as capitalism, its just that the type and distribution of the profit is different.
Is there evidence health care consumers are irrational, given the incentives of the low-deductible insurance industry?
Posted by: Grant at Feb 12, 2008 11:03:43 AM
Stephen Downes wrote:
The nice thing about laser eye surgery is that it is not a life-or-death thing. People can do without it, which means that the demand can more or less match the supply, as regulated by the pricing policies of laser eye surgery providers and the purchasing decisions of potential clients.
But this is not true of health care in general.
The same is true for food, water and, in Canada in the winter, shelter. Now you might say that those other things that you would die without are cheap, but so are the most affective medical things like vaccinations and antibiotics and Tyler’s point is that the other things could be much cheaper also if more completion existed.
Also another small quibble with what you wrote drugs do not normally rise in price. In fact they fall in price when the patents run out and generics come to market. We spend more on drugs because we buy the new drugs that come out, often will reason to do so. We do not pay more for the old drugs.
Posted by: Floccina at Feb 12, 2008 11:09:59 AM
"a major form of government intervention in the health care marketplace, patent protections on drugs, has been one of the most significant drivers of increased costs in recent years.Drug company lobbies have successfully convinced governments to extend periods of patent protection, with a corresponding rise in the price of the drugs protected."
Could you please name the 5 or 10 most important drugs that you believe this happened with? The only important ones I can think of had their patents 'extended' by coming out with a new product that was similar to the old product. The old one went off patent and became significantly cheaper so if the new one isn't better, everyone can just choose to buy the old one (and insurance companies do in fact encourage that).
But it is possible that I've missed the 5 or 10 important drugs that had their patents significantly extended and were "one of the most significant drivers of increased costs in recent years".
Posted by: Sebastian Holsclaw at Feb 12, 2008 11:16:43 AM
BTW: My own stance regarding health care is not motivated by partisan politics, but rather, the conviction that it is wrong to allow people to die prematurely merely because they are poor.
We do this all the time. E.g. should we take all old cars from poor people and replace them all with newer safer models?
Posted by: Floccina at Feb 12, 2008 11:22:25 AM
"Historically, when government has mediated distribution because of market failures, such as shortages in supply that lead to infinite demand, such mediation has persisted only so long as the shortages have prevailed. Food rationing during the war years evaporated once supplies expanded after the conflict."
I think this is tempting but misleading. We really only need so much basic food, so we expect that with economic growth it will consume an ever smaller portion of our income. That's why countries could outgrow rationing.
But I don't see any such limits on heathcare. While technology will make last year's techniques cheaper, it will also keep finding better and more expensive techniques. And we will want these, and be prepared to devote an ever greater proportion of our income to getting them.
Posted by: improbable at Feb 12, 2008 11:22:34 AM
Let me also tell you my ideal world.Why is one ideal more likely to become reality than the other? In a market where the customers cannot judge the suppliers without honest third-party auditors, why is it crucial that they be spending their own money?Insurance companiesPrimary care trusts are judged by honestthird party intermediariesgovernment regulators.Insurance companiesPrimary care trusts compete like heck to make customers satisfied.Insurance companiesPrimary care trusts monitor doctors, read Robin Hanson, and require evidence-based medicine.Insurance companiesPrimary care trusts which fail at these pursuits eithergo bankruptare shut down or they must abide by an ex ante contract to permit the exile of their CEOs to Greenland. Every year prices would fall in real terms, quality would improve, and coverage would be expanded.
Of course, if instead they spent taxpayer money they would be always clamouring for more insurance. A simple case can be made on the quantity side that they would end up with too much, leading to aggregate over-spending on health care because of excessive quantity consumed by each individual. But on the price side, the intrinsic difference is not so obvious.
Posted by: Aneurin B. at Feb 12, 2008 11:44:31 AM
Anerin, you say: "In a market where the customers cannot judge the suppliers without honest third-party auditors, why is it crucial that they be spending their own money?"
I won't say most markets are similar to the above, but a great many are. eBay is a good example, where trust metrics and reputation (the Internet's version of "word of mouth") are required to keep the place running. Without them, you've just got a bunch of usernames posting pictures of things they claim to have for sale. Fortunately, eBay is an honest third party auditor; they'd go out of business if they weren't. No one whines very much about market failure on the Internet because (being a true free market) there is very little of it. When failure occurs, an opportunity is created. Entrepreneurs discover ways to correct this failure, and quality of service improves significantly every year.
