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Sentences to ponder
But if the public plan exists, gambling actually becomes more practical. Contra Tyler, I expect that Ezra's strong plan would actually hurt private plans as some of their healthiest, youngest patients made the rational decision to join the ranks of the uninsured.
Here is much more.
Posted by Tyler Cowen on June 9, 2009 at 02:00 PM in Medicine | Permalink
Comments
I don't understand why everyone is discussing plans that have only slightly to do with the plans being drafted by the House and Senate Democrats. Both plans have an individual mandate, with tax penalties for the young who choose to be uninsured. Sure, Candidate Obama criticized a mandate, but Candidate Obama criticized giving away cap-and-trade allowances too.
Posted by: John Thacker at Jun 9, 2009 2:39:16 PM
Well, then that means we'll see a mandate.
People are misunderstanding the point of the exercise. The entire idea is to move to a single-payer system, but to do it in such a way that it seems as if everyone voluntarily made the move.
This scheme wouldn't work if young people could gamble, or if people could get super-cheap catastrophic plan. So understand that young people won't be allowed to gamble, and people won't be able to get super-cheap catastrophic plans.
In some ways, focusing on the public plan option is the least of our concerns. Maybe opponents should concede the public plan, but fight the regulations on community rating and pre-existing conditions. What we should hope for--the best case, I'm afraid, that we can actually hope for--is a future in which it is possible for people to buy excess benefits outside of the public plan. And the insurance "reforms" that are intended to drive people to the public plan will, if left in place, prevent that from happening.
Posted by: Thomas at Jun 9, 2009 2:51:38 PM
1) Mandates are key to making this kind of system work.
2) Thomas says: "What we should hope for--the best case, I'm afraid, that we can actually hope for--is a future in which it is possible for people to buy excess benefits outside of the public plan. And the insurance 'reforms' that are intended to drive people to the public plan will, if left in place, prevent that from happening."
I don't understand which "reforms" he is referring to, or why they would cause the problem he forsees, so if someone could explain that I would find it helpful.
Posted by: matt wilbert at Jun 9, 2009 2:59:52 PM
This is in part the dynamic that makes private/public competition effective. Low cost users will want to be in the public plan and high cost users in the private plan, while the reverse of this is the case for private plan providers. They will want more low cost users but will find it difficult to attract them and want fewer high cost users but will find it difficult to deter them. They will end up providing superior care and service at higher cost to higher cost users.
Posted by: Lord at Jun 9, 2009 3:12:04 PM
"What we should hope for--the best case, I'm afraid, that we can actually hope for--is a future in which it is possible for people to buy excess benefits outside of the public plan. And the insurance 'reforms' that are intended to drive people to the public plan will, if left in place, prevent that from happening."
OMG, two tiers. Are suggesting we aren't all equal?
/sarcasm
Posted by: Ann at Jun 9, 2009 3:18:19 PM
"I expect that Ezra's strong plan would actually hurt private plans as some of their healthiest, youngest patients made the rational decision to join the ranks of the uninsured."
There are many excellent discussion threads that can be mined going back to the original post. However, I would like to offer an observation based on personal experience, one shared by about 25,000 other employes of the same company. About 40 years ago when I began my career the company that I went to work for had an attractive benefits policy both in terms of coverage and cost to the employee. It was called the Employee Mutual Assistance Plan and was administered by the benefits department of the company. Participation was mandatory. There were two rates for coverage: single, and family. In the early eighties an influx of young, healthy new hires complained that the plan was unfair because they were subsidizing the older workers, those with families and the retirees. They started to leave or never accepted job offers. The company outsourced the plan to an insurance company experienced with a la cart benefit plans. The majority of the single and newly married employees dropped out. Rates for the rest were determined age group. All rates went up at the same time that benefits were reduced. The increase in rates and reduction of benefits has continued to this day. If anything it has accelerated because of other factors. If we take the divide the country's total expenditures on medical and dental care and divide them by the total number of citizens earning income (simplistic, I know) the resulting "insurance rate" is not onerous. It can be make even less so by making the co-pay amount a function of income (with limits.) This can be implemented through the tax system, certainly, and I am certain that others could suggest other approaches. The important point is this: If we want to have affordable coverage everyone must be covered. If we want it to be equitable everyone ought to pay the same rate. Please note that payees are those earning income "from whatever source derived."
Posted by: Butch at Jun 9, 2009 3:24:13 PM
The public plan won't hurt private alternatives in the same way that the public school system didn't hurt private schools.
Butch, your suggestion is exactly what I DON'T want. The only way to have affordable coverage is to cover risks, NOT maintenance. The young and healthy are correct to not wish to subsidize the maintenance of the old. Your old plan wasn't good because it is the same plan that fell apart when the demographics made it non-viable.
Posted by: Andrew at Jun 9, 2009 3:35:28 PM
McArdle says:
"...the optimal behavior for someone who is currently basically healthy is not to buy it. Buy some super-cheap catastrophic plan to deal with a car accident or similar..."
She appears to have the delusion that buying individual health insurance is practicable. Is it an unspoken assumption in this debate that insurers will be required to provide insurance to customers?
Many of us who are under 35 and perfectly healthy who are routinely unable to acquire even limited insurance except through our employer group plans. One friend spent months determining that in California, it is simply not possible.
Posted by: Chris D at Jun 9, 2009 5:09:07 PM
She appears to have the delusion that buying individual health insurance is practicable. Is it an unspoken assumption in this debate that insurers will be required to provide insurance to customers?Many of us who are under 35 and perfectly healthy who are routinely unable to acquire even limited insurance except through our employer group plans. One friend spent months determining that in California, it is simply not possible.
