Saturday, August 29, 2009

More Health Care Thoughts

Thought 1: I have probably said this previously but I think the biggest peril in health reform lies in the convergence of two areas- the minimum benefit and an individual mandate. If the minimum benefit is generous (i.e. covers all the first dollar stuff like physician visits and eyeglasses) than it will be fairly expensive. This will be problematic as even with subsidies (currently proposed for folks with an income up to 3X-4X the poverty level) a lot of the middle class that do not get their insurance from an employer will find themselves still unable to afford healthcare (maybe less so than before) and will now face the prospect of a penalty for not having complied with the mandate. Sounds fantastic.

Thought 2 (closely related to thought 1 for those keeping score): The emphasis on coverage thus far has been on the first dollar variety (e.g. low deductible, low copayment, low coinsurance). This emphasis is misplaced. Going to the doctor for your annual physical, semi-annual dental checkup, and some antibiotics are the typical interactions for most people with the medical system. This can be done and should be done out of pocket. These are predictable events not suited for insurance and add to the overall cost growth of health insurance in creating administrative waste. What is important though is that you are covered when something unfortunate does happen, such as getting hit by a bus, a sudden stroke, etc. This is what insurance is typically for, low frequency events with high payouts. It is this type of event, a catastrophic event that causes medical bankruptcies for the uninsured. It would thus seem logical that a mandate would involve such a plan-catastrophic coverage-as opposed to something that makes sure you can get a pair of designer glasses and prescription sun glasses without having to reach into your wallet.

Thoughts 3&4 (interrelated thoughts: Out of Pocket Spending and Administrative Waste)- Everyone decries out of pocket spending as if there is something tragic and immoral about having to reach into you pocket and plump down a sweaty wad of cash for medical care. In a sense this is logical, at least in the employer provided and medicare context. Most people are insulated from the full cost of their healthcare. Your contribution of your premium comes out of your paycheck, which you probably don't think about if you are like me and only really pay attention to the actual amount that gets direct deposited into your account. Your employer pays anywhere between 50% and 100% of your premium which you never see (note: this portion, or a portion thereof, really are foregone wages). So all of sudden you have a big medical expense, a couple hundred for a specialist visit outside of your insurer's provider network, which you have to pay out of pocket and you scream bloody murder. But you shouldn't and here's why: a direct payment is a lot more efficient. The public discussion of administrative efficiency focuses exclusively on how adept your insurer is at denying your valid claim or medicare is at rubber stamping your fraudulent claim. Certainly this is a significant portion of the health care industry's administrative overhead but it also neglects a significant portion. Think of the process of going for your annual physical. You call your doctor set up the appointment and go. You pay a $25 co-pay, give the clerk your insurance information and leave. What happens subsequent to your visit is absurd. Your doctor then sends a bill to your insurer. Your insurer (if they are all like mine) then sends you a letter each week for the next month telling you that you owe the provider and every letter the amount changes (it usually goes down). I suspect during this period that the doctor's staff is trying to get full reimbursement from the insurer and probably resubmits the bill to they get full reimbursement or that the staff just keeps haranguing the insurer. Then at some point once the doctor has failed to get reimbursement from the insurer they send you a bill indicating the amount you owe them. I suspect that your doctor doesn't play too direct a role in this but his staff does which he has to oversee (this sucks because the more time he spends managing the less time he can spend giving care which is how he is going to make bank). And have you ever noticed that seemingly there is at least a 1-1 match between doctors and administrative staff. I can't imagine what my iPod would cost if the typical purchase was conducted through a 3rd party payment. It would probably cost me a grand for a damn refurbished iPod shuffle. If you cut out all of this nonsense, i.e., by just paying up front, couldn't the doctor/practice have a much smaller staff and then pass those savings on to you? I bet you the net result would be a total payment in the neighborhood of a copay- maybe $50? Honestly, when you are at the doctor's office, they spend maybe 3 consecutive minutes with you, maybe 5 total. How long does it take to diagnose if someone has strep or chlamydia, not long. Let's be conservative, you get 5 people per hour (that's 12 minutes per person=quality time) at $50 bucks a pop, that's good money. That's a half million before taxes.

