Not to say your preference is worse than others but it suffers a few problems too.
- people will have an even greater tendency to avoid preventative care and low cost early interventions that might be cheaper in the long run.
- someone has to decide which items are high cost and which are not. If this varies based on each person's ability to pay it gets rather complicated, especially when some have lots of separate conditions, events, and treatments.
I seem to remember that 50% of my lifetime health costs will be in the last 6 mo of life. Having a planning horizon of less that 2 decades maximum I made a comment about a decision to give a big hunk of resources to our child that is now unemployed. He would get it anyway when we die, but now would be more useful, but our probability of being short of retirement funds (not a civil servant with a cola protected guaranteed retirement) would increase. If we run short the main losers will be the medial providers cheated out of turning me into a "cash cow" being milked for an extra few month of a miserable existence. The value of that last 6 mo is not that high in most cases and may be a negative value to the individual.
Here's something I've always wondered about reading your views on health care. Suppose you (Arnold) had more egalitarian values, and you felt it was morally unacceptable for the government to permit a situation in which some people can't afford moderately expensive life saving treatments like chemo. What would you consider the best possible system compatible with those values?
1) Singapore does have a lot of beuracrats looking over peoples shoulders. The government regulates the hospitals. They are just really good at it.
A key in the Singapore plan is high forced savings. You aren't allowed to be one medical bill away from bankruptcy, that would be irresponsible.
It's also unclear how Singapore would deal with an entrenched underclass (that never makes money to put away into such accounts and has poor health). Obviously Singapore doesn't have such a thing for various reasons, but the west does.
2) A lot of plans these days have big deductibles and coinsurance. Your employer plan is likely a High Deductible plan with an HSA.
My understanding is Obamacare plans tend to have decent sized deductibles, but the premium is almost entirely subsidized by the government for most people.
For healthy people not a big difference. For people with pre-existing conditions it basically means that your yearly health expense is whatever your maximum out of pocket is.
First dollar coverage is mostly about subsidizing people with pre-existing conditions through the medium on "insurance". If it were really insurance the sick would pay higher premiums or have a different benefit structure, but people HATE that idea.
With Medicare it's complicated. Medicare Advantage works on a STAR rating system. If you get good STAR ratings you get a lot more money from the government. But a big component of the STAR ratings is member surveys. In CMS's infinite wisdom is does the surveys between March-Jun, right after most people had to pay their deductible at the beginning of the year. So there is a lot of pressure to eliminate deductibles because of how they impact STARS.
It's the same story with medication adherence. High cost shares on meds represent a potential discontinuation point in adherence, which hurts STAR ratings.
With traditional Medicare you actually don't have catastrophic coverage. Theoretically you can pay 20% forever. So most people buy Med Supp. Med Supp has to conform to these letter structures and really some are dominant in the market. Generally they turn Medicare into first dollar coverage.
With Medicaid they just get every damn thing for free, even their rent and phone bill.
"I proposed a system that would greatly increase the share of medical services that people pay for themselves. They would only be insured against expenses that are very high relative to their ability to pay for them. I call this providing insurance only for the very poor and/or the very sick."
This sounds like a great idea: align the incentives. The consumer (or patient, if you will) is the only person in the system who has the incentive to seek both the best health outcomes and the lowest feasible cost. And it might very well help both health outcomes for most people and cost.
However, it's not likely to help much with cost, for the reason you noted in the beginning: 50% of the costs are spent on 5% of the people, and most of the rest of the cost is spent on the next 10% of the people. If you think these 15% of the people can pay for their own costs, then there isn't a need for insurance at all, except maybe for the 1 or 2% of people who have truly enormous costs.
Otherwise, most of the spending will still come from third parties, and we'll still have the problem of misaligned incentives. We won't even save on insurance company overhead, because people who pay their own bills will still have to send their bills to the insurance company to apply against their deductibles, just in case they end up with enough expenses for the insurance to kick in.
Being sick is a combination of genetic & environmental (bad) luck, and individual decisions (like over-eating, under-exercising, experimenting with drugs & alcohol & promiscuous sex).
