Thursday, February 17, 2011
If you insist that there is an intermediary to each transaction, then there will be a considerable amount of overhead costs to facilitate transactions that in other industries don't exist. On its face this is an inefficient set up. Why should someone that practices family medicine need anything more than one staff member who functions effectively as his bookkeeper and scheduler. That additional overhead gets passed on to you in the form of premiums to pay for more staff at the providers office to chase reimbursements and more staff at the insurer to process claims. But additionally, the only possible avenue for cost control is top down as opposed to a bottom up manner that we find in most industries. If I am spending my money directly then I have an incentive to minimize my expenses. For instance, if I have to get a colonoscopy, something that does constitute a significant and expensive procedure, but not urgent, I can research prices and reputation and make a more informed decision. If we make price information available I think initially we will find a wild variance in pricing but that will come down, resulting in significant savings to the average consumer. None of this I think is terribly controversial but it seems that we view health care in such a manner that all rules that apply to other goods and services don't to health care.
* I think the non-paternalistic alternative to providing lower income folks with free or massively subsidized insurance is to just give them cash. The obvious criticism here is that lower income folks having many needs and wants and very little cash will forgo care for other things both wise or unwise. I think there is a middle ground to providing cash and a strictly in kind benefit and that would be something along the lines of a medical debit or credit card that has strict restrictions on purchasing. To a doctor this would be as good as cash but to a grocer it would be worthless thus it would seem to address the fear with someone forgoing necessary care but still retain the efficiency of reducing the parties to a routine transaction.
Wednesday, February 16, 2011
I think there is a good argument to be had that now is not the optimal time to start budget cuts. And I don't think budget cuts where the discretionary non-defense to defense ration is 85-15 is appropriate either. I would be content with a smaller cut this year where the non-defense to defense ration was 25-25 for a total of $50 billion and scaled up to $100 billion the following year and the year after that the ratio would change to 50-100 with a total cut of $150 billion. The reason I think you want to start with modest cuts now is that you don't know that the economy will start roaring back due to deficit spending. So while revenues will probably continue to rise the deficit is likely to be a problem for a while and the longer we fail to address it the more likely it is that we will be present with harsher choices when we are forced to deal with it.
Thursday, February 03, 2011
Wednesday, February 02, 2011
In Health Care we see something similar. The employer exclusion is the original sin in healthcare. Most of my coworkers can tell you how frequently they can get prescription glasses for "free", if their plan reimburses a gym membership or not, if the copay on a doctor's visit is low. They won't be able to tell you what the coinsurance is in the event they have a major medical event. Even a low coinsurance rate, say 20% can add up quickly if you have an extended hospital stay. They can't tell you how much they are foregoing in wages as a result of the employer contribution to their health care plan, because of course, don't you know, the employer pays it. One of the policy constraints politicians operated under was this lockin effect of people's expectations of continuing this form of first dollar coverage with somebody else's money. The problem with first dollar coverage is it is expensive and paying for it with somebody else's money is ultimately gonna cost you in wages. But alas, that is where we have ended up in health care reform, building on and further reinforcing a broken model.