I’m not a healthcare actuary; I am a life & investment actuary.? I did pass my health exam on the actuarial syllabus with a high score, but that was almost 20 years ago.? So, take what I say not as expert opinion, but as reasonably well-informed opinion (I hope).
I general, I believe the US needs to move away from insurance with respect to healthcare.? Let people pay directly for healthcare services, and if they must have insurance, let it be with a high deductible, like $5000/year.? If the government then wants to help the poor, let them pay on the deductible.
Wait.? That’s a non-starter.? First-dollar coverage is the holy grail.? Expensive as anything, but that is the perverted goal.
Rationing takes place in any economic/political system, it is merely a question of how the goods and services get rationed.? Price?? Time?? Need (however defined)?
So, the politicians look to cover everyone, and yet control costs in the medical system.? Covering everyone is very expensive, because for the most part, the worst risks aren’t insured.? Those that would pay the highest premiums on a actuarially fair basis don’t buy/get insurance.
Controlling costs means reducing access, limiting doctor freedom, limiting choices, delaying treatment, etc.? Preventive care is a nice concept, but the gains are negligible.
I say let people be free, and get the government out of the picture.? No corporate deduction for healthcare costs.? No HSAs or other tax-preferred benefits (I have one of those).? Scale back Medicare; it is way too expensive relative to the GDP of the US.? Finally, inculcate a culture that recognizes that we are all going to die, and that certain care for the elderly will not be available unless they can pay for it privately.? We don’t want to prolong an expensive death at taxpayer expense.
An Idea
But with all that, let me propose one idea that might help.? I once proposed a program to improve the banking system of the US through the creation of mutual banks.? I thought, why not try the same idea with health insurers?
So, I started reading the news on the healthcare proposals, and I was surprised to find the idea of co-ops being discussed (also).? Some co-ops have been successful in managing costs and access, others not, as many co-ops have failed.
My thought was this: mutual banks could work versus the big? banks, because scale is not much of an advantage in banking.? Big banks have expense advantages, but they take dumb risks.? With healthcare there is a real advantage to size.? Small co-ops can’t compete against major health insurers.? But maybe a big mutual entity could do so.
Instead of a bunch of medical co-ops, better to sponsor/seed one mutual health insurance company that can cover the whole USA, and challenge the big private insurers.? The new entity would be charged with the tasks of reducing the uninsured, and lowering healthcare costs.? Much better than the co-ops idea.
But, nothing is perfect; we haven’t reached Solla Sollew yet.? If the mutual insurer is supposed to subsidize care, how should they do it?? Many of those that are uninsured are bad risks.? Others who might want to use the mutual company might look for policyholder dividends, particularly if they did not use the healthcare system much.
In the life insurance industry, the best mutuals imitate stock insurers, but adopt a longer-term view of their business.? I would assume that it would be true of a mutual health insurer as well.? So, what benefit would come from a large mutual health insurer?
- Competition against the large managed care providers, lowering prices, kind of like what Southwest Airlines does…
- Skimming the cream of those who are basically healthy, but can’t easily find insurance.
- Congress would gain insight into how difficult it is to lower medical expenses, and how difficult it is to cover the uninsured.
The main reason that Congress is having large problems with this issue is that they are trying to do too much.? They are aiming for costless solutions to a costly problem.? They are looking to restrain access to healthcare to a culture that wants its problems solved now.
This is all a fool’s bargain to me, so let Congress charter National Healthcare Mutual, and see how much good it can do, before it returns to them hat in hand.
Hmm… a large, government-sponsored entity to provide healthcare in competition with the existing corporations. Why didn’t anyone else think of this?
Dave, If you’ll note — I don’t think the Mutual would succeed, but it would stand a better chance than the co-ops idea.
This blog, together with the author’s enormous ego, is dying and losing out to ZH.
C — Care to explain your point?
David may be a lot of things but i find “enormous ego” is not one of them. What the heck is ZH?
I’m confused why you think it’s a good idea that we move away from health insurance all together (you admit it’s a non-starter, but do propose it as the ideal). Certainly having insurance pay for the health care equivalent of an oil change or brake tuning doesn’t make a ton of sense, but almost all people need to be insured against the catastrophic costs that accompany major medical work. Unless we start denying people that care which they can’t pay for out of pocket I don’t see how such a system can work.
Michael, I did suggest buying catastrophic cover, and even having the government pay for some of it for the poor. Being poor does mean that you face tough choices in all of life, and medical care is no different. (I have insurance like that.)
My view is shaped by the differing behaviors between insured and uninsured populations. Utilization gets high for anything where someone does not have to pay. Poor people, and everyone else, should have to pay enough that it makes them think before going to the emergency room, or even to the doctor. The easiest way to keep healthcare costs down is to give people incentives to avoid using the medical system, except when it is necessary.
