US healthcare: a post mortem

[bascule]

I mostly stopped paying attention to the healthcare bill after it became clear that the public option was pretty much dead. I felt it was pretty pointless to discuss the bill until it actually passed, which, well, it did!

 

This is a pretty awesome list of what the bill actually does:

 

http://www.reuters.com/article/idUSN1914020220100319

 

In 2014 (a date which is ostensibly set happen after the 2012 election) the mandatory insurance requirement will kick in. Some will scream SOCIALISM! Others will complain the government doesn't have the Constitutional authority to force you to buy something (a statement I mostly agree with). Still others will go, well I have to buy insurance for my car and that makes a lot of sense. Doesn't it also make sense to buy insurance for my body?

 

What the bill does looks pretty cool and all, but I just wish it included some form of public option that can be expanded in the future to cover more people so we can grow the program at a sustainable pace. The public option would've saved money. I really don't see why there was so much opposition, or how you even oppose something like that especially when the alternative costs more.

 

Oh, and one final note:

 

2011: A new program under the Medicaid plan for the poor goes into effect in October that allows states to offer home and community based care for the disabled that might otherwise require institutional care.

 

COMMUNISM!

[iNow]

What the bill does looks pretty cool and all, but I just wish it included some form of public option that can be expanded in the future to cover more people so we can grow the program at a sustainable pace. The public option would've saved money. I really don't see why there was so much opposition, or how you even oppose something like that especially when the alternative costs more.

Ideological opposition to "big government" overwhelms the perceived benefit of lower cost and better outcome. Simple, really. I realized it today while speaking with my old boss at lunch about the vote last night. There was no logical argument I could make which would overcome his opposition to larger government and the sense that he shouldn't be paying for "free loaders" gaming the system (I think he mentioned people being intentionally unemployed since they knew they'd get healthcare and subsidies).

 

Phi for All made a point in another thread just about 15 minutes ago... and I agree with him fully. Universal healthcare makes the most fiscal sense, and manages to be the most moral approach in parallel.

[Mr Skeptic]

Ideological opposition to "big government" overwhelms the perceived benefit of lower cost and better outcome. Simple, really.

 

Not as simple as that actually. They're just fine with big government telling you what you can do in your bedroom with consenting adults, what you can inject into your body, and in general having big government tell you how to live your life. They just don't want big government doing any form of wealth redistribution.

[ecoli]

Not as simple as that actually. They're just fine with big government telling you what you can do in your bedroom with consenting adults, what you can inject into your body, and in general having big government tell you how to live your life. They just don't want big government doing any form of wealth redistribution.

yes... we all know about the meme that republicans are hypocrites. Please stay on topic.

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In 2014 (a date which is ostensibly set happen after the 2012 election) the mandatory insurance requirement will kick in. Some will scream SOCIALISM! Others will complain the government doesn't have the Constitutional authority to force you to buy something (a statement I mostly agree with). Still others will go, well I have to buy insurance for my car and that makes a lot of sense. Doesn't it also make sense to buy insurance for my body?

 

The distinction is that auto requirement comes from the states. This will probably be challenged in the courts and be an important interpretation of the commerce clause of the constitution.

 

I really don't see why there was so much opposition, or how you even oppose something like that especially when the alternative costs more.

 

The general GOP opposition was partisan only. This bill is actually pretty good for windfall profits of insurance companies. Something you'd think liberals would hate under normal circumstances.

 

I've said this elsewhere, the left claims that the problems with health care industry are corporate profits... but they just handed these same companies 32 million new customers who are spending the gov't's money for insurance.

 

I don't hate everything in this plan. I think non-discrimination against pre-existing conditions is probably beneficial in the long term.

 

But, without making the health insurance market more competitive, you haven't dealt with the problem of cost control. This is definitely some sort of stepping stone towards single payer... because when costs inevitably get out of control, they'll say we need to get rid of private interests entirely.

Edited March 23, 2010 by ecoli
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[Phi for All]

I think a lot of the opposition is to what would be, in effect, the dismantling of an industry. I would normally be opposed to government takeover but if you think about it, health insurance is unlike any other business in the world. Holding the maximum amount of our healthcare dollars until our medical service providers need them is something the government is perfectly suited to do. Giving that money to an industry that needs a small chunk of it for denying claims, a bigger chunk for administration and an even bigger chunk for profit is just ludicrous when you think about it.

