Options for health care coverage reform

by on June 11, 2013 at 7:25 am in Economics, Law, Medicine | Permalink

This topic has been reconsidered much as of late, so I thought I would do a summary post on some of the possible options.  I suspect I have covered all or most of this ground in 2009 or so, but here goes:

1. Universal health insurance vouchers on exchanges, with means-tested subsidies and also a mandate.  The logic of this can work just fine, but it is quite expensive as it would exist in the United States and we end up spending too much on health care.   Over time it would be accompanied by say a five percent VAT.

2. Single payer systems.  I don’t want to repeat the usual debates, but perhaps we can agree single payer won’t come anytime soon in the United States.  I also think they work least well in the land of medical innovation, and best in small countries such as New Zealand, but that consideration doesn’t even rise to the fore here.

3. The Singapore system, involving single payer for catastrophic expenses and health savings accounts for smaller expenditures.  To varying degrees you can combine this with forced savings for the HSAs and price controls on service provision, both of which you will find in Singapore.  Where “catastrophic” starts can vary as well.  This is my first choice, although if you wish to dismiss it as “utopian” for the United States you have a point.  I’ll get back to that.

4. One particular path for how ACA could evolve into a (relatively inefficient) form of a Singapore system.  Imagine that the mandate becomes fairly narrow with time, while at the catastrophic end insurance companies evolve into (inefficient) public utilities.  Health savings accounts are reintroduced through new legislation, perhaps under a Republican administration, and can be supplemented with cash transfers when desired.  Here is one discussion of that path.

5. The mandate and subsidized exchanges under Obamacare prove unworkable and eventually they are abandoned either partially or in full, or in some states but not others.  Their place is taken by a Medicaid expansion.  Coverage is not universal, though it is higher than pre-ACA, and of course coverage under the status quo is not going to be universal either.

6. The status quo of Obamacare.

7. More managed care.  We should remove the legal restrictions and barriers which penalized managed care in the first place, as it is a feasible and desirable means of bending the health care cost curve.  You will note that this option is not a strictly rival alternative to 1-6, but rather can be combined with them in varying degrees.  Still, it seems appropriate to list it as an option.

Now, if I am allowed to be utopian, I favor #3 over the status quo.  If I am asked to be less utopian, I see #4, #5, and #7 as some of the better versions of what ACA could evolve into.  I would not predict that those options come to pass, nor would I say those options are better than the rather unrealistic version of ACA as envisioned by its proponents, but I think they follow from the dictates of reality as the better options on the table, #3 aside of course.  And I do not feel I am being utopian in holding them as alternatives to the status quo.  They are not so far away from the status quo in the policy space.

I don’t think ACA in its current form is stable.  Too many moving parts, too many margins of danger, too many jerry-rigged incentives, too many “it worked OK in Massachusetts so it has to work at the national level even if it doesn’t appear to be maximizing” requirements, and too little recognition that the whole system is poorly geared for a world of stagnant median wages and rising inequality.  The higher is inequality and the lower are lower-tier wages, the harder it is to guarantee near-equal consumption of health care through employment institutions.  The greatest single danger to ACA is eventual massive employer-shedding of health care obligations, penalties or no, which at best evolves us into #1, which I do not favor.  On top of that there is state shedding of Medicaid obligations, which again pushes us into #1.  Most generally, the national health care systems which work are much more consolidated in nature than is the U.S. status quo.

It is a Denkfehler when people write “you don’t have an alternative to ACA” or “the Republicans don’t have a health care plan,” and so on.  You can take such pronouncements as leading indicators that ACA is not going well.  #3 aside, you can take the relevant alternatives as a mix of #4, #5, and #7.  Those are not so much alternatives “given by the Republicans (or whoever else),” as much as they are given by reality.  I don’t see “ACA as envisioned by its propnents” as on the table either, so in this sense it is also the Democrats who don’t have an actual health care plan.

I view the real choice before us as #1 vs. some mix of #4, #5, and #7.  And in that setting I do not favor #1 and I still can dream of and advocate #3.

Addendum: Here is my earlier post on how to debate health care policy.  Let’s see how many of its strictures you all violate.

1 Ashok Rao June 11, 2013 at 7:46 am

Part of the reason most of the world free-rides on America is monopsony effects from European single-payer systems. The logical solution would be to allow all pharma and medical innovation to collude in export markets.

The value of European (and increasingly, Asian) surplus from American innovation is hard to calculate, but I imagine it would significantly improve American revenues, and international competition, which can bring domestic prices down since poorer Americans won’t have to subsidize rich Norwegians.

I see the whole global coordination as a prisoner’s dilemma where, as far as healthcare is concerned, monopsony (not sufficiently, but necessarily single-payer) is the defect. It is probably America’s dominant strategy to go single-payer but that might have consequences down the road insofar as innovation is concerned.

Rather, in a non-utopian solution, we should promote health consumption inequality. We know that good, basic outcomes are too expensive in America. First, get rid AMA which is second-only to AARP one of the worst organizations in the country. Doctors (not GPs but the rest) are overpaid. Second, provide something like Medicaid but for all the bottom 50%.

Get rid of things like cadillac tax and remove any restrictions from top 30% buying ultra-good plans. Suck it up, and let them drive consumption. This provides social insurance for the poor (what we liberals want), and innovation (which is in everyone’s long-run benefit). *We do not control costs as well*. Regulate American health innovation exports, or bully the WTO into taking action. I don’t know how this would work, and I’m scared it will have perverse consequences, but we should capture as much European surplus as we can.

I expect the free riding is far more than we believe it is (which makes a defect-defect all the more worse).

2 Ashok Rao June 11, 2013 at 7:51 am

I’d add – a lot of the cutting edge (though “high impact/unlikely to materialize”) type of health innovation comes from basic research. America is already generally a better place to commercialize such research. The long-run solution that controls costs without hurting innovation might be a single-payer that provides lavish research subsidies to universities and, yes, big pharma.

However, the impossible trinity for healthcare *might* be something like you can have only two of {social insurance for the poor, innovation, cost control}. Woes of being the world’s most competitive economy?

3 Frederic Mari June 11, 2013 at 8:12 am

How much people free-ride on the US system has been thoroughly questioned. It could be that pharmas, if they were unable to screw Americans, would just accept lower ROEs. IIRC, Health Care has one of the highest annualised Sharpe Ratio, with Energy.

As to the triangle of impossibility for health care, I am less convinced that you, Ashok. I think that the health care provided by social insurance ought to be cost controlled. But the state can still financed and/or reward private/public-private research deals and/or allow cutting edge technologies to be richly rewarded in the private space. I am not even sure we got a good handle on what motivates research in the bio-tech space. I am sure researchers and founders of bio-tech don’t mind “hitting it big”. But how much do they really need to be motivated?

Besides, while I know of Bill Gates and cohorts, can someone really name, off the top of their heads, some bio-tech guy who became filthy rich for inventing a new drug or new treatment? If you are just as stump as I am, it suggests that the rewards in health-care don’t all go to “the inventors”.

4 Ashok Rao June 11, 2013 at 8:20 am

I’m inclined to agree with you insofar as the intellectual framework behind the stuff (most scientists are very underpaid, but that doesn’t stop us). On the other hand, commercialization is a big problem.

I like to think of America vs. Britain between 1925 and 1975. The Oxford/Cambridge prowess created a lot of the basic research needed for the best inventions of the day (by all means not all). However, it was America that actually went the last mile through innovation and managed to commercialize the research, because of its fairly creative-friendly atmosphere. This lecture from Josh Lerner is a good one: http://www.voxeu.org/vox-talks/architecture-innovation

I’m not sure how convinced I am of the “triangle”. But I do believe very strongly that the world free rides off of us. It makes full theoretical sense, and the delta in price is largely an extraction of surplus via monopsony. Where we go from there is trickier. I support very strong patents for pharma, unlike most people left right and center nowadays. It provides insurance for risk, and that’s important for healthcare innovation.