It's not fair that some are more healthy than others - and there is no "just" solution to this unfairness. Even blaming God and becoming an atheist doesn't increase cosmic fairness - tho I think many young atheists have such belief tendancies.
Like the perennial deserving vs undeserving poor, there are sick folk whose lifestyle choices mean they don't deserve so much gov't / forced taxation of others / support.
Not quite mentioned here, as usual, is the need for more doctors, which means we need more medical schools. More doctors allow more alternative choices. It would be nice to have some doctor based / HMO orgs that are legally allowed to differentiate on med insurance premiums based on all known tests including lifestyle, weight, location as well as sex, race, age, & prior conditions. I'm imagining a state "unregulated" HMO combined with Universal Basic Health Care Insurance vouchers so that most careful & responsible folk get quite good care at lower costs, with the more problematic & more often sick folk getting more gov't benefits that are politically discussed.
I also think the US gov't Tax Forms should have a one page explanation of gov't expenditures, where every program which absorbs at least 4% of the prior year's spending was listed, so more folk have stronger knowledge about how much the Feds are spending on what, now. We should have a lot more transparency in gov't expenditures.
This was a really insightful essay, but I want to push back on this.
"In a typical health insurance pool, 5% of the members will account for 50% of the costs. If you are the Minister of Health, you cannot afford (politically) to spend half your budget on 5% of the voters – many of whom are too sick to even go vote."
This isn't as large a problem as it seems for rich democracies because there is a risk that you or, more importantly, your family members could become part of the 5% in any given year if you get an illness or when you get older. Maybe this results in undertreatment of health issues for the underclass (homeless, mentally ill, etc.) who are unlikely to vote or have close family members and friends who vote.
Lots of quite helpful replies here. But one big thing they don't address is control-freak-ism. Having a nationalized monopoly health service may potentially be the most efficient approach to insurance, but it unfortunately opens the door to unlimited paternalism, backed by fines or loss of coverage for people who don't exercise or who smoke or overeat. I couldn't live in a country that imposed that sort of tyranny.
If we are discussing 'things that we probably cannot get politically' -- Set up a way to fund your healthcare, say via VAT. This is a special charge, not something that comes out of the general budget.
You want this to be sized for 'the optimal number of patients to have in your potential patient group'. A great many bad things have happened when somebody proposes 'we should merge x and y for reasons of efficiency' and then discover that this may have made some providers richer, in terms of patient outcomes things are worse because if the group is too large, you are less efficient not more. This is probably related to the communications cost in Brooks' *The Mythical Man-Month*, but there could be other reasons -- for instance lack of competition. There is quite a bit of organsational theory on the optimal size of organisations, and we want to use this knowledge where we can.
So BigCity could have maybe 3 competing organisational units, and all of RuralFarmland have 1 and that might be the best pragmatic outcome. RuralFarmland might be unhappy that there isn't enough competition, and BigCity will be full of people who complain that patients in group A are better served than in group B, who instead of using this as a stick to demand that group B do a better job, instead want to merge the two so that everybody can get the same level of treatment, even if it is worse than what either A or B are getting now.
But you then elect people to the medical governance board. Nice general election thing. Do it every 4 years. You get public oversight by elected officials whom the public elects based on their election promises about how to allocate the resources to best promote public weal and heath.
And the way to improve it is "No Government?" And what is the best approximation to "no Government" right now?
Pace Kling, I am not too worried about adverse selection -- I do not think individuals KNOW that much more about their probabilities of illness than insurers so I think tax credits for individuals to purchase insurance from companies who would have some incentive to push for cost-effective treatments would be an improvement on the current system.
Let’s not confuse Government with governance which is self-government within a framework of the Common (discovered) Law, shared morals, values, standards, manners, voluntary exchange which rests on specialisation and division of labour. Rule of law, enforcing the law does not require Government and can be done by private or community organisations - elected/hired sheriffs, for example. Markets are primarily controlled by reputation and consumer choice. (By the by: the British King has less power, that is to say none, than the US President.)
