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Update on the public plan
Ruth Marcus tells Democrats not to go to the wall for it. She is not personally against the presence of a public plan, she just doesn't think it is a "do or die" question. There are other ways of making the sector more competitive, if need be.
Here is the veteran commentator Wisewon on the public plan.
As Ezra Klein indicates, the health insurance exchanges are a more important part health care reform. Here is a progressive symposium on the public plan; read Paul Starr.
Brad DeLong writes:
We should set up a public plan, let it compete with the privates, and see if it can provide care people like more cheaply than the private insurance companies. Friedrich Hayek would approve: the idea is to use the market as an institutional discovery mechanism.
Is this the SOE model? I'm still stuck on what the public plan will be instructed to maximize, much less what it will end up maximizing after ?? years of Congressional interference. And exactly who in our government will mimic the behavior of shareholders?
Posted by Tyler Cowen on July 1, 2009 at 11:47 AM in Medicine | Permalink
Comments
this is what I don't get. We have a public plan already: Medicare. On a practical level, they control all health pricing already. Private insurance companies just follow medicare's lead with all reimbursements. How is a public plan going to help save money?
Posted by: charlie at Jul 1, 2009 12:11:09 PM
Who will mimic the behavior of shareholders?
Why do you want someone to pay the CEOs of the public plan multi-million dollar salaries regardless of how well the plan does?
Posted by: spencer at Jul 1, 2009 12:37:25 PM
I don't understand the need for a public option. If you want to expand competition just allow people to purchase insurance across state lines. There are already something like 1,300 providers -- why would the addition of one more suddenly produce such a decrease in costs?
Further the notion that a public option would compete on a level playing field strikes me as naive. Existing public options don't do this. The USPS is currently facing massive losses that are picked up by the taxpayer, unlike Fedex or UPS. 11% of K-12 students attend private schools rather than the public option even though the public option is free while private schools have an average tuition of over $8K.
Given the inefficiencies that predominate in government and competition already found in the health insurance sector (I read profit only accounts for 3% of health insurance dollars) I see no obvious way the public option could offer a similar service at comparable costs. That is the real guarantee that a public option won't compete on a level playing field. If it did there is the chance that hardly anyone would use it, which would be deeply embarrassing to the politicians, that have made this a centerpiece of reform. Will anyone be willing to admit that it was a failure and then scrap it? They will have to tilt the field to ensure its success.
Posted by: Colin at Jul 1, 2009 12:47:02 PM
Interesting. Where was Brad Delong when Newt Gingrich proposed just such a solution in the mid-1990s? The plan was to offer Medicare recipients a voucher if they left Medicare and purchased their own plan. Newt said it would cause Medicare to whither on the vine because everyone would prefer the choice in private plans. You remember how Democrats reacted to choice then? Have they changed in 13 years?
And, I still cannot buy a private plan in Massachusetts. The State forces me to buy hair replacement treatment insurance among a host of things I do not want insurance for, and I cannot purchase a high deductible plan—it is illegal.
How in the hell can anyone say there is competition when it doesn't even exist today? I should check my bias, but I really wonder what goes on in the mind of people on the left. What they say does not match reality. Maybe they are creating their own reality and forgot to tell me.
Posted by: 8 at Jul 1, 2009 1:02:11 PM
"We should set up a public plan, let it compete with the privates...": Mr Broad deRound takes you all for a bunch of suckers. I wouldn't have the insolence to advise Americans about how they should reform their absurdly extravagant medical system, but even I can see that no "public plan" would compete, except in the sense of exploiting huge taxpayer subsidies to let it suppress its competitors.
Posted by: dearieme at Jul 1, 2009 1:05:59 PM
Does anyone intellectually honest believe that the public plan will act as a purely market-based price discovery mechanism?
The temptation to tinker with costs to please voters, regardless of market direction, will be enormous. This already happens with Medicare parts A and B, why will this public plan be different?
And a public plan will have the same problems as today's private plans: no direct incentive on the patent to improve personal health and reduce doctor visits.
Posted by: Jeff Garzik at Jul 1, 2009 1:39:58 PM
chuck:
Because the public plan will mimic medicare in its lower adminstrative cost.
colin:
because it is easier than 100 anti trust cases againt the localised monoplies of current employer-based healthcare companies
Jeff:
You are rifgt in that control should not be directly in the hands of congress, but a administrative board similar to a board of directors would be pretty good. But then again if I compare this to a similar item, the Fed, I get the sense that it may be a non-political body that becomes overly involved with politics itself... What do they do in France and Germany, we should just do that.
Posted by: Travis at Jul 1, 2009 1:54:53 PM
Travis: Are you being sarcastic in your reply to chuck? I can't tell.
And what "localised monopolies" might these be? There are multiple providers an employer can pick, at least around here. (Blue Cross, Kaiser, etc.)
