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Healthy Distinctions

I've done very little thinking about health care policy. I realize that it is important, but every time I've attempted to think about it I've just glazed over. It isn't even that it is intrinsically uninteresting: as a key human concern in the modern world where technology, morality, life and death come together I am hard pressed to think of another subject that objectively ought to be more interesting.

But I haven't thought about it much.

Nevertheless it is a subject of enough importance that you can't help but encounter it periodically if you regularly read blogs with political and social content. And it seems to me that there are any number of quite distinct things which are entangled together in discussions about health care.

One thing to realize is that on average insurance is a lousy deal, on purpose, and that is a good thing. Much like Las Vegas and Atlantic City, it is designed to be a lousy deal on average. That is pretty much its central point. The risks insurance cover are small in probability, but large in terms of financial (and other) consequences. So when we buy insurance we intentionally pay more than we are statistically likely to pay if we didn't buy insurance; but we are protected against catastrophic loss. That is pretty much the whole point to it: when we buy insurance we are betting against the house and hoping to lose. And it is worth it.

Another thing to realize is that modern health "insurance" isn't so much. That is, it isn't mainly insurance. It is more like a collective bargaining organization for consumers which negotiates pricing with health care providers. The standard pricing at a hospital is in my experience many times - literally several hundreds of percent - higher than the negotiated rates paid by the "insurance" companies and HMO's. That is pretty much the only reason my family is enrolled in a group plan. In general I could save a lot of money by just paying directly if I could get the same price the "insurance" company gets. When I buy health "insurance" what I am mostly doing is paying a subscription fee for a service which gets me lower prices than I could get on my own if I paid for each use as a one-off. That still leaves the traditional insurance role - protection against major losses - untouched, but it is the primary use I make of health insurance.

A third thing to realize is that health care for the poor, for those who cannot afford it for themselves, is an utterly distinct subject which has virtually nothing to do with insurance (where we pay more than the actuarial expectation of what we will cost on average for coverage of high-consequence low-likelihood events) or with health cooperatives (where we also pay above actual cost but we have the advantage of collective bargaining as consumers). When things have virtually nothing to do with each other it is usually best to keep them distinct; otherwise we are creating a recipe for obfuscation, gerrymandering, and all kinds of political, bureacratic, and financial dishonesty, confusion, and other shenanigans. That doesn't mean I am against health plans for the poor. But it does mean that if we don't keep them distinct from insurance and health care subscriptions which are in fact paid for by those who use them we are opening ourselves up to corruption.

Comments (10)

You know I have problems with your first thing you realize paragraph. I won't rehash them.

There is a very real benefit provided to the provider from insurance, surety of payment. You can consider your insurance premiums a pre-pay program, but for the provider that payment within 30 days is worth a lot. I realize you aren't writing a treastise on the matter, but there are things of greater consequence that are there for reasons.

The third thing is where we will actually disagree. We have operated under a charitable care model for about 40 years. While expense is a problem, the larger problem is the system is grossly inefficient. From a policy standpoint, we could increase subsidization of poor folks to better enable them to participate in the system. We have already done that considerably. Half of births in my State are covered by the public now. Admitedly I cherry picked that data point; I'm not sure people realize the extent of public provision already.

So what is the other option? The other option is to build a public foundation of care. Think of it like the highway system or like the electric or water grids in a city. You ensure relatively inexpensive access to a public system and let the private sector work off that system. You can have the equivalent of $5000 a month electric bill and I can have the equivalent of a $25 a month electric bill. I get electricity when I never would have paid for the erection of lines given my use; you still get slightly cheaper electric because you can use the existing grid rather than having to create your own massive connection. In essence, build a smooth road system, and I can ride my horse and buggy farther, but you can take you Lexus whereas you couldn't before or at least that far.

Funny, the keywords "we will actually disagree" got my attention, but I couldn't find anything I disagreed with in that paragraph :-).

I think some subsidy of the very poor is necessary, and I don't have any in-principle problem with the product purchased coming from the same vendor (if you will); but as with most things I think it should be transparent.

Think of it like the highway system or like the electric or water grids in a city. You ensure relatively inexpensive access to a public system and let the private sector work off that system.

I think that is tough to do in part because of the complexity of the customer/provider interface. Health care isn't a commodity or utility like electricity or water or (arguably) roads. There are probably aspects of the health care system which are commons (like the electrical grid) and which require some care as commons, as opposed to just properties owned by investors. On the other hand modern services (e.g. the Internet, cable TV, Fedex, etc) have self-funded their infrastructure to a greater degree than in the past, though they arguably are commons too. Few people choose not to have electricity but quite a few people choose not to have health insurance at market cost, and unlike electricity and Internet access this can create public burdens.

In general I don't have any pat answers though, and mostly I'm just arguing for transparency in what we are doing, who is paying, who is benefitting, what exactly is being provided/done, etc.

It is always a let down when one reaches the where-I-disagree part and finds agrrement. Let me try greater clarity on my part and see if we can maintain our agreement. Rather than strictly providing charity, I think a charitable care model creates a two tier system. In Milwaukee one sees this as hospitals are closed in predominantly charitable care areas and hospitals are erected in affluent areas. This is the thing that turned Mark Belling (sometime substitute host for Rush Limbaugh) into a non-believer that markets were the best way to control health care costs. This is because whenever a hospital is constructed prices go up. Part of it is new technology and part of it is duplication of services. While there isn't a great cost difference in having competing MRI teams, there is a significant infrastructure cost of having competing heart catheterization teams. Now I'm afraid I'm burying you in minutae.