I’d couple strong patents with some form of export price control and massive investment into basic research. In this government has a good comparative advantage, and even the stricter libertarians cede that point.

5 dan1111 June 11, 2013 at 9:15 am

“most scientists are very underpaid, but that doesn’t stop us”. If it doesn’t stop you, I guess you aren’t underpaid.

6 Claude Emer June 11, 2013 at 10:48 am

I’m not convinced we’re subsidizing the rest of the world. It’s an idea that makes sense on the surface but all we’re doing is looking at the fact that we lead the world in medical innovation and voila! But wait, we lead the world in other sectors that are not subsidized. Correlation … causation.

Maybe what we lead the world in is marketization of ideas and medical subsidies have nothing to do with it. As as already been written, let’s remove price discrimination and put this theory to the test. It’s a too convenient excuse to claim we have to pay through the nose because we are the innovators when we know companies can maximize profits without adding any more utility to their product (cf Apple with their rounded edge smartphone). We’re paying for the box, we’re paying for the brand, but most importantly, we’re paying because we don’t have a choice.

What is medical innovation anyway? We’re producing thousands of new patents but most of the diseases we’re fighting have been around forever. We’re still fighting tuberculosis with medicine from the 1950s. How many different types of aspirin does one need? Has anyone ever researched the utility of medical innovation? How much is useful vs just commercial tricks?

7 John Skookum June 12, 2013 at 8:22 am

“(most scientists are very underpaid, but that doesn’t stop us).”

Most scientists are not staying up on call every third or fourth night, either. Nor spending $50,000 a year on malpractice insurance, nor at risk of losing everything they own to the pirates of the plaintiff’s bar for an unavoidable act of God that produces a poor outcome. Nor are many of them paying off $300,000 in debt– there are no teaching or research stipends or tuituon waivers in medical school as there are for other grad students.

8 Dan D June 11, 2013 at 9:05 am

I believe Don Panoz is a good example of someone who became very wealthy through the development and marketing of the transdermal patch

9 Frederic Mari June 12, 2013 at 5:38 am

Thanks but, as it happens, he was unknown to me… I wouldn’t take myself as a benchmark of ‘general knowledge’ but the truth is that I know about the fabulous fortunes of Facebook/Yahoo/Microsoft/Apple… founders without any conscious effort and not pharma or biotech.

It suggests that either it is less well advertised… or that it happens less.

10 Bill June 11, 2013 at 9:56 am

Ashok, Consider the alternative position: that the US should not be price discriminated against. Every pharmaceutical company that sells to another country does so by choice: they can sell or not sell, or chose between other countries. Think of it as a pool of a number of purchasers. In this sense, it is not monopsony, any more than I am a monopsonist when I purchase for myself, and there exist other purchasers (themselves monoposonists) purchasing for themselves. Although, I would agree that there is a likely price effect.

But, if you apply a non-price discrimination rule, the effect will be, oddly enough, that foreign prices will increase, and US prices decrease, and the market would clear.

Moreover, there are hidden costs to our current price discriminate against the US system: what happens is, companies compete with advertising, more sales reps, free pens, etc. for this monopoly profit.

So, consider a non-price discrimination rule, rather than a cartel rule you propose.

11 Rahul June 11, 2013 at 2:42 pm

His cartel idea sound silly. OTOH I agree with you about the price discrimination but the only reason Pharma can pull that off is because of our own laws that prevent imports.

I say, get rid of import restrictions on approved drugs, ( at least from countries of reputable provenance ) and watch American drug prices fall to more reasonable levels.

12 Peter Sperry June 11, 2013 at 7:59 am

I would favor a blend of #1 and #3. The government provides means tested subsidies to puchase health insurance. Families and individuals are free to do so or not as they choose. In the event of catastrphic need, the government provides loan to families to cover expenses. If, and only if, the family or individual has purchased health insurance with minimal acceptable levels of coverage; the government loans are zero interest, discharged at death with no claim against estate and subordinate (payable last) to all other debt. If the family or individual has NOT purchased health insurance with minimal acceptable levels of coverage; the government loan is at market rate, chargable against the estate at death and prior (payable first) to all other debt. Subsidies provided by the government should be set at a level sufficient to cover cost of minimally acceptable health insurance and means tested.

Although this system would not include an absolute legal mandate to purchase health insurance, it would be very difficult to maintain a decent credit rating without doing so. Individuals and families would be guaranteed health care regardless of cost but failure to make at least minimal provisions to cover that cost could result in financial devestation. Those with minimal income or assets may choose to accept that risk. Those with more to lose are likely to buy health insurance.

13 Uninformed Observer June 11, 2013 at 8:03 am

The Singapore system might seem utopian, but so are many other current arrangements that we so take for granted we don’t even think to mention them. In this case I think it can be achieved through two inevitable developments:
1. The myth of healthcare as this occult art, so arcane and impenetrable that it can only be practiced by the credentialed, bonded and certified, is simply going away. The internet has brought medical information to the masses, and we often know as much about diseases, medications and treatments as our doctors. This can not help but drive down costs, eventually.
2. At the same time, as healthcare becomes more commoditized, it will become less litigious. The only reason I can’t get heath services and related products in a competitive market is that the providers have to protect themselves from lawsuits. Reduce that risk and it all gets much cheaper – so cheap, in fact, that the idea of paying much of anything for anything but catastrophic coverage is ridiculous.

14 F. Lynx Pardinus June 11, 2013 at 8:38 am

“The internet has brought medical information to the masses, and we often know as much about diseases, medications and treatments as our doctors.”

No, you don’t. You may think you do, but I assure you that you don’t.

15 RPLong June 11, 2013 at 8:55 am

How do you know what U.O. knows?

16 F. Lynx Pardinus June 11, 2013 at 9:03 am

From his username.

17 anon June 11, 2013 at 9:31 am


18 JWatts June 11, 2013 at 5:14 pm

Good answer.

19 Tracy W June 11, 2013 at 9:56 am

Conversation I had with the holiday-cover doctor:
Me: “I just found out this morning that my 6-week old baby has been exposed to whooping cough!”
Doctor: “Don’t worry about it, it’s not very contagious”
Me: “Are you sure? I’ve been looking at the NHS website and it says it’s very contagious. It also says that a course of antibiotics can prevent it developing.”
Doctor: “Hmm, I’ll get back to you.”

(We eventually got the preventative antibiotics and no one got whooping cough.)

20 Frederic Mari June 11, 2013 at 10:09 am

I wouldn’t take English GP as the baseline for medical competency. Having lived more than 10 years in London with 2 young children, I got horror stories galore.

Eventually, we were just using a French medical center (http://www.medicare-francais.co.uk/). It’s fairly cheap – for a private solution – and they are good.

21 sloopjohn June 12, 2013 at 12:22 am

If U.S. were at U.K.’s % GDP, we, in the U.S. would all be dead or on our way. In other words, Britain doesn’t do that bad given the resource constraints. The U.S., on the other hand, s*cks worse than s*cking, given it’s hcare nonsystem.

22 Rahul June 11, 2013 at 10:09 am

Wikipedia says: “There is insufficient evidence to determine the effectiveness of antibiotics in those who have been exposed but are without symptoms”

A 2010 Review Article says: “Since antibacterial treatment of pertussis is generally ineffective as it usually sets in too late, the main focus should be on the prevention of pertussis by immunization.”

Your doctor may not be too wrong.

23 derek June 11, 2013 at 11:45 am

This isn’t a particularly damning story. It would be damning if you were not prescribed antibiotics and then the baby got whooping cough. As it happened, we have no way to know whether the doctor was correct to begin with and was simply placating you/protecting himself from liability.

