Category Archives: Health Insurance
I buy collision and comprehensive insurance on my car, but after talking to my State Farm agent, it might as well be called collision and incomprehensible. With seven layers of coverage, most of it is as clear to me as the details of health insurance are to many others. But it has two aspects I do understand. First, it doesn’t cover gasoline, oil changes, or worn-out tires. Those are predictable, normally affordable consumer purchases. Even if I could buy such coverage, I wouldn’t. It’s not worth the added insurer overhead and profit—not to mention the cost inflation on gas and tires once sellers discover their customers no longer care about price. I’m better off shopping around for reliable service, low price, and credit card convenience.
The other part I understand is the deductible. If my car gets accident damage, I pay the first $2,000 to fix it. Insurance pays the rest. I could get a $100-deductible option, but that costs an extra $183 per year. I’d rather save the money and drive more carefully—even if the two gents who’ve run into me during the past 40 years didn’t. I’m still way ahead.
Health-reform bookmakers currently favor the Senate bill over the House version as bicameral, unipartisan, unconference-committee participants conspire in a C-Span-free White House to extrude their secret sausage. One of many unfortunate consequences of the Senate bill—according to a new report from the government’s own Center for Medicare and Medicaid Services (CMS)—is likely to be a significant shrinkage in the ranks of medical providers willing or able to treat Medicare patients. The Senate’s proposal to insure the uninsured would require Medicare benefit cuts of $541 billion to pay the lion’s share of health reform’s $882 billion ten-year cost. CMS projects that fully 20% of doctors and hospitals participating in Medicare’s Part A inpatient benefit program will become unprofitable as a result. According to CMS’ chief actuary Richard Foster, “Providers for whom Medicare constitutes a substantive portion of their business could find it difficult to remain profitable and, absent legislative intervention, might end their participation in the program (possibly jeopardizing access to care for beneficiaries).”
Death is an unavoidable theme this time of year. Having just celebrated a great religious martyr, we move on to witness last January’s swaddled babe transformed into an ancient, arthritic geezer doomed to die at Thursday’s midnight toll. We ponder the lives of those who’ve passed this past twelvemonth—whether near, dear, or merely famous. And stories like the New York Times’ “Hard Choice for a Comfortable Death: Sedation” challenge us to ponder the process of dying itself. Such is the end of the year and a troubled decade.
Hence comes to mind “Life-Line,” the great Robert A. Heinlein’s first published science-fiction story (1939). In it, the ingenious Professor Pinero invented an apparatus that accurately predicted the exact moment of any person’s death. Although many of Heinlein’s speculative musings later came to pass (waterbeds, rail guns, travel to the moon), this one, thankfully, did not. Such a device (doubtless following a hideously expensive and lengthy FDA-approval process) would cause no end of mischief, including cutting billions from medical costs by simply denying care to people about to die.
This week’s deal on abortion-funding between pro-life Nebraska Senator Ben Nelson and pro-reelection Senate Majority Leader Harry Reid got me thinking about its fundamental economics. You probably know that, to secure Nelson’s essential 60th vote for the Senate’s health reform bill, the other 59 Democratic and independent senators agreed to his Read-My-Lips-No-Federal-Funding-For-Abortions ultimatum (plus an incidental $100 million in extra Medicaid funding for his native Nebraska). According to the deal, the individual states will decide for themselves whether to allow abortion coverage in their respective health insurance exchanges. But any state that allows it must also require that any women who choose it and who receive federal insurance subsidies must buy the abortion coverage separately as an extra-cost insurance policy, or “rider.” Nelson was satisfied that this will force all such women to pay for their abortion coverage with their own—not the government’s—money.
WE DON’T NEED AN INDIVIDUAL MANDATE TO BUY HEALTH INSURANCE: PART 2 – WHAT THE SENATE AND HOUSE BILLS MISS
People will game any economic system for their own benefit—whether medical care or anything else. It is this characteristic human behavior that makes markets thrive while assuring that no alternative, centrally-controlled mechanism will ever match markets’ ability to optimize the creation and distribution of economic goods. The necessary rules and top-down decisions that govern centralized systems can never be sufficiently detailed or flexible to match markets’ indescribably complex and dynamic interactions among millions of consumers, producers, and intermediaries—each gaming the system for his own advantage. No one really understands why this emergent property of human behavior works, but it does.
Thus, we should always seek minimally regulated market solutions for creating and distributing economic goods, even—or especially—in the presence of market failure. Accordingly, enacting health reform to correct the health insurance market failure requires setting up a new regulatory and safety-net framework that reforms the system to allow everyone to purchase (or not) affordable individual insurance while preventing people from killing the market with free-riding adverse selection.
