The new Bush health care plan

Jonathan Zasloff writes:

Bush plans to pay for it not by efficiencies, but rather by restricting the benefit packages of the already insured, through the deductibility cap.  I’m sure that there are some extraordinarily lavish plans out there, but is there any serious policy justification for this way to go?  If anything, this seems to be a recipe for business to delete coverage, and throwing more people into the individual market.

Paul Krugman is very negative.  Arnold Kling loves the plan.  Greg Mankiw isn’t complaining.  Ezra Klein says it is better than nothing.

My feelings are mixed, but my view is closest to Zasloff.  In the short run the plan gives more coverage to the people who need it most, while avoiding the mistakes of recent state-level plans.  That doesn’t sound so bad.  (By the way, has anyone serious done a study of subsidy incidence for health insurance tax credits?)

But I cannot side with Arnold Kling’s view that third-party payment lies at the root of America’s health care problem.  Our tolerance for anxiety is sufficiently low that I expect the future to bring more and more insurance of many kinds, whether from the private sector or from government.  The cost of this insurance, in terms of induced inefficiencies, will be high but a secure health care situation is one of the things in life that alone can make a difference between happiness and misery. 

Furthermore given our "political irrationality" (my apologies to many readers, such as Matt and Ezra, but I am referring to your tendency, yes yours, to want national health insurance), there is a positive external benefit attached to private health insurance, above and beyond the gains to the insured.  How far would the Democratic health care agenda get without "45 million uninsured"?

The goal is to get (virtually) everyone insured and keep them insured for as long as possible, and yes I know that eventually means health care at 20 percent of gdp and lots of people getting screwed out of just claims for reimbursement.  It is simply the best we can do, and for that reason I don’t want to tax private health plans.

The ambitious long-run program should be to restructure the insurance industry –through a judicious mix of regulation and deregulation — to encourage competition across service quality rather than competition across cost-shifting.  Frankly I have no idea how to do that but no one has ever convinced me it is impossible or utopian.  We simply need better incentives for evaluating the performance of our insurance companies, and better ways of evaluating the performance of our doctors and hospitals.  I’m not going to call that small potatoes, but compared to how health care has evolved since say 1920 it is not asking for the moon.  That is one reason why I don’t want to lock into total government control of the health care market for the next five generations or more.

In the shorter run, I expect medical tourism to continue to grow in importance, including possibly cruise ships. 

Last week I had my first physical in twenty years, and it seemed no different from visiting a witch doctor who makes you feel better by shaking the rattle.

Comments

>>The goal is to get (virtually) everyone insured and keep
>>them insured for as long as possible

Isn't the goal to provide everyone with adequate health care? Insurance is just a means to an end.

Better means of evaluating doctors and insurance companies come with a better informed more knowledgeable consumer.

In the current system with the third party payer picking up the tab we really don't care or have the tendency to want the latest treatment instead of the one that gets the job done.

A more individually directed market would move us in that direction. If you are paying yourself you are more likely to be interested.

"A more individually directed market would move us in that direction. If you are paying yourself you are more likely to be interested."

There's a point where ill health impedes or even prevents a person from being actively interested. If it's not obvious that neither you nor anyone else knows what that point is, then I'm guessing that you haven't had the pleasure of being seriously ill or injured.

The last time I was in the hospital for four days, the first three I was basically conscious but completely fried due to the medications and pain killers.

So I have to say fellas, get serious. Because this informed consumer in the hospital dogma is absurd.

Russell,

I tend to agree with you - in many states of health we are in no condition to be informed consumers. I recently had an experience with collapsing after a walk - and was hospitalized for two days. No way I was making decisions in that state.

It occurred to me upon my exit however that an innovative insurance plan might have enabled me to make SOME choices about my course of care before any such incident happened. Yes, it would be impossible to pre-plan for all, or even many, contingencies, but surely there are some general guidelines that could have been followed.

Tyler's recommendation about restructuring the insurance industry has political teeth. Many folks in my circle have an extreme distaste for insurance companies - claiming that they make huge profit margins while forcing providers to squeeze every last efficiency out of their people. Granted, the folks I know are on the provider side of things - and I have no idea what the real picture of the private insurers looks like.

What I'd like to see on the deregulation side is allowing health insurers to have an increased degree of flexibility in risk rating their pools, much like life insurance. Does it ever seem odd to people why it is OK for life insurance firms to come and give you a physical, draw blood, ask lots of questions about lifestyle and health choices, etc. before underwriting your policy, but that health insurers do not (are not permitted) to do the same? If this were allowed, then I would be in favor of having strong government programs for those "priced-out" of the risk pools, and programs to aid those that are too poor to purchase insurance on their own.

I'd also like to see a way for providers to receive bonuses, rather large ones, for demonstrating that they are getting good outcomes - controlling of course for the type of patients and illnesses that they attend to.

I can't believe that an economist is arguing that health insurance should be subsidized for the wealthy.

Means test the health insurance tax break, make mortgage interest less deductible for the wealthy, and lower their tax rates (maybe make the top rate 28%). That's the argument I would expect from an economist.

Mike writes:

"Yes, it would be impossible to pre-plan for all, or even many, contingencies, but surely there are some general guidelines that could have been followed."

Mike, I had never even heard of the extremely rapid skin infection that nearly did me in before the diagnosis in the emergency room. That's the only significant health care I've needed over the last 20 years. I am going to be nice here: it is simply infeasible to a priori know which, let alone choose from, the available therapies that might need to be applied before hand. I have five doctors in my immediate family, and they are not stupid people.

"If this were allowed, then I would be in favor of having strong government programs for those "priced-out" of the risk pools, and programs to aid those that are too poor to purchase insurance on their own."