24 Jani June 11, 2013 at 12:35 pm

That is usually the case the antibiotics: just give them the damn meds so they shut up and quit pestering the doctor.

25 Carlos Carmona June 11, 2013 at 11:40 am

The experience that has a doctor cannot be achive without doing treatments…… Small diseases can be treat with internet but go to the doctor is the ideal.

26 mpowell June 11, 2013 at 2:28 pm

I do believe that GPs could be largely replaced by nurses armed with computers. The diagnostic process currently employed is extremely crude.

27 Bill June 11, 2013 at 8:03 am

We should try what that guy in Massachusetts tried. Or, was it that Kenyan?

28 Udkfchkfc June 11, 2013 at 9:51 am

We should try whatever system delivers such a delicious, accessible and affordable variety of food to us.

But let’s not try the system that delivers our k-12 education.

29 Michael June 11, 2013 at 11:18 am

1. Food markets and medical markets are very different. Adverse selection, asymmetric information, uncertainty, etc. aren’t really issues when buying a honeycrisp apple.

2. I think the closest health care example I can think of to running a health care system like k-12 would be the NHS in the UK where the doctors are government employees. I think that even single-payer advocates in the US still envision hospitals, doctors, etc. to be privately run.

The “Obamacare” version of K-12 education would be to get rid of public schools (except for the children of soldiers) and mandate that all citizens pay for tuition of private schools, with those with low incomes getting subsidies to cover the tuition costs.

30 Cliff June 11, 2013 at 11:25 am

I think you’re talking about the medical insurance market, not the medical care market. But we somehow manage to overcome those problems in other insurance markets.

31 Ad Nauseum June 11, 2013 at 10:45 am

We should try acupuncture and Bear liver for medicine! It worked for billions of Chinese for hundreds of years! And they have higher IQs than us! So it must be good!

32 Cliff June 11, 2013 at 11:26 am

Well, it would be a hell of a lot cheaper and would get roughly the same results, so according to liberals we should mandate it.

33 JWatts June 11, 2013 at 5:17 pm

Well, it would be a hell of a lot cheaper…so according to liberals we should mandate it.

Sorry, but that’s a Fail.

34 dearieme June 11, 2013 at 8:03 am

“The greatest single danger to ACA is eventual massive employer-shedding of health care obligations”: danger? The divorce of healthcare payments (and subsidies) from employment is surely required for substantial improvement.

“When it comes to medical innovation … 12 Nobel Prizes in medicine have gone to American-born scientists working in the United States”: but the Nobel for medicine rarely rewards innovation in medicine – it usually goes to science that might, maybe, someday, help medicine.

“Even when the initial research is done overseas, the American system leads in converting new ideas into workable commercial technologies”: indeed it is development at which the USA has often shone, rather than origination. This is important because development is probably (I guess) much more sensitive to economic incentives than is origination, so that it would be a fine thing if American health reform were able to preserve such incentives.

Mind you, WKPD reports “The first commercially viable CT scanner was invented by Sir Godfrey Hounsfield in Hayes, United Kingdom, at EMI Central Research Laboratories using X-rays. Hounsfield conceived his idea in 1967.The first EMI-Scanner was installed in Atkinson Morley Hospital in Wimbledon, England, and the first patient brain-scan was done on 1 October 1971. It was publicly announced in 1972.”

It also remarks “Reflecting the fundamental importance and applicability of MRI in medicine, Paul Lauterbur of the University of Illinois at Urbana-Champaign and Sir Peter Mansfield of the University of Nottingham were awarded the 2003 Nobel Prize in Physiology or Medicine for their “discoveries concerning magnetic resonance imaging”.”

I suppose it is otiose to complain that reducing cholesterol is not, of itself, a cure for any disease (for almost all patients) and that statins are probably grotesquely overprescribed, causing God knows how much misery by their side-effects. Mammography is pretty fine, but its use in mass screening is of doubtful benefit.

One of the problems with medicine is that the Golden Age appears to be over and no one can have any idea whether another one will crop up.

35 dan1111 June 11, 2013 at 9:24 am

Regarding your first point, decoupling health insurance from employment would be a good thing (all else being equal). But that doesn’t mean employers dumping people into a government-subsidized system (and exploding the costs of that system) would be good.

36 AaronM June 11, 2013 at 8:06 am

My “dream” system would be one akin to 3, though with one significant change. Why wait for catastrophic expenses to be incurred for single-payer coverage to kick in? I think that ideally, there would be single-payer coverage for the most basic of health care products – those services that meet some threshold of low cost and high efficacy such that we know that they will improve patient outcomes and be a “good buy” for the system.

Immunizations, antibiotics for pneumonia, medicines to control blood pressure, etc.

The other 60% of medicine (that’s my own number, but I’d maintain that I’m in the ballpark) that is of unproven or minimal benefit, let us pay for ourselves.

My understanding is that a similar system exists in France, though with a practical definition of “basic” care that is much more expansive than mine would be.

37 Frederic Mari June 11, 2013 at 8:18 am

Yes and no. In France, the coverage for what a GP might prescribe is relatively high, especially if you have a “mutuelle” (a private complementary insurance on top of the state-provided one).

But state payments for dental and, especially, eyes care are pretty low.

That said, in general, I think the French system is a lot like the Singaporean one, except ineffectively designed and overly cumbersome. That is to say, you have catastrophic insurance and you also have some kind of split over the rest, with the more coverage the more basic it is deemed.

Ideally, what is deemed basic keeps on improving/increasing as health care gets better and better (cheaper and cheaper).

38 NPW June 11, 2013 at 8:18 am


Have you considered the idea that the tools existed prior to ACA to eliminate extraneous costs? Similar to credit unions vs banks, we could have had profit and non-profit healthcare insurance coexisting. A non-profit insurance organization could have employed SMEs and negotiators to resolve insurance issues on their member’s behalf. A non-profit could have returned profits to their members like some credit unions do.

Healthcare providers will chose to negotiate with a large organization to keep the business. There could easily be a method for end of year remuneration back to the members being tied to use/lack of use. This is a profit motivation for the member to control use.

39 Cliff June 11, 2013 at 8:37 am

Most insurers are nonprofit, right?

40 NPW June 11, 2013 at 12:40 pm

I’m not aware of any.

41 mike June 11, 2013 at 1:19 pm

You’re pretty clueless and misinformed, then. Look at Blue Cross. Is it any wonder that we have such dysfunctional politics when one side is shrilly screaming that the profit motive is ruining healthcare, not being aware that most insurers are nonprofit, and when someone points this out, not even bothering to do a cursory search and actually saying “I’m not aware of any.” Brazen, stubborn ignorance.

42 gvtucker June 11, 2013 at 2:07 pm

Actually, most Blue Cross/Blue Shield licensees are for-profit, not nonprofit.

43 Urso June 11, 2013 at 4:23 pm

The non-profit designation isn’t that meaningful anyway. For the most part, it just means you cannot pay dividends to shareholders. Read the recent Times piece for a (to me at least) surprising revelation on how little most of these non-profit hospitals actually spend on charity.

44 anon June 11, 2013 at 9:38 am

In credit unions and other forms of cooperatives, the most successful have some form of “identity” common among the members, not merely the nonprofit aspect. When that common identity becomes diluted, members and staff look more to financial incentives that often conflict with the goodwill inherent in the common identity.

The only thing special about most large nonprofits is how well they serve staff, not members.

45 David C June 11, 2013 at 8:20 am

I think that the best medicine for US Healthcare is to move as quickly as possible away from employer-provided insurance. This is an idea that could be combined with any of your options.

The goals that employers have when negotiating contracts with insurers overlap with, but are certainly different from the goals of employees, and the criteria for evaluating insurers’ performance differ as well. I have lived under the US system. I live now in Switzerland, where people shop for health insurance the way they shop for car insurance. It is enormously better here.

