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March 14, 2006

Skin in the Game

I find this the most baffling line of argument:

"One of the reasons we have a healthcare crisis is because, as a consumer, I don't have that much skin in the game," said Arkansas GOP Gov. Mike Huckabee. "A lot of us feel there needs to be a transformation from a third-party [insurance] system to more [financial] participation by the [patient]."

This "skin in the game" phraseology has emerged the leading trope of the HSA-movement, so much so that it was a running joke throughout a recent health policy conference I attended. But its weirdness transcends its linguistically resemblance to George Allen's politics-as-football-metaphors language. In health care, all your skin is in the game. If you don't seek out the right care from competent professionals in sanitary environments, you...die. And if the threat of death, or illness, or amputation (as seen in the negligent self-care of many diabetes-sufferers) doesn't put your "skin in the game," Huckabee thinks moderate financial exposure will? Just how greedy are Republicans?

But sometimes, it doesn't matter how vulnerable you are on the field, the play's already been called and you rapidly learn that you're a) not the coach and b) ill-equipped to call an audible:

Magdalene Adenau, who is 29 and single, ended last year with about $700 left in her health account. And when she needed a chiropractor, she went to one who charged about $60 until she shopped around and found one who charged about $30. "There's a real benefit to you if you use the money smartly," Adenau said.

But when his son was hospitalized, said Meschke, the Minnesota professor, "I realized that I neither had the bargaining power nor mental capacity" to influence the price of Jason's chest X-rays, intravenous fluids or antibiotics. The hospital staff he asked about the charges had no idea, he said, "and you are kind of overwhelmed with the medical aspects of this. If you're negotiating a car, you can always say, 'I'll walk off the lot.' If your 1-year-old kid has an I-V in his arm, you don't have the same situation."

A survey last fall by the Employee Benefits Research Institute found that people with HSAs were more likely than those with other health plans to delay or avoid care when they were sick.

And Meschke's experience with his son demonstrates the central flaw of the skin-in-the-game theory: It's when you're most vulnerable -- when you have the most "skin in the game" -- that you're least likely to make the decision on your own. Those are the moments when you defer to the doctors and health professionals with decades of experience and an interest in seeing your son pull through. You may decide to call your own play to save thirty bucks on acupuncture, or delay your own care because treatment for your hypertension would keep you from paying off the car, but HSA's sure as hell aren't changing attitudes towards your kid's chest x-rays.

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Comments

The whole "patient responsibility" rhetoric is absurd. It's amazing to me how these hacks paint us, their "citizen bosses" as a bunch of idiots that need to be taught a lesson whenever it suits them.

Here's the other side of putting more "responsibility" on the patient. Let's say two people go to the hospital and have triple-bypass surgery done. One is a multimillionaire who has made his money by being the most badass, cutthroat merger and acquisitions negotiator in existence, but he doesn't have insurance. The other is a meek and mild accountant who does have insurance. Total cost to the badass negotiator: probably around $50,000-$75,000 if it all goes as planned. Total cost to the insurance company for the accountant: around 12,000-15,000, of which the accountant will pay anywhere from 2-5 grand, depending on his plan.

Insurance companies negotiate with doctors, drug companies and hospitals. Individuals don't, no matter if they are in a good frame of mind to do it or not. It isn't about education, expertise or ability, it's about large groups getting better deals than individuals - something that is true in every single endeavor of life and especiallly true in healthcare.

The whole plan of the Bush administration is apparently to divide all of us into individual units so that health care becomes a reality only for the truly rich.

Posted by: Stephen | Mar 14, 2006 3:30:53 PM

Has Gov. Huckabee (and other skin-in-the-game advocates) tried negotiating the price of an item with Walmart or Target or Macy's?

Or, more apropo, with an ambulance driver when he has suffered a car accident with injuries to his family? What if he is unconscious from the crash? What if his HSA is at zero from the prostate surgery he just had?

This is so laughably pitiful as a national prescription for health care that one is almost speechless to respond.

Brain dead 'leaders' who think opening their mouths and making sounds indicates intelligence. The Mummies Return: Republican Healthcare.

