« Exhibit A in the Case Against Brooks | Main | Myth-Busting »

April 09, 2005

Snidely Whiplash in Scrubs

One day, and I like to think it soon, politicians will muster their will and Americans will call forth their outrage and we'll finally fix our broken health care system. And when we do, and the histories of the epic battle to guarantee coverage are written, these folks will be the villains:

One of the most talked-about new plans is Tonik, launched a few months ago by the California Blue Cross subsidiary of WellPoint Inc., the nation's largest health insurer. Directed toward people in their 20s, Tonik seeks a coveted group insurers call the "young invincibles" because they are rarely sick.

The company's marketing campaign looks nothing like the button-down image the Blues have long presented. Silhouetted snowboarders careen across Tonik's website, on which medical plans have hipster names such as the "calculated risk-taker" and the "part-time daredevil." Its monthly premiums are as low as $64, with out-of-pocket deductibles as high as $5,000 (the "thrill-seeker").

The most controversial feature of Tonik is its exclusion of any maternity coverage.

Blue Cross says Tonik serves a niche of the uninsured market — people who are put off by high premiums because they rarely see a doctor. "Because of their age, attitude and culture, this group wasn't interested in paying for maternity coverage," said Michael Chee, a Blue Cross spokesman. "Maternity is one of the higher-cost items to price a policy for, so taking it out allowed us to price it lower."

Critics say such plans allow insurers to cherry-pick the healthiest consumers but offer skimpy benefits. "The market is likely to turn PPOs from the Cadillac of plans into Pintos that might cost less but have much less protection," said Jerry Flanagan, a spokesman for the Santa Monica-based Foundation for Consumer & Taxpayer Rights.

"The problem when you exclude benefits like maternity coverage is you don't have fair risk pools in the marketplace anymore," said Astrid Meghrigian, a lawyer for the California Medical Assn. "People have babies on [an HMO plan] and then go back into a cheaper PPO."

This plan-hopping has pushed a rising tide of people with costly health problems such as diabetes, morbid obesity and heart failure onto HMOs, whose costs are capped.

That, right there, is our whole health care problem in a few simple paragraphs. You can time travel back to the beginning of Blue Shield, where they created a one-size-fits-all plan with true community ratings that could've been the model for a perfectly efficient health care sector, right up until start-up competitors saw an opportunity and began cherry-picking the healthy out from under them. That was early in the 20th century. Since then, the same tactic has replicated itself over and over, and now it's bringing us to the breaking point.

This is why health care is not a market. Because in a market, you limit your liabilities. In health insurance, your liabilities are the sick. In health care, the aim is to cover the sick. In private health care, the aim is to turn a profit, and thus you have to ignore the sick and cover the healthy. It just doesn't,
it just can't, work.

April 9, 2005 in Health Care | Permalink

TrackBack

TrackBack URL for this entry:
http://www.typepad.com/services/trackback/6a00d8341c572d53ef00d8345e38ca69e2

Listed below are links to weblogs that reference Snidely Whiplash in Scrubs:

Comments

This is why health care is not a market. Because in a market, you limit your liabilities. In health insurance, your liabilities are the sick. In health care, the aim is to cover the sick. In private health care, the aim is to turn a profit, and thus you have to ignore the sick and cover the healthy. It just doesn't, it just can't, work.

I'm not exactly sure what you're saying the problem is. The problem isn't that private health care aims to turn a profit even if it means sick people aren't treated. The problem is that there's no equilibrium (not even getting to the issue of whether the equilibrium is efficient). It is always possible to design a profitable contract to offer to a given group with a known risk distribution. It is always possible to design ANOTHER contract that will peel off some people in the first contract, rendering it unprofitable.

A separate reason why health insurance cannot be dealt with by the market is that there is a great deal of quality differentiation. Markets are always bad at dealing with quality because in theory there should be a different market for each quality and people should know the quality of the goods they buy. In fact, it's very difficult for individuals to know the quality of the healthcare they receive. So the good is priced incorrectly.

Dumb.

