A number of people have written to express surprise that I "favor" single payer health insurance. Not sure that's accurate. I would prefer personal responsibility, and a competitive market in health care. Modeled after the very successful, constantly cheaper, constantly better quality, service in Lasik surgery and other "elective" surgeries. If someone, anyone, would even consider going in that direction, that would be fine.
Insurance would be for major problems, big surgeries, accidents. You might have an annual deductible of $5k or more. Doctors would advertise prices (yes, PRICES) of standard surgeries.
Does any of that sound familiar? I didn't think so. Instead, we have something really bad. Single payer would be better than what we have. Single payer is also better than ACA, by the way, which is why I am not happy about the decision yesterday.
What we have is this (more below the fold):
1. Effectively zero competition. It's partly ideology, partly simply price-fixing, enforced by government regulations. You have no idea what the price is going to be, and in fact no one can tell you. What you know is that it will cost about 5 times what it "costs," at the margin, to provide the service. Your bill will be unbelievably huge, after a surgery. But "you" don't "pay" it, if you have insurance. Except that YOU end up PAYING, because you also pay for everyone else.
2. Fully socialized medicine. No hospital or emergency room can turn away a dying patient, though any primary care physician can turn away a healthy patient who can't pay. So, suppose I have diabetes...but don't know it. I don't go to a doctor, because it's really, really expensive and I don't have insurance. After a couple of years my toes look funny and they tingle. Then I lose feeling in one foot. Then the end of one toe, after I stub the toe but don't notice the cut, starts to turn black, I finally go...to the emergency room. They diagnose my diabetes...after they remove most of my foot, to save me from the rapidly spreading gangrene. I pay NOTHING for the emergency room visit, the surgery, or the disability benefits I receive for being crippled. All free. All fully socialized. All really, really STUPID. I go from being a productive member of society, with a job, to being a cripple on the dole. All because we have this bizarre idea that we won't pay for health care, UNTIL THE PERSON IS DYING AND NEEDS SURGERY AND WILL NEVER FULLY RECOVER. Then, we are happy to pay, and in fact pay 100% of the costs.
3. Zero cost controls. Rates of increase of health care costs are going up, not down. Health care costs will hit 18% of US GDP this year. Since nobody actually pays, because everybody pays, we have an industry run by rapacious large insurers and drug companies. Many small insurers can't afford to write policies and are getting out of the business. Even though premiums are super high, and rising, small insurers are disappearing very fast. The insurance industry doesn't work, because insurance has to cost at least as much as the care it insures. Without cost controls, it's not clear we can actually afford insurance. But the greater the cost of medical care, the more we all MUST HAVE insurance.
4. In the last 20 years, real wages have gone up about 20%, less than 1% per year compounded. But total compensation has gone up by nearly 90%. In other words, total compensation has almost doubled. Are workers better off? No, they are not. Their wages are stagnant, and they have health care. It doesn't benefit them much that their compensation has nearly doubled, because health care has gobbled up all the increase. All the productivity gains, all the innovations of the last two decades were just poured into the gaping maw of health care. That might be okay, in some sense, but those costs are real on the employer side. I think one of the most important drags on the economy is that wedge between what employers pay and what workers receive. Health care costs, paid by employers, are a huge drag on new hires, and also make employers substitute part time or contract workers to avoid having to pay.
5. Of course, it's worse than that. By tying health care to jobs, and forcing employers to provide health care, we are distorting the wage-benefit mix workers receive. Of course, we also do that through the fact that medical bens are tax-free, but that is not the whole problem. Suppose I am a low-skill worker. My employer is forced to offer health care, which has a certain fixed cost per employee. That means that the worker is able to receive only a much smaller wage from what is left over of the total amount the employer is willing to pay. For me, with high wages, I'm happy to like me some "free" health care. But the worker just starting out has his wage artificially depressed because so much is taken out for health care. (Don't mean literally taken out, because the employer "pays" it. But the pay is wage + compensation, and more compensaton means less wage, no matter who writes the check.) The worst thing is that if you combine the effects of minimum wage laws and mandatory provision of health insurance by employers, it is IMPOSSIBLE for poor people to find jobs. And if they do find a job, they would prefer more pay and self-insure. But they don't have that option under current system OR under ACA.
6. Finally, 25% of Americans have limited or no health insurance. Yes, half of those are by choice, maybe more than half. But 10%, about 30 million, want health insurance but can't afford it. One can say "They can't afford it because they would cost more than they would pay in premiums." And that is likely true. The problem is #2, above. That person who doesn't have insurance, whom we could insure for $5k per year, is going to cost us $25k in surgery, and then $20k per year in disability, for the rest of their lives. How's THAT for "costing more than they pay in," pumpkin?