Posted by: JimPortlandOR | Mar 14, 2006 4:24:20 PM

But when his son was hospitalized, said Meschke, the Minnesota professor, "I realized that I neither had the bargaining power nor mental capacity" to influence the price of Jason's chest X-rays, intravenous fluids or antibiotics. The hospital staff he asked about the charges had no idea, he said, "and you are kind of overwhelmed with the medical aspects of this. If you're negotiating a car, you can always say, 'I'll walk off the lot.' If your 1-year-old kid has an I-V in his arm, you don't have the same situation."
This can just as easily be used as an example for the other side. Why doesn't the hospital staff know about charges? What other business works that way? If I went into a mechanic and he 'didn't know about charges' I would be quickly going to another mechanic. Yet the entire medical industry works this way, insulting consumers from prices.

This is of course a huge benefit to insurance companies, they pretty much take a percentage and the bigger the ammount of money flowing through them, the bigger the amount of money they can skim. Insurance companies don't negotaite lower prices, in all liklihood they would much rather negotiate higher prices (albeit in a predictable fashion.)

Certainly some of this is an arguement for a single-payer system. But it can also be an argument for a system that is more connected to consumers pocketbooks, more 'skin in the game' if you will.

Would such a system work? Would it promote greater efficiencies and serve more people better? There are not guarantees of course (and single payer has risks too) but the markets work in a lot of other areas just fine. Housing is as critical to people's needs as health care. So is food. Free markets have delivered these needs easily.

Why has health care failed? Perhaps, we should ask how is health care different. Health care seems to be more heavily regulated than either of the other two areas we are talking about. Health care also, as a side effect of wage freezes, has been moved in the popular mind to be a benefit and something employers give people for 'free.' at least it used to be 'free', now it is obviously expensive to buy insurance.

Given these factors, why is it so unreasonable to think that a market based health care would not work?

Posted by: Dave Justus | Mar 14, 2006 4:33:02 PM

Dave, I know a lot more about what to do if I don't have food in my cupboard than I do if I am vomiting blood. We don't go to food consultants to tell us what to buy, but we do go to doctors who tell us what kind of treatment we need.

Posted by: Sara | Mar 14, 2006 4:47:47 PM

Huckabee is a former fatso who droppped about a hundred pounds through a rigorous exercise and dietary regimen. Thus, he has all the zeal of the recently converted (see Bush, G.W). Anything he says on this subject should be seen as the remarks of a fanatic who thinks that healthy people shouldn't contribute to the system and that "unhealthy" people should be penalized for their conditions. Poor health to this asshole is the result of a moral failure. i.e. laziness, dissolution, impercipience, lack of foresight, just plain stupidity or failure to work out with the same creazed intensity that he does.

Posted by: Farinata X | Mar 14, 2006 4:48:00 PM

Do you really think health care is more regulated, on a delivey, level than housing? You've heard of building codes, how many surgery codes do you know of? And you know about the FDA...right?

Doctos don't know about charges because we have insurance, charges are almost never the same. What Blue Cross has negotiated with your provider is different than what Kaiser Permanente has, and both differ from what you'd get as an individual.

Pricing, in health care, isn't static. And when you go to your mechanic, you get an estimate on a procedure. If you go to your doctor, and he tells you the chest x-ray is X dollars, and then he finds an abnormality, and needs to run an invasive procedure, which leads to a surgery, which leads to a...Well, aren't you glad you got that estimate? Sure helped you budget it out, didn't it?

Posted by: Ezra | Mar 14, 2006 4:53:40 PM

"people with HSAs were more likely than those with other health plans to delay or avoid care when they were sick."

This is an important point, and BushCo is banking on the fact that the healthcare costs of these people will be (artificially) low for several years to come. By the time these folks end up in the emergency room dying from the side effects of untreated diabetes, heart disease, etc - health insurance companies, major corporations will have pocketed the savings.

Posted by: CParis | Mar 14, 2006 5:03:31 PM

To continue Ezra's analogy between a mechanic and a doctor, if it costs too much to fix your car, you can walk away from it. Kind of hard for most of us to do with our bodies.

Sure there are things about health care that could be negotiated under certain circumstances but some things can't be.

BTW, I did try to shop some blood tests. No one at three different labs could tell me up front how much they would cost. Maybe it was because there are so many price levels for different consumers but part of it may be that it depends on what the intial tests reveal. Certain findings may trigger further tests. Health care is super complicated.


...

Posted by: Emma Zahn | Mar 14, 2006 5:14:11 PM

The hidden subtext of this sort of thinking is that people just head off to the Dr. for a little health care for the fun of it. Except for hypochrondriacs does anyone overconsume health care?