Posted by: Marshall | Apr 9, 2005 2:40:32 PM

Maybe another problem is referring to health care plans as 'insurance'. Risk pools for car insurance, homeowners and life insurance can be calculated quite closely. No insurer wants high risk purchasers. For instance, in the case of life insurance, everyone is going to die, but advancing age, certain diseases, certain occupations, etc. (including genetics soon) make the risks higher, and may make the insurance very expensive or unavailable. But the withholding of insurance does not cause the applicant to suffer and die.

In the case of health care, similar but not identical criteria apply, but there is an additional factor: moral imperatives to provide care for the sick.

From the societal viewpoint, the best risk pool is the most universal risk pool, but this won't yield the lowest possible premium for all. So, we really have a moral dilemma, not just a marketplace.

Should the sick be healed? Should all of society take on this obligation?

If the answers to these two questions is 'yes', then we really shouldn't consign health care to the vagaries of insurance market economics and dicing/slicing of the risk pool, for the end result will surely be that health care will be unaffordable or unavailable to some significant portion of the population - and that is a moral failure of society as a whole.

I'm not opposed philosophically to private (as opposed to single-payer nationalized) insurance for health care. Maybe there is some role for competition.

But that market approach will surely not meet the moral imperative unless insurers are required to sell to all takers.

In this context, the slicing of the demographics is just evil because it cannot ever lead to a just result.

Posted by: JimPortlandOR | Apr 9, 2005 4:08:17 PM

I'm not exactly sure what you're saying the problem is.

Something like this:

In a well-functioning market, a seller can profit by serving buyers well -- buyers' and sellers' interests are aligned, and the invisible hand makes everyone happy (where it works, it's great.)

In the health care market, the sellers of insurance can only profit by not serving people who need health care -- buyers' and sellers' interests are fundamentally misaligned. In a competitive health insurance market, companies can only do well at the expense of sick people, not by serving sick people.

(Ezra did say it better.)

Posted by: LizardBreath | Apr 9, 2005 4:10:06 PM

LizardBreath,

Then I would say that your (and Ezra's) point is along the lines of quality differentiation. People don't know what healthcare they're purchasing when they buy it.

Jim:

You say "From the societal viewpoint, the best risk pool is the most universal risk pool, but this won't yield the lowest possible premium for all." It's true this is the best pool for society; that's because it will, in fact, result in the lowest premium for "society". However, some individuals would pay less if they were in a different pool... I think you understand the problem well without my repeating myself. I just want to highlight that in fact the universal route is the best for society overall, in cut-and-dry cost benefit terms as well as in moral or justice terms.

I'm less sanguine about the role of private insurance. Rather than forcing insurers to do things they don't want, why don't we just nationalize health insurance?

Posted by: Marshall | Apr 9, 2005 6:00:43 PM

Marshall: I'd be happy and society could look itself in the mirror each day with some form of nationalized health insurance (that didn't result in substantial rationing for everyone - rationing (or long waiting lists) in the UK and Canana are not a good outcome).

But, taking it as a given that there is no way to get from here to there (let us say in the next 5 or 10 years while the Repubs hold sway in many levels of government), then the question becomes more difficult. How do we regulate and guide the current market such that society's goals are not trampled?

Society makes businesses do all kinds of things that they don't want. I'm sure many publicly traded companies would be much happier with no SEC, and restaurants would prefer no sanitary-conditions inspections.

So, I say, regulate those health insurance companies so that they move us in the correct moral direction. (Most people don't know that the insurance industry is the ONLY major segment of business that currently has NO federal regulation.)

Posted by: JimPortlandOR | Apr 9, 2005 6:30:27 PM

In my two comments above, I missed making THE point I wanted to emphasize: Health care should not be viewed as primarily an economics or political philosophy issue.

Instead, let's make this a national discussion about the self-evident moral necessity of providing adequate health care for the the largest possible segment of our citizens as a matter of right.

Posted by: JimPortlandOR | Apr 9, 2005 6:37:13 PM

To me it's like providing basic sewage coverage and making sure the drinking water is safe. Those are recognized as government functions because they provide for the general welfare. I don't want co-workers having to come in sick because they don't have sick days left to take. I don't want co-workers or anyone in the general population running around sick because they don't have health insurance. I don't want families going bankrupt because of having to pay healthcare bills. I don't want companies having to lay off workers because they can't afford health care costs. And I don't want health care companies deciding they know better than my doctor what health care I need. For all those reasons, and many, many more, we need a national health care program. Even if it just covers the basics, it will be better than what we've got. it's time to stop fighting against this and do it. We pay more for health care in terms of GDP than any other industrialized nation - isn't it time we started taking care of this issue?