So, my claim is that single payer is better than the current system, described in 1-5 above. And ACA has many of the same flaws, because it is still focused on employer-provided care. That is NUTS, people. The only things that ACA solves is #2 and #6, and I'm not sure even that will work.
ACA makes #3, #4, and #5 worse, possibly MUCH worse. There are no cost controls, it's employer based, and workers are basically invited to bail out and pay a "tax." But they STILL WON'T HAVE ANY G**D****D INSURANCE! We will still use the emergency room for our "free" socialized medicine provider.
Three things to look at some more, if you want:
1. Matt Welch, editor of REASON, on why Single-Payer
2. My piece for Reason, on costs of care
3. This amazing podcast, by (Republican) William Roper. If you listen to this, and don't agree that single - payer is better than the current system, then we just disagree. That doesn't make you a bad person, it just makes you... wrong.
Insurance would be for major problems, big surgeries, accidents. You might have an annual deductible of $5k or more. Doctors would advertise prices (yes, PRICES) of standard surgeries.
Does any of that sound familiar? I didn't think so. Instead, we have something really bad. Single payer would be better than what we have. Single payer is also better than ACA, by the way, which is why I am not happy about the decision yesterday.
What we have is this (more below the fold):
1. Effectively zero competition. It's partly ideology, partly simply price-fixing, enforced by government regulations. You have no idea what the price is going to be, and in fact no one can tell you. What you know is that it will cost about 5 times what it "costs," at the margin, to provide the service. Your bill will be unbelievably huge, after a surgery. But "you" don't "pay" it, if you have insurance. Except that YOU end up PAYING, because you also pay for everyone else.
2. Fully socialized medicine. No hospital or emergency room can turn away a dying patient, though any primary care physician can turn away a healthy patient who can't pay. So, suppose I have diabetes...but don't know it. I don't go to a doctor, because it's really, really expensive and I don't have insurance. After a couple of years my toes look funny and they tingle. Then I lose feeling in one foot. Then the end of one toe, after I stub the toe but don't notice the cut, starts to turn black, I finally go...to the emergency room. They diagnose my diabetes...after they remove most of my foot, to save me from the rapidly spreading gangrene. I pay NOTHING for the emergency room visit, the surgery, or the disability benefits I receive for being crippled. All free. All fully socialized. All really, really STUPID. I go from being a productive member of society, with a job, to being a cripple on the dole. All because we have this bizarre idea that we won't pay for health care, UNTIL THE PERSON IS DYING AND NEEDS SURGERY AND WILL NEVER FULLY RECOVER. Then, we are happy to pay, and in fact pay 100% of the costs.
3. Zero cost controls. Rates of increase of health care costs are going up, not down. Health care costs will hit 18% of US GDP this year. Since nobody actually pays, because everybody pays, we have an industry run by rapacious large insurers and drug companies. Many small insurers can't afford to write policies and are getting out of the business. Even though premiums are super high, and rising, small insurers are disappearing very fast. The insurance industry doesn't work, because insurance has to cost at least as much as the care it insures. Without cost controls, it's not clear we can actually afford insurance. But the greater the cost of medical care, the more we all MUST HAVE insurance.
4. In the last 20 years, real wages have gone up about 20%, less than 1% per year compounded. But total compensation has gone up by nearly 90%. In other words, total compensation has almost doubled. Are workers better off? No, they are not. Their wages are stagnant, and they have health care. It doesn't benefit them much that their compensation has nearly doubled, because health care has gobbled up all the increase. All the productivity gains, all the innovations of the last two decades were just poured into the gaping maw of health care. That might be okay, in some sense, but those costs are real on the employer side. I think one of the most important drags on the economy is that wedge between what employers pay and what workers receive. Health care costs, paid by employers, are a huge drag on new hires, and also make employers substitute part time or contract workers to avoid having to pay.
5. Of course, it's worse than that. By tying health care to jobs, and forcing employers to provide health care, we are distorting the wage-benefit mix workers receive. Of course, we also do that through the fact that medical bens are tax-free, but that is not the whole problem. Suppose I am a low-skill worker. My employer is forced to offer health care, which has a certain fixed cost per employee. That means that the worker is able to receive only a much smaller wage from what is left over of the total amount the employer is willing to pay. For me, with high wages, I'm happy to like me some "free" health care. But the worker just starting out has his wage artificially depressed because so much is taken out for health care. (Don't mean literally taken out, because the employer "pays" it. But the pay is wage + compensation, and more compensaton means less wage, no matter who writes the check.) The worst thing is that if you combine the effects of minimum wage laws and mandatory provision of health insurance by employers, it is IMPOSSIBLE for poor people to find jobs. And if they do find a job, they would prefer more pay and self-insure. But they don't have that option under current system OR under ACA.
