Friday, March 24, 2017

Hard to say which is worse

I'm not sure which circumstance is the more disturbing, the fact that my health insurance is hanging by the thinnest of threads, or the fact that the only reason I have even that faint hope to cling to is that the freedom caucus doesn't think the AHCA bill is horrible enough.  They want to chip away the requirements that insurance plans provide comprehensive coverage, thereby fragmenting (and hence weakening) the market even further.

Let us be clear: the individual health insurance market cannot be made viable without a government mandate.  This is because there are structural features of health care that make it fundamentally unlike other insurance markets.  When insuring an asset like a house or a car, the size of the potential loss is bounded by the value of the asset.  If your house burns down that doesn't make it significantly more likely that your next house will burn down too.

Health care is different.  The cost centers are much more predictable.  80% of the cost goes to taking care of 20% of the population, mainly the elderly and the chronically ill.  Reducing costs is easy: just cut those high-cost people lose and let them suffer or die.  And that is pretty much the Republican plan, though of course they don't market it in those terms.  But that is the net effect: without mandates, insurers will not -- can not -- cover the old and the sick.  It would be economic suicide.

This is not really about insurance, this is about what kind of country we want to be.  Insurance is just the mechanism that we use to implement policy.  The policy decision we have to make is: do we force the 80% of healthy people to bear the high cost of taking care of the 20% of old and sick people, or do we let those people suffer and die and their families go bankrupt?  Neither one of those is a particularly pleasant prospect.  Unfortunately, those are our choices.  "None of the above" is not an option.  (There are other things we can do to lower the cost of health care, like banning tobacco and refined sugar, forcing people to exercise, etc.  But those are not likely to be very popular options on either side of the aisle.)

The problem is that when you are young and healthy it is hard to see the percentage in allowing the government to take a big chunk of your hard-earned cash to take care of old sick people whom you don't know and likely will never meet.  Why should you care about them?  Well, because some day you will be one of them.  Even if (especially if!) you don't get sick you will definitely get old.  It happens even to the best of us sooner or later.

If you, like me, want to live in a country where we do not throw the old and the sick and their families under the bus, please take a moment to contact one (or more!) of the congresspeople who can actually move the needle on this and urge them to (continue to) oppose the AHCA, especially if you happen to be one of their constituents.  There really is a problem that needs to be solved here, but the AHCA is not the way.

4 comments:

Don Geddis said...

Yeah, your post here sure sounds reasonable ... but government interference in the health care market is an order of magnitude more convoluted than you are suggesting here. Obama's ACA is not a straightforward response to your observation about mandates and 80/20.

ACA plans require many, many conditions to be covered that do not fall under your "old and chronically sick" description. Many people view "health insurance" in a way that the word "insurance" doesn't really apply: what they really want is "free health care", which means the plan pays for all health costs. Even regular, routine, and easily predicted ones. Plus there is never a cost/benefit analysis: if medical science invents a procedure that costs $1 billion, and extends your life by 25 years, what is supposed to happen? Is it "immoral" that only rich people can afford the procedure? When poor people don't get it, and it isn't covered by insurance, is this a "market failure"? Not to mention decades of tax breaks for employer-offered health benefits.

I would be in favor of a plan like you are describing: mandatory enrollment, catastrophic coverage of chronic illness and end-of-life care. But neither the ACA nor the AHCA really has all that much to do with such a hypothetical plan.

Ron said...

> Many people view "health insurance" in a way that the word "insurance" doesn't really apply: what they really want is "free health care", which means the plan pays for all health costs. Even regular, routine, and easily predicted ones.

Sure, there is a reasonable argument to be made for that: not covering routine items gives people a perverse incentive to forego them, which results in higher costs overall. It's the same problem we face with our infrastructure. Routine maintenance costs money in the short term but pays dividends in the long term.

> Plus there is never a cost/benefit analysis: if medical science invents a procedure that costs $1 billion, and extends your life by 25 years, what is supposed to happen?

This is the crux of the matter, that we are not having an honest discussion about this core issue. But even that is the Republican's fault. They made it impossible to talk about cost-benefit analysis the minute they started talking about "death panels." At least the Democrats made an honest effort at solving the problem. I think you have to give them credit for that even if they didn't come up with the ideal solution.

Don Geddis said...

"not covering routine items ... results in higher costs overall"

That is indeed sometimes true, but in those (not typical!) cases, government regulation is not required. For example, many insurance plans choose to cover annual flu shots, even though they aren't required to, much for this reason. If insurance companies are covering the catastrophic cases, and preventative care really does avoid "higher costs", then the companies already have all the incentives they need.

The problem, of course, is that people want routine costs covered which (typically) don't turn in to catastrophic results.

"At least the Democrats made an honest effort [death panels]"

I agree. That one (unfortunately effective) piece of persuasion by Sarah Palin made me the most angry of anything that happened when the ACA was being debated. That caused more harm than almost anything else.

The model was already out there. Yes, we could design some ideal single-payer thing. But Oregon had the brilliant idea of separating funding from medical priorities. One group would decide how much money to devote to (government-provided) health insurance. A completely separate group would rank all possible medical interventions in priority order. (Is a liver transplant for an alcoholic less worthy than for a healthy person? Then make two separate line items, and put them at different points on the list.)

The key is that nobody made any explicit choice of, we will definitely pay for A, but we won't pay for B. Whether a medical situation gets paid for, is only the result of the intersection from the priority list, and the total amount of funding. Beautiful.

O. said...

"The problem, of course, is that people want routine costs covered which (typically) don't turn in to catastrophic results."

I don't think this is true at all. I don't think most people in and above the middle class have a problem with reasonable routine costs.

There are (at least) two problems somewhat related to what you said:
- The average consumer has little opportunity or ability to shop around for major "routine" medical issues, like giving birth, MRIs, etc.
- The average consumer doesn't want major unusual medical issues to bankrupt them.

Neither of those resemble what you described.