How much do people value health insurance?

by on May 5, 2017 at 1:00 am in Current Affairs, Economics, Law, Medicine, Uncategorized, Web/Tech | Permalink

There is a new and very good paper on that question by Amy Finkelstein, Nathaniel Hendren, and Mark Shepard (pdf).  In reality, the price elasticity of demand for health insurance is quite high, at least among lower-income groups:

How much are low-income individuals willing to pay for health insurance, and what are the implications for insurance markets? Using administrative data from Massachusetts’ subsidized insurance exchange, we exploit discontinuities in the subsidy schedule to estimate willingness to pay and costs of insurance among low-income adults…For at least 70 percent of the low-income eligible population, we find that willingness to pay for insurance is far below the average cost curve – what it would cost insurers to provide coverage to all who would enroll if the premium were set equal to that WTP. Adverse selection exists, despite the presence of the coverage mandate, but is not the driving force behind low take up. We estimate that willingness to pay is only about one-third of own costs; thus even if insurers could offer actuarially fair, type-specific prices, at least 70 percent of the market would be uncovered.

That is from both the abstract and conclusion.  I do understand the ideal of universal coverage, but note this:

For example, we estimate that subsidizing insurer prices by 90% would lead only about three-quarters of potential enrollees to buy insurance.

The somewhat depressing and underexplored implication is that the beneficiaries do not love Obamacare as much as some of you do.  In fact you may remember a result from last year, from the research of Mark Pauly, indicating that “close to half” of households covered by the unsubsidized mandate, by the standards of their own preferences, would prefer not to purchase health insurance.  And that was before some of the recent rounds of premium increases, and overall these new results seem to imply even lower demands for health insurance relative to cash.

Now, I think it is an open question how much “non-paternalism” is the correct moral stance here.  Maybe we should force upon people more health insurance than they would purchase in an adverse selection-free market, because a) they are ill-informed, b) they have children, or c) ex post we still need to take care of them in some way, if indeed their gamble to not purchase insurance turns out badly.

Do, however, note the words of the authors: “We conclude that the size of uncompensated care for low-income populations provides a plausible explanation for their low WTP.”  In other words, many of the poor do not value health insurance nearly as much as many planners feel they ought to, in large part because they are already getting some health care.

In any case, consider a political economy point if nothing else.  If you institute a policy that forces on people more health insurance than they think they wish to buy, do not be shocked if a huckster comes along offering them a supposedly better deal, and gets away with it.

Along related lines, consider also this result:

From the perspective of social welfare, to justify connecting the 5% least dense areas of North Carolina would require each adopting household value high speed wired broadband access at more than $1519 per month.

For the pointers I thank Peter Metrinko and Kevin Lewis.

1 JVM May 5, 2017 at 1:12 am

One perverse aspect of the current system is that emergency room service is always offered without means testing of patients. This means that everyone has a form of insurance that is in some ways very generous. This is the logic behind the mandate: people who don’t buy insurance are essentially freeloading.

One read on these results is simply that freeloading is an attractive option to many.

2 Andre May 5, 2017 at 1:28 am

The massive amount of uncompensated care that was being paid for on the backend by the federal government pre Obamacare is something I don’t think anyone has emphasized enough. Debt that was privately written off in doctors offices is massive as well. Even for people who are insured consistently collecting co pays and fees up front before service is one of the best ways small doctors offices improved their cash flow. Chasing after people for that 10 dollars is almost impossible after the fact.

3 Daniel Weber May 5, 2017 at 8:31 am

The massive amount of uncompensated care that was being paid for on the backend by the federal government pre Obamacare is something I don’t think anyone has emphasized enough

Depending on your source, this was either less than 1% of US health care spending, or all the way up to 2%.

So, no. It was definitely overemphasized.

I get the appeal: “If we can cut down on ER visits we will save so much money.” It’s a way to cut our costs without goring anyone’s ox. So simple. So delightful. It’s like appealing to “prevention” as a magic box of money that we haven’t already scraped clean. But it’s just not there.

4 Benny Lava May 5, 2017 at 2:16 pm

Bankruptcy filings have steady declined since 2010. Is this because of the ACA? Or coincidence. Only your prior beliefs will determine what you make of the evidence: http://www.uscourts.gov/news/2016/10/26/decline-bankruptcy-filings-slowing

5 TMC May 5, 2017 at 4:58 pm

Cause we were coming out of a recession?

6 JCS May 5, 2017 at 1:52 am

I think this is basically right.

Really what this elasticity represents is the elasticity for non-emergency, non-life-threatening & non-crippling/chronic care. Lots of that can be incredibly important and pain-reducing but it’s also not top of mind. And if you have a chronic condition that prevents you from working you’ll be on Medicaid which, while perhaps not great, is at least insurance.

The better question is what is the value proposition of purchased insurance for a low-income individual in such a system. If something goes really wrong you can get emergency care, and if it keeps going wrong you’ll fall into the Medicaid bracket. Such a situation is not great for you, but it is also not measurably worse than your existence on a crappy health insurance plan you pay for (you’re actually likely to have to do much more of the wrangling with the insurance company there than on Medicaid, or so I’m told). That is why I viewed the expansion of Medicaid as one of the best features of Obamacare for improving the lives of the poor. Making the marginal low-income individual buy insurance arguably cost them money without improving their lives.

7 bmcburney May 5, 2017 at 9:33 am

“Really what this elasticity represents is the elasticity for non-emergency, non-life-threatening & non-crippling/chronic care.”

This is a very common misconception but is completely and utterly wrong. The sole purpose of health insurance is to protect the insured’s financial assets. The reason that poor people especially are uninterested in paying for health insurance, at any price, is that they have few, if any, financial assets to protect. Without financial assets to protect, a working person without insurance simply goes to a hospital emergency room or other provider and gets treatment. Regardless of whether the person qualifies for Medicaid or not, regardless of the nature of their health problems they receive treatment. If they can pay, they do (more or less). If they can’t, they receive the treatment anyway and, if the government won’t pay for it, they declare bankruptcy or simply ignore the bills.

Doctors in private practice are allowed to refuse to treat new patients if they believe the new patient is a poor credit risk and/or they find the payment terms imposed by government programs unacceptable. Non-public hospitals also have this option but few exercise it because emergency rooms are an indispensable source of income (although payment almost invariable comes from government programs). As a practical matter, the care is always available, one way or another; you don’t need insurance to get care. Poor people know this, even though health care economists are too stupid to figure it out.

On the other hand, you do need health insurance if you own something which a health care provider might take from you if you refuse to pay. Furthermore, this really only occurs when the thing you own is valuable enough to be worth while from the point of view of the debt collector.

8 Dave May 5, 2017 at 9:55 am

As someone from a very large blue-collar family who didn’t have health insurance until his 30s, I believe this is spot on. When we had to go to the doctor, we got the cash rate and we made payments. If we had to go to the emergency room, we just went and then we figured out how to pay for it, again typically through payments along with, in some cases, gov subsidy. To this day, I resent paying the premiums I do for myself, and I’d resent the premiums I pay for my kids if I thought about it. The fact that we’ve tried to overhaul our entire system instead of addressing the specific problem of catastrophic care is crazy to me. My health care plan in one line: The GOV should provide catastrophic coverage for everyone, charging deductibles based on ability to pay, with a surcharge on those deductibles for people could have afforded private catastrophic coverage but elected not to buy it. Start there.