This idea supports a couple of your other points. For example, ACA could be simplified quite a bit if everyone bought insurance on the exchanges. HMOs are a large and growing share of the market in Switzerland, because the premium differences are quite large and very visible to consumers. You can buy policies with very limited choice of providers, or with unlimited choice, and the difference in costs helps you decide. Catastrophic coverage is available (with some limits, especially regarding children) to those who want it.

46 Oreg June 11, 2013 at 9:27 am

Seconded. (Except I don’t follow your point about catastrophic coverage.) I prefer the Swiss system over any other existing one.

47 Oreg June 11, 2013 at 9:30 am

The Swiss implementation of the mandate is also interesting: If you don’t sign up with an insurance of your choice within some period of time the choice will be made for you. No loopholes.

48 Brian Donohue June 11, 2013 at 3:45 pm

I’m convinced. The Swiss are so much more sensible than most Europeans anyway.

49 Andrew June 13, 2013 at 1:46 am

Decoupling insurance from employers also adds flexibility to the labor market. It’s a lot easier to change jobs, become self-employed, or decide to go back to school if your insurance isn’t attached to your current employment.

50 Rahul June 11, 2013 at 8:21 am

It’s interesting that all options deal with financing and none with fundamental supply of drugs and doctors). Why is that a typical feature of American healthcare reform debate?

We pay so much attention to insurance types, single payers etc. but not much is actually done by way of increasing the supply of doctors, nurses etc. When a visit to the dentist for a regular cleaning has a 2 month wait why isn’t having more dentists, the most obvious option on the table?

51 Nate June 11, 2013 at 10:19 am

Yes, in America the debate typically focuses on the “finance” aspect of the cost. We did this in housing, health care, and higher education. Look at college costs. The discussion primarily revolves around loans, and increasing the “availability”, not about the $30 million new student center or the $20 million athletic complex.

52 Rahul June 11, 2013 at 11:02 am

Just for the heck of it, I tried an alternative list:

1. Ramp up drastically the training output of new doctors and nurses: More med schools, larger intakes per school, elimination of 4 years of pre-med university etc. More med school student scholarships and subsidies?

2.Massively expand other lower tiers of the medical system: Physicians assistants, Nurse Practitioners etc.

3. Liberalize drug imports both commercial and personal. Allow direct import of any FDA-licensed drug sold in equivalent nations (western EU / Canada etc.). Mostly ignore Big Pharma’s opinions in this context.

4. Fully recognize all medical degrees from similarly developed nations (e.g. Canada / UK / Japan / Australia etc.) to the point that doctors from these nations can register and practice almost instantly in the US. Provide an almost limitless immigration quota for doctors from western nations. Even better, aggressively recruit doctors from abroad. Mostly ignore APA’s opinions in this context.

5. Allow and encourage Medicare / Insurance procedures to be carried out abroad where cheaper locales (Mexico? Canada? Argentina? ) exist. Incentivize recipients using these options. Premium rebates? Encourage private insurers to offer plans that economize on major procedures by treating abroad.

53 Cliff June 11, 2013 at 11:28 am

Love it!

54 Ima Doctor June 11, 2013 at 12:40 pm

Hate it! How do I keep making $500,000 per year under this scenario? AMA and I will lobby the hell out of Congress to not even touch this blasphemous idea. Don’t you know what kind of status I have?

55 bluto June 11, 2013 at 4:41 pm

4 would be a nice payback against the Europeans who level single payer’s monopsony power to achive price discriminated drug prices.

56 mike June 11, 2013 at 1:32 pm

It’s the managerial way. Our political class largely takes their guidance from economists, MBAs, MPAs, bankers, etc. These are all people who think that manipulating numbers on a spreadsheet can solve any problem, because that’s all they know how to do. It’s like trying to run a baseball team with a bunch of sabermetrics gurus, none of whom know how to swing a bat or throw a curveball.

57 Rahul June 11, 2013 at 2:14 pm

Yes, that’s probably it. The whole American healthcare revamp seems to rest on two pillars: financial jugglery and squeezing out last ounces of efficiency. No doubt these strategies have a role but it’s a bit sad that simpler supply side options are left off the table.

e.g. I see studies figuring out how to triage efficiently and thus let an expensive $400,000-a-year physician see maximum patients in a day. OTOH for that kind of money, you could recruit two of the same (or better) quality of doctors from Germany or Argentina.

In these days of pervasive globalization, the two sectors which have strongly resisted foreign labor are Medicine and Law and the results are obvious in the typical remunerations that these sectors command.

58 JWatts June 11, 2013 at 5:23 pm

When a visit to the dentist for a regular cleaning has a 2 month wait why isn’t having more dentists, the most obvious option on the table?

That most be a regional or local issue, because I can usually get an appointment for a cleaning within the week if I’m flexible and within a couple of weeks if I’m not.

59 Slocum June 11, 2013 at 8:28 am

Things are complex and unstable enough that it’s really hard to see how it all works out, but my best guess is that we get an even wider separation between those who continue to have employer coverage and everyone else. The number of people with employer coverage will shrink to some extent, and many (perhaps most) of those keeping it will be covered by employers who have or switch to self-insured plans that avoid ACA coverage mandates. And the people without employer coverage? Will they actually buy policies on the exchanges when, instead, they could pay the relatively small penalty and only sign up for insurance when needed (and drop it again thereafter)? And keep in mind that this latter option (no insurance, penalty deducted from tax refund) will be the default, do-nothing option. Given that, I don’t see how we can help but predict that the exchanges will be underutilized. So, I won’t be shocked if the combined effect of all of this is that the percentage of people without health insurance actually declines after the ACA takes full effect. But then how fast do the exchanges collapse if only sick people buy coverage?

Then there’s this wildcard:


60 david June 11, 2013 at 8:29 am

Politically speaking, the Singapore system is most vulnerable to professional lobbying: the group it most damages are the doctors. It works because the government finds itself obliged to provide an affordable public option (the state-run polyclinics), that the state nevertheless wants to break-even without subsidies; this fuels a political will to force medical wages the state pays downward, even whilst the price competition squeezes doctors who have escaped to the private sector. The main winners are the large employers of doctors (incl. the state) and diffuse consumers of healthcare, neither of which are generally politically favorable.

This in turn generates a lot of hate by a group of upper-middle class professionals who are organized and sympathetic to the public. In terms of political capital, this is a lot of pokes in the eye of a popular group, for no real gains besides the state budget. But if you’re the Government of Singapore, you can afford to ignore this hate. The last time a white-collar group (the lawyers) tried to assert a political voice, it ended so badly for them that none have tried again. Doctors in Singapore do grumble – but grumbling is all they do. There’s a reason no liberal democracy pulls off this healthcare model successfully, though.

61 The Wobbly Guy June 11, 2013 at 2:23 pm

The Singapore case is interesting. For years, we have known that for various reasons, the number of medical students was strictly capped at 250 at the one and only School of Medicine at the National University of Singapore. Not only were perfect ‘A’ Level scores required, they needed to have done community service, have leadership roles in their extra-curricular activities, work attachments at hospitals etc. I bet they even check if the applicant helps old ladies cross the road (just kidding). Only recently, due to our aging population and burgeoning foreign workforce, they have started increasing the intake (250 to 500).

So the question is: why? According to your theory, the Singapore government would have wanted to increase the supply which in turn lowers cost. But they obviously didn’t want to. And that hints at the power of the Singapore Medical Association, especially since many doctors end up in the political field and could therefore exert considerable pressure to limit their numbers and keep it as ‘elite’ as possible. The state still controls costs by other means: mandatory conscription periods (5 year bond) for the doctors in the public sector before they could spring off for greener pastures, for example.

I guess the government in the past felt it could afford to pander to the elites while healthcare costs were still low. With the population getting older rapidly, they can no longer afford to, and that’s when your theory kicks in.

On the whole, there are several reasons for why our healthcare system can persist with relatively lower costs per capita.