The preface to the Wycliffe Bible contains the mis-quoted instruction: THIS BIBLE is for the Government of the People, by the People and for the People. Taken in context with the first two words left in, the meaning is quite clear. The Bible is a rule book, with morals, values and examples, and provides the means for a sovereign individual to be self-governing with no Earthly power above them. It is not a justification for so-called “democratic Government” and warfare to impose it - Abe pulled a fast one there.
This was the Protestant ethic of individual responsibility, opposing the collectivist, authoritarian Government model of Catholicism.
You don’t think individual know about the probabilities of illness, but they do know when they are ill and about themselves, what there circumstances are, what they want, what their preferences are and how they want to spend their money. All knowledge is local. No insurer or Government knows that or can make decisions about others. Not everybody prioritises their health in the same way which is why some smoke, drink, eat too much whereas others are more abstemious. We are all different and Government and insurer one-size-fits-all solutions cannot except by chance benefit some but mostly are to the detriment of others who would make better choices for themselves. Isn’t there enough evidence of that in every other aspect of Government?
This is why medical care/insurance and provision is best left to the competitive, private free market so consumers can make their own choices rather than have them made for them by people they don’t know and who don’t know them. And I agree, health insurance or provision should be paid for directly rather than as part of an employment reward package or State programme, that truly brings home decision-making to the individual. Continue an unhealthy lifestyle and pay higher premiums, or moderate and get cheaper insurance. Cost are individualised not mutualised or socialised. Don’t we do this for every other form of insurance?
Competition then brings prices down as long as Government keeps its nose out. A step in the right direction on that score would be to get rid of regulatory agencies whose primary aim is to protect the jobs of those in them and advance their interests by increasing their scope and scale - and anyway they are captured and in the pockets of the pharmaceutical and medical supply corporations. Hasn’t the FDA done a stellar job at protecting the masses from the lethal injections that are the experimental, useless, mRNA biochemical products?
No Government = self-government. Serfdom or freedom… which ?
I did, at length. The best approximation to No government right now is no government. How we achieve that is another matter - although I have suggestions - but at least the alternative is there.
Sorry. I read it as King and thought you were referring to system of Government. But there is no list of reasons, only one, Government - my point. Remove it, problem solved, so my comments addressed : “No Government the way to improve?” Yes.
In the UK the State is both provider and payer - the National Health Service (NHS) created 1948. The State is its own customer and producer. There are currently 7 million people on the waiting list and it is near impossible to see a General Practitioner within at least 14 days in most areas. Nurses and doctors have been on strike for more pay and future action is planned. The solution is to spend £2.4 billion on producing more doctors and nurses (How?) but meanwhile to open the doors and recruit doctors and nurses from Commonwealth Countries like India, Sri Lanka, West Indies.
The Government has had 70 years to fix this Stalin-era State-collective so if you think it’s just a matter of Government, taxes, and incentives and cost-effective treatments, then I think you may be mistaken.
Let people make their own choices in a free competitive market.
And with all that their health outcomes are much better than ours for 1/3rd of the cost. And it's not like the Tory governments of the last 13 years has exactly been making good choices. Almost any Western health care system has superior absolute and value outcomes to our current situation in the US.
System value comparisons always require some cost of waiting. When that cost is counted as 0, the system will have a lot more of it. Far more Canadians come to America for health treatment than the reverse, despite there being so many more Americans.
And they're waiting for procedures that are almost all elective. Rather than Americans not seeing doctors to receive care for potentially vital issues that could have been intervened on earlier.
correlation is not causation. Plenty of reasons why theirs is cheaper. Saying their outcomes are better is a very subjective statement but it also can be and is related to many things besides healthcare.
That’s true for everything in a free market. Supermarkets ‘in conflict’ with food producers. Everyone works to serve their own interests but in order to do so they have to serve the interests of others even if that is not their intention.
Not to say your preference is worse than others but it suffers a few problems too.
- people will have an even greater tendency to avoid preventative care and low cost early interventions that might be cheaper in the long run.
- someone has to decide which items are high cost and which are not. If this varies based on each person's ability to pay it gets rather complicated, especially when some have lots of separate conditions, events, and treatments.