Posted by: donna | Apr 9, 2005 11:56:31 PM

Jim: I agree that healthcare should be discussed from a moral imperative viewpoint. And personally, I think it's a great place to bring in the Culture of Life. But I'm curious, what would you say is the way to regulate the private companies so that they provide health insurance in "the correct moral direction." Would it be to force insurers to offer the same options to everyone, regardless of prescreening? I wonder what would happen to insurance premiums, then... Or is there some other type of regulation? I'm not necessarily against that, I just wonder how it would work in application.

Marshall: How is it quality differentiation? The problem is that some people simply cannot get access to health insurance, because of their pre-existing conditions, and that insurers only want to insure healthy people. Not that they don't know what sort of insurance they're getting (or being denied.) Right?

Posted by: acallidryas | Apr 10, 2005 12:40:41 AM

First ofa all, I really believe that Ezra Klein hates freedom.

Now that's out of the way, if the private sector is soooo efficient in taking care of the sick, then why was Medicare and Medicaid so necessary to provide for the old and the poor who were being forced to pay higher premiums or were ignored altogether.

Second of all, EVERYBODY knows that socialized medicine is a lot cheaper and efficient and moral than privitized health care, even Milton Freidman

Posted by: ItAintEazy | Apr 10, 2005 4:04:40 AM

Well, because buyers think they're entering into a transaction where they pay x dollars for p units of healthcare, but once they've established a relationship with the provider they find they get only p-q units of healthcare.

Posted by: Marshall | Apr 10, 2005 4:57:14 AM

What accalidryas said. The problem isn't quality differentiation (although that is a separate problem) the problem is that it isn't profitable to provide health care to people who need lots of it. The market does a bad job of providing health care to people who can be identified as heavy health-care users; if we don't want those people to die in the streets, we need non-market solutions.

Posted by: LizardBreath | Apr 10, 2005 9:52:30 AM

I've come to realize that the private sector is inadequate for anything the covers everyone. The private market is effective when the customers are self-selected. I don't believe the private market will ever be effective for anything like universal education or universal healthcare.

Posted by: Unstable Isotope | Apr 10, 2005 10:07:39 AM

Ezra

So what do you suggest? A UK style healthcare system I presume? Unfortunately that doesn't turn out to be perfect either. In the upcoming UK election the inadequacies of the NHS, despite massive increases in funding (raised from increased taxes on working people), is one of the major issues. Unsurprisingly this extra funding hasn't created a better service instead it's been spent on pay rises all round, recruitment of ever increasing numbers of health "administrators" and computer systems that don't compute. In short a state run health system puts it's employees first and not patients.

Personally I think there should be much more government encouragement for healthy lifestyles. Any obese, alcoholic smokers afterwards can pay for their own treatment.

Posted by: Boethius | Apr 10, 2005 11:20:13 AM

Waitaminute, are you saying, Boethius, that Universal health care might not be PERFECT? Fuck it, then, why bother? Let's just stick with unbelievably shitty.

Posted by: Matt_C | Apr 10, 2005 11:39:03 AM

LOL, Boethius. Have you spent any time in a hospital or a doctor's office lately? Could it be LESS patient oriented? Oh yes, the American healthcare system, a model of consumer-focused business efficiency, nearly as convenient as much missed Soviet-era department stores.

And, um, call me wacky but I think it's a good idea for there to be more computers in healthcare. Personally, I think it's pathetic that in the 21st Century I can read my email on the toilet, but if I were in an emergency room, my doctor can't pull up my medical records to see if the medication he's about to prescribe is going to kill me. Perhaps you think it's a good idea for information-based industries to rely entirely upon paper.

Of course, your point about not paying for the care of people whose illnesses are due to smoking, drinking, and eating too much is well taken. I mean, if the notion of a horrible, slow and painful death from lung cancer, diabetes, cirrhosis, etc. isn't enough to encourage people to lead a healthier life, the fear of unpaid medical bills certainly will certainly do it.