We have to begin asking what is best for society on the whole, and not what optimizes results for specific individuals… my judgment on that is free the medical system from the distortions of the past, and let it be free, and the rest of us too.
ZH — Zero Hedge, a blog that I think is generally worth reading, and has done some incredible reporting, but that won’t make it onto my blogroll because it is too incautious at times.
I feel like our government is nearly non-functional. Maybe like Bank of America, the US is now Too Big to Succeed (TM). It’s a shame that despite his lovely speeches, Obama is just a continuation of the status quo.
Anyway, what do you think of Karl Denninger’s ideas about health insurance?
http://market-ticker.denninger.net/categories/16-Health-Reform
Fu — His point 1 is loopy. If you have to take everyone at the same price in a state, it makes the healthy subsidize the sick, and creates pressure for the system to be modified in subtle ways.
Consider the Massachusetts auto experience. Two companies figured out how to manipulate a restrictive law to their advantage. The same would happen under Mr. Denninger’s proposals.
His other four points are very reasonable.
I am not sure where to start. Living as German in the US for 10 years I started noticing, that even though I always had access to a PPO I probably do not have catastrophic health insurance. This suspicion was confirmed by http://baselinescenario.com/2009/08/05/you-do-not-have-health-insurance/
But I’ve also noticed that this topic creates emotions by some debaters that I find truly irrational and that scare me. I am glad you (again) leave a reasonable impression.
Now, that said you are right that free services create high utilization. Germany has a dual system, where people essentially have to chose if they want to opt out of the public system and use private insurance at higher service level. This system of being able to opt out is self selecting and problematic in multiple ways – the rich don’t pay into the public system, but still demand too many “free” services from the private insurers, causing waste. (I observe this with my US PPO as well.)
I believe that basic catastrophic health insurance should be available to everyone. (Call it high deductible insurance if you want with a 5k or 10k limit.) But for such a fundamental service one cannot allow self selection. This is the governments playing field. I don’t think truly catastrophic insurance needs to be expensive either, nor would it be easily gamed by patients. (Hospitals with MRIs etc. are a different story.) Any additional “managed care” can be open to private insurances, “health unions”, FSAs or however else people want to deal with the residual risk.
That said, I don’t understand your mutual health care idea.
I’m not sure I understand how requiring a single price subsidizes the sick. We’re all going to be sick. Just not all at once. Requiring one risk pool certainly would reduce the profitability of the industry.
The trouble with the current system is that once you’re sick or out of work you’re pretty much screwed (i.e. recission, constant fraud on the part of the insurers, too small a risk pool). Some insurers routinely deny legitimate claims as far as I can tell just because some people don’t dispute.
Since providing coverage for the eventuality that we’re is the supposed point of health insurance, well….
The mutual idea makes some sense to me. If there’s not a profit movtive then there is less incentive for fraud or recission.
It seems that having very high deductibles would certainly help reduce consumption of relatively low-cost and optional treatments (e.g. “I seem to have a fever, should I go to the doctor or just wait until I get better?”), but it certainly doesn’t have any impact on the set of treatments that are higher cost and not in any meaningful way the patient’s choice. The ability for significantly increased deductibles to reduce overall health care consumption depends almost exclusively on the overall mix of these types of treatments. If we’re only spending 20% of our health care dollars on low cost optional treatments, high deductibles don’t help us much.
Does anyone have any data on what this mix might be? I do not have such data. Though the recent New Yorker article everyone is talking about seems to suggest that doctor’s propensity to prescribe more and more expensive treatments could explain differences in health care spending between geographies.
The tough medicine you prescribe, i.e. having persons pay almost all medical care costs out of pocket leads me to infer that you ( the author ) are probably middle-aged or younger ( under 50 ), employed, and/or well off financially. From that basis, recommending the out-of-pocket approach is an easy and painless choice.
I suggest that a highly competitive medical insurance marketplace constrained but not choked by well-designed structural regulations and tax incentives will help reduce medical care costs and make universal access affordable.
The the out-of-pocket approach is academically interesting, but in my view would cause 20 years of chaos in the medical care industry and inflict severe harm to persons needing medical care.
I disagree. Let the government subsidize the first party payer poor directly. The only way to take costs out of the system is to make people pay for care directly, with catastrophic cover for disasters.
At some point we have to ask, do we want the nation survive or not? Unless we deal with municipal pensions, and the entitlements crisis, the US may not survive. Perhaps a constitutional convention will cancel pensions; hopefully they cancel the Fed as well.