It's already allowed. When I was launching a business I was rather surprised to learn that indivudual plan coverage for my family was denied by *all* providers in the great state of Arizona due to my previous episode of melanoma. Even through the alumni assocation pool of my graduate school!

I have come to detest personal anecdotage as a means of persuasion, but "right wing" economists are so far detached from reality that it turns out to be the most efficient approach.

Even Tyler, who I otherwise admire immensely, offers no arguments other than intuition, straight "from the gut":

"It is simply the best we can do, and for that reason I don't want to tax private health plans."

The fact of the matter is that there are other, more cost and health outcome effective systems in place in other countries, and their existence is proof that it's possible to do better than we do, or Tyler thinks we can do. And no, I don't think that psychological ruminations about base inclinations prove anything about what's possible.

Anyone have any comments, pro or con, on the health system in Singapore? They have a public and private network. They force a 6-8% pre-tax savings rate for citizens to build their own accounts and be able to cover routine stuff. Under certain income levels, there is a tax credit to fund your medical savings account (I think). You buy the catastrophic insurance. You choose which health provider to use. While heavily subsidized, the public healthcare network still requires out-of-pocket expenses.

Tyler, have you ever lived without health insurance? Even for one month? Ever??

I don't get it... in a universal health care system, why is insurance required. This post needs to be fast so maybe it'll be glib, but:

1) Insurance is a model where the company:
a) predicts a patient's costs;
b) charges them a little more than that but protects them against lower-probability, high costs, i.e. the consumer spends a little money to be secure against spending a lot of money.

2) This completely does not work for expensive diseases, because the expected costs is ludicrously high. We must subsidize these people. Insurance has nothing to do with this problem.

3) Universal health care means we don't care what people's expected costs are, because we will always pay the costs and they will always get the treatment (excepting --big caveat-- prioritization issues). Thus, insurance is not meaningfully related to universal health care. Expected costs are not relevant, we just pay the costs.

4) It seems pretty clear then, that private insurance companies per se have no logical role in universal health care.

5) However, HMO's or health plans could certainly have a role: coordinating coverage, prioritizing who gets coverage, etc. Government's role could be nothing more than subsidizing costs, so that no one is ever turned away from anything for lack of ability to pay.

6) Probably you do want people to have some "skin in the game", i.e. to have to pay a little more if they go for Cadillac-level health care, etc. So what you really want here is just a curve for every individual, where the market cost of the customer's coverage is the X axis and the post-subsidy cost to the consumer (including health-care-related taxes they pay) is the Y axis. You want this curve to have nice properties, e.g. monotonically increasing. The curve should also be drawn with respect to the individual's ability to pay. So everyone has skin in the game even if they are being subsidized.

7) I'm not sure how to deal with the "prioritization" issue, i.e. who gets lifesaving procedure/drug XYZ. But I am not sure that it should be left to who is willing to pay the most. It seems a little grisly.

8) On the other hand, the price signal does spur innovation.

Let me just restate the most important bit more simply:

All we want to do here is broaden coverage with a subsidy. In particular, we want to draw a single, 3D curve that applies to all individuals:
X axis: Market cost of customer's health care this year
Y axis: Customer's income
Z axis: How much does customer pay the government in exchange for the government paying for all his health care.

We need to draw this 3D curve so that pretty much all people, even poor people, can reasonably afford health care (i.e. they get massively subsidized). Also we should probably ensure that people with the worst, most expensive diseases can definitely get covered.

The devil is in the details, of course. But this is the germ of an idea if nothing else. And this, I repeat my contention, has nothing to do with insurance, because there is no issue of predicting costs.

One more quick post: the 3D curve should be drawn so that dz/dx is positive everywhere (the higher your costs the more you pay, i.e. "no moral hazard"), and dz/dy is negative everywhere (you get more subsidies the poorer you are: i.e. a "progressive" structure)

"In the short run the plan gives more coverage to the people who need it most,"

How on earth can one make this statement with a straight face, given that the 'benefit' to the uninsured is the ability to deduct health insurance premiums - a benefit which drops to near zero (due to low or zero marginal tax rates) for the group that can't actually afford insurance premiums today?

It's no secret that our healthcare system is broken, and any fix involving universal care will take years to implement. If the UK and Canada are any indicator, there's no panacea on the horizon, particularly for the 85 million US un- and underinsured. One large choice, tho only a band-aid, is to travel abroad for treatment, particuarly for prohibitively expensive surgeries such as cardio and orthopedics. Our forthcoming consumer guidebook, Patients Beyond Borders: Everybody's Guide to Affordable, World-Class Medical Tourism, helps patients make the decisions whether, when and where to travel for quality care. Millions of folks are suffering right now, and many will die needlessly long before new health plans are implemented, in whatever form they may take.

I will say, Mike, that this benefit would indeed help people in the middle quintile the most, followed by the second quintile (20-40%) and then the lowest quintile of incomes. It's a net tax increase on the upper quintile, a very small tax cut on the next to upper quintile. Among elsewhere

But, sure, you could make it a credit instead to make it even more progressive. Much of the lowest quintile qualifies for Medicaid, though.

Number of uninsured by income, US Census:
<$25,000 14.5 million 25-50K 15.0 million 50-75K 7.7 million 75k+ 7.9 million

Looks a lot like 45 million (actually 45.1 million) to me. Not "45 million" as a political slogan, but 45 million as a fact.

houyuping 07年8月17日

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資金を増やそうとするのに不動産投資をするのが手っ取り早い。日本で不動産で東京 賃貸をさがすのはきわめて難しくシステム開発は日本の会社が良い。

Seriously though [I'm sure] I do share your concern about all the lost souls. Where the hell are they? Naturally, I hope it wasn't something I said that's keeping them away. Was it perchance something you said, instead?

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