9 Floccina May 5, 2017 at 5:28 pm

@Dave, I like your plan. It is similar to mine: http://un-thought.blogspot.com/2009/09/healthcare-compromise.html

10 adam May 5, 2017 at 10:45 am

This is only sort of true. If you break your arm, then you can go to the emergency room and get it set. But if you get cancer, the emergency room is not going to give you chemo.

11 bmcburney May 5, 2017 at 11:26 am

adam,

Although the emergency room itself may not give you chemo, the hospital to which the emergency room is attached must, by law, provide treatment to any patients admitted via the emergency room regardless of ability to pay or the prospect of payment via a government program. In some cases, non-private hospitals might try to “dump” patients on a local public hospital and some public hospitals don’t resist this practice too vigorously because their budget for administrators depends, in part, on the number of patients served and their overall costs. However, treatment is always provided, for any condition the patient may have, provided that the facility has the ability to provide the treatment. When that ability legitimately does not exist, the patient is referred to a public hospital or another private hospital with the ability to provide the treatment.

12 adam May 5, 2017 at 1:07 pm

That’s not true. The law says hospitals only have to providing stabilizing treatment for emergency medical conditions. That most certainly does not include chemo for a cancer patient.

13 Floccina May 5, 2017 at 5:30 pm

If you get cancer and cannot pay you will most likely end up on Medicaid.

14 adam May 8, 2017 at 4:55 pm

Ok, but the OP’s argument was that “Regardless of whether the person qualifies for Medicaid or not, regardless of the nature of their health problems they receive treatment.”

15 efp May 5, 2017 at 12:12 pm

Very good comment, though these statements are not at odds. I’d say the reason “The sole purpose of health insurance is to protect the insured’s financial assets” is precisely because people know they can get emergency care for “free” (i.e., for bankruptcy).

Suppose this wasn’t the case… ER’s could and would turn away those who couldn’t pay. What would we see? I’d guess only a modest uptick in people paying for insurance, and a huge growth of black-market medical services. Of course, just changing one variable like that is silly. Point being, the ‘sole purpose’ is in fact part of a large matrix of incentives.

16 JCS May 5, 2017 at 1:22 pm

Great comment, thanks for sharing.

17 Floccina May 5, 2017 at 5:21 pm

Yes I we already have Medicaid for all. If you are in the bottom 2 quintiles of income and have a big medical bill you will probably be on Medicaid from then until you die.

The real problem is the cost of medical care and I think that is mostly a state issue.

18 Paul May 5, 2017 at 7:30 am

Lower working class are broke, have no lobby power, compete against open borders and China. No money, no jobs. So now another group of elites want to force upon them. Like they don’t remember Vietnan, Urban Renewal, School busing of their public schools, but not the elites schools. As if they didn’t notice their crappy milll towns close down and the factories shipped off. As if they didn’t notice 20 year wars in Afganistan and the Middle East. As if they didn’t notice Doctors and pharmaceuticals shoving Oxy for every ache and pain. As if they didn’t notice upper income urban elites shut down their mines and forests . As if Wall Street and The Fed and TBTF funancials. As if the Universities and colleges aren’t raping their kids.
They might be slow, but they learn.
Elites have expended their good will.

19 Adam May 5, 2017 at 8:45 am

You must be a blast at parties.

20 msgkings May 5, 2017 at 12:16 pm

LOL, doubt he’s invited to any.

21 mjw149 May 5, 2017 at 8:56 am

It’s obviously a classic commons problem we’re trying to solve, not the idea that people want to pay health insurance but can’t afford it. The issue is that they don’t buy it, but need hospitals to stay in business for when they’re inevitably sick or in an accident.

There were many hospital closures outside the Medicaid expansion states, and no plans to reopen them afaict. Nothing is being done about this without mandatory health insurance.

22 Floccina May 5, 2017 at 5:15 pm

Yes the PPACA looks very Republican to me. That is it looks like an attempt to make people to do the responsible thing and buy insurance. The subsidies are nice for smoothing the marginal tax rate caused by Medicare, republicans would probably rather that they be stingier but not so un-Republican.

Of course politics got in the there with the 3 to 1 rule, 45 to 60 year olds vote so you have to pay them off but these days Republican are OK with buying older American’s votes. So overall looks very Republican.

23 Demosthenes May 5, 2017 at 1:15 am

Aren’t “low income adults” eligible, or close to it, for Medicaid anyway?

24 Jan May 5, 2017 at 5:54 am

Many times, yes. For a single adult, however, they would typically only have coverage if their state expanded Medicaid and their income is pretty darn low, <$19,000/yr in most cases. A lot of people eligible for Medicaid actually haven't enrolled, usually because they aren't aware they qualify.

25 rluser May 5, 2017 at 6:08 am

Because they have no need. Medicaid enrollees can be ex post facto. Hospital staff will enroll them.

26 Jan May 5, 2017 at 7:14 am

Thare can be a three month retroactive period if the person was eligible throughout the period. However, as much as lots of folks don’t realize they even qualify for Medicaid, I’d be surprised if many are aware of retroactive coverage. Not enrolling only makes sense if someone literally has no medical expenses. I think it’s just an awareness issue.

27 Helen DeWitt May 5, 2017 at 12:19 pm

I thought to enroll for Medicaid you had to provide a 1040 for the previous year demonstrating eligible level of income. So if you’ve had a series of crises preventing you from filing the necessary tax return you can’t give them the paperwork they need. If you’re a freelancer you might have the return but be in a lean year following a fat year (fat in the sense that, say, you could risk paying off some credit card debt from previous lean years). I would be thrilled to learn that these are not the obstacles they have seemed to be when I looked into it, but I take it that part of the problem is not only actual obstacles but perceived obstacles.

28 bmcburney May 5, 2017 at 11:46 am

“A lot of people eligible for Medicaid actually haven’t enrolled, usually because they aren’t aware they qualify.”

Again, this is a common misconception but its just flat out wrong. The main reason eligible people don’t apply for Medicaid is that its kind of a hassle and they don’t really need it. Poor people know they qualify for government health assistance but they don’t care unless there is some reason to care. If poor people get sick, or even just need some routine medical-related product or service (ibuprofen, a tampon, a pregnancy test, etc.) they just go to an emergency room. At the emergency room, the hospital intake people will fill out the application for you, or not, as the case may be.

Health insurance is for people with assets to protect. Poor people don’t worry about health insurance.

29 Carol May 7, 2017 at 1:11 pm

“ibuprofen, a tampon, a pregnancy test, etc.” can all be purchased at the pharmacy without going through the hassle of Medicaid enrollment and/or being billed by the ER, not to mention that need for these is not an emergency so they wouldn’t be treated at the ER in the first place.

30 Dan Lavatan-Jeltz May 5, 2017 at 1:27 am

People are *MUCH* better off without insurance. Insurance doesn’t make people well and it is a horrible financial product. If you think we are ill-informed, then why don’t we have an objective test on reasonably relevant facts. But if we win, you should pay us back with interest for all the subsidies that have gone to the insurance industry over the years. If you think you will need to take care of us, why not name a reasonable savings reserve requirement that we will prove we have met. However, we should be able to demand the same of you when your so-called insurance fails. I am bailing out insured people all the time through taxes, subsidies, and corporate HR pseudo-taxes. Why penalize people with children – do you really want this generation to be the last?

Fact is people with limited resources have to be efficient, and those of us that have woken up will always be so. Universal coverage is death. Tyler, you of all people should know this. Soon I will earn enough to start an insurance company every year. But it all starts by saying no to insurance and 401ks so you have money to invest.

31 Mark Thorson May 5, 2017 at 2:06 am

Insurance doesn’t make people well and it is a horrible financial product.

