Sunday, July 26, 2009

ummmm, gravy!!

I have been trying and trying to wrap my head around PK's blog post on why markets can't do health care. Tyler has already discussed some aspects of this in his very gentlemanly way, but I want to focus on something different. In the middle of the post, PK says:

"insurers try to deny as many claims as possible, and that they try to avoid covering people who are actually likely to need care. Both of these strategies use a lot of resources, which is why private insurance has much higher administrative costs than single-payer systems. And since there’s a widespread sense that our fellow citizens should get the care we need — not everyone agrees, but most do — this means that private insurance basically spends a lot of money on socially destructive activities."

I really don't understand parts of this. Look beyond the emotionally loaded "deny claims" and "avoid coverage" phrases. How does denying coverage to high risk people use a lot of resources? Does the case for the government plan really turn on eliminating the insurance physical?

I also can't understand what "our fellow citizens should get the care we need" means. Should the "we" simply be a "they" or is it that everyone should get the same care I want for myself?

Then there is the claim that "private insurance basically spends a lot of money on socially destructive activities".

I assume this last bit refers to reviewing claims for their validity and screening applicants. Would a different approach not review claims for their validity? And if applicants are not screened and price discrimination based on risk is not employed, doesn't that simply mean that the low risk people will have to subsidize the high risk people?

Where is the free lunch here?

Are we really considering providing the same policy to everyone at the same "cost"? So a 45 year old overweight male smoker, drinker and couch potato "pays" the same price as a 30 year old female non-smoker, non-drinker yoga instructor? If so, then the scheme is just plain "stupid" (if I can be permitted an Obama quote here).

If rich people really have lower risks than poor people and the insurance is being funded through progressive taxation, then it's kind of a double whammy for them.

But maybe that's just gravy?


The Dude said...

Why doesn't Krugman challenge employer-provided insurance? This system gives us the incentive to use our health insurance for almost every medical procedure. Since Krugman is claiming that insurance costs are so high partly because insurance companies fight to avoid covering claims, then wouldn't removing the incentive to use our health insurance so frequently contribute to lower health care costs?

Tom said...

A government plan would, indeed, not review claims for their validity (usually). That's deliberate; it gives a future politician grounds to claims he's going to eliminate "waste, fraud, and abuse" (empty promise, given the system, but sounds good).

So, if he thinks reviewing claims is expensive, imagine NOT reviewing them!

Of course low risk people will have to subsidize the high risk people. That's why coverage needs to be mandatory. ...and it makes GovCo's into yet another tax that is not called a tax.

Anonymous said...

I am in the army. The other day i went to the army clothing store to buy an extra uniform. The racks had plenty of uniforms except the "medium" and "large" sizes in pants and tops. The store clerk told me that since medium and large were the most common sizes it was very hard for the army store to keep them in stock. So I went off post to a civilian store that sold uniforms. The store had lots of uniforms, including medium and large. I asked the store clerk about how hard it was to keep medium and large in stock. "They sell the best so we make sure we have them in stock". Incentives matter in clothing sales and certainly in health care. Don't pretend government health care will be different than government clothing shops.

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