I seem to remember that 50% of my lifetime health costs will be in the last 6 mo of life. Having a planning horizon of less that 2 decades maximum I made a comment about a decision to give a big hunk of resources to our child that is now unemployed. He would get it anyway when we die, but now would be more useful, but our probability of being short of retirement funds (not a civil servant with a cola protected guaranteed retirement) would increase. If we run short the main losers will be the medial providers cheated out of turning me into a "cash cow" being milked for an extra few month of a miserable existence. The value of that last 6 mo is not that high in most cases and may be a negative value to the individual.
Here's something I've always wondered about reading your views on health care. Suppose you (Arnold) had more egalitarian values, and you felt it was morally unacceptable for the government to permit a situation in which some people can't afford moderately expensive life saving treatments like chemo. What would you consider the best possible system compatible with those values?
1) Singapore does have a lot of beuracrats looking over peoples shoulders. The government regulates the hospitals. They are just really good at it.
A key in the Singapore plan is high forced savings. You aren't allowed to be one medical bill away from bankruptcy, that would be irresponsible.
It's also unclear how Singapore would deal with an entrenched underclass (that never makes money to put away into such accounts and has poor health). Obviously Singapore doesn't have such a thing for various reasons, but the west does.
2) A lot of plans these days have big deductibles and coinsurance. Your employer plan is likely a High Deductible plan with an HSA.
My understanding is Obamacare plans tend to have decent sized deductibles, but the premium is almost entirely subsidized by the government for most people.
For healthy people not a big difference. For people with pre-existing conditions it basically means that your yearly health expense is whatever your maximum out of pocket is.
First dollar coverage is mostly about subsidizing people with pre-existing conditions through the medium on "insurance". If it were really insurance the sick would pay higher premiums or have a different benefit structure, but people HATE that idea.
With Medicare it's complicated. Medicare Advantage works on a STAR rating system. If you get good STAR ratings you get a lot more money from the government. But a big component of the STAR ratings is member surveys. In CMS's infinite wisdom is does the surveys between March-Jun, right after most people had to pay their deductible at the beginning of the year. So there is a lot of pressure to eliminate deductibles because of how they impact STARS.
It's the same story with medication adherence. High cost shares on meds represent a potential discontinuation point in adherence, which hurts STAR ratings.
With traditional Medicare you actually don't have catastrophic coverage. Theoretically you can pay 20% forever. So most people buy Med Supp. Med Supp has to conform to these letter structures and really some are dominant in the market. Generally they turn Medicare into first dollar coverage.
With Medicaid they just get every damn thing for free, even their rent and phone bill.
As for free market healthcare, the posted prices at a CVS Clinic for most common things are quite low.
You can even check how long the wait is (if any) at each location.
https://www.cvs.com/minuteclinic/services/price-lists
"I proposed a system that would greatly increase the share of medical services that people pay for themselves. They would only be insured against expenses that are very high relative to their ability to pay for them. I call this providing insurance only for the very poor and/or the very sick."
This sounds like a great idea: align the incentives. The consumer (or patient, if you will) is the only person in the system who has the incentive to seek both the best health outcomes and the lowest feasible cost. And it might very well help both health outcomes for most people and cost.
However, it's not likely to help much with cost, for the reason you noted in the beginning: 50% of the costs are spent on 5% of the people, and most of the rest of the cost is spent on the next 10% of the people. If you think these 15% of the people can pay for their own costs, then there isn't a need for insurance at all, except maybe for the 1 or 2% of people who have truly enormous costs.
Otherwise, most of the spending will still come from third parties, and we'll still have the problem of misaligned incentives. We won't even save on insurance company overhead, because people who pay their own bills will still have to send their bills to the insurance company to apply against their deductibles, just in case they end up with enough expenses for the insurance to kick in.
Being sick is a combination of genetic & environmental (bad) luck, and individual decisions (like over-eating, under-exercising, experimenting with drugs & alcohol & promiscuous sex).
It's not fair that some are more healthy than others - and there is no "just" solution to this unfairness. Even blaming God and becoming an atheist doesn't increase cosmic fairness - tho I think many young atheists have such belief tendancies.
Like the perennial deserving vs undeserving poor, there are sick folk whose lifestyle choices mean they don't deserve so much gov't / forced taxation of others / support.