 

What other industry gets to control such a huge portion of our monthly wages so tightly? Who else gets to deny us access to the services we've paid for the way health insurance companies can? And what other middleman gets to make the payee wait 90-120 days for payment the way insurance companies make doctors wait?

[ecoli]

Holding the maximum amount of our healthcare dollars until our medical service providers need them is something the government is perfectly suited to do.

You'll have to back up that claim. I'm skeptical about things government claims it's suited for.

 

 

Giving that money to an industry that needs a small chunk of it for denying claims, a bigger chunk for administration and an even bigger chunk for profit is just ludicrous when you think about it.

Even if gov't ran the show, they'd still have to deny claims. They'd still need administration (bureaucracy).

As for profits?

Profits motivate investments which creates innovation. I suppose you could use tax dollars and throw money at R&D, but this would be underestimating the importance of private investment and economic freedom to growth.

 

What other industry gets to control such a huge portion of our monthly wages so tightly? Who else gets to deny us access to the services we've paid for the way health insurance companies can? And what other middleman gets to make the payee wait 90-120 days for payment the way insurance companies make doctors wait?

Health insurance companies suck... but they have no incentive not to suck when there's virtually no competition between them.

 

Let people buy their own personal health care packages from companies that aren't necessarily from their home states. If quality doesn't improve, costs come down and innovation flourish, I'll lament and become a liberal.

[iNow]

Health insurance companies suck... but they have no incentive not to suck when there's virtually no competition between them.

 

Let people buy their own personal health care packages from companies that aren't necessarily from their home states.

 

There are two main issues with this idea that allowing people to purchase insurance across state lines will help. They've been outlined by Krugman, and the linked post is worth the short read, but since I know how you feel about him I'll share the points from an alternative source:

 

 

http://www.healthcarevoices.org/news/articles/selling-insurance-across-state-lines-a-look-at-republican-ideas/

Republicans are proposing to allow policies to be sold across state lines – a New Yorker could buy a Wyoming policy. Since insurance is cheaper in some states than others, this could save consumers money, they argue.

 

There are two problems with this:

 

First, it would weaken consumer protections

. One reason insurance is more expensive in some states is that those states have adopted more rules to protect consumers. Policies have to cover certain services, and consumers can appeal if they disagree when an insurer refuses to cover an operation or treatment. By allowing sales across state lines, insurance companies could simply set up shop in states with the least regulation, avoiding state rules to protect consumers. This has already happened with credit card companies, as Washington Post blogger Ezra Klein recently pointed out:

 

This is exactly what happened in the credit card industry, which is regulated in accordance with conservative wishes. In 1980, Bill Janklow, the governor of South Dakota, made a deal with Citibank: If Citibank would move its credit card business to South Dakota, the governor would literally let Citibank write South Dakota's credit card regulations.

 

Citibank wrote an absurdly pro-credit card law, the legislature passed it, and soon all the credit card companies were heading to South Dakota. And that's exactly what would happen with health-care insurance. The industry would put its money into buying the legislature of a small, conservative, economically depressed state. The deal would be simple: Let us write the regulations and we'll bring thousands of jobs and lots of tax dollars to you. Someone will take it.

 

Second, it wouldn't save much money.

Much of the variation in costs between states isn't a result of regulation – it's a result of the treatment options available; for example, Massachusetts has lots of sophisticated hospitals and specialists. If care costs more in Massachusetts, insurers aren't going to sell Massachusetts residents coverage at Mississippi prices.

 

I happen to live in a state – Maryland – with lots of regulations on health insurance. It requires the insurance companies cover mammograms; some states don't. Among other services it requires, which some neighboring states don't, are: in vitro fertilization; treatment for mental illness, morbid obesity and smoking cessation. If your insurance company says it won't pay for a treatment, you can appeal to the Insurance Commissioner, who gets neutral medical specialists to review whether you need the recommended care.

 

If insurance were sold across state lines, all of these protections would go away. I wouldn't have the choice of a Maryland policy or a cheaper policy from a state with light regulations – all policies would be offered from states with light regulations.

 

But these protections don't add a lot to the cost of buying health insurance. An

actuarial study for the Maryland Health Care Commission

estimates that policies in Maryland cost about 1 percent more than insurance in neighboring states with fewer rights for patients. What drives costs are not consumer protections but differences in prices and treatment options.

[Phi for All]

You'll have to back up that claim. I'm skeptical about things government claims it's suited for.