1. We are generally not so obese. The Asian diet helps. I visited the US recently, took some photos, and the first thing my girl commented on was the number of fat people around.
2. Lots of public campaigns against smoking, overeating, encourage healthy lifestyles etc. Some of them are working. Others (e.g. smoking), not so much.
3. National service and follow-up reservist training helps to keep a significant portion of the population fit, which in turn leads to less health problems. Possibly down the line too. Of course, this could be counteracted by injuries sustained in training… (back and knee problems being the most prevalent).

The Taiwan experience shares many of the same features as the Singapore one, and if I’m not wrong, their costs are even lower.

62 mw June 11, 2013 at 8:43 am

“the whole system is poorly geared for a world of stagnant median wages and rising inequality.”

Please elaborate on how HSAs could possibly be *well-geared* for that world.

63 david June 11, 2013 at 8:50 am

Diverts political will from having the government pay for incrementally more and more medical services, so that the low-income can benefit from them, to having the government incrementally push down the cost of more and more services, so that the low-income can afford them.

The former invariably ends in accounting gimmicks. The latter might actually go somewhere. The key is whether the level of funds to be spent on medical care is to be taken as a given constraint, by the large bureaucratic institutions that will inevitably exist.

64 mw June 11, 2013 at 8:58 am

Well I’m intrigued. Please describe in detail the sequence of events when the first 5 million poor people go to the hospital and find their HSA doesn’t cover the aspirin.

65 david June 11, 2013 at 9:11 am

The whole point of a Singapore-type HSA model is where the HSA is pretty liberal about what treatments are approved; instead the coercion is in the state forcing you to save in a HSA, whether you like it or not. The HSA provider sets withdrawal limits, but you pick whether you want to spend those funds on the brand-name aspirin or the generic.

66 Hazel Meade June 11, 2013 at 9:24 am

An HSA is a savings account. You can spend it on whatever you want. So by definition, it does cover aspirin.

67 Tyler Cowen June 11, 2013 at 9:01 am

Cash transfers when needed or desired, not forcing people to take so many benefits in the form of health care.

68 david June 11, 2013 at 9:19 am

Should point out that Singapore does force workers to take a hefty chunk of compensation in the form of obliged savings, including healthcare savings. These are not healthcare benefits per se, but it’s cash that can only be spent on healthcare. The political dynamics are different, as per my comment above, but it does oblige “benefits in the form of healthcare”.

It’s merely that the offered interest rate is so good that their households over-save anyway, in excess of even the crazily high levels the country requires by law (Singapore exceeds even the PRC by private+public net savings rate, even though it doesn’t have any of China’s capital controls). They have a compulsory minimum that is larger than that of a typical Western country, and then an option to contribute even more to the savings funds, an option which many of their workers take. But this is a happenstance unique to what Singapore does with the invested funds. A US-sized country cannot oversave and still expect to offer such real rates of return.

69 brian June 11, 2013 at 9:05 am

in the link in the addendum, Tyler basically predicts the results of the Oregon study.

70 Oreg June 11, 2013 at 9:13 am

Neither the ACA nor Tyler’s post sufficiently addresses two of the biggest flaws of the status quo:

(1) Employer-provided health insurance. It makes the system unnecessarily complex, limits individual choice, obscures the involved trade-offs and complicates reform.

(2) The opaque insurance market. On top of (1), insurance offerings are impossible to compare and the market is fragmented to a degree that competition is impeded.

Solving these two would go some way to lowering cost on the insurance side. Unfortunately, a third big problem has not been solved anywhere on the planet: How to create a competitive market between service providers, i.e., doctors etc., in spite of the massive information asymmetry and conflicts of interest.

71 Hazel Meade June 11, 2013 at 9:41 am

The employer-based system really is at the core of just about everything wrong with the health care and health insurance markets.

1. Employer-provided coverage incentivizes people to over-use medical care. Someone else is footing the bill, why NOT get that extra test?

2. Employer-provided coverage incentivizes the move towards expensive comprehensive plans. It doesn’t make financial sense to buy birth control pills through insurance unless someone else is paying your premiums.

3. Employer-provided coverage (along with other thrid-party payment systems) obscure price signals between the consumer and the provider. The consumer doesn’t care what things cost. The provider has no incentive to make consumers aware of what they are spending. Thus price-opacity. There are no market signals, thus no reason to make prices clear to the consumer. This results in a blowback that falls largely on the uninsured.

4. Employer-provided coverage results in plans whose terms meet the needs of the employer, not the employee. I.e. terms that allow the insurer to drop coverage if the employee loses his job. This causes “job lock” amoung other problems. For all the bitching about birth control coverage, if people bought their own plans, it wouldn’t even be an issue. You want birth control coverage, you pay for birth control coverage (as dumb as that would be).

72 Slocum June 11, 2013 at 10:43 am

2. Employer-provided coverage incentivizes the move towards expensive comprehensive plans.

Actually, oddly enough under the ACA, the reverse will be true. Individual plans bought on the exchanges must be comprehensive plans that include all the ACA mandated benefits. But self-insured employer plans are NOT required to meet the same coverage mandates:


73 Hazel Meade June 11, 2013 at 11:59 am

But the tax incentives to cover more will still be there. Even if you are self-insuring, the cost of care is tax-deductible on the business side, and not deductible on the indiviual side, so employees will push for more expansive coverage, and business will have to weight the benefits of the tax deduction against whatever savings they might get by trimming coverage.

74 Slocum June 11, 2013 at 1:11 pm

But those same tax incentives haven’t prevented businesses from increasing employee contributions and trimming benefits over recent years/decades — so I don’t see any reason for that process not to continue. On the individual market, on the other hand, catastrophic plans have been relatively common, but the ACA will force individuals to switch to comprehensive plans (unless, of course, they choose to go without insurance).

75 Hazel Meade June 11, 2013 at 4:46 pm

It’s true that at some point the benefits of the tax deduction get canceled out by excess costs brought on by medical inflation (which is partly driven by the bad incentives of the employer based system). I just don’t know that the system would necessarily evolve back towards individual-based insurance. It’s possible the equilibrium state would end up preserving most of the perverse incentives of the current market, just with more cost-sharing in a higher-priced market. But you’d still have job lock and people getting sick and losing their jobs and ending up uninsured.

76 Hazel Meade June 11, 2013 at 9:18 am

The correct answer is:

1. Repeal of the ACA.
2. Repeal/remove the tax incentive promoting employer-based care.

Those two steps will restult in people migrating back to the individual market which will result in a natural shift towards HSAs and high-deductible plans. You could combine this with a few modest reforms such as:

3. Mandate that plans cover long-term treatment of chronic conditions, even if you stop paying premiums for whatever reason. (i.e. as long as you were covered when the condition started the insurance company must pay for it.) You could require the insurer to make a lump-sum compensatory payment or put it in a trust from which the patient can draw expenses.

4. Forbid insurers from dropping patients after they develop an expensive illness, even if they lose coverage because they get too sick to work.

The above two ought to be considered “enforcing the terms of the contract”, really, since I doubt anyone would buy a plan that didn’t cover them after they got sick, if they weren’t buying coverage via their employers. (This is all a perverse byproduct of the employer-based system).

5. If you really want to get nitpicky about people using emergency room care – mandate carrying a minimal catestrophic-only plan only, which is priced according to individual risk (no community rating).

6. If you really insist on incentivizing coverage offer a tax incentive for keeping an HSA/high-deductible plan combination.

77 Myron June 11, 2013 at 9:26 am

I’m in favor of # 2 (single payer) but I’m fine with or would even prefer # 3 (Singapore). And actually I see existing single payer systems evolving to # 3 as coverage is cut back due to budgetary/ low national income growth reasons. As I understand it, all “single payer” systems except maybe North Korea have a role for private insurance and doctors outside the system.