If the principle-agent problem actually led to market failure which couldn't be corrected by the market, we'd have problems in many industries other than health care. Fortunately, a simple solution often emerges: consumers hire third-party auditors who are known to produce favorable results.
Posted by: Grant at Feb 12, 2008 12:03:07 PM
"Imagine the whole health care sector working like laser eye surgery or cosmetic surgery."
Laser eye surgery is not covered by insurance. It is a case where the insurance model and all of its atendant problems have been entirely removed from the system. And the market for it seems to function well.
Posted by: Justin at Feb 12, 2008 12:31:41 PM
"a major form of government intervention in the health care marketplace, patent protections on drugs, has been one of the most significant drivers of increased costs in recent years. Drug company lobbies have successfully convinced governments to extend periods of patent protection, with a corresponding rise in the price of the drugs protected...
Patent protection also slows the research effort as laboratories try to keep their processes secret in order to maintain an effective monopoly on research. Ironically so, since most of the research is funded directly by government, or indirectly through the participation of university labs and professors."
Why has this been a driver of increased costs in recent years when there has always been patent protection? How have lobbyists convinced governments to extend patent protection? As far as I know this has not occurred in the U.S.
You suggest patents slow innovation by encouraging secrecy. Yet without patents, the research would not take place at all. So while secrecy may decrease innovation, on net patents vastly increase research in pharmaceuticals, one area where patents are pretty much an unmitigated success.
FYI I am a patent attorney.
Posted by: Cliff at Feb 12, 2008 1:20:02 PM
Cliff,
I don't think its accurate to say that without patents research would not take place. The world (or at least the internet) runs on software largely developed without much IP protection. In many software industries, it is commonplace for otherwise competing businesses to work together to develop open-source software which is beneficial to the industry as a whole (i.e., a public good).
I'm not saying the pharmaceutical industry could replicate this; I really have no idea. I think its a possibility, given serious cultural changes within the industry.
Posted by: Grant at Feb 12, 2008 1:27:40 PM
Question, does single payer health insurance out perform private free market health care if you applied American cultural norms to Western Europe? BTW, why do we constantly hear the U.S cited as a an example of private "free market" health care? The regulatory in the U.S could not be any further from that hypothetical.
Posted by: john pertz at Feb 12, 2008 1:55:56 PM
It is my understanding that Lasik is not covered by health insurance, which, in conjunction with the fact that it's not a required (by health) procedure, might explain why Lasik prices have fallen while its quality has improved. So the question is how those two factors impact health care costs. I think the answer is that both factors contribute to the lack of elasticity in demand of health care, and, therefore, the costs of health care increase.
There are many conditions that are not life-threatening, but because they (or their remedies) are covered by health insurance, people go see a doctor. The doctor, in turn, may charge what he wants because it's not the individual paying but a large corporation with seemingly infinite funds. Hence costs are higher than they should be.
If, however, health insurance only covered catastrophic events, such as surgery, casts, chemo, hospital stays, etc., either through eliminating coverage for other things or raising the deductible, the decision to go to the doctor would rest more with the individual. Most likely, doctor visits would decrease, which might lower health care prices. On the other hand, doctors should not be required to provide free emergency care (or care in general). This could be done through a variety of ways, such as payment plans or wage garnishments. In other words, there should be incentives for people to take preventive care, but not enough to make demand for those services inelastic.
This works with legal services so why couldn't it work with medical services?
Posted by: axel at Feb 12, 2008 2:02:57 PM
"Imagine the whole health care sector working like laser eye surgery or cosmetic surgery."
Right, imagine the world's most advanced medical system providing -- with astonishing efficiency -- unnecessary fluff to the richest 10 percent of patients. It's an economist's dream.
Posted by: Parke at Feb 12, 2008 2:25:40 PM
Ironically, I just came here from an article on consumerist detailing how ebay/paypal are quickly becoming a pair with which I cannot expect to safely do business.