6. Finally, 25% of Americans have limited or no health insurance. Yes, half of those are by choice, maybe more than half. But 10%, about 30 million, want health insurance but can't afford it. One can say "They can't afford it because they would cost more than they would pay in premiums." And that is likely true. The problem is #2, above. That person who doesn't have insurance, whom we could insure for $5k per year, is going to cost us $25k in surgery, and then $20k per year in disability, for the rest of their lives. How's THAT for "costing more than they pay in," pumpkin?
So, my claim is that single payer is better than the current system, described in 1-5 above. And ACA has many of the same flaws, because it is still focused on employer-provided care. That is NUTS, people. The only things that ACA solves is #2 and #6, and I'm not sure even that will work.
ACA makes #3, #4, and #5 worse, possibly MUCH worse. There are no cost controls, it's employer based, and workers are basically invited to bail out and pay a "tax." But they STILL WON'T HAVE ANY G**D****D INSURANCE! We will still use the emergency room for our "free" socialized medicine provider.
Three things to look at some more, if you want:
1. Matt Welch, editor of REASON, on why Single-Payer
2. My piece for Reason, on costs of care
3. This amazing podcast, by (Republican) William Roper. If you listen to this, and don't agree that single - payer is better than the current system, then we just disagree. That doesn't make you a bad person, it just makes you... wrong.
15 comments:
To the extent that health insurance is based on the uncertainty of individual health outcomes, and it largely is, then science is relentlessly condemning it to the trash heap. Genetic assays and the like will ultimately permit sufficient price discrimination to eliminate the very idea of pooled risk. At that point it's either 100% self-insurance (if you can even call it that) or some sort of collective choice to pool support (tax ourselves) for the unfortunate, not to share risk. Either way, life, and death, will get very interesting.
Yes I also have made me peace with single payer. Our Governments already spend enough to cover everyone in country with basic no frills care.
Of course still prefer this:
The state would provide insurance to all Americans but the annual deductible would be equal to the family’s trailing year adjusted income minus the poverty line income (say $25,000 for a family of 4) + $300. So a family of 4 with a trailing year adjusted income of $30,000 would have a deductible of $5,300. A family of 4 with a trailing year adjusted income of $80,000 would have a deductible of $55,300. Middle class and rich people could fill the gap with private supplemental insurance but this should be full taxed. This would encourage the middle class and rich, who are generally capable people, to demand prices from medical providers and might force down costs. They could opt to pay for most health-care out of pocket while the poor often less capable would be protected.
It is not a perfect plan but it might help. Some deregulation of health-care would also help the poor gain access. The gauntlet that Doctors have to run these days to get to practice seems like an anachronism in today’s world. Let smart people get to practice medicine after on the job training. Let the medical businesses decide who is qualified to practice medicine. 12 years of training to tell if my child has an ear infection is overkill and reduces access to health-care for the poor.
Another benefit of my plan is that it would encourage capable Americans (the rich and middle class) to be a counter weight politically against the providers.
http://un-thought.blogspot.com/2009/09/healthcare-compromise.html
I don't argue with most of your points about the preference of single-payer to the Frankenstein of employer-sponsored plans/tax issues we have now, but it seems that the fixation on ER costs for the uninsured is misplaced. What #'s are you basing this off of? I know it's hard to find good #'s, but every time I see someone make the point that uninsured ER visits drive up everyone's costs, I never, ever see a hard number attached.
I found one here: http://www.acep.org/content.aspx?id=25902 which indicates that total ER care represents just 2% of health expenditures. I've seen similar #'s elsewhere. What are your thoughts on the relative size of this problem?
Better.
This feels like a discussion of whether it is "better" to lose left foot in an accident or left hand. You use two hands for so many things! There are good prostheses for missing foot!
Only it's no accident AND the psychopaths doing the cutting are boasting of their moral superiority.
I agree with Mungowitz's #2 thru #6 on why the pre-ObamaCare system is bad and I thank him for providing a counter example to #1 (Lasik surgery). There are others. For example, radiologists in Taiwan are competing with the locals -- in the age of the internet, an X-ray image is wherever you need it to be. Of course, that's mostly for those without insurance, a number now greatly reduced. (When you're not paying, cost is no object!)