Also I think # 2 and # 3 are equally unlikely in the United States, but for various reasons I don’t think the U.S. political and economic system is not capable of reform at the moment without being forced to. Which may happen, as the current corporatist system is both really expensive and deficient in various (not all) measures of care. Logically you want to move into the direction of the free market, with the government providing a backstop for the genuinely unforseeable stuff. The ACA is an attempt to either salvage the existing system or to keep it alive for one more round of plundering, depending on who you listen to.

I also agree with Oreg that alot can be done with reforms that specifically target (as in end) employer provided health insurance and insurance company abuses, without having to construct an entirely new system.

78 bjssp June 11, 2013 at 9:49 am

Why is it an error–a Denkfelher if you are trying to be cute about it–to point out one side focuses on the repeal but not on the replace and thus doesn’t have a health care plan?

“I don’t see “ACA as envisioned by its propnents” as on the table either, so in this sense it is also the Democrats who don’t have an actual health care plan.”

What does this mean? There was a vote on the ACA and it passed. Democrats largely supported it and continue to do so. Republicans universally voted against it and almost all (if not all; I’ve forgotten the break down over each of the 37 votes) continue to do so. Nor have they passed anything that guarantees coverage to those affected by the proposed dissolution of the ACA. So again, why is it an error to say one side really doesn’t have a plan?

79 Urso June 11, 2013 at 11:47 am

Isn’t this a version of the politician’s fallacy? (Which goes (1) we have to do something; (2) this law is something; ergo (3) we have to pass this law). In other words, the fact that there is a proposed solution for an identified problem doesn’t mean that the solution is a good one. This remains true even if the opponents don’t have a contrary proposal.

To be clear, I am totally agnostic as to whether the ACA is a “good” law, either in the short or long run. I just lack the information necessary to make a judgment on that. But I do know that “well these other guys don’t have a solution” is not a good argument in favor of the ACA.

80 bjssp June 11, 2013 at 1:13 pm

I suspect it’s going to be a little more complex than that. It’s been obvious that Cowen is skeptical of the legislation, but does he really think it’s going to collapse quickly and hurt a lot of people in the process? There are some things about it that I don’t like, but while it’s not perfect, and while I think we are going to end up with a particular system sooner rather than later, it looks like it could help quite a few people in the mean time. And of course, it could work better than a lot of the skeptics realize.

The point isn’t that something, however awful, is better than nothing. As you say, we don’t know all that much, and that extends to people who do this for a living. Jon Gruber has been quoted as saying there’s basically every proposed solution for cutting costs in the bill and that we need some time to see what works and what doesn’t. It’s fine if you have a preferred alternative, but the Republicans don’t even have that. Their proposal is largely the status quo. At least from the angle of those who would be left with (almost) nothing, that’s not really very good.

81 Mark June 11, 2013 at 9:52 am

Question about Singapore’s system, and similar systems which are often proposed. It seems like they are flipped…

Why is the catastrophic coverage the part that is paid for by the government? Isn’t catastrophic coverage (presumably meaning relatively discrete and rare events which are undesirable and therefore lead to little moral hazard) exactly what insurance markets _should_ be good at?

Why not a system in which the government pays for all primary care, ie preventative care, chronic disease management, minor ailments? Co-pays, tiered payment, cost-sharing etc could still exist. The role of private insurance companies would be to do what insurance does best – pay for rare and expensive events that no one would wish for themselves.

Obviously the devil is in the details, but that is true of every possible system.

82 Hazel Meade June 11, 2013 at 9:55 am

Well, you could do what the government does with food. Subsidize the production of staple goods, which results in low food prices.

In other words, provide cash subsidies to primary healthcare providers and urgent care clinics.
Make it so that the cost of an urgent-care visit is reduced to the typical co-pay ($10-$20 per visit).

83 Tracy W June 11, 2013 at 10:04 am

Subsidising the cost of food may result in low food prices, but only at the cost of higher tax payments, with the higher tax payments costs higher than the benefit from lower food (because of administrative and dead-weight costs involved with collecting the taxes and paying the subsidies). So basically, what the general population wins from cheaper food they more than lose from higher tax payments.

Generally, for a private good (rivalrous, excludable, like food), if you’re concerned about access it’s much cheaper to just give money to the poor to buy the good rather than subsidising production for everyone.

84 bjssp June 11, 2013 at 10:52 am

My natural reaction is to be against subsidies like this, but I doubt that the administrative and compliance costs on the government’s end are really all that high.

85 Tracy W June 11, 2013 at 11:34 am

Perhaps not, but as long as there’s some, then subsidising the production of a private good is going to be more costly than people just buying it with their own money.

Also don’t ignore the administrative and compliance costs to taxpayers and the farmers claiming the subsidies, along with the dead-weight losses to them. The government is not the only entity in society, if a farmer spends 30 minutes filling out a form then that’s a cost to be weighed against any benefits from a program, no matter how efficient the government is at processing that form.

86 bjssp June 11, 2013 at 11:44 am

I don’t know if that’s really true, but then I don’t know all that much about farming to begin with, so…

What you’re saying makes sense in the abstract, but it’s not clear that the cost of compliance is really all that great, on either end, especially if things don’t change all that much. Most of the subsidies go to big producers, who probably have the resources to do other legal/government things in addition to the work required to get and/or maintain the subsidies. It’s stronger to say that the direct cost of the subsidies might be bigger than the alleged benefit in lower prices, but that, too, isn’t clear, especially since we don’t know how much this forces smaller farms to take a hit.

Just to be clear, again, I’m not saying I am for them.

87 Tracy W June 11, 2013 at 4:55 pm

The direct cost of the subsidies is in the best case equal to the alleged benefit in lower prices.

Think about it: if farmers get a subsidy of $x per ton, then the taxpayers have to be paying at least $x per ton in subsidies. So taxpayers can only benefit if farmers lower the cost of food by more than $x per ton. But if wholesale food markets are competitive the marginal farmer can’t lower prices by more than $x per ton without going bankrupt. And if they aren’t competitive won’t those big agribusinesses keep some of that subsidy for themselves?

The benefits are clearly at best zero, so even very small administrative and dead weight costs mean this is a bad idea.

As for small farmers, what’s your moral case for helping small farmers more than, say, poor factory cleaners, or people too disabled to work at all?

88 JWatts June 11, 2013 at 6:38 pm

My natural reaction is to be against subsidies like this, but I doubt that the administrative and compliance costs on the government’s end are really all that high.

I agree with what you said, but the big cost will come from the inevitable special interest behavior that will creep into the system. Companies will lobby to have their products treated more favorably than their competitors.

89 Tracy W June 12, 2013 at 6:27 am

JWatts: Another set of costs is waste of food (eg by careless storage), because of the disconnect between the taxes paid and the volume you consume. For example, if a bread-making factory pays the full cost of the grain they buy for each ton, they have more incentive to be careful to avoid wasting grain than if they pay a smaller amount per ton, and then some more through taxes to subsidise food production indirectly. The amount the factory pays in taxes for the subsidy scheme is only very indirectly affected by their waste, so there’s a free-rider problem with subsidising food production.

90 Hazel Meade June 11, 2013 at 11:56 am

I generally agree. My point is that if you really insist on intervening in some way intended to make basic healthcare more available to the poor, probably the simplest, cheapest, way ot do that is direct subsidies.

91 Tracy W June 11, 2013 at 5:03 pm

It may be the simplest, cheapest way, but it’s a bloody complex and expensive way all the same. You can’t just pay subsidies to the clinic, you need to check that the clinic employees are doing their jobs competently. This is hard. And it’s a very good idea to check for fraud in claimed provided services, unless you want total expenses to be vast.

Similar problems if you subsidise the consumption of healthcare. People’s food consumption doesn’t vary quite as drastically as their healthcare needs, though teenage boys do eat an awful lot.