A key requirement of the House and Senate health reform bills is that all Americans without employer or government coverage must purchase health coverage through a new insurance exchange. The reason is to avoid the ravages of “adverse selection” by “free-riders” who wait until they get sick to buy insurance and thereby bankrupt the system. This free-rider problem is at the heart of the market failure I’ve written about that prevents universal access to necessary, affordable health insurance.
In effect, insurance mandates are a required license to breathe. The often heard argument-by-analogy is that it’s no big deal, because we already require drivers to buy auto liability insurance. But driving is a privilege subject to reasonable public safety regulation and comes with the right to abstain—as 100,000,000 non-driving Americans do. Everyone breathes. Also, mandatory auto insurance is to protect the victims of drivers’ mistakes, not the drivers themselves. Car insurance mandates aren’t just irrelevant but also ineffective—14.6% of drivers still don’t buy it (similar to the 15.3% who lack health insurance).
The raging health reform debate on the public option has sucked all the air out of the room on the central question that we should be addressing: How can we fix the insurance market failure that prevents everyone from buying affordable health insurance that covers all medically necessary, otherwise unaffordable care?
The current House and Senate health reform bills try to accomplish something like this by creating an insurance exchange that allows the uninsured to buy coverage (and by expanding Medicaid). But they do nothing to correct the overwhelmingly dominant employer- and government-based programs that constitute the real looming train wreck.
In theory, an exchange or similar mechanism that allows universal insurance access is not just a good idea, but an essential one. But it must be open to everyone, regardless of employment status or eligibility for government coverage. Properly structured, it can be the critical component for achieving an effective, sustainable health insurance and medical care delivery system. Neither of the shortsighted, overreaching congressional bills will yield this result.
The new breast cancer screening guidelines released last week, along with the supporting study, are among the most disputatious medical recommendations in recent memory. Critics on the right charge government rationing, while those on the left suspect an insurance company conspiracy to cut essential coverage. Adding gasoline to the fire is the even more heated health reform debate that has led its combatants to hijack the mammography issue to bolster their own particular views, pro and con.
To get past the politics, I read the study. It is hardly a page turner, but it’s a credible scientific analysis of the available data on breast cancer screening. A key question it addresses is how effective mammography is for women under age 50—an issue that has ping-ponged back and forth across the medical policy community for four decades. In this latest volley, the U.S. Preventive Services Task Force (USPSTF), citing the study, recommends “…against routine screening mammography in women aged 40 to 49 years.” But then it equivocates with, “The decision to start regular, biennial screening mammography before the age of 50 years should be an individual one and take patient context into account, including the patient’s values regarding specific benefits and harms.”
THE PROPER ROLE OF GOVERNMENT IN HEALTH CARE REFORM – PART 3: HOW REGULATED CONSUMER MARKETS WILL SUCCEED
In Part 1, I describe the market failure that has caused all the major problems in our dysfunctional health care system. Part 2 recommends straightforward government regulatory reforms that will correct this failure. Now, Part 3 describes how these market reforms will allow all Americans—finally and sustainably—to get their necessary health insurance and high-quality medical care at less than half of today’s cost. This is not deregulation of health care, but enlightened re-regulation to correct a fundamental market failure that the government and economists have ignored for decades.
The key action is to place America’s consumers firmly in charge with the money and the authority to make their own purchase decisions from insurers and medical providers that will be forced to actively compete with better value—higher quality, better customer service, and lower cost. This also makes consumers responsible for living healthy lives or else paying higher premiums if they don’t.
I wrote in Part 1 that medical care is an economic good. More specifically, it is a consumer good delivered directly to patients, primarily in the form of services. Experience has taught us that the most effective, efficient, and fair way to create and distribute consumer goods and services is through open consumer markets that allow each customer to determine a product’s value before deciding whether to purchase it with her limited available funds. Such value assessments require consumers to consider the answers to two fundamental questions:
- Which sellers’ are offering me products and services that will provide the best quality for my needs?
- Of those best sellers, which offers the lowest price?
In (slightly) technical terms, value equals quality divided by price, meaning that the higher the quality and/or the lower the price, the higher the resulting value. The challenge in getting higher quality, lower priced health care, therefore, lies in creating a consumer market for it. Actually, it means creating two markets, one for health insurance and one for medical services. But if we do the insurance market right, the second will naturally follow.