Agree completely. Medical care costs far too much, and a great deal of that is cover-your-ass tests and procedures, like CT scans and MRI for diagnosing conditions that are obvious to an experienced physician. Why did my mother need an MRI to diagnose her dementia as Alzheimer’s when she was 83 — an age when about half of everybody has dementia? When my dad had cancer (already Stage IV at diagnosis), chemotherapy bought him about another year of life, but at least half of that was absolutely miserable. He told me it was the worse pain he ever felt in his life. Simply buying a few months of life at enormous cost should not be standard of care. That is overtreatment.

If you want every minute of a decent life available to you, you need to take responsibility for that yourself. I do 20-30 minutes of vigorous aerobic exercise every day — that’s my health plan. I’m soaked in sweat when I’m done. If I could take a pill or something to get the same health benefits, I’d do that because I hate exercising, but there’s no such thing. I also follow a healthful diet and don’t smoke. I look upon health plans that pool me with lazy fat smokers as a bad deal. It’s like why I never go to all-you-can-eat restaurants — I figure I’d be subsidizing the fat people who are sucking down food like the famine starts tomorrow.

32 prior_test2 May 5, 2017 at 2:25 am

‘ I look upon health plans that pool me with lazy fat smokers as a bad deal.’

Everywhere else ion the industrialized world, all with health care at least a third cheaper, there are no ‘pools.’ Everyone is covered, from infants to those at the end of life, and essentially not a single person living in those countries are concerned about such frameworks being unfair.

This entire debate and its framing is exceptionally American. To illustrate without attempting to be unfair, you are concerned about paying too much, and thus should be able to exclude that would increase your premiums. Does this include those over 90? Those born with a congenital heart defect that can be corrected with surgery? Pregnant women? The very idea that your fellow citizens are possible to subdivide into groups when talking about health care is simply alien to all the other health care systems found in the industrialized world.

What does happen, which undoubtedly contributes to those lower health care costs, is that when a disturbing health trend is recognized, resources are used to reduce it – whether those resources include more extensive and earlier testing to recognize a developing chronic condition, or extensive public education campaigns, or increased taxes on something like tobacco, or any number of other public health measures that look at the entire population, and not merely a selected group.

33 Ricardo May 5, 2017 at 4:44 am

I agree with most of what you wrote but none of this supports the notion that health insurance is wasteful. Everyone who is not independently wealthy needs a plan that will cover the chronic conditions, freak accidents and illnesses that a non-trivial number of people encounter at some point in their lives. Even something as simple as appendicitis can cost $20,000 to treat and no amount of aerobics is going to eliminate the risk of getting it at some point. Genetics are a factor in some treatable cancers or chronic conditions.

34 chuck martel May 5, 2017 at 6:44 am

Appendicitis has been treated with surgery for many, many years. The fact that its treatment might cost $20,000 isn’t a reflection on the difficulty of the procedure. It’s altogether something else, maybe the desirability of the BMW and vacations in Bon Aire for doctors.

35 dan1111 May 5, 2017 at 7:07 am

“People are greedy” is never a sufficient explanation for high costs.

36 Ricardo May 5, 2017 at 11:31 am

This is another benefit of insurance: the bigger companies typically do a good job of negotiating discounts off “retail” prices charged by hospitals and doctors.

37 TMC May 5, 2017 at 5:21 pm

““People are greedy” is never a sufficient explanation for high costs.” In a functioning marketplace.

38 Jan May 5, 2017 at 5:59 am

At a minimum, the financial protection element of insurance is highly valuable to most people, which becomes clear when a serious issue arises.

To your other points, I am guessing your parents were on Medicare and I absolutely agree with you. Medicare needs to stop paying for low-value tests and interventions. Or, at a minimum, it should pay less for them or only pay for them in narrow circumstances where they provide high utility. We should not all be paying $500,000 for a cancer regimen that extends survival by a month, and even then at very low quality of life. Call me a death panelist.

39 Dick the Butcher May 5, 2017 at 8:40 am

Many years ago, they buried the putrid corpse of Homo Economicus.

One only needs insurance (of any species) if one possesses assets and/or income to protect.

Mainly, Obamacare partially shifted the rapidly-approaching-bankruptcy-public-burdens of financing health care delivery onto the 80+% of Americans who were content with their health care arrangements.

Anecdote, a Hillary-worshiping acquaintance on Facebook replied to a comment (I made) by saying that without Obamascare, her husband would not have been cured of a dreaded disease. I don’t air someone’s laundry on Facebook and let it drop. But, here we are anonymous.

Obamascare forced an insurance company to pay for her old man’s cure. Obamascare did not cure him. Most importantly, the couple owns several millions of dollars worth of commercial and residential real estate, which could have been leveraged to pay for his cure. Last Summer, they vacationed in Italy for two weeks.

Call me a “death panelist.” I can’t afford to pay for health care for 20 million illegals, refugees, and Jimmy Kimmel’s new baby.

40 Jan May 6, 2017 at 6:03 am

ACA was actually financed through taxes mostly on the very wealthy. That’s why the AHCA that just cut $800 billion in taxes reduces spending by about the same amount.

41 Jan May 6, 2017 at 6:04 am

Also, I don’t think you understand insurance and what was actually required by the ACA. I could explain it, but I am not really sure where to start because you’re a bit all over the place.

42 Mark May 5, 2017 at 10:52 am

“If you want every minute of a decent life available to you, you need to take responsibility for that yourself.”

I agree with this to a degree, but that doesn’t mean that it makes sense to structure health plans based on following that rule. God “sendeth rain on the just and the unjust.” I’ve run 5Ks, 10Ks, and 25Ks, but a routine physical (required when I started a new job, otherwise I wouldn’t have gotten one, because I was young and in good health) identified a heart defect that could have killed me in the middle of a race (or at any other time). Luckily, it did not prevent me from getting the job and the healthcare coverage because I did not have a gap in my insurance. My spouse and I were fortunate that, even though we each faced layoffs at different times in our lives, we were able to maintain continuous coverage.

The surgery to fix it cost north of $50K. I’m grateful for the diagnosis, the medical care, and the coverage to pay for it all. But it doesn’t make sense that luck has to be a factor in the US.

43 Pete May 6, 2017 at 5:59 pm

Goodness, Mark, you are quite the virtuous fellow. Your insinuation that disease, acute and chronic, is all caused by lifestyle choices is ridiculous. Although I’m sure your dad’s cancer was entirely his own fault.

44 Judah Benjamin Hur May 5, 2017 at 1:35 am

Yet another nail in the coffin of Homo economicus.

45 Dan May 5, 2017 at 1:45 am

”The somewhat depressing and underexplored implication is that the beneficiaries do not love Obamacare as much as some of you do.”

This doesn’t follow at all — what about endowment effects?

46 vinny May 5, 2017 at 2:02 am

Well yeah, they didn’t put the individual mandate in Obamacare because moderate income people would be jumping to buy insurance on their own.

47 prior_test2 May 5, 2017 at 2:13 am

This is not about health insurance, this about health care. Everywhere else in the industrialized world, people understand this.

And they enjoy health care that is at least a third cheaper than in the U.S. In other words, no other country even has debates about ‘health insurance’ or its perceived value when talking about health care.

‘do not be shocked if a huckster comes along offering them a supposedly better deal, and gets away with it’

What, President Trump is now praising Australia’s health care system? Why yes, yes he is – https://www.washingtonpost.com/news/post-politics/wp/2017/05/04/trump-praises-australias-universal-health-care-system-you-have-better-health-care-than-we-do/ Though one can be fairly confident he won’t ‘get away with it’ with such leading public intellectuals as Prof. Cowen doing their best to prevent the U.S. from migrating to one of the numerous systems that are both cheaper and able to cover all citizens found in the rest of the industrialized world.