92 Tracy W June 11, 2013 at 10:08 am

Don’t be too enthusiastic about single-payer in NZ. It’s cheaper than in the USA but spending is rising faster than GDP in NZ as well. Estimates are that only 10-15% of the rise comes from an aging population


93 Claude Emer June 11, 2013 at 10:12 am

Here’s a PBS documentary on the topic. http://www.pbs.org/wgbh/pages/frontline/sickaroundtheworld/

The German or Taiwanese models are most appealing to me. One of the key elements healthcare reform was trying to address is the cost curve which was somewhat exponential. Another was that we rate healthcare services based on quantity, not quality, an economics based approach I’m sure.
If I were to create a model from scratch, I’d decouple health insurance from employment, allow anyone who wants to import medicine to do so, allowing an international style FDA of course. I’d allow a us post office – FedEx type system. Here’s what I’d say to Big Pharma that claims it can’t survive without the monopoly system we currently have: innovate or die. I’m more interested in sick people getting treatment than I am in ensuring big companies secure their profit.

94 Mike H June 11, 2013 at 11:24 am

Great link, thanks for sharing. I found an interesting quote there:

>Would you say that Taiwan has socialized medicine?

“No, sir. Taiwan does not have socialized medicine in any sense of the word. First of all, the doctors are private practices. Most of hospitals are privately owned. They compete with each other. People have a choice of their doctors, hospitals. They have more choice than Americans. In no sense is it a socialized system.”

Speaking as someone from Taiwan, I can tell you what he said is 100% true. Regulations on doctor and nurse licensing are very relaxed here compare to the standards in the West, lawsuits on “medical malpractice” are rare and courts rarely award patients any large amount of compensation. Yet, the intense competition among the clinics and hospitals keep the bad ones out of the market or are quickly discredited by local residents and the media. For-profit private hospitals are everywhere and they often deliver higher quality cares than the ones run by the government.

Even if you go to a doctor without national healthcare coverage (common among foreign workers in Taiwan) it costs only a fraction of what it takes in the US. A trip to the dentist costs you about $5 USD with healthcare or about $10-50 without it depending on the treatment. There is no regulation on the maximum prices a doctor can charge patients who don’t have healthcare coverage, but competition keeps the market prices low and you can always shop around.

Also worth mention is that in Taiwan you can choose NOT to participate in the national healthcare and thus not paying anything at all. It is true that a small portion of the taxes you pay can still be diverted to subsidize the growing deficits of that system, but in general the system has proved to be self-sustainable for the most part. There are also plenty of private health insurance companies offering plans for foreigners and people who simply don’t want to participate in the national healthcare, the government does not regulate them nor attempt to make them subsidize the public healthcare system.

95 bjssp June 11, 2013 at 11:55 am
96 Mike H June 11, 2013 at 12:20 pm

Well the NYT article is interesting but it doesn’t really address the question why medical cares in Taiwan are so cheap. As I said, even if you go into a hospital in Taiwan without any sort of insurance you’d still only be charged one third or even less than what it takes in America. Obviously factors other than “single-payer system” are at play here. Also like I said the government-run “single-payer system” in Taiwan is voluntary, you are not forced to join the system if you don’t want to.

97 bjssp June 11, 2013 at 2:42 pm

I am seeing some links that say you are, in fact, required to join the system. Is there some subtle distinction lost here?

98 Mike H June 12, 2013 at 12:48 am

“I am seeing some links that say you are, in fact, required to join the system.”

Those people definitely aren’t living in Taiwan then. Do you want me to show you my tax return form to prove that I am not paying for the system?

99 T. Shaw June 11, 2013 at 10:31 am

“Most of the major ills of the world have been caused by well-meaning people who ignored the principle of individual freedom, except as applied to themselves, and who were obsessed with fanatical zeal to improve the lot of mankind-in-the-mass through some pet formula of their own. The harm done by ordinary criminals, murderers, gangsters, and thieves is negligible in comparison with the agony inflicted upon human beings by the professional do-gooders, who attempt to set themselves up as gods on earth and who would ruthlessly force their views on all others with the abiding assurance that the end justifies the means.” From The Mainspring of Human Progress by Henry Grady Weaver

100 derek June 11, 2013 at 11:55 am

His categorization of professional do-gooders must be awfully broad to include people like Hitler et al! I don’t see his point at all. Yes, wars have caused much more harm than criminal activity, but do we really consider most wars to have been carried out by professional do-gooders? Let’s include not-wars too: was the Spanish Inquisition carried out by do-gooders, for example? Crazy.

101 bjssp June 11, 2013 at 10:44 am

I’m curious, would any HSA-style advocates be in favor of a system where everyone gets a voucher of a set amount (except for extreme cases, such as someone being born disabled or with a disease) but with the ability to top it off up to a set amount each year, sort of like a Roth IRA? Perhaps, after say, five or ten years, some of the amount could be taken out to be spent on whatever, but most of it would be strictly set for health care.

102 Dan Weber June 11, 2013 at 11:33 am

Here’s one system I didn’t see listed, but it might be the same as #3 in practice:

a. Government establishes dollars/QALY for list of treatments.

b. Government covers population for everything up to $N/QALY, financed by a VAT in place of payroll taxes.

c. Private companies can offer to cover everything up to $M/QALY (M > N), with courts assuming that the government’s calculation is correct.

d. Private companies can offer coverage outside that structure, but legal protections for denying coverage are harder to defend against (i.e., the current situation for private insurance).

There are many ways to have people of means “price out” of this program. Maybe they can choose a $3,000 tax credit in place of getting point b; maybe they can fill up with point c while keeping point b.

103 Jameson Burt June 11, 2013 at 12:34 pm

Give insurance companies what they want — insurance for small amounts but not catastrophic amounts.
Option 3 comes close to this, but insurance companies would complain when health savings accounts kicked them out of the business. Since insurance companies use various strategems to avoid paying catastrophic costs, often to consumers’ disbenefit, have single payer catastrophic benefits but insurance for small amounts. Although insurance is only meaningful for catastrophic costs, “insurance” companies would flourish without those costs and would politically accept the arrangement. You’ve bought them off.

104 bjssp June 11, 2013 at 1:14 pm

Perhaps this is done more than I assume it is, but I have to wonder why we don’t hear about more companies trying the HSA approach. Is it because, for all of the complexity, the current system works pretty well for them in the end?

105 Hazel Meade June 11, 2013 at 4:57 pm

Actually, it’s simply untrue that insurance companies usually try to avoid paying catestrophic costs. So-called “recission” is extremely rare, and, while we hear about these highly publicised cases, in generally, legally, the insurance company can only void the insurance contract if the patient is found to have interntionally lied on his application to conceal a known medical condition. Which is essentially insurance fraud.

The big problem with the existing market isn’t really insurers refusing to pay for catestrophic coverage, it’s that people get too sick to work, and thus lose their insurance.

Because employers are the ones negotiating the contract, the contract does not hold the insurer to continuation of coverage after the employee leaves. That’s how we ended up with all these people who are uninsurable due to “pre-existing” conditions – many of them WERE insured vwhen they became ill, but lost coverage when they became too sick to work. That’s the big loophole for insurers.
Plus, employers have little incentive to negotiate for things like high lifetime limits. If someone needs $3 million in treatment, they probably aren’t ever going to work again, so why pay for it?

When it comes to insurers trying to weasel out of costs, all that is needed is for courts to enforce the terms of the contract. Then we just get individuals back into negotiating for their own insurance and the problem is solved.

106 mark June 11, 2013 at 1:56 pm

Although I don’t think it will happen in the US politically, I would add as an option a 2-tier healthcare system, with a national health service open to all Americans and somewhat close to free per visit, funded out of a national tax of about 8.25% similar to Denmark’s health tax; and the rest being a largely private sector, free market system, with some regulation but no subsidy.