Posted by: Col Bat Guano | Mar 14, 2006 5:24:02 PM

You allow people to make their own decisions for simple procedures, but you deny it from them for more expensive, more important ones.

But, isn't it noteworthy that people have become capable decision-makers when making other costly, important decisions?

Consider housing. Do not people shop for and compare homes when buying a place to live? And are not houses costly and important purchases? What about education? Do not people shop for and compare colleges and universities when buying an education? Is not college costly and important? What about transportation? Do not people shop for and compare cars when buying this modus vivendi of modern society? Are not cars costly and important?

What about healthcare is so fundamentally different that convinces you to fundamentally deny people the right to make it like the other three?

If you are worried about people's ability to finance their wonderful healthcare shopping experience, please, advocate government wealth transfers into their health savings accounts. But this is a seperate issue and the original question remains.

Trapier K. Michael
www.marketplace.md

Posted by: Trapier K. Michael | Mar 14, 2006 5:26:10 PM

"if it costs too much to fix your car, you can walk away from it. Kind of hard for most of us to do with our bodies."

Actually, that is called death, and has been pretty common. I hope future advance will get rid of such barbarity, but for now it happens. Health care will still be regulated, and price will still matter. I tend to think that money is more blind than other forms of power, so a market based system will likely be more egalatarian than other options.

I do think health care is more regulated in many ways than housing is. Yes, both housing and food are regulated in some ways, but those regulations are less intrusive than less comprehensive than others. The first 'surgery code' I can think of is limitations on who can perform a surgery. There are others of course, what drugs can be used is codified, what anethsetics can be used and who can adminster them is codified. The list is endless. Not all of these are bad of course, many are very desirable, but in some cases they do stifle competition and competitiveness. In many cases, there are artificial controls and limititions that have been constructed around seemingly 'good' regulations. For example, have you ever wondered why their are night law schools but not night medical schools? Look into it some time.

Mechanics estimates work just like the estimates Ezra imagines for medical care. They are just that, an estimate. Some mechanics of course are disreputable, and there are a variety of ways to overcome that. Word of mouth is a pretty descent one.

I don't think a market system would be perfect. It might even be worse than what we have now. It is not impossible that whether it would be perfect or not, it is not someplace we can get to from where we are now. However, I think that dismissing the concept out of hand, doesn't show deep thinking on the subject, rather it shows either a reflexive hatred for markets, or such deep love of some other propossal that any alternatives must be dismissed out of fear they might actually work.

Posted by: Dave Justus | Mar 14, 2006 5:29:48 PM

I suspect Dave Justus hasn't been personally exposed to the need for major care 'with his own skin'. Without insurance, the price set by providers/hospitals is the cash price (much higher than the negotiated price for that service that insurance companies obtain.) The cash price is, in turn, higher than actual cost (with overhead) because SOME providers do have to provide services to those without funds to pay - largely in emergency room care for walk-in/carry-in patients.

Large providers - hospitals, for instance - DO NOT negotiate their cash price. Pay or leave, unless they determine you qualify for care without payment, which ever-fewer numbers of people are able to obtain.

If you really believe the market solves the cost problem in healthcare, Dave, use yourself and family as a test-case: cancel your insurance (or don't provide your member number) and try to obtain medical/hospital services without it. Try negotiating and hear their answers. They WILL check your credit card ahead of provision of service for credit available, and that amount better be enough for their standard cost of service. Without insurance it is 'no money, no service'. Just like Walmart. Walmart doesn't negotiate prices, and neither does the UCLA Medical Center (or whatever).

Posted by: JimPortlandOR | Mar 14, 2006 5:33:33 PM

Perhaps, we should ask how is health care different. Health care seems to be more heavily regulated than either of the other two areas we are talking about.

Well, let's hope it stays that way. I for one would not want to be seriously ill or injured and have to put my skin into the sort of free-styled systems that exist in certain third world countries where you can get unprocessed sheep's blood injected into your veins to "extend" your life. And btw, food is very regulated. Would you eat in a restaurant that refused to have a health inspection? Meat from a processing plant that had never had an evaluation from an objective party?

Posted by: sprocket | Mar 14, 2006 5:34:01 PM

Dave, it doesn't take a great understanding of markets to realise who benefits most from "free marketing" healthcare. And it's not the patients.