No competitor exists, of course. Not a realistic one, anyways. People were talking about craigslist as the safe alternative.
(Click your heels together and say "The magic of the market" three times, and maybe one will appear!)
Posted by: M1EK at Feb 12, 2008 2:26:06 PM
"Ironically, that would defeat the whole purpose of insurance!"
You can't ever arrive at a solution if you can't even come to agreement on the problem. The role of insurance is to defray risk, not provide the unhealthy with a medical cost lottery.
Posted by: andrew at Feb 12, 2008 2:28:28 PM
"If you think we should redistribute money from the healthy to the sick, say that. "
They can't say that. It would never fly. So they yack about the uninsured kids, and insinuate that the uninsured are dying in the streets.
Posted by: andrew at Feb 12, 2008 2:31:11 PM
Tyler,
Going back to your earlier post about comments, do you think longer posts garner longer comments? Maybe this post just struck a nerve and people don't write as carefully when they are upset.
Posted by: Sam at Feb 12, 2008 2:32:50 PM
We have the example of the United States, the richest nation in the world, with a private system that leaves 50 million people uninsured, and which sees people financially ruined by illnesses that would be nothing more than an inconvenience in Canada.
Of course, you have people dying or suffering in Canada because there are shortages of care. Instead of a family going bankrupt buying their daughter the most advanced cancer treatment to save her life like in the U.S., in Canada the daughter dies while on a waiting list and the family remains financially secure.
The Canadian health care system hasn't solved the problem of scarcity, it has solved the problem of people going bankrupt paying for healthcare.
Having lived in both the U.S. and Canada, I can say that healthcare is much more scarce in Canada. It may be easy to get 'insurance' in Canada (it is provided by the government), but it is often a struggle to get some actual healthcare.
Now, if you want to argue that financial security is a higher priority to most people than the actual healthcare (advanced medical treatment is far less important to lifespan/quality-of-life than lifestyle choice, genetics, crime... and so the money may be best spent elsewhere), and therefore the Canadian system is better - Well, that is a perfectly reasonable arguement. But don't pretend that Canadians have greater access to medical care, which they don't. Canadians have access to less healthcare.
The government's promise to pay for health care != the government giving everyone healthcare. Price is a rationing system - And socialized medicine replaces the market with a government beurocracy as the form of rationing, but it doesn't actually produce more healthcare. In many cases it reduces the supply of healthcare (for example, when the government decides to pay doctors less than garbage men, bus drivers, and plumbers, so that it can 'hire more doctors', like it does here in Ontario, it discourages the practice of medicine and in the long run you end up with fewer practicing doctors).
Posted by: Rex Rhino at Feb 12, 2008 3:11:31 PM
M1EK,
PayPal only has 24% of the online payments market. Its big, but there are plenty of alternatives. As someone who works with online payments, I can say PayPal is a very good choice for many businesses. Their rates are competitive with the rest of the market, and they offer many services and currencies others do not.
Craigslist isn't an online market, its just ad listings. eBay does have plenty of competitors which anyone can find by using Google. In fact, eBay isn't even close to the first listing under "online auction".
If people can't be bothered to use Google (or one of its many competitors) to find alternatives to a business they may dislike, then no, I don't think markets will work. But neither will anything else.
Posted by: Grant at Feb 12, 2008 3:13:42 PM
Re-reading my earlier comment on this, I see that part of it was poorly phrased, which seems to have created some confusion. It should read:
"A perfect system would charge each customer exactly that customer's future medical costs (plus a profit)."
Improving information systems to this point would, in fact, defeat the whole purpose of health insurance.
The counter-intuitive, yet nonetheless true, result is that better information can have negative value in the context of insurance (and other situations as well, for that matter).
This is not about confounding redistribution with insurance. It's simply a statement about pure insurance, i.e. risk sharing, which becomes impossible in this case.
Posted by: A student of economics at Feb 12, 2008 3:24:10 PM
"A perfect system would charge each customer exactly that customer's future medical costs (plus a profit)."
If your perfect system could predict that I would get leg cancer in 15 years, then I could take specific action right now to address that issue. Which seems good for me.
I do worry about adverse selection, but if I belong to some group that has a higher than normal chance for leg cancer, there ought to be incentives to get me to address the chances of leg cancer.
