Is any healh insurance a good idea?

[Dan J 277]

Cliff notes:

1. US implements some for of just about every health care model between the private system, VA and Medicare.

2. Employer based health care is the root of the problem, limits competition, and distorts real cost of care.

3. Cost of end of life care needs to be considered

I've always maintained that any reform without either offering a public option or ending the employer based health care model, its not really going to produce the kind of competition we need to drive prices down. Even if this is done, care providers need to be able to be upfront about fees and costs, if anyone has tried to get the cost for a visit or procedure from a clinic, all they can usually tell you is some kind of broad range.

This article is interesting, but i doubt many would actually see an increase in salary if employers stop providing healthcare.

While there is a battle raging over the "public option," a kind of Medicare for all, there is so much disinformation and so many outright lies being spewed into the air, there some fundamental truths that are being lost. Here are a few facts for anyone who still cares about facts.

There are roughly four ways countries can run their health systems, to wit:

1. Nationalized medicine
2. National health insurance
3. Regulated fee-for-service medicine
4. Unregulated fee-for-service medicine

Some countries have one or the other. The U.S. has all four. First, there is nationalized medicine. The British National Health Service operates like this. The government runs the hospitals and pays the doctors, who are government employees. Despite what some tea-baggers are yelling at the tops of their collective lungs, none of the five bills floating around Congress propose anything remotely like this. It would be totally un-American--except for our troops, all of whom we support and want to give the best care to. The Veterans Administration runs something pretty close to this, with government-run hospitals and care. While some failures have been well documented, few veterans are calling for the system to be chucked out as socialism in disguise.

Second, there is national health insurance. This is what Canada has. Canadian doctors and hospitals are private (or run by local or provincial governments). Basically, the system is fee-for-service, but with everyone covered by the national government. In other words, the insurance system has been nationalized but the medical system itself is largely private. What the government does is pay the bills. Medicare works like this.

Third, there are countries where the system is entirely private (e.g. Switzerland, as Paul Krugman pointed out today). Another example is The Netherlands, which Krugman didn't mention and which illustrates model 3 very clearly. The government's role there is largely to set the ground rounds and make sure they are enforced. In a nutshell, the key rules are:

• Nobody forces any company to offer health insurance. They do it only if they can make a profit on it.
• Health insurance companies must offer a basic plan covering a list of government-mandated costs (doctors, hospitals, etc.). They can't say: we cover all surgical costs--and then in tiny fine print explain "But only when the operation is performed by a barber-surgeon using leeches"
• Companies must insure anybody who shows up for the same price, regardless of medical history
• All companies operate nationally, set their own prices, and compete on price
• There is an individual mandate; anyone not insured must pay a tax of about what the basic plan costs
• For items not covered (e.g., alternative medicine), companies can do whatever they want
• Employers can bargain with companies to get small (e.g., 10%) discounts for their employees

The fact that all companies operate nationally and employers play only a small role means there is real competition, which provides something of a brake on premiums. The Massachusetts health system is similar to this.

Fourth, there is the fully free-market based system, where individuals, insurance companies, and health providers can pretty much do whatever they want to. Most of the U.S. falls under this regime.

But with all the noise about the public option, almost no one asks the most fundamental question of all: "Is insurance even the right model to think about for health care?" At least not until David Goldhill wrote a must-read article in The Atlantic. Goldhill's point is that the purpose of insurance is to pool large number of people together and get them to pay small premiums to cover a catastrophic event that will not happen to most of them. As an example, car insurance covers the costs of accidents, which most people don't have very often. No company offers full automotive insurance that covers accidents, gas, routine maintenance, parking fees, new tires, and all other automotive-related costs. Instead, individuals buy these other items on the open market and as a result tend to look at the price and quality of the products and services closely. Fire insurance is another example of true insurance--pooled risk against an unlikely event.

Goldhill argues that the fundamental problem with the U.S. health system is that since consumers largely do not pay for their own medical expenses, they don't care how much they cost. This simple fact leads to excessive costs, bloated bureaucracies, and inefficent delivery. Consumers think that medical services are free, since some distant and much-hated insurance company is paying for most of them, so they never weigh need vs. cost. The employer-based health care system is basically due to a mistake Congress made during World War II. While there were stringent wage and price controls in effect during much of the war, fringe benefits were exempt, so unions (which couldn't demand more cash) demanded free health insurance and got it, and tax free to boot. This bit of history is the root of the problem.

