Liberty or Healthcare For All?

Last time we explored how health care has a mix of components, some perfectly suited to insurance, some perfectly suited to universal coverage, some perfectly suited to fee-for-service, and some that doesn’t fit well in any of those. So it would stand to reason that we could break the methods of paying for health care into separate categories, and apply the best payment model to each. That is, for catastrophic external and internal events, we would expect people to buy traditional insurance. For chronic conditions and elective services, we would expect people to pay for everything on a fee-for-service model. For communicable diseases, we would have government-funded universal coverage. We’d still have to figure something out for general maintenance, but it’s not unreasonable to have that be part of the catastrophic internal events coverage, since it should be expected to offset the costs of catastrophic internal events.

But let’s explore this further. The case isn’t as clear as it might seem from last week’s discussion.

Chronic conditions come in two types, congenital and acquired. Acquired chronic conditions do, in fact, have a corresponding form of insurance out there, albeit one few people intentionally carry. Disability insurance is an often overlooked part of Social Security, but some people carry supplementary disability insurance as well. For people of working age, odds are substantially greater of injury causing inability to work than of death. Yet far more people of working age buy life insurance than buy disability insurance.

In any case, we had some spirited discussion about what tradeoffs we’re willing to make in order to produce an ideal system. Not a single person suggested that we should give up universal coverage of communicable diseases, or emergency care access to all, regardless of ability to pay. This could be an artifact of the more liberal lean of the site, but we do have conservatives who participate as well. For the purposes of today’s article, though, I’ll assume that we are in universal agreement of the need for both universal coverage of communicable diseases, and universal emergency care, regardless of finances.

Emergency care access to all is in conflict with the notion of voluntary catastrophic health insurance. That is, the notion of emergency care access to all is more in line with universal coverage, like fire protection services, while catastrophic health coverage aligns with traditional insurance. Just as mixing fire protection coverage with universal firefighting services causes overcoverage, so, too, does mixing emergency care access to all with catastrophic health insurance. Those of us who have health insurance are covered not only via the insurance policy, but also via our taxes; we’re overinsured.

In addition, since emergency treatment is often avoidable through lower-cost general maintenance, it is in the best financial interest of those who cover emergency treatment to also cover general maintenance. So we’re not only overinsured, but we’re overpaying in taxes for the otherwise uninsured.

What about chronic conditions? At the very least, we should have health insurance policies available to us that are similar to disability insurance, in that they cover onset of chronic conditions. I’ve looked for such medical insurance, but it doesn’t exist. In fact, health insurance providers instead drop individual coverage for the very people who develop these chronic conditions. Worse yet, once these people are dropped, they can never be covered for it in the future. So what we have today is similar to the case where an insurer collects premiums on disability insurance, but refuses to make the monthly payments when the insured became disabled. Yet, interestingly enough, the bulk of medical costs come from chronic conditions, which is perhaps why the leading cause of bankruptcy in the United States is medical costs.

Furthermore, untreated chronic conditions (e.g., diabetes or asthma) result in substantial, frequent internal catastrophic medical care. So it is financially in the best interest of insurers of internal catastrophic medical care to also cover chronic conditions. Yet again, those of us with health insurance are overinsured, and overpaying in taxes for the otherwise uninsured.

In other words, if we assume that we want emergency care access to all, it is economically the most sensible to have universal coverage for internal and external catastrophic care, communicable disease coverage, general maintenance, and chronic conditions. To do otherwise is to cost us all more; universal coverage of catastrophic medical care leads to a choice between universal coverage of all non-elective services or paying more money to not cover the other categories of medical care.

We’re left with a decision not of what to cover, but rather how to cover it. Competition among insurers can be beneficial as a means of increasing efficiency, provided a minimum bar of coverage is established to ensure that the financial burden doesn’t fall on taxpayers to handle emergency care access to all. In short, as long as we have taxpayers footing the bill for universal emergency care, taxpayers have a vested interest in either fully funding all non-elective medical services (eliminating health insurance altogether) or mandating a minimum level of private insurance coverage. The simplest approach would be to provide a choice between buying coverage that meets or exceeds the minimum bar, or paying the government an amount of money commensurate with the gap in coverage that would otherwise be paid by other taxpayers.