Posted by: Pooh | Mar 14, 2006 5:58:04 PM

from Dave:

"I don't think a market system would be perfect. It might even be worse than what we have now. "

But this is what's so insane! We know there's something that works better than what we have. Why should we try something that even the proponents say might be worse than we have now when we have a perfectly great option?

Also, something that's always confused me is that insurers wouldn't have been able to influence prices. Really? After all these years and having their profits eaten up, insurers don't have enough clout to introduce market forces? But individuals do.

Boy does that ever make sense...

Posted by: Kate | Mar 14, 2006 6:10:07 PM

Trapier K. Michael
said:
What about healthcare is so fundamentally different that convinces you to fundamentally deny people the right to make it like the other three?

This is a completely unserious question. A little thought would provide some answers. First, Medical decisions are infinitely more complex than the decision to buy a house or choose a college. Are you seriously comparing open heart surgery or cancer therepy to buying a condo? It is fundamentally unlike any decision people are confronted with. Your question is disengenous at best. You cannot make the Healthcare marketplace like housing or any other consumer product or service because it is fundamentally about life and death. When your kid is sick, do you want to haggle over the price of his medication? Uh..NO. Non Medical people are completely out of their depth on complex medical issues, not to mention often caught in a frightening and emotionally devestating sitatuion. You want them to get some skin in the game? When your kid is sick, your skin is in the game. To suggest otherwise is absurd.

Providing a functional and effective market for healthcare is perhaps a good idea. Making consumers more vulnerable in the process to market forces they cannot be expected to navigate effectively is insane. I wish market fundamentalists would actually understand markets before they proselytize about them.

Posted by: Sean | Mar 14, 2006 6:10:39 PM

Some mechanics of course are disreputable, and there are a variety of ways to overcome that. Word of mouth is a pretty descent one.

I can see this now:

Man disappointed with car repair choice: "I thought I didn't need that new gasket, but I really did! My car's engine died. That bastard mechanic didn't tell me! Don't use him!"

Man disappointed with medical choice: "I thought my son didn't need that new liver but he really did! My son died. That bastard doctor didn't tell me! Don't use him!"

These outcomes are *exactly like each other*.

Posted by: paperwight | Mar 14, 2006 7:01:52 PM

One thing that enables our current housing market to exist is the mortgage. The nice thing about a mortgage is that the house works as collateral against the loan. If you default on the loan, they take the home. In the health care industry, such a system wouldn't work, because they can't take back your heart bypass.

Also, housing is a planned expense. You know you're going to need it. If you can't afford a house or get a mortgage, you can always rent until you can. You can't really "rent" health care in the same way. The closest thing you have to that is, well, insurance.

Education is also a one-time planned expense, and it's also an expense that a person can live without. If you can't afford to go to school, you don't go to school.

Unlike housing or education, health care costs are often unplanned and necessary.

Posted by: Royko | Mar 14, 2006 7:34:48 PM

Jim,

I don't have any disagreement with what you say. Obviosly, a single family cannot 'test' whether a free market health care system would work, as a single family isn't large enough to support a health care system. It certainly would not be competive.

To the best of my knowledge, the U.S. is the closest in the industrialized world, and it is far from it. I will note in passing though, that the requirement for that health care be provided for those unable to pay is another government regulation on the industry. Once again, not one that I am at all sure should be gotten rid of.

sproket: having traveling in the third world I have certainly eaten at establishments that didn't have health inspections. Some of it was quite good. I have also cooked for friends and family without being inspected by the health department. While I am not the worlds best cook, no one died from my food either (my Chili came close once.)

Pooh: Why do you say that? I will certainly agree that distorted marketing doesn't benefit patients. Trade as a concept benefits both the seller and the reciever, we can both get what we desire. Why is health care fundamentally different from other activities?

Kate: I have read the arguments for your point, but I am not totally convinced. I think that part of other nations success is from over grazing the 'commons' of U.S. research, prescription drugs being a big example. Other factors are statistical mistakes or misunderstanding. For example, Japan has the highest life expectancy, but Japanese Americans have a higer life expectacny than Japanese people in Japan. It is difficult to compare other nations with America, as we have greater ethnic variety than most.

I don't believe insurers have had their profits eaten up at all. My understanding is that insurance companies are doing quite well. It makes perfect sense that the more health care costs, the more insurance companies will make.