Posted by: theorajones | Apr 10, 2005 2:08:40 PM

I know I need to wade in here, and I will, just been busy. Quickly though -- Marshall, of course consumers can't do quality differentiation. That's the nature of the beast. Beyond that, I don't see your issue with my post. Yes, it's a problem that equilibrium is never reached, but if you don't see what the constant undercutting is doing to the premiums and care quality for the ill, you've got to take off the economist shades for a moment. Health care is not efficient when run as a private market because, unlike in many markets, the needs of the buyers aren't aligned with those of the sellers. The sellers need to selectively sell, the buyers need to uyniversally buy -- the twain shall never meet.

Posted by: Ezra | Apr 10, 2005 2:22:03 PM

Theorajones

I'm all for the use of computers - I use one at work and am using one now but the important thing is that they work.

In state run organizations they often don't work as intended and/or cost much more. In the private sector there is much greater incentive for things to be done right as when they don't you're likely to lose your job, either individually or through company closure.

I'm not sure whether you agree or not with me about healthy lifestyles. Personally I think this is an area which the government should be more concerned about, in particular among the young.

Of course, the ultimate problem with healthcare is that resources are finite (under whatever system) and that demands infinite.

Posted by: Boethius | Apr 10, 2005 5:21:49 PM

Jim, Marshall, Ezra; the problem is a little different than you think it is. Assuming that the law of large numbers is accurate; that people are risk averse; and that people have enough discretionary resources to eliminate a major risk, health insurers should be able to profitably sell insurance without denying coverage to their insureds. However, with the astronomical cost increases of care, the insured's expected risk is often more than he or she is silling to pay. In other words, people are either too risk prone, or they don't have enough discretionary income to spend on this item. Cherry picking exacerbates this problem, but I think it is important to realize that eliminating cherry picking will not solve the underlying reason that our medical system is failing. The only way to eliminate that problem is to ration heath care expenditures, and it seems unlikely that anyone in our country has the courage to suggest that course of action. Queue rationing is obviously preferrable to price rationing in this field, but until people nuderstand the nature of the beast, neither will occur.

Posted by: blogsy mcblog | Apr 10, 2005 11:52:12 PM

Adding to all of the above, we need to factor in the environmental issues which affect the general health. Artificial foods; various toxins in the water,air and soil; conditions which are now being treated as diseases that would respond to less aggressive action; medications that cause more problems than they solve; these are a few of the things we confront in our battle for health care. Overall basic coverage for everyone would be a good thing. For elective items such as cosmetic surgeries and other expensive but non-life-enhancing treatments could be covered by private insurance.
Since the insurance business removed itself from a mutual benefits arrangement to a for-profit business it will be difficult to find a workable premium structure that would allow everyone to participate.
There are some of us who have opted to work with alternative practitioners and gentler treatments at a lesser cost. It isn't covered by most insurance but is safer to our minds.
In other words, there is no easy answer, is there.

Posted by: Nora Ingram | Apr 11, 2005 8:43:48 AM

LizardBreath: "(Ezra did say it better.)"

I thought you said it better.

I would say that in a competitive insurance market, the only way that an insurer can increase their bottom line is by being able to select the customers with a low expected cost, and reject the customers with a high expected cost.

Posted by: Ilkka Kokkarinen | Apr 11, 2005 9:03:16 AM

Ilkka, there are some problems with the assumption that insurers have to reject high cost insureds. Insurers compete by finding new proxy variables that enable them to offer customers with lower expected costs lower prices. The insurers don't necessarily reject people with higher expected costs; they just offer them coverage at higher prices. This practice is defended as being "actuarily fair." Technically, people who KNOW that they will not have children have a lower expected cost (expected cost= (likelyhood of medical expenditure in given time frame) * (likely cost of medical expenditure during time frame)) than people who either don't know, or who desire to have children during that time frame. While I would agree that it is sound social policy, and maybe even the fundamental purpose of a government, to have low cost health care consumers subsidize high cost health care consumers, I would posit that most people in this radical capitalist country disagree. Therefore, until we can convince people that "atuarily fair" does not equal "fair,"

Posted by: blogsy mcblog | Apr 11, 2005 10:25:01 AM

"The insurers don't necessarily reject people with higher expected costs; they just offer them coverage at higher prices."

This is maybe just semantics, but that is a form of rejection.