Such a minimum bar would need to have coverage for pre-existing conditions, and prohibitions against the insurer dropping coverage, which otherwise would result in health care costs falling on taxpayers.

The above mandates present a significant fiscal danger to lower-income families. Health insurance is expensive if we are to maintain the life-at-all-costs level of service to which we have grown accustomed. To handle it in the same way we handle traditional forms of insurance, we need to charge everyone premiums that are irrespective of income. For lower-income families, this would likely result in over half of all income being used for health coverage. While this prevents the uncertainty of bankruptcy resulting from unforeseen circumstances, it rather causes certain bankruptcy from health, housing, and food costs permanently exceeding income. A subsidy for low-income families can overcome this, but at that point we’re playing a lot of financial sleight of hand to disguise the shift to a progressive-tax model, where people pay based on income.

It should be clear by now that I’m describing something very close to the high-level design of the Patient Protection and Affordable Care Act (PPACA). I have described, in broad brush strokes, how we ended up with this model in the legislation.

There is no economic reason for us to maintain the employer-supplied medical insurance. So why aren’t we getting rid of it? Because, when surveyed, most people with employer-supplied medical insurance say that they want to keep it. There are several reasons for this, which I won’t go into here; the point is that it would have been politically unpopular to force people to give up their employer-supplied medical insurance. This was the intent of the “if you like your insurance, you can keep it” message. But as much as it starts to sound nanny-state-like, I still want to get rid of employer-supplied medical insurance. The economist in me recognizes that this is a significant source of inefficiencies in our medical system, due to all of the disconnects among the payers, suppliers, and consumers.

So this is not the most efficient model, but it does amount to a compromise that is on one hand designed to limit the load on taxpayers (at the point of care), while increasing the load on taxpayers (at the point of insurance), and maintaining the strangely popular employer-supplied insurance.

What would I like to see? True open-market insurance, where employers take the existing insurance money and turn it into larger paychecks, would be one reasonable option. I don’t like increasing complexity in the income tax code, but I can see how many would want this to come with a corresponding tax deduction for medical payments. I’ll save my income tax notions for another article. But open-market insurance would need to maintain minimum standards designed to minimize the taxpayer burden that comes along with universal coverage.

I am a fan of a public insurance option, provided there is no thumb on the scale in terms of government subsidy. That is, any public insurance would have to be fiscally self-sufficient. I recognize that there are startup costs, and so there would need to be an initial investment, but the key word is investment. Lend the money to the program, at market interest rates, with an ordinary market payoff schedule, to be paid for by what amounts to an increase in premiums. Beyond that, the public insurance service would have free reign to offer whatever services it wishes, provided all policies meet or exceed the minimum bar, and would be forbidden from receiving supplemental government funding.

Other than elimination of employer-funded insurance, and the public option, PPACA covers pretty much everything I would ask for. The features most often decried by the right are, ironically, the features designed to protect taxpayers. The only way to get rid of those features and simultaneously protect taxpayers is to eliminate universal emergency service.

So I leave you with a few questions, as usual.

  • If you oppose the PPACA insurance mandate, does this mean that you also oppose protecting taxpayers, or do you oppose universal emergency service?
  • If you don’t want health insurance to be held to a minimum bar, does this mean that you also oppose protecting taxpayers, or do you oppose universal emergency service?
  • If you agree with me that employer-supplied insurance is economically inefficient, how do we get to a country that no longer has employer-supplied insurance, given its general popularity?
  • If you are one of the people who loves employer-supplied insurance, please explain why the system is worth the inefficiencies that arise from it.
  • Finally, if you believe I’m setting up false choices, explain how they are false choices and what the real options are.