What other entity could hold that kind of money against claims and not charge a profit? Medicare's admin costs are for the sector that uses medical services the most, and their overall admin costs are still lower than those of a private insurer.

 

Sure, the government would have to deny claims, but not for pre-existing conditions and may be not for experimental procedures and medication. That's the real burn here, when you're on your back laid low by something unexpected, and the insurance you've paid into all your life is suddenly worthless. This is where universal healthcare that is more interested in the health of its citizens will be more effective than a private insurer who will, at some point, decide that there is no more profit in keeping you healthy.

[ecoli]

There are two main issues with this idea that allowing people to purchase insurance across state lines will help. They've been outlined by Krugman, and the linked post is worth the short read, but since I know how you feel about him I'll share the points from an alternative source:

I take the point, but the second source basically boils down to: 1) companies can be corrupt and still skew the books in their favor and 2) costs won't come down.

 

I think 1 is the best point, but I don't think it's an inevitability. It has to be done right, from a policy perspective, but I don't think it's impossible.

 

The second point I don't agree with. He's assuming that bureaucratic rules can't be adjusted and ignores (or doesn't realize) that direct competition will lower costs.

 

These are real concerns, and would have to be addressed if actually implemented, but not good reasons to abandon the idea of increasing market competition (which works in every other market - I think it's hubris to assume health care is really that different that economic logic doesn't apply).

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This is where universal healthcare that is more interested in the health of its citizens will be more effective than a private insurer who will, at some point, decide that there is no more profit in keeping you healthy.

There is still a very important role for government here: enforcing private insurance contracts.

 

This is why I like some of the rules in this new bill. When you enter a legal agreement, it's the job of the courts to enforce the terms of those agreements. A good law should work with market forces for health insurance.

 

Competition should keep prices low and allow insurance purchasers buy the best comprehensive plan they can. Good legal system should let insurance companies know they couldn't get away with denying coverage that they've agreed to pay for.

 

I admit, the problem here is that people who lock into a good plan when they're young are better off (more likely to get sick later in life, and therefore changing plans would be more expensive)... but this is the way insurance always works. I don't have an ethical problem with cost-sharing.

[iNow]

These are real concerns, and would have to be addressed if actually implemented, but not good reasons to abandon the idea of increasing market competition (which works in every other market - I think it's hubris to assume health care is really that different that economic logic doesn't apply).

Some economic logic applies, I don't deny that, however, it's important to note why many of the free market principles your approach implicitly requires simply don't apply when healthcare is involved.

 

I'll summarize why it tends to fail thusly:

 

• You must assume consumers know what products and services they’ll need, when they cannot (healthcare needs are not equivalent to needs of buying a car, or a tv, or bread)
  
• You must assume consumers know anything about the products and services they buy, when they (generally) do not
  
• You must assume that consumers have a choice when they ultimate get ill, and they do not (it's not like they can research cheapest doctors or hospitals prior to getting care after being hit by a car or having a massive heart attack, as an example)
  
• You must assume that private insurers have a motivation to provide good services for free market principles to apply well to healthcare, when they are motivated almost entirely by profit which is antipodal to quality healthcare outcome in most circumstances
  
• You must assume that lowering costs will result in higher consumption, but that is also not something which applies in healthcare coverage (since so many people would just choose not to purchase coverage, but would still need healthcare and have it ultimately paid for by the rest of us as premiums rise to cover the costs of care to the uninsured which is guaranteed them by law)
  
• You must assume that parties have bargaining power to impact the private insurer, when in most cases participants do not (this is why large corporations can generally offer better coverage for cheaper than can small businesses, and also why the exchange is so helpful)

 

That's just a few off the top of my head.

 

 

Also, there are some good write-ups on precisely this below.

 

http://www.who.int/bulletin/volumes/82/2/PHCBP.pdf

This paper is an exploratory and tentative study of the specific differentia of medical care as the object of normative economics. It is contended here, on the basis of comparison of obvious characteristics of the medical-care industry with the norms of welfare economics, that the special economic problems of medical care can be explained as adaptations to the existence of uncertainty in the incidence of disease and in efficacy of treatment.

 

 

http://krugman.blogs.nytimes.com/2009/07/25/why-markets-cant-cure-healthcare/

There are two strongly distinctive aspects of health care. One is that you don’t know when or whether you’ll need care — but if you do, the care can be extremely expensive. The big bucks are in triple coronary bypass surgery, not routine visits to the doctor’s office; and very, very few people can afford to pay major medical costs out of pocket.