48 BC May 5, 2017 at 2:32 am

“no other country even has debates about ‘health insurance’ or its perceived value when talking about health care”

That’s not a very good endorsement.

49 prior_test2 May 5, 2017 at 2:56 am

Really? Another reason all of the rest of the industrial world has lower health care costs is that they do not have to support the profits of a company like Aetna for doing nothing at all related to actual health care. Part of this entire discussion involves ensuring the continued profitable existence of a company like Aetna, especially in relation to its share price, which receives distinctly higher priority politically than removing health care from more than 24 million people.

50 BC May 5, 2017 at 4:35 am

Saying that one’s healthcare system results from not having much debate or thought is not a good endorsement of it. One example of not thinking too deeply is thinking that, when the government does something, it can do it more cheaply because it doesn’t need to produce a profit. Profit is an opportunity cost of capital, and the cost of capital of, say, a hospital is the same whether a for-profit corporation builds it or a non-profit or government builds it. Cost of capital is a property of the risk of a project. When a government builds a hospital, it still takes a risk, for example, of building the hospital in the wrong location and serving fewer patients than expected. There is an opportunity cost to society that the resources could have been better deployed to do something else. That’s true whether or not government makes an accounting profit or includes opportunity cost of capital in its reported amounts spent on healthcare. I have no idea whether countries with socialized medicine undercount their healthcare spending by excluding hidden opportunity costs of capital, but not debating much about it probably doesn’t help.

51 prior_test2 May 5, 2017 at 8:28 am

‘Saying that one’s healthcare system results from not having much debate or thought is not a good endorsement of it.’

Are you intentionally missing the point about how health insurance, in its American version, is just a well paid middle man? Without getting into extremely specific details, no other industrial country supports something like Aetna – ‘HARTFORD, Conn.–(BUSINESS WIRE)–Aetna (NYSE: AET) announced fourth-quarter 2016 net income(1) of $139 million, or $0.39 per share. Full-year 2016 net income was $2.3 billion, or $6.41 per share. Operating earnings(2) for fourth-quarter 2016 were $578 million, or $1.63 per share. Full-year 2016 operating earnings were $2.9 billion, or $8.23 per share.’ https://news.aetna.com/news-releases/aetna-reports-fourth-quarter-and-full-year-2016-results/ Do note that Aetna’s profit is more than a quarter of the amount of tax money likely to be set aside to help those with pre-existing conditions.

‘One example of not thinking too deeply is thinking that, when the government does something, it can do it more cheaply because it doesn’t need to produce a profit.’

Who says anything about government doing it? The German health care system (leaving aside AOK) is basically private, from beginning to end. The same is true, again without getting too specific, for France and Switzerland, all three countries using different models to provide health care to essentially all citizens that is at least as good as that in the U.S., for a third less in cost.

‘Profit is an opportunity cost of capital, and the cost of capital of, say, a hospital is the same whether a for-profit corporation builds it or a non-profit or government builds it.’

This may be difficult to grasp, but the vast majority of hospitals in Europe outside of the UK are private (again leaving aside the question about church owned facilities), and interested in profit.

‘I have no idea whether countries with socialized medicine’

Again, that only describes the UK.

‘undercount their healthcare spending by excluding hidden opportunity costs of capital’

Look. a country like Germany has a much more transparent system for accounting for health care than is imaginable in the U.S., in large part because it is in the public interst to be aware of what is going on. And not because of ‘tax money’ or government spending, but because people pay for their health insurance/health care out of their pay checks. It is a political issue, routinely featured in public debates.

‘but not debating much about it probably doesn’t help’

To re-emphasize – people in Europe debate health care, and its costs, not whether a policy will cause something like Aetna’s profits and share price to go up or down.

52 BC May 5, 2017 at 11:13 am

“The German health care system (leaving aside AOK) is basically private….people pay for their health insurance/health care out of their pay checks.”

Oh, well then the uninsured poor that Tyler’s post refers to are already getting the benefits of the German system. That’s what uninsured means: one pays for health care out of one’s own paychecks. The uninsured also don’t have to pay any profits to health insurance companies because they don’t buy health insurance. You should tell Democrats to stop trying to force the uninsured off of the wonderful German system and forcing them to pay profits to health insurance companies.

53 prior_test2 May 5, 2017 at 11:37 am

‘Oh, well then the uninsured poor that Tyler’s post refers to are already getting the benefits of the German system. ‘

There are no ‘uninsured poor’ – in part because essentially everyone with a job, regardless of how well it pays, pays into the health care system. Tyler’s post is referring to millions of people with a job too. The AOK compares, extremely roughly, with Medicaid, which already exists in the U.S:

‘That’s what uninsured means: one pays for health care out of one’s own paychecks.’

No one in Germany would be able to make sense out of that sentence, without a lot of background explanation, in large part to overcome their disbelief that such a thing could even exist in an industrialized nation.

‘to force the uninsured off of the wonderful German system and forcing them to pay profits to health insurance companies’

Workers are by pretty much by definition not ‘uninsured’ in Germany (neither are university students, pregnant women, or children), and no one wants to pay any profits to DAK, TK, Barmer, etc. Everyone in the U.S. that uses Aetna is (simplistically) paying 100 dollars each too much to a middleman that provides absolutely no health care. Nobody in Germany would ever support such an insane waste of their health care money to keep Aetna’s shareholders happy.

The American system is screwed up in ways that your attempts to point out the supposed flaws of other systems just highlight. Systems that provide coverage to essentially everyone, at American or better levels of care, for at least a third less.

54 anon May 5, 2017 at 1:49 pm

Keep in mind that the U.S. government already spends (right now) as much on healthcare as a % of GDP as European systems that are virtually fully paid for by the government. So it’s impossible for the U.S. to capture the significant savings that you claim by going single payer. I sort of doubt they would see costs go down at all.

55 prior_test2 May 5, 2017 at 5:40 pm

‘So it’s impossible for the U.S. to capture the significant savings that you claim by going single payer.’

Assuming this is directed to me, I don’t claim any saving from using any single plan, whatever it may be. It is simply that the American system is a third more expensive than all of the other models for health care systems in the rest of the industrialized world. As these debates show – at least to me – America is in an essentially hopeless position of being utterly unable to provide its citizens one of the fundamental benefits enjoyed by essentially all other citizens of the industrialized world.

But you are completely right about the vast amount of money that the ‘private’ American health care system gets from public spending – ‘Public spending on health care amounted to $4,197 per capita in the U.S. in 2013, more than in any other country except Norway ($4,981) and the Netherlands ($4,495), despite the fact that the U.S. was the only country studied that did not have a universal health care system. In the U.S., about 34 percent of residents were covered by public programs in 2013, including Medicare and Medicaid. By comparison, every resident in the United Kingdom is covered by the public system and spending was $2,802 per capita. Public spending on health care would be even greater in the U.S. if the tax exclusion for employer-sponsored health insurance (amounting to about $250 billion each year) was counted as a public expenditure.’ http://www.commonwealthfund.org/publications/issue-briefs/2015/oct/us-health-care-from-a-global-perspective

56 BC May 5, 2017 at 2:31 am

“c) ex post we still need to take care of them in some way, if indeed their gamble to not purchase insurance turns out badly”

Not necessarily a good reason to force the poor to buy health insurance they don’t want if you need to offer subsidies to help them afford it. After all, the saved subsidies can help pay the cost of treating the uninsured poor if their gamble turns out badly. Effectively, the government can self-insure against the risk of the uninsured poor getting sick. Come to think of it, that’s essentially single-payer government healthcare for the poor: the poor are treated using taxpayer dollars and the political system determines what level of treatment and under what circumstances (e.g., emergency room vs. non-emergency, etc.). Proponents of socialized medicine should actually like allowing the poor to choose reliance on government over buying private health insurance. If one doesn’t think that the political system offers the uninsured poor sufficient access to treatment, i.e., it rations their treatment too much, then that’s not a very good endorsement of single-payer.