If in some state that's not so because the State makes it so, the solution is for the State to stop making monopolies, rather than anti-trust lawsuits (which would have to fail, I imagine, if the State was enforcing the monopolies...).
Posted by: Sigivald at Jul 1, 2009 2:00:56 PM
Travis: that's a good argument for eliminating the tie between employment and health care, which is an artifact of WWII wage controls.
Posted by: Colin at Jul 1, 2009 2:04:54 PM
I'm proposing this because it makes sense to me, and no one else is:
Let me ask everyone a question: Do you consider price and discount when buying Tylenol and Pepcid? I answer in the affirmative.
Here's another question: Do you consider price when considering brain surgery? I answer in the negative.
Therefore, I suggest splitting health care costs into two categories:
1) Medical goods that a consumer could price and shop accordingly on.
2) Medical goods that a consumer cannot price and shop accordingly on.
Once you do this, you can split up medical costs into:
1) Costs subject to a deductible.
2) Catastrophic Costs.
And, further, you can say the following:
For 1) You don't want third party payers, since you want the consumers to shop for the best price.
For 2) You can have a third party payer. In fact, you can have one: the Federal Government.
Now, here's Milton Friedman's plan:
"A more radical reform would, first, end both Medicare and Medicaid, at least for new entrants, and replace them by providing every family in the United States with catastrophic insurance (i.e., a major medical policy with a high deductible). Second, it would end tax exemption of employer-provided medical care. And, third, it would remove the restrictive regulations that are now imposed on medical insurance—hard to justify with universal catastrophic insurance.
This reform would solve the problem of the currently medically uninsured, eliminate most of the bureaucratic structure, free medical practitioners from an increasingly heavy burden of paperwork and regulation, and lead many employers and employees to convert employer-provided medical care into a higher cash wage. The taxpayer would save money because total government costs would plummet. The family would be relieved of one of its major concerns—the possibility of being impoverished by a major medical catastrophe—and most could readily finance the remaining medical costs. Families would once again have an incentive to monitor the providers of medical care and to establish the kind of personal relations with them that were once customary. The demonstrated efficiency of private enterprise would have a chance to improve the quality and lower the cost of medical care. The first question asked of a patient entering a hospital might once again become "What’s wrong?" not "What’s your insurance?"
I would add a Democratic Party addition to this plan: You could relate the deductible to income.
That's my plan. Everyone covered.
I would add the following: I've no idea what the correct amount of money that we should spend on health care should be. That's why I would like some portion of our medical bills to be subject to our own choice.
Posted by: Don the libertarian Democrat at Jul 1, 2009 3:45:04 PM
You've at least got the gist of it Don. The most important thing we need to do is force people to shop around. Until that happen costs will continue to skyrocket.
The really radical, and necessary, reform that no one is talking about is ending insurance as the centerpiece of health care in this country. Insurance should be for catastrophic and emergency conditions -- think heart attacks and cancer. For most other procedures you should have to shop around. Think of all the paperwork and bureaucracy this would cut down on!
Posted by: Colin at Jul 1, 2009 4:00:02 PM
@Sigivald
A lot of private insurers have >20% overhead. Medicare is, from the numbers I've read, well under 10%. Whether this is mostly due private insurers having the burden to advertise, launch investigations to find typos in forms to deny care on costlier patients, purchase and maintain private jets for executives, or spending lobbying money to destroy an effective public plan in the Senate, I don't know.
Posted by: Ben R. at Jul 1, 2009 4:02:03 PM
colin: "Insurance should be for catastrophic and emergency conditions -- think heart attacks and cancer. For most other procedures you should have to shop around."
Why? If consumers wish to pay a fixed amount for all their health care - and they're willing to pay that price - are you and libertarian Don going to prevent them for choosing that option?
What is wrong with employers providing full coverage health insurance? Even if the tax benefit of employer-provided health insurance were eliminated, wouldn't many employees prefer to take advantage of the buying power their employer can provide them?
It's not the private health insurance industry that drives up costs by increasing usage. Provate insurors pass on costs to ultimate consumers through higher premiums. It's the free riders - Medicare and Medicaid beneficiaries - who consume without incurring the costs of that consumption.
Posted by: John Dewey at Jul 1, 2009 4:42:04 PM
When Brad DeLong cites Hayek, a baby angel dies.
Posted by: Vichy at Jul 1, 2009 5:27:54 PM
Ben K: "A lot of private insurers have >20% overhead. Medicare is, from the numbers I've read, well under 10%."
Here's one explanation:
"A draft report by the inspector general of Health and Human Services -- circulating on Capitol Hill and leaked this week -- determines that Medicare may have paid $2.8 billion in improper or fake claims for medical equipment in 2006. ... insurance companies spend money to screen their claims for fraud. Medicare automatically pays more than 95% of the bills it receives. This lack of scrutiny reduces overhead, but it makes the program highly vulnerable to abuse."