Anyhow, those are my thoughts. I find them persuasive, which is good, otherwise no one would.

P.S. Thought 5 (post conclusion thought)- There is a big status quo bias in favor of the present system because, well, it's the status quo. But also, as previously mentioned, what most people really obtain is not so much insurance (characterized by infrequent events and high payouts) but rather a product called insurance that really functions as insulation or consumption smoothing (characterized by frequent events and low pay outs). Imagine for a moment that instead of having your employer pay a portion of your premium they gave you that money in wages and you had to go buy your own health insurance. I think a lot of people would get plans that were less generous and choose to spend the money on more important things like crack and iPods. If this were the norm (minus the crack and iPods bit, ok, just minus the iPods) the notion of paying out of pocket wouldn't be so jarring. My wonderful co-worker, who will given the pseudo-nym Jane Median Voter, would not brag to me that her plan covers prescription sun glasses but would instead be bragging about all the extra smack she could buy because her wages were higher and her premiums were lower, which, pace the Rand study would have no impact on health outcomes. That sounds like a much better world indeed.

P.P.S. Thought 6 (preventative care, what about preventative behavior)- I am fat, probably technically obese, but you wouldn't know it because I carry my weight very well. I am an extreme outlier in being a lardass but simultaneously passing for studly. This is what happens when you have broad shoulders, they are very deceiving to the eye. Back to my point, it's absurd that I should pay the same premium as someone that is in good shape. Now, I do to some degree buy the argument, however self-serving, that there is no real difference between an active fatty like me and someone that is thin. But what if you are obese, or smoke, or mainline heroine, or have really high chlorestorol, some combination of the above or or other unmentioned behavioral characteristics, shouldn't you pay extra? Car insurers don't have good risks subsidize bad risks, why is that the norm in health care? My wife gets speeding tickets like their going out of style. Actually she mostly gets out of them because she is a girl (an attractive girl, this a crucial distinction unfortunately, it's a cruel world). But even a speeding ticket or a little fender bender where you are at fault will cause your premiums to go up. And this is all logical, if you drive like a moron there is a greater chance you'll get into an accident which implies a greater chance that your insurer will have to pay out a large sum of money because you drove like a moron one too many times. This was the underlying incentive structure (reward healthy behavior, penalize bad behavior through premium adjustment) that Safeway adopted that President Obama commended (which by the way would not be allowed under community rating which both the house, the HELP committee, and the President have all proposed).

Wednesday, August 26, 2009

Kennedy and Colson

Hanna Rosin has a blog post bemoaning references to Mary Jo Kopechne and Kennedy because Kennedy suffered some consequences and did good deeds later which distinguishes him from many others. She compares him to former Nixon aide Chuck Colson who founded Prison Fellowship. The big difference is that Chuck Colson didn't have the Kennedy name to trade on and actually did have to go to prison. Kennedy didn't really suffer any consequences. She argues that he partially repented by not running for president but this is incorrect; he did in fact run for president in 1980, running against Carter for the democratic nomination and losing. I have heard others suggest the fact that he wasn't ever president was consequence enough, implicit therein that the presidency was his birthright as a Kennedy. Kennedy certainly deserves to be remembered for his accomplishments, which were considerable, but also his flaws which in the case of Mary Jo Kopechne, were tragic.

Wednesday, August 19, 2009

An Ugly, No Good, Very Bad Chart

If you look at the image to the left you can see that the finances for social security have gone to crap as a result of the recession. In the current year it appears that social security will break even, i.e. there will be enough money coming in to pay out benefits, but not a penny more. Further, it looks like the point at which Social Security will take in less money than it pays out will move forward from late next decade to the middle of the decade (or about 6 years out). Given that the trust fund does not have actual assets or fungible debt it will be interesting to see how the politics of Social Security evolve. For one, I expect a lot of people to stop talking about how the trust fund will maintain Social Security's solvency till 2042.