57 JLK May 5, 2017 at 2:57 am

Hyperbolic discounting is a fact of life [W]. The cost of medical care is opaque [P]. (Forget out-of-network, uninsured costs…I always choke on just the post-deductible coinsurance!) Put these together and it is then no surprise at all that WTP is low. +1 to the comment above on the death of Homo economicus.

58 dearieme May 5, 2017 at 5:40 am

“do not be shocked if a huckster comes along offering them a supposedly better deal, and gets away with it”: a sly reference to Obama, I presume.

59 Jan May 5, 2017 at 6:09 am

I think he actually means the AHCA, the Republican proposal that just passed the House.

60 Alan May 5, 2017 at 8:00 am

Why would you think That? T admitted healthcare is more complicated than he thought. O would not admit it and plowed on regardless. The fatal conceit.

61 Adam May 5, 2017 at 8:54 am

“O would not admit it and plowed on regardless.”

Where did you get this from?

62 Alan May 5, 2017 at 10:41 am

From the fact that he plowed on regardless. Did he think he could design a system that would work – despite the complexity – or was it something more cynical?

63 Jan May 6, 2017 at 6:01 am

Yeah, the ACA process and this one are not even remotely comparable. Zero hearings, no CBO score, amendments the day before, a total of less than one month of lawmaker consideration. No support from patient groups, insurers, doctors or other health care stakeholders.

64 derek May 5, 2017 at 8:19 am

I don’t think so. He refers to health care people buy. Whatever that means. I know dozens of people off the top of my head that use oil of oregano instead of getting a flu shot.

65 Ftth May 5, 2017 at 6:04 am

“From the perspective of social welfare, to justify connecting the 5% least dense areas of North Carolina would require each adopting household value high speed wired broadband access at more than $1519 per month.”

As somebody who’s built wired broadband access networks, this claim makes no sense. Typically a buildout in a rural / low density area would cost $5000 to $10000 per household, totally. It’s ridiculous to require a six month payback on an asset which has a lifetime of at least 25 years.

Even if you build out into the wilderness, costs are not going to be over $1500 per month. In rural areas you can often build a mile of fiber for about $20,000. As such, even at the lower limit of 1 household per square kilometer in the paper, a mile of fiber should roughly be sufficient to connect the household, if the target is universal service.

Looking at it in another way, $1519 per month over 25 years is almost half a million dollars. While building fixed broadband networks is expensive, in no way or shape or form is it *that* expensive.

66 Adam May 5, 2017 at 8:56 am

Did you forgot to factor in monopoly profit margins?

67 Hank Webber May 5, 2017 at 10:48 am

Ftth, it doesn’t look like the $1519 is an estimate of the cost. It also factors in adoption. Every time you lay a mile of fiber to connect one home there is only a 40% chance it gets used. So really to hook up one household requires laying 2+ miles of fiber.

What good is universal service (homes connected to fiber) if the homes elect not to purchase it??

68 Ftth May 5, 2017 at 3:04 pm

> Ftth, it doesn’t look like the $1519 is an estimate of the cost.
No, according to the paper the $1519 number is:

“The subsidy cost per-adopting household as a function of the desired coverage of the broadband footprint in currently unserved regions of North Carolina.”

Specifically, at a 95% desired coverage.

The inherent insanity in the paper is that it assumes it would actually require such an astronomical subsidy to build out the network.

> Every time you lay a mile of fiber to connect one home there is only a 40% chance it gets used.
> So really to hook up one household requires laying 2+ miles of fiber.
Network designers and builders are not idiots. Well, unless somebody is paying them to be idiots, that is.

When you build a network, there are two important metrics. Houses passed and houses connected. Houses passed are houses that can get service. This means there is a feeder cable and you can hook up the house, if needed. It does not mean there’s a cable going to the house. Nobody builds out to a house unless they have an order for service to that particular house. Houses connected are the actual properties that have ordered service and have had an actual drop cable installed to the house.

So, there will be no requirement to install 2+ miles of fiber per subscriber on the off chance that 40% of them will use it. Each mile of fiber (as in the drop cable) will *only* be installed when they order service. The remaining 60% will not have any fiber installed.

The unserved houses will still have coverage, and they can order service, but any unnecessary extra fiber will not be installed.

> What good is universal service (homes connected to fiber) if the homes elect not to purchase it??

People move and habits change. Even if the current residents don’t purchase service from they fiber network now, they may later or the people that move in later may do so. You try selling a house with no access to broadband.

69 Ftth May 5, 2017 at 2:39 pm

Not really 🙂

Not even monopolists charge more than $300 per month for residential gigabit service.

For $1500 a month you can get almost any fiber company to build out a lateral to your premises and provide enterprise / wholesale level service to you if you sign a 1 to 5 year contract.

70 Thomas May 5, 2017 at 11:15 am

Generous assumptions above include 0$ maintenance and service costs, a “house-to-house” fiber installation rather than a main path with branches, and zero opportunity cost of capital.

71 Ftth May 5, 2017 at 3:16 pm

> Generous assumptions above include 0$ maintenance and service costs,

A brand new fiber network has significantly lower maintenance and service costs than a copper network. Even allowing for a few percentage points of the CAPEX for yearly OPEX, we are *nowhere* near $1519 per month.

> a “house-to-house” fiber installation rather than a main path with branches, and

In low density rural areas, like in this paper, this is a perfectly valid and cost effective design.

> zero opportunity cost of capital.

If you are making $1519 per month on a $20,000 investment, what opportunity cost?

72 Mario May 5, 2017 at 8:36 pm

Ask yourself this question. If it’s so cheap to enter these areas and people want the product, why are there tons of areas with “medium-low” density that are not served privately? Obviously the firms don’t think it’s that profitable to enter an area with a density of let’s say 100 homes per square mile. So if the density is 5 homes per square mile, and half those homes won’t even buy the product, that area must be extremely unprofitable and would only be worth connecting if those few homes that buy the product value it at an outrageous value like $1519 per month. To me that’s the point of the paper: universal service clearly fails a benefit cost analysis.

73 Ftth May 6, 2017 at 7:49 am

> If it’s so cheap to enter these areas and people want the product, why are there tons of areas with “medium-low” density that are not served privately?

I never said it was cheap, that is something you just made up in order to be able to ask your rhetorical question. Building wired broadband networks, such as fiber networks, in rural areas is expensive, compared to the local’s disposable income and, perhaps, even compared to the consumer surplus. What I said was, it is not as ridiculously expensive as the cited paper falsely claims.

The problem isn’t that it’s expensive to build fiber. It is. The problem is that the paper reads like a propaganda piece, where the aims is to claim and convince the reader that universal access is so expensive that we should not even attempt it.

> Obviously the firms don’t think it’s that profitable to enter an area with a density of let’s say 100 homes per square mile. So if the density is 5 homes per square mile, and half those homes won’t even buy the product, that area must be extremely unprofitable and would only be worth connecting if those few homes that buy the product value it at an outrageous value like $1519 per month.