107 bjssp June 11, 2013 at 2:45 pm

Isn’t that sort of like what we have now, in the sense that nobody who has the ability to pay for something is being prevented from not buying coverage?

Sure, regulations and similar stuff might make it more expensive, but there’s nothing to prevent someone from personally buying all of the coverage they want. Nor is there widespread proposal to stop that. (I say widespread because there was a CAP footnote about limiting something if cost-cutting measures don’t pan out, but it was one sentence and nothing more, so…)

108 Donald Pretari June 11, 2013 at 1:56 pm

A Very Good Post, meaning I basically agree with it. I would simply emphasize that 3 won’t leave the needy to suffer. It will provide for them.

109 rjh June 11, 2013 at 4:14 pm

I think that the US public would be reasonably comfortable with the Dutch system. It’s similar to the Swiss system, but closer to US norms. I would add it to the list. There are several important characteristics:

1) Like the Swiss system, it is NOT SINGLE PAYER. Despite the disinformation campaigns of the US progressives, much of Europe is not actually a single payer system.
2) “Curative” insurance is mandatory, much like basic auto insurance is mandatory in the US. An insurance vendor must offer basic curative insurance to anyone who pays their bills. A person must have curative insurance.
3) There is a low income subsidy that is directly applied to curative insurance fees, so the poor and low income get assistance from the social insurance fee. The payment is direct to avoid use for other spending.
4) The relationship is between the person and the insurance company. The employer usually includes an insurance contribution as part of an employment contract, but this is a simple straight bill payment. The employee tells the employer where to send the payment. The employer has no role in choosing the insurance company, and insurance contracts are not contingent on employment.
5) The insurer may offer, at their discretion, “preventative” and additional coverage. This is optional for both people and insurers. It can be contingent upon health conditions.
6) Insurers are dominantly mutual insurance companies. Profits are returned to insurance customers as dividends.

“Curative” insurance covers basic curative services. The list is scrupulously kept to the lowest cost cures only so that curative insurance remains affordable. Americans are often shocked by how basic this list can be.

This approach avoids the socially destructive practice of leaving people to die in the streets while keeping costs down. Having the relationship be directly between the person and the insurer means that plans exist that are much better tailored to different individual situations, and employers don’t get in the middle. It’s much more like the situation with automobile insurance. People still dislike insurance, but insurers compete on quality of service and cost. Each person makes their own tradeoff on how much beyond “curative” they purchase.

110 JWatts June 11, 2013 at 6:43 pm

Americans are often shocked by how basic this list can be.

I doubt you could ever get the US Left on-board with any kind of basic list.

111 Ricardo June 11, 2013 at 10:12 pm

Since rjh’s “basic list” includes an individual mandate, I’m not sure why you think the “US Left” would be the biggest obstacle to its enactment.

112 mulp June 12, 2013 at 12:12 am

By US Left, you are referring to people like Sarah Palin who called limitations on end of life care chosen in consultation between patient and doctor long before EOL to be death panels because insurers should pour endless money into deathbed care.

And I recall conservatives being loud in criticizing the Oregon Medicaid reform a decade plus ago where they listed all procedures based on cost-benefit and QOL metrics which put child wellness care really high, and organ transplants really low, then drew a line where the money ran out, and Medicaid did not cover anything below the line. Liberals merely argued for more money, but the basic scheme was right.

The people who I saw complaining the loudest about the transplant policy were conservatives who jumped at the chance to blame Obama for the rules on transplant allocation set up under Reagan. Organs are the absolute cutoff of care resulting in death; liberals look for ways to increase the number of organs, conservatives seem to look for changes to allocation of organs (highest bidder, most connected politically, best lawyer, best publicist,…)

113 mulp June 11, 2013 at 11:52 pm

re 7.

Your comments on HMOs is basically wrong because by the late 90s, virtually every HMO had been destroyed by changes to Federal law that was pushed by for-profit insurers to tax HMOs like they were insurers, when HMOs were NOT INSURERS, but were prepaid health care with risk sharing at the basic level and reinsurance to cover catastrophic losses. The only way to cope was to split the HMO into a provider and an insurer. Once split, the provider corporation then began losing control of delivery because they started dealing with multiple insurers to maximize utilization, because the insurer started going to other providers which offered lower prices under contract.

By the 90s, it was insurers offering HMO policies where the insurer hired clerks who told doctors how to practice medicine.

The doctors had no knowledge about the criteria the insurer was using for its “managed care decision” policy, and the insurer had no idea what the doctor and clinic could do to cut costs in caring for patients because the insurer had the practice frozen in a list of billable items done by billable agents. A doctor could listen to lungs etc for code x, but the nurse doing it was code z, with no provision for the nurse doing it while talking by skype to the doctor.

I loved my HMO in the 80s – it wasn’t uncommon for a doctor to grab another in the hallway or his office for a two minute consult – there was no billing code or anything – the doctors were a team who backed each other up because they had different specialties, and they all got paid the same way, not by piecework.

But then the impact of the law change in the late 80s forced a change in operation and then structure in the early 90s.

The Oregon system is one where the doctors et al got together and then worked with a few insurers to do the equivalent of the HMO, working out a system of billing the insurers that was not strictly standard. My guess is that without an agreement between insurers, providers, and the State government, they could be sued for conspiracy to commit fraud.

The IPAB is intended to change the billing from piecework to patient care delivery. Instead of billing for a visit, a physical, labs, with a hundred different codes possible, there would be three codes for a visit based on the degree of complexity or something, and the lab costs would be built in. The provider decides on the kind of labwork based on what leads to best care most efficiently.

The problem is giving the providers the maximum flexibility to innovate on health care delivery. For example, there are experiments where nurses call patients daily for those at risk of certain problems, while others send nurses every few days. Others train social workers to visit and check vitals and observe the patient in the home on a regular basis on the basis this person will see the patient take a turn for the worse simply by seeing them regularly. The HMOs created at the insistence of Nixon policy had that flexibility because they got the money for each patients and then spent it the best way possible under the direction of doctors, not insurance executives.

In more than a decade with the HMO, I regularly saw innovations, some obviously worked because they persisted, while others didn’t. After they began working for pay from an insurer, or billing patients on piecework, things went backward. If the doc wasn’t sure, then it was an appointment for a specialist, approval from the insurer, then a separate doctor visit, then a followup from my primary, sometimes with another visit if more than a note was required. It was not possible to go down the hall for a two minute consult.

114 ww June 12, 2013 at 12:17 am

Unless fee-per-person (HMO) is a part of reform, the nation will continue to collapse under the weight of fee-for-service, no matter what other remedies are put in place.

115 Max Bupa June 14, 2013 at 12:27 am

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116 Jim June 14, 2013 at 4:05 pm

I know I am a bit late to this discussion, but I think there are a couple of important things to add about the Singaporean system as someone who lived there for a year and a half.
1) The single payer system for catastrophic does NOT cover all of the costs. It is indeed tiered for levels of income, but a poor person in SG stuck with a $20,000 hospital bill still needs to come up with $4,000, which is not always possible (although, in theory, will be taken out of the Medisave account.)
1a) The important connection to this is that the Singaporean government is very effective at making people pay up, even including jail time (I do believe.) Such rigid enforcement is key to their system, but I doubt seeing it in the US.
2) In terms of the private sector that provides supplements to the co-pays, it very much discriminates on age. So, while there as a person in my young 20s, I paid only $250 a year for the top catastrophic plan, but people over 80 will be paying thousands of dollars a year for similar insurance.
3) Finally, I think the biggest key to the system is a system of local neighborhood clinics everywhere. No appointment is needed, just show up, and a doctor will see you within about 10 minutes, and provide whatever is needed (for just to get prescriptions, the cost is about $15.) Until such cheap and readily available clinics are available, its hard to see how the US will keep costs down for simple doctor visits.

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