Posted by: Dan Weber at Feb 12, 2008 4:13:14 PM
Monitoring isn't merely an IT project. It takes a lot of regulation too. Few providers are even willing to provide cost information for one. It will take a lot of regulation to even create a healthcare market. Insurers are no better when it comes to providing this information. Secrecy is highly profitable. They are often more an obstacle to markets than providers.
Posted by: Lord at Feb 12, 2008 5:20:43 PM
Monitoring isn't merely an IT project. It takes a lot of regulation too. Few providers are even willing to provide cost information for one. It will take a lot of regulation to even create a healthcare market. Insurers are no better when it comes to providing this information. Secrecy is highly profitable. They are often more an obstacle to markets than providers.
Posted by: Lord at Feb 12, 2008 5:23:13 PM
In fact, with an independent monitor, government, and all public information, insurance companies largely lose their significance. How will they make money then?
Posted by: Lord at Feb 12, 2008 5:35:43 PM
Me,
So don't use eBay? There are plenty of alternatives. The fact that some may not like others using PayPal and eBay isn't an indication of anything really. eBay in fact has higher customer satisfaction ratings than its competitors:
http://www.theacsi.org/index.php?option=com_content&task=view&id=147&Itemid=155&i=Internet+Auctions
Student,
If information was that good, insurance would be unnecessary. People would know how much to save and invest in order to deal with future health problems. But thats true in many areas, where technology and innovation render some industries obsolete. Its happening all around us. So I'm not sure how your observation helps us understand the problem?
Lord,
All thats really relevant is the satisfaction of the customer. That is easily monitored, but that information isn't very helpful in the USA today because the patient isn't the customer. The insured isn't even the customer in most cases. As far as suppliers providing information so that online markets can function, I agree. There would be resistance to that as there has been resistance to that sort of thing from established suppliers in many other industries. None of that resistance has stopped change from occurring and prices from being driven down.
Posted by: Grant at Feb 12, 2008 6:07:18 PM
Grant,
Pharma and software are on two opposite ends of the patent spectrum. There is largely an agreement that patents are very helpful in spurring pharmaceutical research. On the other hand, the majority of knowledgeable people believe that patents obstruct innovation in computer software.
With pharmaceuticals, research, including human studies, is in most cases an extremely expensive process costing billions of dollars. On the other hand, manufacturing of the drug can be done relatively cheaply. Without protection of the intellectual property generated by the research, it would not be profitable to conduct the research at all. The instant your drug was on the market, you would be in fierce competition with every generic drug maker out there, who would be just as good if not better than you at the simple process of manufacturing your drug. The losses would be enormous. Pharma does not work without patents. It is the "textbook case" for the patent system.
Software, which is developed and improved by small groups all over the world all the time, each group improving on the work of myriad others, is a far different industry. Many in the industry complain that software patents are granted too easily to familiar or obvious concepts that are necessary to the work of others. Companies like Microsoft file hundreds of patent applications a day, hoping to slip through a patent on email so they can sue everyone else in the industry for infringement. Patents are often used as weapons against other innovators by large firms, rather than to protect a product that is the fruit of intensive research. In my opinion the problems with software patents could be resolved by making the patentability standards in the art more stringent or perhaps allowing public comment, but many recommend abolishing the software patent entirely.
Posted by: Cliff at Feb 12, 2008 6:12:05 PM
One thing that I think bares remembering when discussing online markets (in health care monitoring, auctions, or whatever) is how search engines can aggregate relevant results from many sites at once. eBay was a significant improvement over other methods of sales, but the time may come when it is only used due to being "locked-in" via the network effect.
Enter the search engine, which could pull from 20 auction sites. It starts to matter less how many users browse eBay directly, because even auctions on a low-traffic site will be spotted by a potential customer. eBay would still have more trusted sellers and a bit of a network effect there, but eventually trust metrics based on OpenId-style systems will replace eBay seller ratings.
The market creates something imperfect, and it then creates imperfect solutions to that imperfection, etc. etc. I guess some of this stuff is hard to predict if you're not familiar with the industry, but then I think a good number of people need to read Hayek before arguing for public policy, and realize they should probably not be trusted with a democratic vote over things they know nothing about (I know I shouldn't get to vote on health care!).