Well, it looks like you bought the propaganda hook, line and sinker. We do not need outrageous subsidies like $1519 per month per subscriber to connect remote and rural areas.

Large rural areas can be built out profitably. Yes, profitably. Others may require a subsidy, but only a smallish subsidy per subscriber and not an ongoing subsidy. What cannot be done is a buildout on commercial terms by private companies, simply because their cost of capital is too high. However, where low cost loans are available, such as RUS loans, the networks can be built, operated profitably and the loans paid back. All without a since cent of taxpayer subsidy. All that is needed is low cost capital and a time horizon equal to the asset lifetime.

Universal service should be the end goal, but of course the buildout should be made with care and fiscal responsibility.

> To me that’s the point of the paper: universal service clearly fails a benefit cost analysis.

I fail to see how the paper proves that point as it’s analysis is not credible.

74 Jan May 5, 2017 at 6:08 am

One problem of not making people buy into health insurance is that it weakens the market for people who really need it. If coverage is not in some way mandated, then many patients will only purchase plans once they are sick, after they have already become high-cost cases. That creates a small pool of mostly sick purchasers, which results in more expensive plans that even fewer people can afford.

We can debate how rich health plans should be–Republicans complained for years that deductibles and co-pays were too high under Obamacare, but I am not sure they really want to propose plans be *more* generous. Plan richness affects premiums, but as this research shows, it may not make enough difference in cost to make people eager to buy it. Why we need the mandate for insurance markets to function.

75 Jan May 5, 2017 at 6:12 am

So do the conservatives here support Singapore’s system? I’d adopt in America in a heartbeat. Many on the right enjoy it as a talking point–saw it on Fox News not long ago–but are they ready to roll with it?

76 Sure May 5, 2017 at 6:41 am

I would be up for doing so on the state level with some freedom for experimentation. Singapore requires a lot of active management that is going to be extremely hard to manage from DC with the diversity of issues facing our extremely divergent populace.

I have no doubt that there will be horror stories and terrible decisions made, but any healthcare policy that gets active popular buy in up in CT will not be viable in ID. The real secret of the Singapore system as I understand it is a willingness to adopt and offer choice. Static congressional bills that require unified control of Congress to amend are simply not worth bothering about. Unstable agencies that serve at the whim of the president are likewise never going to be adaptive enough. Given that we already do the vast majority of regulation at the state level for insurance, it would be nice if we could try something like Singapore that does not nuke whole swathes of the system if things get mucked up.

77 Jan May 5, 2017 at 7:20 am

The Collins/Cassidy bill seems like it might allow states this level of flexibility, but few details as of yet.

One challenge would be the forced savings element of Singapore’s system, but I think there could be a shot if we simply converted Medicare payroll taxes and probably slightly increased them.

78 William Wykeham May 5, 2017 at 6:29 am

When I was just out of college and needed to buy health insurance for the first time, to avoid becoming a drain on my parents in the event of a catastrophe, I was denied due to a pre existing condition, spherocytocis, which does not affect my life at all.

Whatever its failings Obamacare has correceted market failures in healthcare, including cases where people bought healthcare and had coverage denied due to something irrelevant they omitted in their application like a broken pinkie.

Maybe overcorrected with too-broad coverage but corrected nonetheless.

79 Sure May 5, 2017 at 6:50 am

Spherocytocis does not affect you now, it unfortunately can worsen markedly with certain viral infections and the like.

The real problem is that many individuals with elevated risks, like yours, are not in the individual market. They are shielded by employer provided insurance; it is virtually impossible to get enough people at your health risk level to get adequate risk mitigation. As long as we keep employer provided healthcare in the mix we either need billions of general tax revenue or individual insurance has to carry a huge risk premium.

80 JonFraz May 5, 2017 at 4:05 pm

Or simply spread the risk across everyone signed up for a given plan, regardless of where their insurance comes from.

81 rayward May 5, 2017 at 6:53 am

I realize a large measure of utility from the car that I own, even though the car sits in the garage most of the time. Indeed, I realize a large measure of utility from the car while it sits in the garage because I know it’s there if I need to go somewhere: to the beverage store or to my favorite restaurant or to the pharmacy or to visit my sister. Health insurance isn’t like that. I realize a very low measure of utility from my health insurance because I am, fortunately, healthy. Sure, I realize a small measure of utility from the insurance knowing it’s there in case I need it, but human nature being what it is, I believe, falsely, that I will never need the insurance. Indeed, the measure of utility when compared to the cost of the insurance make it extraordinarily painful to maintain the insurance. The utility curve for health insurance is very steep: one day I realize very little utility and then the next day an enormous measure of utility. Treating health insurance like a car fails to take into account the fundamental difference between the two. I’m sick of hearing and reading about health insurance and paying the very high monthly premiums for something I’m sure I will never need. I think I’ll go for a ride in my car.

82 rayward May 5, 2017 at 7:21 am

You recognize huge costs from that car in the garage. Only when you are using it as transportation is there any value, and even then, the risks are substantial.
If we could pool ownership of the car and professionalize the driving, the cost during driving would go up a bit (I think) but the cost of transportation would plummet.
Places with arrangements like this reflect value partly in the price people are willing to pay to live there. One of the big problems is the cost of hiring that chauffeur.
So, if people can access cars on demand without drivers… well, we are already discussing that business model, to some extent.

A problem is that we mix trips to the moon in with airplane tickets and taxi rides (and pay astronauts to train astronauts to drive cabs).

83 rayward May 5, 2017 at 7:33 am

An imposter – not the rayward we know.

84 rayward May 5, 2017 at 7:11 am

Pre-existing conditions. My law firm once represented a third party administrator (TPA) for a health insurer. One lawyer in our firm devoted all of his time, not some of his time but all of his time, to pre-existing conditions and denial of coverage mostly based on mistakes made by the insured in her insurance application. I suppose health insurance is like sausage for some people: they choose to ignore how it’s made.

85 Rich Berger May 5, 2017 at 7:23 am

It has been found that many low-income people are unwilling to pay the full price of a BMW 5 (well equipped, $64,000 MSRP). In fact, they are only willing to pay 30% of that price.

Solution – buy Hyundai Elantra – price around $16,000.

86 Joshua May 5, 2017 at 7:31 am

It would interesting to survey these low-income people to see if they consider emergency room visits as health care, or a public service (like the police and fire department). I could easily imagine a number of people with the attitude of “if I get sick and die that’s what life has given me” but would be outraged if they were turned away from an ER when they were in a car accident.

87 Carol May 7, 2017 at 1:28 pm

Automobile liability insurance covers automobile accidents.

88 ewig May 5, 2017 at 7:42 am

The term Pre-Existing Condition needs to be redefined: If you had insurance when your condition developed, like say multiple sclerosis or some other unpreventable, incurable, debilitation chronic condition, then it’s not pre-existing. This is what continuous coverage is all about: if you’ve played by the rules and carried a policy, you’re covered. If you’re a freeloader who waited until diagnosis to try to buy a policy, you need to just gtfo because you’re breaking the system. But assuming adults should have some modicum of personal responsibility is apparently not something a large segment of society supports.

89 Joshua May 5, 2017 at 10:53 am

What about a situation like mine: Have always had insurance but worked overseas for a few years. My US coverage was broken but I have never been a bad actor. What if I come back to the US and the insurance company finds I have something. Pretty chilling repercussions for the millions of people that work aboard.

90 Ricardo May 5, 2017 at 11:41 am

“This is what continuous coverage is all about: if you’ve played by the rules and carried a policy, you’re covered.”