 

This tells you right away that health care can’t be sold like bread. It must be largely paid for by some kind of insurance. And this in turn means that someone other than the patient ends up making decisions about what to buy. Consumer choice is nonsense when it comes to health care. And you can’t just trust insurance companies either — they’re not in business for their health, or yours.

<...>

The second thing about health care is that it’s complicated, and you can’t rely on experience or comparison shopping. (“I hear they’ve got a real deal on stents over at St. Mary’s!”) That’s why doctors are supposed to follow an ethical code, why we expect more from them than from bakers or grocery store owners.

 

 

http://www.thehealthcareblog.com/the_health_care_blog/2009/11/why-free-market-competition-fails-in-health-care.html

In trying to think about the future of health care, thoughtful, intelligent people often ask, “Why can’t we just let the free market operate in health care? That would drive down costs and drive up quality.” They point to the successes of competition in other industries. But their faith is misplaced, for economic reasons that are peculiar to health care.

 

More “free market” competition could definitely improve the future of health care in certain areas. But the problems of the sector as a whole will not yield to “free market” ideas – never will, never can – for reasons that are ineluctable, that derive from the core nature of the market. We might parse them out into three:

1. True medical demand is wildly variable, random, and absolute.

2. All demand apes this absolute demand.

3. The benefit of medical capacity accrues even to those who do not use it.

 

 

http://www.theatlantic.com/business/archive/2009/10/a-free-market-case-for-the-public-option/28218/

Free-market conservatives and libertarians have made the case that sweeping health care reform, especially the inclusion of a government-run health insurance option, would undermine the free-market for health insurance. They rightly say that, without a free market, there are little or no incentives for promoting innovation or efficiency. The great thing about our system is that the more companies compete for our business, the more they must produce a better product at lower cost, and so on. But this is a fallacy because the health insurance industry is not a free market right now.

 

Something like televisions exist in a free market because consumers, if they don't like any of the new TVs on the market, can simply keep their old one. If they really don't like the market, they can even forgo owning one altogether; it will make you unpopular on game day, but it won't risk your life. Insurance is different. Anyone with a sense of basic self-preservation has no choice but to buy health insurance every single month. You cannot opt out, there are few options to choose from, and it's difficult to know how to price your future risk of injury. So health insurance companies have distorted incentives to innovate or provide a more cost-effective product.

[Pangloss]

So the right's plans tend to fail for one set of reasons and the left's plans tend to fail for a different set of reasons. Why is it that vigilance of one kind is considered more likely to succeed than vigilance of another kind?

[ecoli]

 

• You must assume consumers know what products and services they’ll need, when they cannot (healthcare needs are not equivalent to needs of buying a car, or a tv, or bread)

I don't see how the reforms (or even single payer) will solve this problem. People don't make informed decisions about health care now, and they won't if it's gov't footing the bill either.

 

• You must assume consumers know anything about the products and services they buy, when they (generally) do not

what do consumers know about buying a computer? or where they're fruit comes from? Nothing.

Consumers need more information to make good decisions about care, but outcomes can give them all the information they need to know what kind of care and insurance works and what doesn't.

 

What makes you think consumers will be smarter if they're insurance is being paid for by the gov't? If anything, they'll get away with being even less informed (because why bother putting the effort in if you're not paying). This would tend to make care worse, not better.

 

 

• You must assume that consumers have a choice when they ultimate get ill, and they do not (it's not like they can research cheapest doctors or hospitals prior to getting care after being hit by a car or having a massive heart attack, as an example)

No, but they can shop around for insurance coverage before hand. This point has little to do with why health care is expensive and why insurance markets are not competitive.

 

 

• You must assume that private insurers have a motivation to provide good services for free market principles to apply well to healthcare, when they are motivated almost entirely by profit which is antipodal to quality healthcare outcome in most circumstances

This is economic nonsense. Profit is the motivation for providing good services, except when consumers don't have options (and they are forced to buy insurance anyway). I'm afraid current regulations won't be enough to account for this.

 

 

• You must assume that lowering costs will result in higher consumption, but that is also not something which applies in healthcare coverage (since so many people would just choose not to purchase coverage, but would still need healthcare and have it ultimately paid for by the rest of us as premiums rise to cover the costs of care to the uninsured which is guaranteed them by law)

This makes no sense... If prices for good health insurance came down, people would opt for better insurance rather than crappy "emergency room care" (which I *think* is what this is talking about, though it's not clear at all).