Posted by: Grant at Feb 12, 2008 6:19:25 PM
Cliff,
Could these drug manufacturers not fund research collectively? The transaction costs involved in providing a public good to themselves wouldn't seem outlandish to me. I understand this sort of thing would require a completely different mindset for them, but it doesn't seem impossible?
As far as IT patents go, I agree completely. In my opinion they should just be abolished. The industry doesn't seem to have any problem at all funding public goods, so I really don't know what good patents do. You'd be surprised at the number of IT businesses who pay full-time employees to sit around and write totally free software (and they don't do it out of altruism). Although, its worth noting that few IT professionals have much of an understanding of the entire industry (if any do), so there might be some place where patents are used for their intended purpose.
Posted by: Grant at Feb 12, 2008 6:28:11 PM
ASOE,
"The counter-intuitive, yet nonetheless true, result is that better information can have negative value in the context of insurance (and other situations as well, for that matter)."
You mean, negative value _for the insurance companies_? Because yes, in your (impossible) scenario, they would all go out of business. But obviously people would be much better off, because they would no longer need to pay the insurance companies' profits in order to protect against risk, since they would know the timing and cost of the necessary expenses and plan accordingly.
But since that will not happen for at least 100 years and most likely will never happen, it hardly seems relevant.
(I am assuming they know the timing of expenses, since that is necessary for your hypothesis that the purpose of insurance would be defeated)
Posted by: Cliff at Feb 12, 2008 6:34:31 PM
Grant,
"Could these drug manufacturers not fund research collectively?"
I don't know. :) I am having a hard time envisioning how that would work. I imagine if even one generic drug company was not in on the agreement, it would be trivial for it to steal the profits of research from the other drug companies. How would the drug companies agree how to split the costs and resulting profits? Wouldn't this require industry collusion and monopoly?
I don't want to derail this thread though. Probably a topic for another post.
Posted by: Cliff at Feb 12, 2008 6:42:13 PM
Universal health care proponents argue that the government can create a cheaper AND better service. Most of us know that this is pure crap. The three reasons why other countries are cheaper than America with health insurance is because a) there are huge shortages, b) they make huge cuts on what is treated, and c) clinics can charge whatever they want. Fix these problems while keeping the system competitive, and you'll have an amazing system.
Sorry to all the Moore's out there, but American insurance companies are not denying claims left and right, and people are not charged high just so a few CEO's can be rich.
The problem with health insurance is that it doesn't provide an incentive to not spend a lot of money. Want to spend? OK. Here are inflated prices. Oh, no, my insurance is paying for that. When is the last time anyone has ever even asked for a price when going to the doctor?
Cowen rightfully praises cosmetic and eye surgeries. I'd be arrogant to assume he doesn't know why-- I'm only a high school student-- so I'll summarize on what both of us can probable agree. Cosmetic surgery has become so much better and cheaper in the past few years, and it is not a coincidence that insurance barely ever covers it. axel is 100% right. When people spend their own money, the have the incentive to receive what they desire at the cheapest price they can. Competition in prices also leads to better competition in quality.
Our current system is failing in that sense, but there's a shred of hope. In these places, you're more likely to get treatments only if you need them. People know what they're paying for, doctors have more intimate customer relations to attract business, and only what is needed is paid for.
Once insurance companies take the initiative to offer "accounts" where money builds up over time and people spend it on less serious treatments, and when people realize that this is the best solution, then we'll see some real change; some GOOD change.
Right, imagine the world's most advanced medical system providing -- with astonishing efficiency -- unnecessary fluff to the richest 10 percent of patients. It's an economist's dream.
Parke, is it any more unnecessary than a trip to Six Flags or any other leisurely ways of spending money? Your criticism is completely invalid.
Posted by: Daniel Reeves at Feb 12, 2008 7:11:25 PM
Everything Tyler outlines in his "Let me be clear: The incentives are screwy" paragraph are what Enthoven and his colleagues imagined would result from managed competition in health care. It didn't work out that way, and not because of problems of monitoring. It's because of the incentives.