Not true. You can’t continue parental coverage once you turn 26, if your employer goes out of business or drops coverage, if you run out the clock on COBRA coverage or, pre-PPACA, if your individual insurance provider withdrew your plan or raised premiums to an unaffordable level.

91 Dale May 5, 2017 at 8:11 am

The juxtaposition of health insurance and broadband policy is interesting – I have compared the two in my own work. At the core, there is an issue of public policy – as a society, what services do we share the cost of provision of? I realize some of the readers reject any notion that anybody should ever pay for services for another person (not related to them). But I think those people should go off an live on their own island. Others, of course, believe everything should be equally shared, regardless of cost or efficiency. For them, … well there are few places left for them to try that out. The society I want to live in is somewhere in between. I am willing to share the costs of health insurance for the poor – even if it is expensive and even if they value it little. Why? Because it is the right thing to do. It comes with limits – we can’t afford everything for everyone. But basic coverage should apply to everyone – and, if you can afford to go beyond that, you are free to pay for it yourself. But the basic coverage should not be confined to the poor or the sick – it is a shared social responsibility.

Broadband is more debatable – but it should be debated. That is what s society should do. We seem to have forgotten that discourse, values, civic engagement, etc. are actually things that make us a society rather than a collection of rational economic individuals. For those readers who don’t see the difference, I feel sorry for you (and me, as a result).

92 B. Reynolds May 5, 2017 at 8:16 am

If you’ve never been around low income people you may be surprised at how happy they are to buy expensive life insurance when they have absolutely nobody who is depending on their little to nothing incomes or existence.

93 Bill May 5, 2017 at 8:25 am

People have biases which keep them from purchasing insurance. Overconfidence is one of them. Knowledge that the hospital has to provide care in an emergency is another.

94 AlanG May 5, 2017 at 8:37 am

“Knowledge that the hospital has to provide care in an emergency is another”

True, but that is not cost free and it’s also not a negotiated price via an insurance policy. You are on the hook for the full bill. One also has no idea when something problematic will happen and insurance comes in very handy. 31 years ago, our second daughter was born about eight weeks early with some mild breathing difficulty and low birth weight. She was kept in the NICU for four weeks until her breathing was clear and her weight was up to the discharge level. We had to arrange to deliver pumped breast milk down to the hospital on a daily basis and were living without or child at home for that period of time which was emotionally draining. The total hospital bill for all services was $55K (1986 dollars) which was pretty much equal to my yearly salary. Can you imagine paying that out of pocket? In the end, we had a co-pay of $500 if memory serves me correctly.

I use this to show that one never knows when life will deal you a bad card.

95 steve May 5, 2017 at 8:59 am

We needed a study for this? Just hang around an Emergency Department. (OK, I know economists don’t really like to physically venture into the real world, but give it a try.) Those poor people get “health care”when ever they want, they just call the police and get taken to the nearest ED. However, this is not especially good care and they end up having bad outcomes this way. Since they can’t really afford better care anyway not sure why they would value it. Also, since they don’t get to experience better care, how could they really put a value on it anyway?

Steve

96 Tom Bri May 5, 2017 at 6:22 pm

Why do you think they get bad care? I am a critical care nurse, and we get these people up from the ED every single day. Pretty often, we already know them by name, since they tend to come back in again and again. Just last week I took care of a guy who had been in the ED once every one to two months sine 2013. I know, because I got curious and started scrolling back through his history to try to figure out what was wrong with him. Currently, he is on dialysis and has altered mental status. In pretty bad shape. In 2013, he had high blood pressure, which he didn’t bother to treat except to come into the ED when he got chest pain, so his kidneys failed and he has popped a lot of capillaries in his brain.
He gets the same level of care as our insured, paying patients, up to and including cath procedures, CT scans and so on.

97 Carol May 7, 2017 at 1:35 pm

If he’s broke he’s eligible for Medicaid.

98 Edgar May 5, 2017 at 10:20 am

Great article. Demonstrates how prescient candidate Obama was debating Hillary back in 2013 when he campaigned in opposition to a health insurance mandate: “But the fact of the matter is, is that if, as we’ve heard tonight, we still don’t know how Senator Clinton intends to enforce a mandate, and if we don’t know the level of subsidies that she’s going to provide, then you can have a situation which we’re seeing right now in the state of Massachusetts, where people are being fined for not having purchased health care but choose to accept the fine because they still can’t afford it even with the subsidies. And they are then worse off. They then have no health care and are paying a fine above and beyond that.”

Read the transcript. Ah those were the days. Fantastic bonus points to both Barry and Hillary for promising to renegotiate NAFTA too! http://www.nbcnews.com/id/23354734/ns/politics-the_debates/t/feb-democratic-debate-transcript/

99 Albigensian May 5, 2017 at 10:49 am

IF a lack of insurance plus inability to pay translated into denial of medical service then insurance would be valued more highly.

BUT the public (and probably many providers) is not willing to be so heartless, and so long as one can at least obtain medical care for serious medical problems it may remain rational for those with few assets and low income to value medical insurance well below the cost of providing it.

In a hard libertarian world there would be no right to medical care, but, we don’t live in such as world, do we?

In this world, the argument would be whether insurance should cover only catastrophically costly events (such as most hospitalizations, and emergency services), leaving it up to low-income patients to negotiate cash payments to providers, or whether medical insurance should be comprehensive.

The argument for “comprehensive” is that people are too stupid and short-sighted to pay for preventive and routine care; therefore, if this isn’t available at low- or no- cost many will let their health deteriorate until the problem is serious enough so that insurance will pay for it.

Can anyone deny that many translate “insurance won’t pay for it” into “I was denied care”? Or can the argument be made that people are smart and self-interested enough to obtain basic medical services even if/when they have to pay out-of-pocket for them?

100 Dale May 5, 2017 at 8:53 pm

I just paid $4,000 for a promising diagnostic test that insurance won’t cover. The interesting thing is how shocked virtually everyone in the system is by that – it makes me feel like an alien.

101 rayward May 5, 2017 at 11:28 am

If Obamacare had not included a mandate, as candidate Obama had proposed, would more or fewer healthy young people have purchased insurance? It’s unknowable, even though many if not most people (candidate Clinton for sure) believe that far fewer would have purchased insurance. Absent the mandate, the insurers would have been more motivated to figure out how to get young and healthy people to purchase insurance to offset the “losses” from having to cover pre-existing conditions. That I assume is why candidate Obama opposed the mandate. During the Congressional debates over Obamacare I made that argument and suggested a few strategies for the insurers, including level premiums for health insurance for insureds who maintain the same coverage: buy coverage when young and healthy and be rewarded with a level premium for life. I suppose the difference in candidate Obama and candidate Clinton is that candidate Obama had confidence in private enterprise crafting a solution to a problem while candidate Clinton didn’t. Does Cowen have confidence in private enterprise to craft a solution to the problem?

102 Albigensian May 5, 2017 at 1:23 pm

“Absent the mandate, the insurers would have been more motivated to figure out how to get young and healthy people to purchase insurance to offset the “losses” from having to cover pre-existing conditions.”

Two factors worked against being able to convince the young and healthy to buy this insurance.

The first is the Obamacare requirement that premiums could not vary by more than a 3:1 ratio, even though the age-related actuarial cost difference is significantly greater than this. Thus, medical insurance for the young and healthy had to be a poor value relative to its cost.

The second is, one can’t be refused many medical services even if one is unable to pay for them and has no insurance. Therefore, if one has little or no assets and not that much income then it makes little sense to buy insurance as one can be reasonably sure one will receive essential medical services anyway.