Posted by: Ilkka Kokkarinen | Apr 11, 2005 11:25:48 AM

I would like to know may I get a Catalog , because I sell Scrubs .

Posted by: Jessica | Jan 18, 2006 10:17:17 PM


I think important aspect of provision of public goods in health care would relate to government support to research and development ,unfortunately ,health planner and the people at the helm of affairs have not sensed the real issue and have therefore not came up with logical solution to the problems.

Posted by: Andrew Spark | Feb 11, 2006 6:57:23 AM

托盘
托盘
钢托盘
钢制托盘
塑料托盘
木托盘
木制托盘
纸托盘
木塑托盘

托盘
钢托盘
钢制托盘

托盘
钢托盘
钢制托盘
塑料托盘
托盘

托盘
钢托盘
钢制托盘
钢托盘
木托盘
钢制托盘
托盘
塑料托盘

托盘
钢托盘
钢制托盘

托盘
钢托盘
钢制托盘
塑料托盘
木托盘
南京托盘
南京钢托盘
上海托盘

托盘
钢托盘
钢制托盘
塑料托盘
木托盘
南京托盘
南京钢托盘
上海托盘

托盘
钢托盘
钢制托盘
塑料托盘
木托盘
纸托盘
南京托盘
上海托盘
北京托盘
广州托盘
杭州托盘
成都托盘
武汉托盘
长沙托盘
合肥托盘
苏州托盘
无锡托盘
昆山托盘

托盘
钢托盘
钢制托盘
塑料托盘
木托盘
纸托盘
南京托盘
南京钢制托盘
南京钢托盘
上海托盘
北京托盘

托盘
托盘
托盘
托盘
钢托盘
钢制托盘
塑料托盘
塑料托盘
塑料托盘

托盘
塑料托盘
钢托盘
钢制托盘
铁托盘
托盘
钢托盘
铁托盘
钢制托盘
塑料托盘

托盘
钢托盘
铁托盘
钢制托盘
塑料托盘
托盘
钢托盘
铁托盘
钢制托盘
塑料托盘

托盘
托盘
钢托盘
钢托盘
铁托盘
铁托盘
钢制托盘
钢制托盘
塑料托盘
塑料托盘

托盘
钢托盘
铁托盘
钢制托盘
塑料托盘
托盘
钢托盘
铁托盘
钢制托盘
塑料托盘
托盘
钢托盘
铁托盘
钢制托盘
塑料托盘

托盘
钢托盘
铁托盘
钢制托盘
塑料托盘
托盘
托盘
托盘
钢托盘
铁托盘
钢制托盘
塑料托盘

托盘
钢托盘
钢制托盘
铁托盘
塑料托盘
木托盘
木制托盘
纸托盘
木塑托盘
柱式托盘
波纹托盘
镀锌托盘
南京托盘
上海托盘
北京托盘
广州托盘
托盘
钢托盘
钢制托盘
铁托盘
塑料托盘
木托盘
木制托盘
纸托盘
木塑托盘
柱式托盘
波纹板托盘
镀锌托盘
南京托盘
上海托盘
北京托盘
广州托盘

托盘
钢托盘
钢制托盘
铁托盘
塑料托盘
木托盘
木制托盘
纸托盘
木塑托盘
柱式托盘
波纹托盘
镀锌托盘
南京托盘
上海托盘
北京托盘
广州托盘
托盘
钢托盘
钢制托盘
铁托盘
木托盘
塑料托盘
木塑托盘
柱式托盘
波纹板托盘
镀锌托盘
南京托盘
上海托盘
北京托盘
广州托盘

托盘
钢托盘
钢制托盘
铁托盘
塑料托盘
木托盘
木制托盘
纸托盘
木塑托盘
柱式托盘
波纹托盘
镀锌托盘
南京托盘
上海托盘
北京托盘
广州托盘
托盘
钢托盘
钢制托盘
铁托盘
塑料托盘
木托盘
纸托盘
木塑托盘
柱式托盘
波纹板托盘
镀锌托盘
南京托盘
上海托盘
北京托盘
广州托盘


托盘
钢托盘
钢制托盘
托盘
塑料托盘

Posted by: peter.w | Sep 15, 2007 8:13:38 AM

The comments to this entry are closed.