About Michael Weiss

Michael is now located at http://www.logarchism.com, along with Monotreme, filistro, and dcpetterson. Please make note of the new location.
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19 Responses to Liberty or Healthcare For All?

  1. shiloh says:

    I’m not a health care expert like yourself, but just wanted to say thanx for your well thought out/informed post.Didn’t participate much in the health care debate at Nate’s old blog, other than the public option seemed like a good idea and medicare/medicaid for all or at least lowering the age requirement sounded rational as you say, anything that gets the middle man out of the equation ie the health care insurance shysters was definitely a positive. Been hearing for years that 25% of the health care industry is paperwork er redtape.And of course the lobbyist for the health care industry will fight to the death, pun intended, to keep the status quo er a cash cow for the few as the rest of us get screwed.Being a veteran w/a slight disability always have the VA to fall back on and have to laugh at the Rep fools who want to totally eliminate the VA as in recent years the VA has done a 180 and is now considered one of the better, if not the best health care provider and a leader in efficiency.As always you’re either part of the solution or part of the problem and health care lobbyists and the health care insurance stranglehold on American health care is a major part of the problem.Just a layman’s observation.

  2. filistro says:

    fix bold… … or not?

  3. shortchain says:

    Well, I agree that employer-supplied health insurance (or any health insurance for which the person for whom it applies is not on the hook) is not a good idea.Since the market (or should I say the Market, to give it the proper respect?) has adapted to the current circumstances, it’ll be tough to dislodge (not to mention all the nice health insurance executives who make a fat living off the status quo).About the only way I can see to disrupt the current situation is to either offer lower-price and comparable quality in a competing product (and the only way to do that is through a government-sponsored and probably government-run plan) or to raise the cost of the company-run plan until it’s not competitive.The ACA, from what little I’ve read, seems to do a little of both — but probably not enough to make a difference.But what do I know?

  4. Monotreme says:

    I know this is going to evoke cries of “Socialism!” but I feel like we have reached a crisis point where health care costs are choking our economy.I’d nationalize the health care delivery system.I’d remove employer-provided health care and convert it to a tax, at the same level or perhaps lower if I felt I could get away with it. Those taxes would be used to fund the system.I would meet terrific resistance from insurance companies and Big Pharma. I would fight that resistance by hammering the vagaries of the current system over and over again in advertisements and in the punditocracy over a period of perhaps four to eight years to drive the narrative.Then, when I had the necessary enabling legislation ready, I’d phase the plan in over a period of perhaps 10 years to give those insurance company execs plenty of time to bleed the system dry before they retired to Bimini.

  5. Jean says:

    Michael,re: For the purposes of today’s article, though, I’ll assume that we are in universal agreement of the need for both universal coverage of communicable diseases, and universal emergency care, regardless of finances.I think you may be overly generous in what wingers are willing to concede. I can’t count the number of times I have had a similar conversation with my 10 winger siblings, and their position is always “Everybody already has health care. You can ALWAYS go to the Emergency Room.” To them, it really is no more complex than that. They use this position to argue AGAINST any reform of health care. BTW, all these winger siblings have significant and various Health Savings Accounts and have no interest in their fellow man or what their own “unseen” costs may be. The upcoming ACA changes significantly decreasing the previously unlimited amount of tax-exempt dollars they are able to contribute to Health Savings Accounts or similiar tax-free accounts may force a change of minds, but I have my doubts. There is no rational basis for their beliefs.

  6. Michael Weiss says:

    Jean,See, that’s the point. The Emergency Room is a horribly inefficient and expensive way of addressing health care. That’s how we end up overinsured if we carry our own insurance, or underinsured if we don’t.And it costs us all more to have people be treated that way than if we had it done properly in the first place. That’s why anyone who sincerely cares about the use of taxpayer dollars either doesn’t want universal care at all, or wants full coverage rather than just catastrophic coverage.