Not quite mentioned here, as usual, is the need for more doctors, which means we need more medical schools. More doctors allow more alternative choices. It would be nice to have some doctor based / HMO orgs that are legally allowed to differentiate on med insurance premiums based on all known tests including lifestyle, weight, location as well as sex, race, age, & prior conditions. I'm imagining a state "unregulated" HMO combined with Universal Basic Health Care Insurance vouchers so that most careful & responsible folk get quite good care at lower costs, with the more problematic & more often sick folk getting more gov't benefits that are politically discussed.
I also think the US gov't Tax Forms should have a one page explanation of gov't expenditures, where every program which absorbs at least 4% of the prior year's spending was listed, so more folk have stronger knowledge about how much the Feds are spending on what, now. We should have a lot more transparency in gov't expenditures.
This was a really insightful essay, but I want to push back on this.
"In a typical health insurance pool, 5% of the members will account for 50% of the costs. If you are the Minister of Health, you cannot afford (politically) to spend half your budget on 5% of the voters – many of whom are too sick to even go vote."
This isn't as large a problem as it seems for rich democracies because there is a risk that you or, more importantly, your family members could become part of the 5% in any given year if you get an illness or when you get older. Maybe this results in undertreatment of health issues for the underclass (homeless, mentally ill, etc.) who are unlikely to vote or have close family members and friends who vote.
Lots of quite helpful replies here. But one big thing they don't address is control-freak-ism. Having a nationalized monopoly health service may potentially be the most efficient approach to insurance, but it unfortunately opens the door to unlimited paternalism, backed by fines or loss of coverage for people who don't exercise or who smoke or overeat. I couldn't live in a country that imposed that sort of tyranny.
If we are discussing 'things that we probably cannot get politically' -- Set up a way to fund your healthcare, say via VAT. This is a special charge, not something that comes out of the general budget.
You want this to be sized for 'the optimal number of patients to have in your potential patient group'. A great many bad things have happened when somebody proposes 'we should merge x and y for reasons of efficiency' and then discover that this may have made some providers richer, in terms of patient outcomes things are worse because if the group is too large, you are less efficient not more. This is probably related to the communications cost in Brooks' *The Mythical Man-Month*, but there could be other reasons -- for instance lack of competition. There is quite a bit of organsational theory on the optimal size of organisations, and we want to use this knowledge where we can.
So BigCity could have maybe 3 competing organisational units, and all of RuralFarmland have 1 and that might be the best pragmatic outcome. RuralFarmland might be unhappy that there isn't enough competition, and BigCity will be full of people who complain that patients in group A are better served than in group B, who instead of using this as a stick to demand that group B do a better job, instead want to merge the two so that everybody can get the same level of treatment, even if it is worse than what either A or B are getting now.
But you then elect people to the medical governance board. Nice general election thing. Do it every 4 years. You get public oversight by elected officials whom the public elects based on their election promises about how to allocate the resources to best promote public weal and heath.
Why health insurance systems are mismanaged... one word answer “Government”.
And the way to improve it is "No Government?" And what is the best approximation to "no Government" right now?
Pace Kling, I am not too worried about adverse selection -- I do not think individuals KNOW that much more about their probabilities of illness than insurers so I think tax credits for individuals to purchase insurance from companies who would have some incentive to push for cost-effective treatments would be an improvement on the current system.
Let’s not confuse Government with governance which is self-government within a framework of the Common (discovered) Law, shared morals, values, standards, manners, voluntary exchange which rests on specialisation and division of labour. Rule of law, enforcing the law does not require Government and can be done by private or community organisations - elected/hired sheriffs, for example. Markets are primarily controlled by reputation and consumer choice. (By the by: the British King has less power, that is to say none, than the US President.)
The preface to the Wycliffe Bible contains the mis-quoted instruction: THIS BIBLE is for the Government of the People, by the People and for the People. Taken in context with the first two words left in, the meaning is quite clear. The Bible is a rule book, with morals, values and examples, and provides the means for a sovereign individual to be self-governing with no Earthly power above them. It is not a justification for so-called “democratic Government” and warfare to impose it - Abe pulled a fast one there.