 

Basically this point says that lower cost won't result in increased consumption, because people won't buy care. It neglects the high costs as a reason people aren't buying care in the first place.

 

 

 

• You must assume that parties have bargaining power to impact the private insurer, when in most cases participants do not (this is why large corporations can generally offer better coverage for cheaper than can small businesses, and also why the exchange is so helpful)

So what? If big insurance companies can save us money, how is that an argument against private care?

 

Right now, comsumers have no bargaining power because they have no leverage. In other words, it's hard to change insurance companies, so they can do whatever they want.

 

I don't see how this problem is solved with single payer or the reforms. In both cases, you haven't made it easier to shop around. With single payer, the only leverage you have is in the voting booth, and that's less powerful than dollars, AFAIC.

 

 

________________________________

 

The main problem I see is this. If you insist that consumers are too dumb to buy their own health care then you either need sweeping gov't bureaucracy and don't let people make their own choices (the big assumption is that bureaucracy will be more efficient and produce better outcomes over the long term) or let consumers make their own uninformed choices and realize that prices are going to sky rocket.

 

Consumers are certainly dumb, but I don't think outcomes will be as bad as feared. I'd rather see what consumers and companies do in a competitive market any day.

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here's an interesting post by Tyler Cowen about the subsidies of the bill and what it means politically: http://www.marginalrevolution.com/marginalrevolution/2010/03/how-the-bill-will-evolve.html

Edited March 23, 2010 by ecoli
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[pioneer]

Back in the 1970's there was a fad called the pet rock. Essentially an entrepreneur came up with the idea of selling "rocks" as pets. It sounds silly, but with good marketing this became a cultural hit.

 

Although this was meant for children's fun and entrepreneur profit, because it became a fast moving fad, there was eventually pressure among the children to get on board. One did not want to be the only child without one.

 

With supply moderate and demand amplified the way it was, demand exceeded supply, until it was hard to find pets rocks. Many children were pained by the prospect of being left out of the fad. Their mother then felt their pain and made an extra effort searching for pet rocks in all the stores. What had been only a fun fad became an almost perceived necessity. The mothers who could not help relieve the anxiety of their child, passed on their anxiety to their mates.

 

Back then males were more masculine mined such that common sense and practical mindedness allowed them to keep a cool head. Dad came up with a practical solution, why not get a rock from the yard. The entire fad is just a rock one pretends is a pet. But to mother and child, that would never do, since it had to be a genuine pet rock. With common sense, trumped by the social movement, there was social anxiety.

 

If you go back to that time, there was also health care. But it did not have the irrational necessity of today. The new medical pet rock would takes many more decade until culture was irrational enough.

[jryan]

It's interesting to contemplate the impact of this bill if the Supreme Court finds that the mandatory purchase of health care is unconstitutional. Without that one requirement this new program gets a good deal uglier.

 

With no mandatory purchase of insurance, and no denial for preexisting conditions, there is absolutely no reason for a healthy person to pay for health care insurance while they are healthy. Likewise, there is no reason for them to keep the insurance after they are cured.

 

I personally keep my health insurance I have for catastrophic coverage, but for the most part my insurer pays maybe $1000 a year for doctors visits for me and my wife and two children. I pay $12,000 a year for the coverage. It would be cheaper for me to simply pay the doctors the $1000 and pocket $11,000 and simply apply for health care coverage when one of us winds up in the hospital.

[iNow]

I don't see how the reforms (or even single payer) will solve this problem. People don't make informed decisions about health care now, and they won't if it's gov't footing the bill either.

But that's moving the goalposts, ecoli. I was providing some examples of why the free market approach is limited when dealing with healthcare. My points were not presented as an attempt to defend the current reforms or the single payer system.

 

 

What makes you think consumers will be smarter if they're insurance is being paid for by the gov't?

Where did I say I thought that? I was talking about limitations to using free market principles as a method of controlling costs when dealing with healthcare.

 

 

No, but they can shop around for insurance coverage before hand. This point has little to do with why health care is expensive and why insurance markets are not competitive.

Again, though... There is too much uncertainty and absolutely no way to predict what they will need. Consequently, by definition, they cannot make an informed choice about what level of coverage is appropriate for them and their family. The WHO link I shared above does a better job than I can at elucidating these issues.

 

 

This is economic nonsense. Profit is the motivation for providing good services, except when consumers don't have options (and they are forced to buy insurance anyway).