The root problem was not the mandate, it was creating a system that depended on young and healthy buying insurance even though the insurance had to be a poor value for them (relative to expected costs) and even though they could obtain essential medical care anyway.

How were insurers to convince the young and healthy that the insurance was a good value for them, when it all too obviously was not?

103 Bill May 5, 2017 at 12:06 pm

A lot of behavioral biases would explain why anyone would want not to buy insurance: present bias, overconfidence, etc.

But, everyone wants to buy insurance just before they have a major operation or are headed to the hospital in an ambulance.

Actually, the behavioral biases probably explain why most industrialized democratic countries have some form of government health insurance. Just as I would favor a law punishing drunk driving, thinking I will never drive drunk, but someone else will who will impose costs on me (until the time that I have had too many and get pulled over for a sobriety test), most people favor coordination through laws, mandating, for example, that we all carry car insurance, because there is an externality if you don’t.

My decision not to pay for healthcare affects your costs. But, as an overconfident, present biased person, I will not purchase healthcare as an individual. But, I would consider it, if everyone else did and my costs were lower.

104 Bill May 5, 2017 at 12:07 pm

Also, We undervalue the future, and insurance payouts are in the future, maybe, while insurance payments are now. So, insurance will always be undervalued.

105 matt May 6, 2017 at 10:05 pm

AKA – Single payer!

106 pyroseed13 May 5, 2017 at 1:26 pm

“In other words, many of the poor do not value health insurance nearly as much as many planners feel they ought to, in large part because they are already getting some health care.”

This right here is exactly what is so wrong with the typical framing of this issues as people who are ok with people “dying in the street” and those who are not. Obamacare did not guarantee access to health care. It guaranteed protection from personal bankruptcy. Of course, we don’t want to encourage people to just use emergency rooms, because those costs are imposed on everyone, and we might wish to focus on preventive care. But the reality is that poor do receive health care even without insurance.

107 Ricardo May 5, 2017 at 2:19 pm

Low-income people receive a minimum level of emergency care without insurance. That leaves out a lot of things like non-emergency surgery, physical therapy, prescription drugs, chemotherapy, etc. The idea that access to the ER equals access to an acceptable level of care is an oft-repeated myth.

108 pyroseed13 May 5, 2017 at 3:28 pm

I never said that it did. I said in my original comment that we would probably want to help these people access preventive care, so that we don’t have to treat them in emergency rooms. And not all services and prescription drugs should be covered by insurance. We could probably solve these problems by just giving people cash. My point is that if you are arguing that “people will die in streets” if we don’t do something, they you are arguing against a system that does not actually exist.

109 JonFraz May 5, 2017 at 3:58 pm

The poor are supposed to be covered under Medicaid, not under subsidized ACA plans (unless the definition of poor” now includes many lower middle class people). This survey, insofar as it looks at attitudes among the poor, is rather irrelevant.

110 Ricky Tylor May 5, 2017 at 4:45 pm

I am not entirely sure about this, but I personally value is very HIGH; I believe you got to put a lot on it. If the health is not there than nothing else matters! I do Forex trading which is a business very high on stress, but still I always maintain my health which is easier thanks to supportive broker like OctaFX, who are forever on the go for helping me out with lovely conditions from 0.1 pips, high leverage up to 1.500 and much more, it’s superb!

111 Floccina May 5, 2017 at 4:59 pm

I had a friend who turned down employer insurance because his part of the premiums would be $40/month and the deductible was $2,000. He said why should I pay for something and if I go to the Doctor I still have to pay up to $2,000. (I think he must have been about 40yo then.)

That was about 10 years ago and he was younger and healthier, so I recently asked how much he would pay for the PPACA bronze plan (I detailed it a bit) and I explained to him without it if he got cancer they would just send him home with a prescription for pain killers. I started with would you pay $10 for it, “yes” he said, $20 etc.. he ended up saying he would pay $90/month but not $100. I then ask if I were to give him the PPACA bronze plan free what it would take to get him to give it up. It ended up he would be willing to give it up for $150/month.

He was a target of the PPACA, I have another friend who matches the profile and I intend to ask him when I get a chance.

It seems to me like people like my friend do not have insurance because they do not worry, they take lots of risk (he drives fast for one thing).

The state will pay much more to cover them than it is worth to them, which makes me think that the coverage is not for them, but for the advocates to feel better about themselves, that they are the kind of people who take care of their fellow citizens. I think that is why some Europeans are appalled at us they they are just as likely to sirk on paying taxes to fund such things or to give to charity.

I am OK with the PPACA but I would like to the following changes:

Remove the 3 to 1 rule because with income subsidies I see no reason to force a subsidy of older people by younger people.
Slowly each year raise the allowable deductibles until they get very high, like $30k per year or $250k lifetime.
Either fix or eliminate the employer mandates, by fix I mean, do not completely exempt part-time workers (maybe make employers pay a percent based on hours worked), and do not exempt employers based on the number of employees they have.
Allow insurers to create plans that only cover care with strong evidence of proven net benefits.
Finally raise the penalty to where you are forcing most everybody to get health insurance.

http://un-thought.blogspot.com/2017/01/what-should-republicans-do-about-ppaca.html

112 Boris_Badenoff May 5, 2017 at 5:45 pm

Most of the previously uncovered people who came under Medicaid under Obamacare were already eligible before & only signed up due to the mandate. This is a perfectly rational choice: repeated large surveys demonstrate Medicaid has no effect on health outcomes. None. Half a trillion dollars a year for no net benefit.

O-care was never about health insurance anyway. It is a massive wealth transfer from the middle class to lower incomes. That’s all.

113 Bill May 5, 2017 at 9:10 pm

You are relying on pre-Obamacare experience in Oregon and not more recent studies. http://kff.org/medicaid/issue-brief/the-effects-of-medicaid-expansion-under-the-aca-updated-findings-from-a-literature-review/

114 Carol May 7, 2017 at 1:56 pm

This survey is spot-on. And, it should be noted that:

“Compared to people with full-year private insurance coverage, the full-year uninsured receive less than half as much care ($1,686 compared to $3,915), but pay for a larger share of their care out-of-pocket ($583, or 35%, compared to $681, or 17% for the privately insured).” (Covering the Uninsured in 2008: A Detailed Examination of Current Costs and Sources of Payment, and Incremental Costs of Expanding Coverage. Kaiser Commission on Medicaid and the Uninsured, Aug. 2008.)
http://www.kff.org/uninsured/upload/7809.pdf

Note that the cost of a $100 per month premium alone is much higher than their out-of-pocket cost for actual health care. And they would still be expected to pay a portion of their actual health care costs to meet the deductible. Of course this is a bad deal. It’s a bad deal for the taxpayers, who subsidize those premiums to the tune of about $5000 a year. All this to pay for actual health care costs of $1,686?! And at the time this $1,686 included all those older, sicker people who couldn’t get insurance.

115 KevinH May 8, 2017 at 1:11 pm

This is also a pretty big piece of evidence that free markets healthcare will never get anywhere close to optimal.

The majority of health care costs aren’t like normal cost of production. They represent costs that will be paid one way or another by society, and the question is only who pays. Of course low income families don’t want it to be them.

116 Peter Nguyen May 10, 2017 at 8:26 am

Private Health Plans are more better the insurance plans, Insurance plans have so many hidden charges and also don’t include major operations.

117 Drake May 10, 2017 at 6:07 pm

…talk talk talk….all ya’ll love your masturbatory proclamations……………….”they shoot horses don’t they……….”

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