This was the Protestant ethic of individual responsibility, opposing the collectivist, authoritarian Government model of Catholicism.
You don’t think individual know about the probabilities of illness, but they do know when they are ill and about themselves, what there circumstances are, what they want, what their preferences are and how they want to spend their money. All knowledge is local. No insurer or Government knows that or can make decisions about others. Not everybody prioritises their health in the same way which is why some smoke, drink, eat too much whereas others are more abstemious. We are all different and Government and insurer one-size-fits-all solutions cannot except by chance benefit some but mostly are to the detriment of others who would make better choices for themselves. Isn’t there enough evidence of that in every other aspect of Government?
This is why medical care/insurance and provision is best left to the competitive, private free market so consumers can make their own choices rather than have them made for them by people they don’t know and who don’t know them. And I agree, health insurance or provision should be paid for directly rather than as part of an employment reward package or State programme, that truly brings home decision-making to the individual. Continue an unhealthy lifestyle and pay higher premiums, or moderate and get cheaper insurance. Cost are individualised not mutualised or socialised. Don’t we do this for every other form of insurance?
Competition then brings prices down as long as Government keeps its nose out. A step in the right direction on that score would be to get rid of regulatory agencies whose primary aim is to protect the jobs of those in them and advance their interests by increasing their scope and scale - and anyway they are captured and in the pockets of the pharmaceutical and medical supply corporations. Hasn’t the FDA done a stellar job at protecting the masses from the lethal injections that are the experimental, useless, mRNA biochemical products?
No Government = self-government. Serfdom or freedom… which ?
You did not answer my question. :)
I did, at length. The best approximation to No government right now is no government. How we achieve that is another matter - although I have suggestions - but at least the alternative is there.
It is not at all clear to me what you think "No government" in the health insurance sector would look like.
"I do not think individuals KNOW that much more about their probabilities of illness than insurers"
Then you defiantly aren't an actuary that works in healthcare.
Anyway, its illegal for insurers to discriminate based on health status, so even if we knew the member is the one in the drivers seat on selection.
I think you need to read the post again. Govt is but one of many reasons Kling has listed.
Sorry. I read it as King and thought you were referring to system of Government. But there is no list of reasons, only one, Government - my point. Remove it, problem solved, so my comments addressed : “No Government the way to improve?” Yes.
In the UK the State is both provider and payer - the National Health Service (NHS) created 1948. The State is its own customer and producer. There are currently 7 million people on the waiting list and it is near impossible to see a General Practitioner within at least 14 days in most areas. Nurses and doctors have been on strike for more pay and future action is planned. The solution is to spend £2.4 billion on producing more doctors and nurses (How?) but meanwhile to open the doors and recruit doctors and nurses from Commonwealth Countries like India, Sri Lanka, West Indies.
The Government has had 70 years to fix this Stalin-era State-collective so if you think it’s just a matter of Government, taxes, and incentives and cost-effective treatments, then I think you may be mistaken.
Let people make their own choices in a free competitive market.
And with all that their health outcomes are much better than ours for 1/3rd of the cost. And it's not like the Tory governments of the last 13 years has exactly been making good choices. Almost any Western health care system has superior absolute and value outcomes to our current situation in the US.
System value comparisons always require some cost of waiting. When that cost is counted as 0, the system will have a lot more of it. Far more Canadians come to America for health treatment than the reverse, despite there being so many more Americans.
And they're waiting for procedures that are almost all elective. Rather than Americans not seeing doctors to receive care for potentially vital issues that could have been intervened on earlier.
correlation is not causation. Plenty of reasons why theirs is cheaper. Saying their outcomes are better is a very subjective statement but it also can be and is related to many things besides healthcare.
There are multiple modern health care systems that are correlated as better value for money. Like double digits.
"If people pay for their own health insurance, the market is subject to selection games. ..."
"Another challenge with health insurance is the conflict between insurers and health care providers. …”
That’s true for everything in a free market. Supermarkets ‘in conflict’ with food producers. Everyone works to serve their own interests but in order to do so they have to serve the interests of others even if that is not their intention.
Read what I said again. I didn't say government wasn't part of the problem. I said it wasn't the ONLY problem.