  7. Jean says:

    Michael,re: The Emergency Room is a horribly inefficient and expensive way of addressing health care. That’s how we end up overinsured if we carry our own insurance, or underinsured if we don’t.Yes it is. But my winger siblings, and a lot of conservatives like them, really do not see that they have any “skin in the game” since instead of health insurance, they have Health Savings Accounts” and other tax-free options, which are used to decrease their tax liability. And currently those Health Savings Accounts have NO LIMIT on pre-tax contributions (at least until ACA restrictions related to health savings accounts kick in.) Those folks like my teaper siblings truly do not care if everyone else in the country has no choice but to use the Emergency Room as their only health care. They do not see that ultimately it DOES affect them and their costs, regardless where the money originally comes from. Further, it’s a sad commentary, especially coming from these so-called right-wing Christian folks. Really, what would Jesus do?

  8. shiloh says:

    @JeanReally, what would Jesus do?~~~~~That’s what’s great about being Jesus lol as he can do whatever the hell 😉 he feels like doing!Father forgive them for they know not what they do …Jesus weeps!

  9. shrinkers says:

    Employer-provided insurance was a convenient way to get close to near-universal coverage in an era in which most adults had full-time jobs. The employers may not have liked it at first. But in vastly improves the health of employees, and thus, their productivity.One way to wean us off employer-provided insurance, and get to true universal coverage, is”1) Establish a public insurance option. Make it similar to Medicare. In fact, make it Medicare Part E. 2) Add Medicare Part E into the options available in an exchange. Make it available in all parts of the country. Make it available to people who have employer-based coverage, and to people who do not. In other words, make it an option for every person in the United States.3) Since it is a single public option, it is portable. Anyone can carry it anywhere, without any change or modification. If they change jobs, if they move out of state, if they have children, if they retire — no problem, you keep your insurance.4) Have Medicare Part E continue for people people who have lost their jobs. You are insured no matter what, even if you can no longer afford to pay. Set the premiums accordingly.5) Make the premiums a standard amount, based on income. Prices are not higher based on age, pre-existing conditions, area of the country, or anything other than income level (which leads, of course, naturally to point 4) above).5) People on Medicare Part E have no deductibles or copays or coinsurance, free prescription drugs, no annual or lifetime limits. 6) Throw open all limitations on all other insurance. Allow insurance companies to sell across state lines. They would then be free to compete with the public option in any way they wish. If they can offer something better, fine.7) If employees choose to pay 100% of their insurance premium (whether for Medicare Part E option or not), rather than having the employer pay some of all of it, then 100% of that payment is pre-tax.8) Require health care providers to offer the same rates (or lower) to all individuals and insurance companies, including Medicare. This means the Medicare rates would, de facto, become the ceiling, and insurance companies would not be able to complain about unfair competition from the government.9) This is already part of the new law — institute a healthcare tax, which goes for uninsured emergency room care. Make 100% of that tax refundable to anyone who has health insurance.10) Elective procedures are covered at some reduced rate, depending on the nature of the procedure. Everything else is covered 100%.11) Repeal Glass–Steagall. This plan provides immediate universal coverage. It allows people to have private insurance if private insurance companies choose to offer something better. If people don’t like the Medicare Part E plan, they are not required to have it. It addresses the major concerns that people who oppose public insurance scream about (state lines, competition, etc.)

  10. shrinkers says:

    I hit 3000 characters on my last post. I wanted to add –Perhaps 20 years after enacting the above plan, remove the requirement for employers to offer insurance. The tax instituted in step 9) of my plan would cover anyone who chooses to have no insurance at all. Raise the rate of that tax to the point where it is equal to the premiums for Medicare Part E, and use its revenue as part of the Part E funds base — that is, it goes to help cover all expenses, not just uninsured emergency care. This would naturally wean people off the insurance exchanges, and allow them to simply pay the tax and remain insured. Remember that they can always keep their private insurance, and avoid the tax that way, so this would in no way prevent private insurance companies from competing.