True reform might go something like this. Employers simply get out of the health insurance business altogether and give the $12,000 or so they spend per employee to their employees as more salary. The government enacts laws like The Netherlands has to keep insurance companies honest and make them compete nationally, and then people go out and buy insurance on this newly competitive market. No public option is needed. If the government chooses as a matter of public policy to subsidize health care, then the first $12,000 (or some other amount) of money anyone spends on health care could be tax deductible, and direct subsidies could be given to poor people (health stamps, sort of like food stamps) to enable them to pay their medical bills.

The intention would be to have health insurance cover only catastrophic illiness with normal medical costs (seeing GPs and specialists and short hospital stays) being paid out of the $12,000 raise now-covered employees get. All of a sudden, people care about how much that MRI costs. Goldhill describes how when his wife needed an MRI, multiple hospitals refused to tell him the cost. If consumers were paying for things like this out of pocket, you betcha they would be telling. Many would be advertising their prices.

Could something like this work? Goldhill talks about LASIK (eye surgery that eliminates the need for glasses). This procedure is almost never covered and there is vigorous free market for it. The cost has dropped ten-fold since it was introduced as clinics are forced to truly compete. If all medical providers had to compete for consumers' business, prices would be driven down, too. The government's main job here would be to certify providers to make sure they met high medical standards and publish the results. Getting a "D" rating wouldn't be good for business and providers would act accordingly. Goldhill's main point is that all the incentives are wrong now so we need to rethink the whole idea of "insurance" as the model (except for catastrophic illness, which is like having a car accident or your house burning down).

The problem with all the bills in Congress now is that none of them attack the problems of bad incentives and the customer being insulated from the cost of what he is demanding. As a result, the percentage of GDP being spent on medical are is only likely to increase and become even less sustainable.

One issue Goldhill doesn't discuss (because it is totally taboo) but is crucial to the debate is the imaginary "death panel" Sarah Palin and Chuck Grassley are against. A huge amount of money is currently being spent to keep Grandma, who is 85 and has Alzheimer's, alive. Families want no expense spared to give her a couple more months--since they are not paying for it. Suppose Goldhill's system were implemented and Grandma, or more likely, her children and grandchildren had to decide how much expensive care she was going to get--knowing that some or all of the care was coming out of their expected inheritance. It is likely that in many cases 85-year-olds with Alzheimer's would not be getting quadruple bypass operations. The family wouldn't stand for it if they were footing (part of) the bill. They would be making god-like judgments about quality of life vs. cost and probably in many cases would be a lot stricter than any imaginary government death panels would be.

If you have gotten this far, now go read the article. Agree or disagree, it certainly raises some key points about whether insurance is the right model here.

http://www.electoral-vote.com/evp2009/Sena.../Aug17-s.html#1

[w¡n9Nµ7 §£@¥€r 123]

Insurance is meant to pool risk. Not everyone in the 0-40 age group will have a serious health problem requiring hospitalization. That's a good 'opportunity' for insurance. Everyone pays in, some have to be covered. Everyone wins.

However, what about regular health check ups? Everyone should be getting those. That's not a risk. Why do we use insurance to cover those costs? Makes no sense. There's a lot like that. Lots of things that can't really be called 'risks' because everyone (or most) will need them. It really does strike me as a misuse of insurance.

Car insurance works much better, because it adheres to fundamental insurance principles. Is regular maintenance covered? No. What is? Accidents are.

Health insurance should work the same would. Use insurance for what insurance is meant for, and I think we'll all find it all works so much better.

[Peikko 1,575]

Yeah, like 'good health' is a 'luxury'

Seriously, how many people 'demand' unnecessary tests and procedures do you suppose? I mean, simply go into the Dr's office and say, I have this pain here, I demand you perform an MRI? Oh, that would be NO ONE, or virtually no one. They go to the Dr's office and give their symptoms. The Dr then recommends various courses of action (if there are alternatives) and they go from there. Can the discourse get any more STUPID?

Youbetcha

[one...two...tree 2,762]

Very interesting. My employer offered Medical Spending Accounts as an alternative to conventional health insurance. The problem that I saw with it is what you stated, Dan - my employer was only offering an initial $500/$1,000 individual/family for the spending account and for a family, the deductible was $10,000 before any insurance would kick in. That's a lot of out of pocket medical expenses considering that right now, under the convention insurance model, I'm paying about $400 a month in premiums.