I understand your point, but am unsure you're grasping mine. Profit is wasted money in healthcare, and profit is maximized by denying care and raising premiums, ultimately leading to worse coverage for people who need it.

 

This is an ideological thing, and I appreciate that you and I likely come down on this differently. I think healthcare is too important and too distinct in circumstance to be treated like a normal business having normal profit motives. I also am completely unwilling to accept that 50-60% of all bankruptcies in our country result from medical costs, and that 80% of those who went bankrupt due to medical costs actually HAD existing insurance coverage.

 

I appreciate your stance, and accept your challenge to this particular bullet point. I also concede that my use of it is ideologically based. My other points, however, stand on their own.

 

 

I'm afraid current regulations won't be enough to account for this.

Again, I was not posting to support current regulation. I was talking about limitations to using free market principles as a method of controlling costs when dealing with healthcare.

 

 

This makes no sense... If prices for good health insurance came down, people would opt for better insurance rather than crappy "emergency room care" (which I *think* is what this is talking about, though it's not clear at all).

I agree, but the point is that lower costs won't motivate most healthy people to purchase insurance in the first place. While lower costs are good, not cost is as low as no insurance whatsoever... zero cost.

 

 

So what? If big insurance companies can save us money, how is that an argument against private care?

ecoli - again... I was not arguing against private care with my points. I was talking about limitations to using free market principles as a method of controlling costs when dealing with healthcare.

 

 

I don't see how this problem is solved with single payer or the reforms. In both cases, you haven't made it easier to shop around. With single payer, the only leverage you have is in the voting booth, and that's less powerful than dollars, AFAIC.

As per the above, you are moving the goalposts.

 

 

 

The main problem I see is this. If you insist that consumers are too dumb to buy their own health care then you either need sweeping gov't bureaucracy and don't let people make their own choices (the big assumption is that bureaucracy will be more efficient and produce better outcomes over the long term) or let consumers make their own uninformed choices and realize that prices are going to sky rocket.

I insisted no such thing. I was talking about limitations to using free market principles as a method of controlling costs when dealing with healthcare.

 

 

I'd rather see what consumers and companies do in a competitive market any day.

I understand.

[Cap'n Refsmmat]

Back in the 1970's ... culture was irrational enough.

 

Please stay on topic. Or, if this is on topic, please be more obvious about it.

[iNow]

It's interesting to contemplate the impact of this bill if the Supreme Court finds that the mandatory purchase of health care is unconstitutional.

My stance is that this will never happen, in much the same way that the requirement to buy auto insurance and the requirement to buy home insurance are not unconstitutional. Those are both mandated by the government, and are perfectly constitutional.

 

We'll see what happens, though. I concede the possibility of being wrong.

[Cap'n Refsmmat]

My stance is that this will never happen, in much the same way that the requirement to buy auto insurance and the requirement to buy home insurance are not unconstitutional. Those are both mandated by the government, and are perfectly constitutional.

 

We'll see what happens, though. I concede the possibility of being wrong.

I thought that auto insurance requirements were issued by the states, which are not necessarily constitutionally restricted the way the federal government is. Is that not the case?

[Phi for All]

Does anyone know if a future public option is still possible or does this bill preclude the government ever proposing one? That's the kind of thing I worry about in a bill this large and complicated.

[Mr Skeptic]

ecoli:

What iNow (and the folks he is quoting) are basically saying, is that health insurance does not satisfy the requirements of things that can be met efficiently by the free market:

 

Perfect Information

What we have is very, very poor market information -- advertisement would be completely unnecessary and irrelevant, people wouldn't have to spend hours looking through the various policies but would magically know what all of them contain and choose the best one, etc.

 

No monopoly (aka near-infinite competitors offering indistinguishable products)

Each health insurance company offers a different product, and usually has a monopoly on that product. The various policies make each offering a different product, and there isn't necessarily all that strong of a competition between them.

 

Furthermore, switching insurance companies can be nasty as they will refuse to inherit any pre-existing conditions, not to mention the bother of finding a better choice.

 

Rational consumers

Nope, consumers buy based on poor knowledge, are influenced by advertising, and don't always read every single word of the policy to make sure that it is a good one. Price is the one thing that is easy to compare, but frequently the low price comes at the cost of certain coverage.

 

Also, you talk of the companies wanting to improve quality as a means to gain customers. This could not be further from the truth. It is the perception of quality that matters. One of the things about health insurance is that for the most part people will be satisfied getting very little of their money back, but the few who really need it happen to be extremely expensive. If the choice is between spending millions on one person's healthcare (and note that they might die anyways), or spending those millions on damage control and advertising, which do you think would most improve the perception of quality?