I like your Fed Ex example. I as a private citizen have little use for Fed Ex. My work place does have a use for them. Fed Ex uses public airports and roads to provide its services to the people. I wouldn't want them to have to recreate that on their own. If they or the trucking companies were forced to create that infrastructure, I'm confident that my own ability to travel would be significantly impeded because I'm not sure private motorists could come to an agreement on building a network of roads efficiently.

I should mention that I won't be able to stick around for debate. I might add a comment before the thread is done today.

I wish you and yours and the folks at WWWtW a Happy Thanksgiving.

I think a charitable care model creates a two tier system.

I was trying to address that in my last comment with this: ...with the product purchased coming from the same vendor (if you will); .... That is to say, government-assisted purchase of the same medical insurance products available to everyone else might be the right approach for providing for the very poor, in particular to avoid a two-tiered problem associated with things like Medicaid.

But my opinions on particular policy issues aren't fixed. It is more the basic issues of transparent terminology and concepts that are the focus of the post.

Happy Thanksgiving!

I think this post is very clear-eyed.

One problem that the collective bargaining aspect creates is that--or so it seems to me--it drives up prices overall. Take orthodontic care. Most people don't absolutely have to have it for their kids, but they want it. Suppose _nobody_ had dental insurance. Would the orthodontists just go out of business, throw in the towel? Well, some of them probably would. But my own guess is that the price for orthodonics would come down to the point where a lot of the same people who purchease orthodontic care now (paying about half while their dental insurance pays half) would be able to do it then, without the inflationary involvement of the middleman--the insurance company. On a fairly trivial level, something like this happened with the mild allergy medicine, Claritin. At first when it became non-prescription, it was _much_ more expensive than the co-pay that was all you paid while it was prescription. But over the course of about two years (by my estimate) it came down to the point where, at least when it's on sale, it costs about the same as it would with a prescription co-pay.

The problem is that you can't go through that transition period for more important medical care. People would die. But it's in a way unfortunate that we can't put at least more non-urgent things back into a consumer-provider ordinary market system and let the prices work themselves out from there.

(Oh, I see a similar pattern with body work on cars. I suspect the reason it is so much more expensive than engine work is because body work is so often paid for by comprehensive collision insurance.)

The more I see, the more I become convinced that government should NOT be a large, principal part of the solution. (This is not, by the way, an attitude I learned at my father's knee, but is much more recent.) I think that it is often true that poor people's lack of medical care is a great concern of any good Christian (or good person, for that matter). But there are three drawbacks to putting gov. in the driver's seat in getting them that care: first and foremost, gov. doing it means doing it with taxes, which are taken from those who have some wealth they would otherwise have applied in some other way, and (for at least some people) they would have applied it precisely by acts of charity in buying health care for the poor. So the gov. method takes away an act of charity from one who has to one who has not. Likewise, the gov. method takes away gratitude from the poor person who would have received a gift (nobody was ever grateful to the government for a legally-prescribed hand-out, especially after filling out multiple forms to "justify" it). And society loses a needed bonding action-reaction in persons of different situations, where they might have learned to love one another.

Second, although some people who lack health care lack it through no fault of their own, some who lack it do so because of their own poor choices (and many who lack it without their own fault are in need because of the poor choices of their parents). Once we alter the equation by providing gov.-paid care (through insurance or any other mechanism) we alter the natural response-mechanism to poor choices. People are supposed to learn from the unpleasant effects of poor choices. Insulate them from those effects, and you inhibit the learning process, and they continue to make the same poor choices. If some people insist on learning only from the school of hard knocks, then the wise and prudent thing to do is let them get some hard knocks (also called hard love). Do we really want it to be a gov. function to decide who has had enough hard knocks, or who has a valid reason for needing other-paid health care (one not rooted in stupid, short-sighted, or pernicious prior acts)? I didn't think so.

Third, linked to the second, is the skew that gov.-paid care puts on the system economically, as mentioned by others. Once you get gov paying, you create an unbalanced market, which then shifts toward a new balance by charging more for something that all of a sudden is in more demand. The Medicare mess is a prime example. If 85 year old grandpa's knee replacement has to come out of my pocket, I think long and hard about cost-benefit ratios. If it comes out of someone else's pocket, I am much more willing to go ahead for modest overall benefits. It is almost IMPOSSIBLE to set rational standards on how much care Grandpa is "entitled" to through gov, because in reality he isn't "entitled" to care that he cannot pay for. Gov. involvement disguises that fact.

Much better, if possible, to engage a private/ charitable model, (with, perhaps, gov. involvement limited to systematic record-keeping on who is getting aid from whom, disclosure rules, and the like). Given the inefficiency of the gov. model anyway, we could probably achieve just as effective a private/charitable arrangement simply by having a $2 deduction for each dollar given for direct health-care donations (though that still skews the market forces in part).

When FreeMarketUberAlles types make fun of goverment/socialized medicine systems they always talk about UK or Canadian systems.

They never mention France. Is it because France's system is superior to US in most aspects or FreeMarketUberAlles types are ignorant shmucks?
Probably latter.

Why should we have NIH (Not Invented Here) syndrom? Why not just copy a successful systems in France or Germany?

I have some friends who are French - they came over here 12 years ago, and eventually became US citizens. Their expressed opinion is that while they would make use of the French medical system since it was there, they don't think that it is inherently better than what we have here.

What specific differences do they have that makes their socialized arrangement different from Britain's, and why is it so good?

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