In employer-based insurance, the insurers get the same payment whether they insure a healthy or sick individual. In the private market, even without community rating, the actuarial rates are probably a little low compared to the ex ante use of the higher risks. In both segments of the market, the plans want to encourage the healthy to enroll and encourage the sick to obtain their coverage from some other company. Thus, the growth of panels of physicians with 90+ percent of the physicians, because the healthy value convenience. And thus, the efforts at ex post underwriting and creating obstacles to getting appropriate care, in order to get high risks off the books. Companies may not seek it publicly, but a reputation for treating the sick badly is a good reputation for a profit-seeking health insurer to have.
As McGuire and Ma pointed out in their 1997 American Economics Review article "Optimal Health Insurance and Provider Payment," the only way to get the incentives right for insurers to compete for and therefore provide appropriate care to the sick is to set the premiums they receive for insuring a high risk individual or family higher than the actuarially fair rate, and the premiums for the low risk below their actuarially fair rate. Of course, if employers had to pay more to insure their high risk employees or high risk dependents, it might encourage employment discrimination against them.
We had this argument 20 years ago. We tried the prescription. It leads to discrimination against the sick. It's time to move on.
Posted by: Jack Needleman at Feb 12, 2008 8:17:13 PM
As far as I can see, you are saying that if health insurance companies had different incentives to do something different from what they actually do, competition might result in them doing it well.
Could be.
Posted by: matt wilbert at Feb 12, 2008 9:22:39 PM
I searched in this whole comment page for 'actuary' and got nada. I am wondering if libertarians actually know what an actuary does. I don't think they do... are all libertarians innumerate? Could be...
Because if you know what an actuary actually does, and why they're important to insurance companies, you'll understand why Tyler's original post is pure nonsense.
Posted by: Russell L. Carter at Feb 12, 2008 11:16:33 PM
It is definitely a good thing for Insurance companies to compete with one another. A solid insurance company will monitor your doctors and monitor pharmacies to make sure everyone is doing their job correctly. Unfortunately today's world is different; of course there are those few companies who actually care that much, but they cost too much. With competition between companies people can have options like picking a company that fits their income.
Maybe after this recession insurance companies along with others can compete with reasonable rates and prices. Allowing less income families to afford insurance.
Posted by: Zach Alexander at Feb 12, 2008 11:27:15 PM
"The counter-intuitive, yet nonetheless true, result is that better information can have negative value in the context of insurance (and other situations as well, for that matter).
This is not about confounding redistribution with insurance. It's simply a statement about pure insurance, i.e. risk sharing, which becomes impossible in this case."
Better information could give you a more refined expected value, but unless you think you can predict the future, then all you know is the relative risks. Once you have a disease, then your expected costs change. If you have a chronic condition, like something that requires dialysis, then people don't have a 'risk' issue, they have a financial issue.
However, for the most part, health care isn't about risk transfer but rather financing. The origins date back to WWII when wage controls made benefits a way to attract workers (may be an urban legend). Still, with current employer based health care, there is no risk transfer for larger employers. The insurer just rations care to the consumer and beats the hell out of providers.
I would be fine with high deductible insurance, except for the fact that I need someone to get the cost of that xray from the usual and customary to $15.
Currently insurers do all the dirty work in health care, and are paid to be the people we hate. And the price decreases in the early 90's were from managed care, not hmo's per se. Doctor's really took a beating when they could no longer charge 'reasonable and customary' fees.
I don't have any answers, but it is clear that getting the word insurance out of what's going on, except for catastrophic illnesses, would be useful. Risk transfer is the least of it.
Posted by: Ziggurat at Feb 12, 2008 11:28:24 PM
"As McGuire and Ma pointed out in their 1997 American Economics Review article "Optimal Health Insurance and Provider Payment," the only way to get the incentives right for insurers to compete for and therefore provide appropriate care to the sick is to set the premiums they receive for insuring a high risk individual or family higher than the actuarially fair rate, and the premiums for the low risk below their actuarially fair rate. Of course, if employers had to pay more to insure their high risk employees or high risk dependents, it might encourage employment discrimination against them."
What is an actuarially fair rate? Do you mean a single rate for everyone? If you took out the catastrophic illnesses, then you could have a reasonably small number of rating variables and charge based on the expected value based on age, sex, etc. Probably have to skip income, race, maybe gender, and any other socially unacceptable variable.