[ecoli]

But that's moving the goalposts, ecoli. I was providing some examples of why the free market approach is limited when dealing with healthcare. My points were not presented as an attempt to defend the current reforms or the single payer system.

Ah. Then it seems I may have misrepresented you in some my responses. Apologies.

 

 

Again, though... There is too much uncertainty and absolutely no way to predict what they will need. Consequently, by definition, they cannot make an informed choice about what level of coverage is appropriate for them and their family. The WHO link I shared above does a better job than I can at elucidating these issues.

I have to think about this

 

 

I understand your point, but am unsure you're grasping mine. Profit is wasted money in healthcare, and profit is maximized by denying care and raising premiums, ultimately leading to worse coverage for people who need it.

Right... but this is only true if consumers are forced to stay with their company. I'll present my point this way for simplicity's sake:

 

Profits = income from premiums - payouts

 

From looking at this, you appear to be right. Raising premiums but denying payouts to cover costs results in more profit.

 

The thing you're missing, however, is that these aren't independent variables. If a hypothetical insurance company refused to make any payments, they'd quickly lose all their business and therefore income from premiums.

 

Profit is motivation to stay in business, but in the insurance market right now, insurance companies can stay profitable without fulfilling their end of the bargain. This is definitely due to institutional and legalize problems, but also because markets are not competitive. If our hypothetical bad insurance company loses it's business, it's because there's a better company out there.

 

In other words, in theory, insurance companies have to be good companies to remain profitable. Denying claims can't keep you profitable forever, because that's a sure way to lose all your business.

 

That's in theory. In practice, consumers are stuck with business that don't have to pay out claims, because there's nowhere else for them to go.

 

 

This is an ideological thing, and I appreciate that you and I likely come down on this differently.

 

I think healthcare is too important and too distinct in circumstance to be treated like a normal business having normal profit motives. I also am completely unwilling to accept that 50-60% of all bankruptcies in our country result from medical costs, and that 80% of those who went bankrupt due to medical costs actually HAD existing insurance coverage.

Me too, but I reluctant to agree that this is a problem with health insurance markets in theory, and not due to "artificially" constructed barriers to competition.

 

I don't think you've said this (but plenty of others have), but they blame free markets for rising costs. It's a hard claim to make because health insurance markets have not been free in a long long time. How do you distinguish these two?

 

I guess we'll see if I eat my words on this, but that would require governments to somehow learn to be good at controlling costs.

I agree, but the point is that lower costs won't motivate most healthy people to purchase insurance in the first place. While lower costs are good, not cost is as low as no insurance whatsoever... zero cost.

two points here:

 

1. I don't see how you're forming your opinion on this one. Why wouldn't healthy people buy insurance if costs came down? I think if most people had lower cost catastrophic insurance available to them, they'd buy it and choose to pay for normal, routine care out of pocket.

 

2. There's no such thing as a free lunch. Zero cost care is not zero cost. If there's free (to the consumer), quality health care available, can't you see how that would be overused and abused... and therefore made very expensive to tax payers?

 

 

Once again, sorry about responding to points you didn't make. I blame the fact that OP is on the health reform bill, but we've once again wandered to ideology and general principles about the health care in general.

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I thought that auto insurance requirements were issued by the states, which are not necessarily constitutionally restricted the way the federal government is. Is that not the case?

 

This is exactly right. And given the way SCOTUS has been voting lately on constitutional issues, it wouldn't surprise me if it gets overturned from the top. Especially if Stevens retires before it comes up.

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ecoli:

What iNow (and the folks he is quoting) are basically saying, is that health insurance does not satisfy the requirements of things that can be met efficiently by the free market:

 

you're talking about properties of how the "market" is. Not how it could/would be.

 

 

If the choice is between spending millions on one person's healthcare (and note that they might die anyways), or spending those millions on damage control and advertising, which do you think would most improve the perception of quality?

I've said this in other threads, that I see clear reporting of health care performance as a potential role for government or some other NGO or non-profit. This would, indeed, be key for a well functioning free market.

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Does anyone know if a future public option is still possible or does this bill preclude the government ever proposing one? That's the kind of thing I worry about in a bill this large and complicated.