Still, the detailed analysis of which disgustingly bad system has worse short term consequences is depressing. A more useful discussion is about which system is harder to escape from. The experience with single payer is bad. The English, French, Canadians, Australians, and others seem to have given up trying -- the majority LIKE their chains. I'm not aware of other systems like ObamaCare, except the short experience with Romneycare. They both seem unpopular, here and now. It's time to fight! Praising Single Payer for being "better" (ugh!) sounds like settling for permanent chains. Eff that!
The idea of pools anybody can enter is a good idea, but the pools should be marketed to the consumers needs. Not having children? A pool with no maternity coverage. Like to ride motorcycles? A pool for bike riders, etc. -- then free up the insurance companies to compete. If the point is to bring more people into the system, then treat medical debt the same as child support or student loans -- no discharge in bankruptcy, or a $10-20k limit. A ten-to-twenty thousand dollar deductible policy is within everyone's reach, and it's an amount anybody can earn in a year if that's what it takes to get your life back (everyone seems to be able to find that kind of money when it's important -- like having to post bail). There are a lot of potential free market solutions, and most require the government to retreat and stop interfering, not take more control. I fear we're sacrificing the good for the perfect.
The wrongness of this post is simply staggering.
Hack economists frequently say "nobody ever washes a rental car" as if they're saying something insightful. Yet every single rental car is clean when you get into it. How can this be? Because--as anyone whose brain function is not hindered by the stupid stuff in econ texts is fully aware--the cars are washed between rentals. "Someone" washes rental cars all the time.
The same principle applies to negotiating the price of health-care services. Hospitals and doctors don't just send insurers a bill. They are reimbursed according to rates determined in advance. The insurer does the price negotiation ahead of time for the patient, just as the car rental company does the washing of its cars.
The BIG difference between "single payer" and "competing payer" systems is this: If Aetna sets its reimbursement rates too low, providers will leave its network. Which will cause Aetna to lose customers to Blue Cross, which will offer a larger network of providers. But if HHS sets reimbursement rates too low, providers have no recourse other than to cut back on their hours--and potential med students decline to work so hard, and just go to law school instead.
When you say you prefer single-payer to the current system, you're saying that you prefer having the government as your agent instead of a private firm.
When you argue that the problem of unreimbursed ER expenses makes single-payer a good idea, you're failing to argue for repeal of the law that mandated unpaid ER care, the "Emergency Medical Treatment and Active Labor Act."
That doesn't make you a bad person, it just makes you...a very odd sort of "libertarian."
I am sympathetic to Jimbo's cause, but there are some unpleasent facts not accounted for. In most (all?) states, there is but one choice for health insurance. (It's odd, this language: "one choice" means there is no choosing.) If you are employed by a company with interstate operations, then your employer chooses for you. Otherwise, there will be just one health insurer, by law, and the state chooses. (A special exception to the antitrust laws was made to allow states to do this.)
I hope Munger's message is "if you think you hate single payer, you should hate the current system more." That point is arguable, but it doesn't raise the same "you're a communist!" ire in his allies.
I don't know what state you have in mind, Tom, but it's not the one I live in. There are many insurance providers here. I know--I've shopped around.
Pre-ACA, I also checked a wide variety of states online, out of curiosity. Every one I checked had multiple insurance companies offering a wide variety of policies.
OK, I was misinformed. I see multiple choices, too. States regulate pricing and coverage, though, limiting competition. They do this under authority of the the McCarran–Ferguson Act, an exemption from antitrust law, dating to 1945.
I presume we agree, Tom, that the preferred way to correct bad regulations is to repeal them rather than to impose even more regulations.
It's sort of a key libertarian tenet.
I got to thinking about your example of the guy with diabetes, so how different is letting that person go with out health insurance from allowing people to drive motor cycles. Motor cycles often take the lives and health of the young.
Also, would over the counter access to diabetes meds and testers solve that problem?
Jimbo,
1) Asking for the "Emergency Medical Treatment and Active Labor Act" to get repealed is a non starter. Asking for things you know won't happen in a democracy is dumb policy analysis.
2) Competing insurers are bad at negotiating rates. Governments are better. For all the hand wringing about shortages if HHS is set to low, all the countries "squeezing" their medical providers all end up with basically the same health outcomes we do. Paying higher prices doesn't necessarily get better results.
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Some anonymous dude said...
Asking for things you know won't happen in a democracy is dumb policy analysis.
This is pretty funny considering that it's posted on a blog run by a guy who got less than 3% of the vote when he ran for elective office.
In any event, I'll take my advice on policy analysis from Milton Friedman, who was quite successful at it.
all the countries "squeezing" their medical providers all end up with basically the same health outcomes we do
Wrong. Spectacularly wrong.
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