State-run health insurance plans

This article in The New York Times offers some detail on the government-run insurance plans at the state level.  I learned:

1. Three dozen state governments currently run such plans and they do not in general drive private insurance companies out of business.  In California, the largest such plan, two-thirds of all eligible people choose the privately-run health insurance plans.

2. The state-run plans are usually administered by a major private insurance company, which has authority to negotiate payment rates with doctors and hospitals.  In this regard the forthcoming Obama proposal might be quite different.

3. These plans are not especially effective at controlling costs.

4. The North Carolina plan now requires a significant bailout.

5. Some people (this is now my esoteric reading) view the state-run plan as a way of forcing private insurance companies to bargain down reimbursements much further than they have done.  It's a monopsonistic social means of opting for lower expenditures and lower returns for the medical sector.


Regarding point 5: I think people are hoping we can come up with a better compensation model in general. It's not just a question of paying doctors less, but finding a model that will pay them for needed procedures instead of just as many procedures as they would like to get paid for. People are looking at expenditures in European countries and wondering why ours are so much higher while there is no evidence our care is actually any better in terems of results. It is a pretty reasonable view. There's no assurance that we can fix it this way, but I think it's a worthwhile goal at the very least. Personally, I have no idea whether it will work at all. One of the big troubles with the healthcare in the United States is that there are actually two separate issues: 1) we pay way too much for healthcare (it seems) and 2) we have a terrible model of paying for healthcare. But it is hard to fix 2) without fixing 1).

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"People are looking at expenditures in European countries and wondering why ours are so much higher while there is no evidence our care is actually any better in terems of results."

It depends on how you define "results," specifically it means how much weight you give to things like catastrophic care. There is plenty of evidence that suggests our system better at producing favorable results for serious illness (once things are broken) in many and likely most cases for a larger number of people. That, however, is not what is typically measured in many studies that paint U.S. healthcare as inferior. Beginning with imperfectly described or understood evidence is not a good way to begin to solve a problem.

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How do we know we are measuring healthcare outcomes rather than initial public health inputs? If Americans go to the doctor sicker, for whatever reason, then it seems obvious the services would cost more and outcome be worse. I haven't seen that paper yet, certainly not from the leftist commentators.

I assume they are referring to things like Blue Cross. These are evil. I'm generalizing. They creatively hide their "reserves" because they are "non-profit." They allegedly retain or spread work around as many lawyers in the state as they can so there will always be a conflict of interest if you need to hire one. This is hearsay. I don't know where this strawman came from that you have to destroy all your competition to be evil. People are evil when they can be. Bigness is bad. Just because you are big enough to screw doctors doesn't make it right, just because you don't like the price tag.

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Tyler, if the public option companies in these states are thought to exert significant control on the pricing structures of private insurance companies, then how do we know that they don't drive out other private insurers? It sounds like your (1) and (5) face a tension. I'm probably wrong about this, but could someone help me see why?

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The only way to drive down health costs is to replicate the situation of the '90s, with numerous HMOs competing against each other..

Seems to me the best way to achieve this is to abolish the insurance model in favor of fee for service. Where we find this in health care -- such as cosmetic surgery and elective surgery like Lasik -- we find little cost inflation and pretty good quality.

Now, insurance will always have a role in health care, such as for catastrophic events like cancer. But much of it should be fee for service.

An especially egregious example is dental insurance. This makes little sense. Dental care is for the most part about maintenance. Having insurance for predictable, routine costs is a formula for price inflation. Just think what would happen to auto insurance if it covered oil changes.

The best reform possible for health insurance would be to end the tax breaks for employer-provided health care. Not only would this help to fix the health care mess but it would also break the link between employment and health care, which promotes labor market inefficiencies.

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The State run plans are the solution chosen by those States to the requirement that everyone have an insurance option. The more common solution is a high risk pool that directs the uninsurable to insurers with cross subsidies to the rates to make them "affordable". When the State sets up its own insurance pool, the rules pretty much insure that the rest of the insurance industry can skim off the 80% of the people who are buying insurance who are low risk to low claim, leaving the high risk and high claim insured to be covered by the State which necessarily sets the rates higher than the market to limit the subsidies it needs to remain solvent.