Fake claims for medical equipment is just one of many, many ways medicare is being defrauded:
"Law enforcement officials said it's just one of the many widespread, organized and lucrative schemes to bilk Medicare out of an estimated $60 billion dollars a year — a staggering cost borne by American taxpayers."
Posted by: John Dewey at Jul 1, 2009 5:47:05 PM
Don: agreed completely.
John Dewey: Sure, if you really wanted to buy "insurance" that covered small and routine expenses, there's no reason to stop you. It's just that there's also no reason to have that model actively encouraged by tax policy.
What is wrong with employers providing full coverage health insurance? Even if the tax benefit of employer-provided health insurance were eliminated, wouldn't many employees prefer to take advantage of the buying power their employer can provide them?
Maybe, and if they do that's fine. But if the "buying power" really results in better benefits, why don't our employers pay for our cars and housing?
Posted by: Brian 2 at Jul 1, 2009 6:56:11 PM
And exactly who in our government will mimic the behavior of shareholders?
One would hope, no one. Do you believe that the shareholder demand that insurers deny coverage to the high risk individuals, deny preventative care as unnecessary because the policy can be cancelled with the insured develops a chronic condition, and raising premiums to extract maximum revenue and maximum profit is something that increases the general welfare of the economy/society?
Of course, if I were writing the charter for the public plan, the number one priority would be "maximize the health of the nation."
Lots of evidence indicates that a sort of laffer curve exists between spending on so called health spending and outcomes. Spend too little and the health overall is lower than it should be, but on the other hand, spend too much and health is also lower that it should be, but spend somewhere in the middle and health will be maximized, as long as the system is well managed.
Clearly "free market health care" has driven spending well beyond the value that will maximize health, clearly indicating that the "free market health care" is absolutely terrible at managing the spending on health care in furtherance of maximizing health.
So, how much more badly can government do than the free market?
And all you need to do is look at any of the other OECD nations with better longevity, infant mortality, lower rates of births requiring neonatal care, lower levels of bankruptcy because people got sick.
And for those who think that the US has a great system, just think about suffering some sort of personal crisis like discovering you have lupus, drug resistant TB, ALS and you end up out of work for a period of time. Would you rather be in the US in say Alabama, in Socialist Massachusetts where only 3% lack health insurance, or in some place that spends far less than the US on health care like France, Switzerland, Canada, Sweden, that also have a great social welfare system as well?
Posted by: mulp at Jul 1, 2009 8:30:37 PM
And for those who think that the US has a great system, just think about suffering some sort of personal crisis like discovering you have lupus, drug resistant TB, ALS and you end up out of work for a period of time. Would you rather be in the US in say Alabama, in Socialist Massachusetts where only 3% lack health insurance, or in some place that spends far less than the US on health care like France, Switzerland, Canada, Sweden, that also have a great social welfare system as well?
You realize that people are denied coverage in socialist systems if the care is too expensive, right? You realize that there is no guarantee of treatment in socialist systems, correct?
A health care system is limited by supply. Its ability to treat patients can't exceed its inherent capacity to treat patients. If Canada (for example) has fewer doctors than the U.S. (which they do), if they have fewer hospitals than the U.S. (which they do), and fewer specialists than the U.S. (which they do), then a greater number of people will go untreated than the U.S..
As a Canadian who has been waiting for weeks to see a specialist for an acute health problem, and have no clue when or if I will ever see one, I can make a phone call and have an appointment with a specialist in the U.S. in a single business day. It doesn't matter if my healthcare is free in Canada, when chances are slim to nill I will ever actually get the healthcare. Socialist fairy dust unfortunately doesn't materialize doctors or equipment out of thin air. So I most certainly, without any doubt whatsoever, would rather be seeking treatment in Alabama than in Canada for any sort of life-threatening disease. I rather go bankrupt paying for the best treatment, than to risk my life with free treatment that I may or may not receive before I die.
Having supposed "better healthcare outcomes" than the U.S. is super easy. All you have to do is focus on the outliers that are ignored in the U.S. system... you get a homeless crackhead prostitute early treatment for her Hep A, or you make an abortion free and easy for the neglected 13 year old child in government housing that gets knocked up, and if you do that well it doesn't matter how crappy your countries cancer treatment is. That kind of treatment is dirt cheap, and does wonders for life expectancy and infant mortality, where as the most advanced cancer treatment can cost millions and cancer is usually rare enough and happens late enough in life that it won't have much effect on the overall statistics. If you want to argue that spending money on the outliers is a better use of the money, that is fine. Just don't pretend that a socialist system is going to provide for everyone's medical needs. Be honest and lest Americans know that they will be denied healthcare even more than they are now, but that it will help the poorest and most at-risk and therefore is worth the sacrifice.