  11. Michael Weiss says:

    Shrinkers,I like the idea of a public health insurance, at least in principle. However, it’s hardly necessary as a prerequisite for elimination of employer-provided health insurance.Your sixth point is a good one. These results can be achieved through a modicum of regulation of private insurance policies, national regulation that would eliminate the state boundaries we have today.Better yet, we can have regulations establishing how to address movement of one’s policy from insurer to insurer. This would encourage competition among insurers, as the insured would no longer need to worry about coverage lost due to insurance companies bickering over their liability…while the patient dies.I don’t understand, though, why elective procedures should be covered at all. That runs completely counter to the whole point of insurance, and creates economic imbalances that lead to overconsumption and higher insurance rates.

  12. shrinkers says:

    @Michael Weiss I like the idea of a public health insurance, at least in principle. However, it’s hardly necessary as a prerequisite for elimination of employer-provided health insurance.I agree it’s not a prerequisite. I just think it’s the best way to do it. At least, the best way that I know of.I don’t understand, though, why elective procedures should be covered at all.That’s a fair point, and I would not argue it too fiercely. I’d leave it in my proposal so I have something to bargain away :-)The main concern there is simply where you draw the line on what is “elective.” Are abortions elective? Vasectomies? Reconstructive surgery after an accident? I think all these sorts of things have reasonable answers, but I’d have to see what thise detailed answers are before I sign off on any particular exclusion of electives being a reasonable one.

  13. mclever says:

    WRT “elective procedures”, I would argue that there isn’t a clear line between “elective” and not, and in many instances, covering what is arguably elective would also be in the best long-term interests of the patient’s health. And many cases, a procedure that would normally be classed as “elective” may actually be necessary (or strongly endorsed by medical professionals for the sake of the patient’s health/quality).Are birth control pills elective? Should they be covered? I would argue rather vehemently that they should be.Is a pregnancy elective? Again, with all the birth control options available, it could be argued that it is. So, are we now not going to cover the hospital bills associated with birth?Still on reproduction, what about an abortion? The ultimate “elective” procedure, but I would argue that it should be covered without question during the first 16 weeks, and after that if the mother’s life is in danger. We can go dollars and sense if you’d like, because an abortion is much cheaper for the taxpayer than delivery…Or let’s shift gears to the man who’s having heart problems, one doctor thinks he should get a stint, but another thinks he should wait. The stint obviously would be “elective” at this point, so would it be covered, or do we wait until he’s in the emergency room having a heart attack before we call it “necessary?”The list goes on (and on and on)… Breast implants (for a cancer survivor) breast reduction (to save a patient’s back), plastic surgery (to repair a harelip or burn damage), bunion surgery, acne treatments, rehab for a broken elbow, diagnostic treatments for a condition that is merely painful and not immediately life threatening, preventative treatments for migraines, getting a mole removed, etc. etc. I’m sure you all can come up with more examples. The point is that we need to be very, very clear what we mean when we say “elective”, because many things that are not absolutely medically necessary should still be covered.What about Lasik? For a man who’s so blind that glasses and contacts barely enable him to see six inches in front of his face, but Lasik plus glasses would enable him to see well enough to drive?What about mental health coverage? Visits to a psychiatrist? Medications prescribed? Visits to a counselor? Visits to a counseling group? I understand if you say that “elective” treatments don’t fit in the classical model of insurance, but most health care doesn’t. A huge part of good health care is preventative and/or quality-of-life rather than strictly life-saving. That’s why health care in general doesn’t really fit an “insurance” model.

  14. Michael Weiss says:

    mclever,It’s not just that elective treatments don’t fit the classic nature of insurance. It’s that covering elective treatments creates moral hazards that significantly increase the cost of medical care for everyone.I recognize that it’s difficult to draw the line for what constitues “elective,” but to opt therefore to throw our hands up and say “it’s too hard, let’s just cover everything” is a mighty expensive answer. We will all end up paying more than the health care we are receiving is worth. Is that really the best solution?