 

As far as I know, it's still very much on the table. I think it will be proposed if these reforms are too expensive (and the poles can continue to spin rising costs against the free market) and/or if these reforms get overturned via commerce clause and the dems still have their shit together.

[iNow]

I thought that auto insurance requirements were issued by the states, which are not necessarily constitutionally restricted the way the federal government is. Is that not the case?

 

All state laws and regulations must not conflict with the constitution or any federal laws as per article 6 clause 2. I contend that the challenges made about constitutionality will all be deemed without merit and little more than political expression.

[ecoli]

All state laws and regulations must not conflict with the constitution or any federal laws as per article 6 clause 2. I contend that the challenges made about constitutionality will all be deemed without merit and little more than political expression.

 

It's a bit trickier than this. The commerce clause may be in violation because it allows for federal regulation only in interstate commerce. Since health insurance companies are bound to state lines, there's a potential conflict there. (that's what I call irony)

 

Another difference is that state requires people buy auto insurance to get a driver's license. There is no legal requirement to own a license, however (you don't have to drive). This bill would make it illegal not to own insurance... it's not like you can choose not to "own" a body.

Edited March 23, 2010 by ecoli

[iNow]

It's a bit trickier than this. The commerce clause may be in violation because it allows for federal regulation only in interstate commerce. Since health insurance companies are bound to state lines, there's a potential conflict there.

 

Another difference is that state requires people buy auto insurance to get a driver's license. There is no legal requirement to own a license, however. This bill would make it illegal not to own insurance.

Right, but the only grounds on which constitutionality can be challenged is on the mandate itself, and we have existing mandates... ergo, history has demonstrated such mandates to be constitutional.

 

I understand the argument. People concede that the congress has the power to write laws and collect taxes which are intended for the "general welfare" of the populace. However, they get heartburn when congress writes a rule which requires citizens purchase a product from private companies. This is the basis of their contention that this might be unconstitutional. In essence, government can collect taxes and use those revenues as they see fit, but they cannot mandate people become consumers of private products. That point does not escape me.

 

My response to this, though, is that it's shown fallacious by current history. Currently government DOES mandate insurance purchase for autos and DOES mandate insurance purchase for homes. These mandates are at the state level, but state level laws must still exist within the confines outlined in the federal constitution, and the point of focus is on the mandate itself, not what is being mandated. Since these state level laws have been demonstrated constitutional, and within the parameters of the US constitution, my contention is that so too will health insurance mandates.

 

Again, I could be wrong, but I don't think I am. I think the challenges to constitutionality are going to be little more than an effort by states to politically express dissatisfaction and that court will find their cases and challenges to be without merit. We'll see though.

[ecoli]

Right, but the only grounds on which constitutionality can be challenged is on the mandate itself, and we have existing mandates... ergo, history has demonstrated such mandates to be constitutional.

I understand, but I'm thinking that this particular mandate is different enough that it'll warrant it's own review.

 

 

I understand the argument. People concede that the congress has the power to write laws and collect taxes which are intended for the "general welfare" of the populace.

well not everybody concedes this (especially about income tax, but lets not get off topic).

 

 

However, they get heartburn when congress writes a rule which requires citizens purchase a product from private companies. This is the basis of their contention that this might be unconstitutional. In essence, government can collect taxes and use those revenues as they see fit, but they cannot mandate people become consumers of private products. That point does not escape me.

Which is why it seems like single payer would be deemed as "more" constitutional than these reforms.

 

It just seems to set a bad precedent. If gov't can tell you to buy insurance, can they tell you which company to buy it from? It gives lots of new potential power to lobbying groups and corporations.

 

From a practical standpoint, this could be slippery slope paranoia, but who knows what politicians will be able to get away with in the future... as long as it's for the "general welfare."

 

My response to this, though, is that it's shown fallacious by current history. Currently government DOES mandate insurance purchase for autos and DOES mandate insurance purchase for homes.

You're not required to own a car or a home, however. It's not like you can choose to not own your body.

 

Again, I could be wrong, but I don't think I am. I think the challenges to constitutionality are going to be little more than an effort by states to politically express dissatisfaction and that court will find their cases and challenges to be without merit. We'll see though.

 

I agree with your general point, though not with the ideology behind it. There's a practical side of things - we have to realize that forcing people to buy health insurance is far from freedom-stripping communism - but there's the issue of precedence and constitutional interpretation to consider.

 

Lots of things in the constitution are pretty vague and, if this is a line we choose to cross, we have to realize it could have [negative] consequences for years to come.