Personally I favor a two tier system. A basic plan that is universal and the ability for individuals to purchase more if they wish through a provider. The basic plan would cover stuff that is cheap and anything associated with public health. You might as well have a government catastrophic pool also, since most really sick people will end up there anyway.
Posted by: Ziggurat at Feb 12, 2008 11:40:03 PM
"But if it's price signals and competition you're after, why not cut out the middleman and have consumers pay doctors directly? "
Kevin Drum doesn't get the extent to which insurance companies pressure providers. A sick individual has zero, no leverage to bargain if he/she is sick.
Posted by: Ziggurat at Feb 12, 2008 11:46:08 PM
Health insurance companies do three things:
1) they pay ordinary medical bills which most people could afford. This is extremely expensive "insurance" because nearly everybody ends up getting a payout.
2) They mitigate against the risk of a catastrophic (unaffordable) health collapse, say a car accident, or a chronic disease.
3) They act as a risk pool to ensure that people who lost the genetic lottery do not have to pay all their own health care.
So, if you talk about changing how health insurance works, you need to address all three of these functions if you want to make sense.
Posted by: Russell Nelson at Feb 13, 2008 2:31:36 AM
Ziggurat: you are being silly. A sick individual has as much leverage to bargain as anyone else who needs something. An unconscious person in an emergency room has zero leverage to bargain, sure. But that's not the usual case. Optimize for the usual case.
Posted by: Russell Nelson at Feb 13, 2008 2:36:48 AM
"So don't use eBay? "
Grant brought it up as an example of the supposed ability of the market to provide trust absent any regulatory interference. I pointed out that it's beginning to fall apart the more heavily it's being used. I haven't seen any evidence that more trustworthy competitors have emerged.
Craigslist was brought up to avoid the problems inherent in shipping. Yes, they do sell a lot of goods; no, they're not just for jobs. Where on earth did you get that idea?
Posted by: M1EK at Feb 13, 2008 9:22:14 AM
A sick individual has as much leverage to bargain as anyone else who needs something.
It depends on "what kind of sick."
If I have a chronic condition and need dialysis once a week, sure, I can negotiate.
If I have strep and need antibiotics in the next 24 hours, it's harder for me to call around to find the best deal.
Posted by: Dan Weber at Feb 13, 2008 10:36:43 AM
I think that doctors are as much of an obstacle as the insurance companies. They've built a myth of infallibility and indisposability, when there's very little that they do that can't be done by so many others. Requiring me to see an MD for any health care condition is inane. Why must I pay a Dr $100 to verify what the free blood pressure monitor at the grocery store says and write me an Rx for the same drug I would buy myself if I spent 15 minutes researching on the internet? Even if I wasn't the diy-type, I would get identical care from a pharmacist, dentist, vet, 1st year med student and the actuary at the HMO who decides which drugs I may take.
I understand that there are times that Drs are necessary and useful, but requiring their involvement in almost every health care transaction seems like a medevial guild. The supply-demand curves would be radically altered if non-MDS were legally allowed to provide the services they're capable of, and MDs, unable to compete on price in that market, were left to compete with each other to do the things they spent so many years in school learning to do.
Posted by: nick at Feb 13, 2008 2:44:33 PM
>Ziggurat: you are being silly. A sick individual has as much leverage to bargain as anyone else who needs something. <
I have bargained for cars with reasonable success and had almost zero success with doctors. With cars, it is easy to walk out the door, and since the dealer cost is pretty easy to determine, the information asymmetry is reasonable. Further, everyone knows they are dealing in a strictly commercial relationship
With medical care the information asymmetry is inherently too large. First, the doctor is a "professional" and is paid both to tell you what you need (a fully loaded lexus), and who to get it from. Even without all those issues, an insurance company has pricing power and is actually at an advantage in negotiating with a doctor. Anyone that gets a bill for a ppo sees the 'list' price and the negotiated price. The difference is huge.