  15. mclever says:

    Michael, on your earlier post on this topic, I believe I said that truly elective procedures should probably not be considered part of basic coverage. But I pointed out then (and I’m pointing out now) that “elective” is a very difficult term to define, and I am leery of saying that zero “elective” procedures should be covered, when most preventative medicine could be considered elective. I am concerned about too strict of a definition of elective.I would tend to agree that we shouldn’t cover things that are purely cosmetic, or without medical merit. Plastic surgery to repair a harelip is technically elective, but I would argue that it should definitely be covered. Plastic surgery to puff one’s lips like Angelina Jolie’s probably should not be. Similarly, removing a mole is largely cosmetic, but it also could be preventing skin cancer. So, do we cover it? Or is it only covered after a biopsy confirms cancer, which means it has to be removed first, and the patient has to make that decision without knowing whether they will be able to pay for it or not?Fundamentally, I don’t disagree with anything you say, but I’m worried about how you define “elective.” In part, because covering these “elective” procedures (especially preventative ones) actually may have an eventual cost savings for the patient’s future medical care.

  16. Michael Weiss says:

    mclever, I see that we are in agreement. I was just conveniently sidestepping the issue of how to define “elective” medicine. It was intentional, by the way; I don’t have a good answer, but I’d really like to see what we might be able to come up with.

  17. mclever says:

    Michael,I apologize that it took so long to respond, but defining “elective” is difficult, in part because the science of medicine changes almost faster than one can type.To start, let’s knock off some easy ones: – Anything done in an Emergency Room or as a life-saving measure is NOT elective. I would give doctors the benefit of the doubt and pretty much assume that whatever they do in a triage or emergency situation is necessary. – Preventative or maintenance care is NOT elective. Cancer screenings, annual checkups, vaccinations, etc. Good preventative care = cheaper long-term.- Treatment for chronic conditions is NOT elective. (Insulin, HIV meds, etc.)Now for the gray areas that are technically elective, but probably should be covered or subsidized:- The most controversial: an emergency abortion performed to save the life of the mother–better to save one life rather than lose both. (Sometimes an abortion is not really be a choice.) I would argue that any 1st trimester abortions be covered (perhaps up to 16 wks), and after that only if it is a matter of saving a life. – Reproductive health and pregnancy, including prenatal exams and birth, premie care, C-sections, etc. These are arguably elective–pregnancy is a choice!–but most would agree they should be covered. I would argue that birth control should also be covered. (Hey, an IUD or a lifetime of pills is cheaper than one live birth.)- Plastic surgery that is reconstructive rather than “vanity” surgery is technically elective, but should be covered. This includes repairing birth defects or deformities.- Mental health is NOT elective, in my opinion.- Rehab after an injury is not elective.- Hormone treatments for post-menopausal men and women…- End of life care…I could go on and on, delineating case by case, but that’s not effective as policy, because (as noted earlier) medicine changes faster than policy can be written.So, what would be a more general approach:- After the obvious non-elective procedures, anything medically “advisable” but not necessarily “required” should probably be covered. Exams or treatments where two or more doctors concur with the appropriateness aren’t really elective, either, because I doubt many patients would go against medical advice. OK, but what about unusual or experimental treatments for chronic conditions? Case by case, if (some number of) doctors agree with the treatment, then I would be inclined to cover it at least partially. So, what does that leave as “elective”?- plastic surgery or enhancements for “vanity” reasons- hair removal treatments (again, cosmetic rather than health related)- viagra, cialis, enzyte and the like – stomach banding and other weight loss surgeries, except (perhaps) in patients who have BMIs over 40ish.- life support after clinical brain death.OK, you tell me… What treatments are so elective that they shouldn’t be covered at all? or are there some that should only be partially subsidized?

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