Posted by: Vehical Driver at Jul 2, 2009 12:23:06 AM
Vehicle Driver: how can you argue that it's possible to have a big effect on the statistics by treating "outliers", while at the same time claiming that the important thing is cancer which you say is "rare"?
Also, in the socialist systems, not only are you allowed to buy your own insurance, but you can get it tax-deductible through your employer.
So far as I can see the main drive against national healthcare in the US appears to be the belief that poor people are always poor because of lack of effort, and should therefore suffer or even die for that.
Posted by: Pete at Jul 2, 2009 6:27:10 AM
Driver: Well it certainly depends on what condition you have. I don't know what yours happens to be, but there are expensive long term treatments that are covered in socialists systems that would render you ineligible for insurance in the United States. So there is a balance. You are also contending that the primary explanation for improved outcomes in other systems is preventative treatment for those who would be uninsured in the United States. Maybe so, but I don't think your explanation is definitive. Perhaps other countries have also found a better balance between providing people care that the society can afford but not every individual versus providing the treatment that the most wealthy individuals can afford, a la the United States.
Posted by: mpowell at Jul 2, 2009 7:23:06 AM
mpowell: "You are also contending that the primary explanation for improved outcomes in other systems is preventative treatment for those who would be uninsured in the United States."
I don't think Vehicle Driver has accepted the assertion that other health care systems deliver improved outcomes. I certainly do not believe that to be true.
The "outcomes" which socialists use to promote universal health care are generally infant mortality and life expectancy. A number of studies have shown that, in highly developed economies, health care does not determine these outcomes.
June O'Neill and Dave M. O'Neill compared U.S. and Canadian health care systems. Here's their conclusion about infant mortality:
"low birthweight-a phenomenon known to be related to substance abuse and smoking-is more common in the U.S. For babies in the same birthweight range, infant mortality rates in the two countries are similar. In fact, if Canada had the same proportion of low birthweight babies as the U.S., the authors project that it would have a slightly higher infant mortality rate. Thus, the authors conclude that differences in infant mortality have more to do with differences in behavior than with the health care systems."
And their conclusions about life expectancy:
"The gap in life expectancy among young adults is mostly explained by the higher rate of mortality in the U.S. from accidents and homicides. At older ages much of the gap is due to a higher rate of heart disease-related mortality in the U.S. While this could be related to better treatment of heart disease in Canada, factors such as the U.S.'s higher obesity rate (33 percent of U.S. women are obese, vs. 19 percent in Canada) surely play a role."
Posted by: John Dewey at Jul 2, 2009 8:57:33 AM
"Clearly "free market health care" has driven spending well beyond the value that will maximize health, clearly indicating that the "free market health care" is absolutely terrible at managing the spending on health care in furtherance of maximizing health.
>Where is this free market you speak of? I live in the US where health care is 60% paid for by the gov't and 100% severely regulated.
So, how much more badly can government do than the free market?
> As evident by all the 'need for reform' talk, the government currently does MUCH worse.
And all you need to do is look at any of the other OECD nations with better longevity, infant mortality, lower rates of births requiring neonatal care, lower levels of bankruptcy because people got sick."
> As John Dewey above shows, and the other numerous post, studies, ect, this line of argument has been debunked years ago, ad nauseam.
When you want to evaluate a health care system, you compare outcomes. The US ALWAYS comes out on top.
The bankruptcy study took about 12 hours to be discredited. No one who has any attention to honestly discuss the subject brings these points up for several years now.
Posted by: Td at Jul 2, 2009 9:31:52 AM
Why? If consumers wish to pay a fixed amount for all their health care - and they're willing to pay that price - are you and libertarian Don going to prevent them for choosing that option?.
No, consumers can choose what they want. But we should stop subsidizing that option with the tax credit.
And I agree with you re: Medicare/aid.
Posted by: Colin at Jul 2, 2009 10:25:11 AM
Great sentence: "And exactly who in our government will mimic the behavior of shareholders?"
"Why do you want someone to pay the CEOs of the public plan multi-million dollar salaries regardless of how well the plan does?" -spencer
Shareholders do get it wrong sometimes. That's why those shareholders should be allowed to fail for their poor decisions. In the private market, failure repels capital. In government, it attracts it.
Posted by: Seth at Jul 2, 2009 10:38:16 AM
colin: "But we should stop subsidizing that option with the tax credit."
Is that because you wish to level the playing field for all options or because you want the government to take more of our incomes?
I agree that government rules about taxes distort our decision-making. That's true not just for employer-provided health insurance, but also for mortgage interest deductions, property tax deductions, business travel expense deductions, casualty loss deductions, education expense deductions, charitable contributions deductions, etc., etc. Of course, distorting our decision-making is exactly the intent of those who lobby for such deductions.
Posted by: John Dewey at Jul 2, 2009 11:19:06 AM