In a market where the private parties can chose the customers that maximize their profit while shifting the lose generating customers to the government, isn't it obvious that the government will end up with all the money losing business?

And the US does have a massive government run insurance company, Medicare, but you never hear insurers calling for ending its operation so they can compete for the insurance of the old people. With the US providing health care insurance primarily vie employers, and by charity care cost transfers, insurers saw Medicare as good for their business - the cost of the low income uninsured old people would be transferred to the government instead of doctors and hospitals raising the prices for the insured employed to pay for the uninsured unemployed.

I would draw attention to the fact that the US tax payers pay on average more per person for government funded healthcare than the Canadian tax payer. I'm guessing that the government pays for the health care, and most is done by way of insurance (Medicare, Medicaid, government run insurers and government run and subsidized risk pools), of only 20-30% of the population. The for profit sector has skimmed off the cheap basic care and then focused on the high profit elective market, like fertility and sexual potency and body sculpting.

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Even if we find magic combination of government and private health care, aren't costs going to continue to rise due to decreasing supply (healthcare workers) vs the demand (aging baby boomers)? I had read awhile back that the healthcare industry was going to face a shortage of workers, doctor's, etc. Unfortunately, I failed to remember the source. If my point is built on an deck of cards, then ignore :).

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What do demographic shifts have to do with the efficiency of a health care system?

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>Did your wife's uncle go to New Zealand to get
>the necessary cancer treatment?

Probably not, as Ginny Postrel pointed out in March...

"New Zealand “is a good tourist destination, but options for cancer treatment are not so attractive there right now,† Richard Isaacs, an oncologist in Palmerston North, on New Zealand’s North Island, told me in October."

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An especially egregious example is dental insurance. This makes little sense.

It does make some sense: how much is an empirical question. If you have dental insurance you are more likely to a) get regular dental check-ups to take care of cavities while they are still manageable and b) at least have a regular dentist who can see you on an emergency basis when something goes wrong.

In the absence of a) and b), you have more people going to the emergency room for root infections that have gone out of control. These really are emergencies as the infection can be lethal if not treated aggressively with anti-biotics and emergency oral surgery. This happened to me during a lapse in my dental insurance (although I did have a regular dentist and got regular check-ups) and cost me about $2500-$3000 out of pocket for surgery + root canal + crown. I had savings but I can imagine other people running up credit card debt in a situation like this. People without credit cards would have had to go to a public hospital or clinic and run up even larger bills that they wouldn't be able to pay.

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That's a good point, mpowell. On whom does the burden of proof lie?

You know, facetiously, one might posit that the extra US health care costs are a measure of how much the US values not having government-run health care.

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I have to wonder why our nation this year decided to take on all the "ills" at once .... when those "ills" affect less than 10% of our population.

Less than 10% of our mortgage holders were not paying their our Nation's financial security is put at risk? Especially when a lot of these people knew they could not afford that house when they bought it, were living horribly above their means OR were flipping to try to take advantage of the "bubble" and lost.

Now less that 10% of our citizen currently do not have health care. (I know about the inflated 47 million...but sorry I am not counting illegal aliens or people who make over $75,000 a year and elect to spend their money on something else).

If a person is in that "less than 10%" ... how percentage of them were born into welfare and have been on the government hand outs all their lives?

When did it become my responsibility to pay for someone else's irresponsible behavior.

Yes, there are exceptions...but you don't build a business, a government or health care on exceptions.

Health Care is not a RIGHT, it is a responsibility. You don't bring children into this world that you can not properly care for. American Society has to many :OctoMoms: .... they simply had them one at a time.

Tennessee tried this and failed. Hawaii tried it and failed. California is handing out IOUs (now there is a ringing endorsement)....

Personal responsibility is the only answer that works.
If you don't have a nation where that is the foundation... you are doomed.

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