[Dan J 277]

Insurance is meant to pool risk. Not everyone in the 0-40 age group will have a serious health problem requiring hospitalization. That's a good 'opportunity' for insurance. Everyone pays in, some have to be covered. Everyone wins.

However, what about regular health check ups? Everyone should be getting those. That's not a risk. Why do we use insurance to cover those costs? Makes no sense. There's a lot like that. Lots of things that can't really be called 'risks' because everyone (or most) will need them. It really does strike me as a misuse of insurance.

Car insurance works much better, because it adheres to fundamental insurance principles. Is regular maintenance covered? No. What is? Accidents are.

Health insurance should work the same would. Use insurance for what insurance is meant for, and I think we'll all find it all works so much better.

Health insurance isn't really insurance at least not the way its used. Health insurance end up cover routine care because the cost for routine care has gotten pretty expensive. Is that right or wrong? I suppose it depends on how you see the health care model working.

We are not going to see any real improvement in cost unless we get real competition (Which basically means and end to the employer based model and/or a public option) or the government regulates rates which I'm sure will make all the free market types all giddy.

[one...two...tree 2,762]

Insurance is meant to pool risk. Not everyone in the 0-40 age group will have a serious health problem requiring hospitalization. That's a good 'opportunity' for insurance. Everyone pays in, some have to be covered. Everyone wins.

However, what about regular health check ups? Everyone should be getting those. That's not a risk. Why do we use insurance to cover those costs? Makes no sense. There's a lot like that. Lots of things that can't really be called 'risks' because everyone (or most) will need them. It really does strike me as a misuse of insurance.

Car insurance works much better, because it adheres to fundamental insurance principles. Is regular maintenance covered? No. What is? Accidents are.

Health insurance should work the same would. Use insurance for what insurance is meant for, and I think we'll all find it all works so much better.

Apples to oranges. Preventive care can save both you and the insurance company more money down the road. Nobody buys car insurance for the actual operation of the car, which would be more comparable. It's cheaper for you to replace the break pads on your car than it is to wait until your brake calipers are scratching right into the disc brakes.

[Dan J 277]

Very interesting. My employer offered Medical Spending Accounts as an alternative to conventional health insurance. The problem that I saw with it is what you stated, Dan - my employer was only offering an initial $500/$1,000 individual/family for the spending account and for a family, the deductible was $10,000 before any insurance would kick in. That's a lot of out of pocket medical expenses considering that right now, under the convention insurance model, I'm paying about $400 a month in premiums.

The people that end up with MSA/HSA are the people that can least afford to use it. It is the cheapest option in terms of premiums. But you need to have the extra income to make use of the HSA/MSA. On top of that, Its impossible to make informed choices about cost/quaility when no one can actually tell you what something will cost until they give you a bill afterwards. Without cost information you can't compare a competitor and make the choice that suits you.

[one...two...tree 2,762]

Very interesting. My employer offered Medical Spending Accounts as an alternative to conventional health insurance. The problem that I saw with it is what you stated, Dan - my employer was only offering an initial $500/$1,000 individual/family for the spending account and for a family, the deductible was $10,000 before any insurance would kick in. That's a lot of out of pocket medical expenses considering that right now, under the convention insurance model, I'm paying about $400 a month in premiums.

The people that end up with MSA/HSA are the people that can least afford to use it. It is the cheapest option in terms of premiums. But you need to have the extra income to make use of the HSA/MSA. On top of that, Its impossible to make informed choices about cost/quaility when no one can actually tell you what something will cost until they give you a bill afterwards. Without cost information you can't compare a competitor and make the choice that suits you.

I don't know if a market based system where individuals are choosing doctors based on costs for basic or preventive care would be ideal. For me, I'd rather stay with one doctor than constantly look for another doctor who might be running a weekly special on check-ups. That kind of model pushes doctors into becoming more like car dealers than health care professionals, IMO.

Edited August 17, 2009 by Col. 'Bat' Guano

[Peikko 1,575]

Added to the fact that 'good health' isn't some luxury item that we can well do without if we can't afford it, nor can we just 'do without' if we find something goes wrong with the insurance and somehow what's happened isn't covered.

Good health isn't even simply in the hands of the 'owner'. Sure, there are conditions that one's actions have an effect on but the whether you get the problems or not is not simply at one's own hands.

How many people smoke based on the notion that 'it will not happen to them'? We know that smoking does cause disease, and we can extrapolate a probability of getting various diseases based on best estimates, but we all have stories of 'uncle bob' who smoked 60 ciggies a day and lived to be 100.