It's considerably more possible in some states than others. California has a form of modified community rating, so yes, it is not possible. The same is true of New Jersey. Other states require insurance to cover certain things, so buying a catastrophic insurance plan is difficult, though possible. However, in some states individual catastrophic health insurance can definitely be purchased.
Your complaint is analogous to living somewhere with rent control and complaining that it's impossible to find a good apartment for cheap without knowing someone and getting into a controlled one.
Both the House and Senate Democratic health plans have a form of modified community rating as well as a mandate/tax penalty for indviduals who don't buy and stiff requirements for what insurance may cover, so I presume that Megan's objection will not hold.
Posted by: John Thacker at Jun 9, 2009 5:27:40 PM
Megan's objection, or mine?
That's good news, though your analogy is flawed: to continue it, it's not simply impossible to find a good apartment for cheap. It is impossible to find an apartment, of any quality, at any price.
Posted by: Chris D at Jun 9, 2009 6:54:29 PM
That's good news, though your analogy is flawed: to continue it, it's not simply impossible to find a good apartment for cheap. It is impossible to find an apartment, of any quality, at any price.
Individual health insurance is available in California. It's just really expensive. It's the only way that small business owners of proprietorships can buy their own insurance. It's not "simply not possible."
For example, this is a California-based company that sells individual health insurance. There are plenty others that you can find through searching. It's not cheap, and because of regulations like modified community rating, it's much more expensive than in other states. Blue Shield of California has a page for individual health insurance plans. This site promises to compare California individual health insurance among the largest insurers.
Anthem has a page for California individual health insurance. Aetna offers individual plans in California.
I'm sorry, it's just not true that there aren't individual health care plans in California for those under 35.
Posted by: John Thacker at Jun 9, 2009 10:36:53 PM
I wonder if there is a market for blackmarket health insurance. If a desirable type of insurance (catastrophe only cheap plans for example) are illegal, surely that is a demand that can be filled.
Of course you can't trust a criminal organization, but if the insurance is legal in say... Japan, what's to stop the company offering it to Californians? Or Canadians?
Posted by: doctorpat at Jun 9, 2009 10:51:01 PM
"People are misunderstanding the point of the exercise. The entire idea is to move to a single-payer system, but to do it in such a way that it seems as if everyone voluntarily made the move."
Is that Tyler's plan? Megan's plan? Ezra's plan?
The system of health care that works is despized by large numbers of inexperienced patients and lots of god-complex doctors: true HMOs and other similarly health focused community plans.
The doctors and hospitals must not be rewarded for doing more, or harder, stuff. It seems that patients fear them because they expect that not getting heart surgery is a bad thing, which is the primary goal of everyone at a well run HMO. Some doctors, like surgeons, think every patient should get heart surgery, which all the doctors on the team of an HMO reject as a good standard of care.
Single payer produces some of the most expensive health care, especially in poor, conservative parts of the US. Like McAllen Texas, one of the highest cost according to the single payer Medicare data.
But the issue at hand isn't what is the single best system, which I'm convinced is totally impossible, but how to eliminate all uncompensated care and do so without closing all ERs, clinics, and requiring a change in the medical ethics codes and repealing all laws requiring medically necessary care be provided and prohibiting dumping sick people on the street at midnight.
Once everyone is insured in some fashion, then the matter of maximizing health and minimizing cost can be tackled in systematic ways.
Like letting people pick the plans based on price and performance, without the providers picking them. Ideally, the doctors and hospitals in McAllen Texas are forced to find an insurer that will provide coverage for their patients and then be forced to complete with a Mayo style HMO which delivers better care for less than half the cost in McAllen.
The only requirement is each plan charges its customers/patients identical prices and covers enough so nothing will ever be uncompensated. That basically means any care required by medical ethics would be paid for, and if a team of doctors argues mothing more makes sense, there would be no public outcry.
For anyone to think that non-health science trained individuals (patients) can objectively determine the best possible health care for themselves is irrational; teams of health scientists with the means to run studies and collect and analyze data can't do it. And to think a doctor can do what teams of doctors and actuaries and health researchers and behaviorists can do with great difficulty, as in cases like Mayo, is irrational.
But people have their own preferences, often irrational, so the economics question is how to provide choices that are equivalent, and operate like a true market. When you go buy a TV or PC, the salesman doesn't look at you, at least in a "free market" and say, you're black, so your price is twice the white price, or you are sick, so your price is twice that of a healthy person. Buying health insurance should be like buying a TV. All (new) TVs sold in the US have long been required to meet certain minimum requirements for more than half a century. Those minimum standards have been good for TV sales, not harmful. The minimum standards for health care are more complicated, but economists should be working on how the market for health insurance works as well as the market for TVs.
Posted by: mulp at Jun 10, 2009 2:54:43 AM
Not buying health insurance? Risk aversion should make people prefer insurance pretty strongly!
Or what is your determinant for "rationality"?
Posted by: IWantCookieNow at Jun 10, 2009 4:29:20 AM
@John:
Yes, I realize companies list it on their websites. Getting them to enroll you in it is the problem, and it *is* a problem.
Posted by: Chris D at Jun 10, 2009 10:22:56 AM
I stand partly corrected. A friend was able to get individual insurance for himself, but not for his pregnant wife.
I'm not sure that "you can't get insurance if you're going to use it" is an improvement over "you can't get insurance at all", but at least the discussion can match reality.
Posted by: Chris D at Jun 10, 2009 12:06:11 PM
I'm not sure that "you can't get insurance if you're going to use it" is an improvement over "you can't get insurance at all", but at least the discussion can match reality.
Insurance is a hedge against uncertain future costs. If you know you're going to use it, it's not insurance, it's "I want somebody else to pay for my stuff". Most of our problems with health care stem from an inability to distinguish between the two.
Posted by: Brian 2 at Jun 11, 2009 7:26:53 PM