Posted by: Ziggurat at Feb 13, 2008 5:28:26 PM
Ziggurat, if you have zero success negotiating with doctors, you are not trying hard enough. You can usually negotiate below insurance rates if you pay cash, because they like cash and like not having to fill out forms and are afraid they will not get paid otherwise. If you are willing to wait until you get a bill, you can negotiate it even lower.
Posted by: Cliff at Feb 13, 2008 10:12:57 PM
There will never be an incentive for insurance companies to provide preventative care so long as their relationship with an insured is relatively finite. Why pay for screening procedures, when the likelyhood of an adverse result will not be their responsibily to deal with.
As an example, I just paid $269 per filling, for bonded fillings, to my dentist. The insurance company based their reimbursement on a silver filling(which few dentists perform anymore) which according to them is $74 less. The life expentancy of a silver or amalgam filling is only about 7 years. A bonded filling is theoretically good for life. Wouldn't it make more sense to pay a little more now than to have to redo the procedure in 7 to 10 years? An actuarial determination that most insureds will change jobs and/or insurers before that 7 years is up reduces the insurers cost, but does nothing for the insured in regards to preventative care. I am sure these same principles could be applied to just about any preventative procedure. So my question is, how can insurance companies be motivated to do what is in the patient's best interest, and still be mindful of their own bottom line? Expanding insurance coverage as it now stands is not going to solve our problems.
Posted by: Dean at Feb 14, 2008 12:01:02 PM
M1EK,
Grant brought it up as an example of the supposed ability of the market to provide trust absent any regulatory interference. I pointed out that it's beginning to fall apart the more heavily it's being used. I haven't seen any evidence that more trustworthy competitors have emerged.
There isn't a single online auction site you trust? There are dozens of them out there. Markets work for individual's preferences, but there are no guarantees a product or service others use will live up to your standards (nor should there be, I think). There are also escrow services which have arisen in response to fraud. Do you not trust these either? They are not free, but neither is regulation.
How could government intervention help? Auction sites already regulate their users, and they have every incentive to reduce fraud. Could the government do a better job? If they could, what prevents those policy makers from starting a competing auction site which promises significant fraud reduction? There are likely ways in which existing trust metrics can be improved upon, although that doesn't mean the improvement would be significant enough for users to switch over to a new service.
Obviously the Internet poses unique challenges to dealing with fraud, but I don't think that is any indication of market failure. Its very hard to even know if reported instance constitutes fraud or not; you can't just take the word of the buyer or seller on its face value. In most cases it probably just makes sense for eBay to side with highly-trusted power sellers. In all likelihood, users are just not willing to pay for a third party to provide more expensive fraud protection.
I don't think that would be the case health care markets, where people are more than willing to pay for trusted service. Its hard to say though, since the government runs most health care markets.
Posted by: Grant at Feb 14, 2008 12:34:04 PM
Dean,
Most businesses work to keep their customers as long as possible. To loose a customer in 7 years would be a loss, and one a business would want to avoid. The trouble here is not the incentives of a normal customer/supplier relationship, but the fact that the insured is not the customer. For the most part employers are the customers, so the incentives aren't there to protect their employees longer than they will be at their job. I think the solution would be to remove the legal advantages to employer-provided health care.
Posted by: Grant at Feb 14, 2008 12:39:44 PM
Grant, I've had 4 jobs in the past 12 years, and 8 insurance companies. You're woefully out of touch.
Posted by: M1EK at Feb 15, 2008 9:37:34 AM
"There isn't a single online auction site you trust? There are dozens of them out there."
eBay is the most trusted one, and they're not trusted enough, apparently.
But remember - it was you that brought them up - as an example of how the market would magically provide trust and verification when the regulators don't.
Posted by: M1EK at Feb 15, 2008 9:39:52 AM
Grant,
Maintaining employer control over health benefits is no longer in the patient's(ultimate consumer's) best interest. If one loses their job due to health issues, they also lose their health benefits. COBRA tries to protect those benefits, but the cost is staggering to one dealing with debilatating health and unemployment. M1EK is right, I have had the same employer for 19 years, but 3 different insurers in the last 18 months. The solution lies in bringing simpler economics into the picture. I think most employers would gladly lose the legal advantages of providing benefits if a reliable alternative was available.
Posted by: Dean at Feb 16, 2008 11:17:22 PM