Monday, August 17, 2009

Delectable Edwards Trash

There may be a sex tape.

Great Health Care Article

This is one of the better ones I have read recently. The author does a great job of cataloguing some of the absurdities of the health care industry. His prescriptions are quite radical and I can never imagine them being passed which is unfortunate. It is deeply unsettling to me that the basis of reform is essentially not to disrupt the current system but rather to build on it. If everyone is in agreement that a policy sucks why should the emphasis of reform be to further establish said system. The alternative that has been discussed, and has been the source of much left wing frustration, has been the public option or in extremis a medicare for all approach. But yet again, this too is merely an expansion of the status quo. Medicare is a huge and unsustainable portion of the health care industry, why does it constitute an adequate model for reform? At what point in the health care debate do we move from heated discussions of the virtues of Policy A (Employer Based Insurance)and Policy B (Public Option/Medicare for all)--which both suck and where the sole distinction is whether your overinsurance is provided by tax dollars or foregone wages--and move to a discussion of Policy C (something that doesn't suck)?

Thursday, August 13, 2009

More Health Care

Apparently the Senate Finance Committee big proposed revenue source is a 35% levy on insurance companies premiums for plans above $21k. This is daft on so many levels. One, this utterly ignores tax incidence. As Diane Lim Rogers notes, you can't tax things, you can only tax people. Conceivably insurers will stop selling "cadillac" plans but more likely insurance companies will simply pass on the cost of taxes on to the consumer. Outside of providing a paltry revenue source this doesn't do much.

The problem with this proposal is not that individuals will ultimately be taxed but rather in its opacity it is unlikely to get people to make more cost concious decisions vis-a-vis their health insurance. If you were to eliminate the employer exclusion or cap it then at least a portion of the employer contribution would be taxed as income. One, the employee would have visibility as to the amount they are foregoing in wages as a result of health care. Two, the employee would then have an incentive to obtain less generous coverage. Going back to the Rand Study we know that increased cost sharing has a neglible impact on health outcomes while drastically reducing health expenditures. The important exceptions to this finding were those who were lower income and had chronic diseases such as hypertension. These finding should be the basis for health care reform. But instead there is an obsession with first dollar coverage and a public plan whose purpose is ill defined.

Wednesday, August 12, 2009

The Best Health Care Post Ever

Check out Chris Hayes blog post "Your Questions About Health Care Reform Answered". This is my favorite part:

"3) I heard the proposals currently under consideration provide seniors with option of free counseling sessions under Medicare, where they can discuss a living will and end-of-life care.

That's a huge misconception. The bills require all senior citizens (who are non union members) be euthanized on their 70th birthday. Under section 278(c)ii all last rites will be performed by Jeremiah Wright using a Q'uran."

Sunday, August 09, 2009

Murdoch Saves Newspapers?

Murdoch is planning on charging for all the web based content of his newspapers. The real issue is whether other newspapers will follow suit. If they restrict their content as opposed to giving it away for free then ostensibly their advertising would be worth something again.

Sunday, August 02, 2009

More Health Care

Political Calculations has a handy dandy chart adjusting OECD life expectancies for non-medical fatalities (automobile accidents, homicides) and interestingly the U.S. jumps from 14th place to 1st place in terms of life expectancy at birth. I imagine the margin would increase if the data were further adjusted to normalize the data for premature births (in europe premies that die within a certain time period are counted as stillbirths and aren't figured in the life expectancy statistics). This doesn't mean that the US healthcare system isn't craptastic. However, it does seem to indicate that public health measures, transportation policy, and crime prevention will ultimately have a much greater impact on life expectancy than health care.