Sean: I don't put a whole lot of stoke in 'people are too dumb to know better arguments' in general, people are quite able to make rational decisions and do so all the time. Yes, everyone does dumb things some times, but we notice because they are the exception, rather than the rule.

Obviously we will always need experts for medical care. We need experts for a lot of things. One of the benefits of the concept of trade it that it allows for specialization. However, I do know people with various chronic illnesses. In many cases, due to extreme motivation, they are as informed on thier condition as their medical providers, often more so. The information is availible, and we have immense resources to gather it that didn't exist even a decade ago. This is especially true of parents in regards to their children.

One thing to remember, even with single payer care will be rationed in some form, so everyone will still not be able to get everything they want, or even need. That just won't be possible.

I also don't understand why people think medical care isn't a planned expense. I certainly plan to need it.

Posted by: Dave Justus | Mar 14, 2006 10:57:24 PM

I think you've misunderstood Huackabee. No "skin in the game" is a way of saying that consumers don't have a strong -- proportional to scarcity -- incentive to ration health care consumption. That inevitably drives up prices, which makes it more difficult for some people to afford health care consumption.

That's a pretty basic, uncontroversial Econ 101 lesson that Huckabee cites.

Posted by: Jon Henke | Mar 15, 2006 8:25:36 AM

"I don't put a whole lot of stoke in 'people are too dumb to know better arguments' in general, people are quite able to make rational decisions and do so all the time. Yes, everyone does dumb things some times, but we notice because they are the exception, rather than the rule."

Yes, but expecting to people to make rational decisions at a time when their or their family member's lives are at stake, as well as their entire financial future...well, let's just say people are pretty vulnerable at that point. More to the point, most free-market enthusiasts don't seem to grasp that the ideal outcomes of free markets only occur when everyone has the same knowledge about the market. This is what makes going to the mechanic such a tricky proposition for most people: of course the mechanic knows more than you do. And as cars have gotten more and more complex, ordinary people are left further in the dust; my father's engineering degree and gearhead past mean he could probably construct a working 1950s era automobile with enough time, but he's just as lost as me on fixing power steering or anti-lock brakes.

Extend this to medicine. with apologies to the mechanics, I'd say medicine has ALWAYS been more complex than car repair, it's complexity is accelerating EVEN faster than cars, and the costs and stakes are MUCH higher. I really think if you ask people "Would you like to deal with your doctor the way you deal with your mechanic" (which is to say from a position of relative to complete ignorance), almost everyone will give a resounding "no."

Posted by: Kylroy | Mar 15, 2006 9:58:47 AM

I'm trying to figure out where this doesn't lead to "kill off all the sick people", and if it doesn't, why won't anyone really say so?

Posted by: perianwyr | Mar 15, 2006 10:12:34 AM

Jon, I assume by Econ 101 you are referring to "the law of supply and demand".

And you are correct that as more people seek medical care, without a commensurate increase in the supply of care, the cost of health care will go up.

But the incorrect assumption you and Huckabee are making is, that people seek care not because they need it, but just because they want. That people decide to go for medical care, like someone, or me for that matter after I finish this comment, would decide to go play golf. Not because I need to, but because I want to.

I contend that people don't go to the doctor, or hospital to have an operation, just for fun, but instead go because they need to go.

As long as the population continues to rise, and the age of the population increases, demand is going to increase, and no amount of "skin in the game" is going to reduce that demand.

Posted by: Marc | Mar 15, 2006 10:35:20 AM

"the ideal outcomes of free markets only occur when everyone has the same knowledge about the market."

I think free market proponents are well aware of this. Equal knowledge about the market never exists, whether with mechanics or houses or grocieries or medicine. The point is though, that even less than ideal outcomes of free markets are better than the alternative. This is obviously (at least to me) true in many situations, and thus it seems to me that if medical care is an exception, higher proof is needed.

I don't think that the 'skin in the game' idea is based at all around the concept that people are seeking unneccessary care, rather than the concept that there is little incentive of health care providers to compete on pricing. Users of health care generally don't pay the costs themselves at the time of procurement so there is little reason for them to choose a cheaper alternative.

This is also true in the insurance market. In many states the market is heavily regulated as to what can be offered, lessening competitiviness.

Posted by: Dave Justus | Mar 15, 2006 11:22:03 AM

As for me, I wouldn't select the less expensive heart surgeon to do heart surgery on me, nor would I go to the least expensive infusion center to have chemotherapy.

When it comes to my health, I want the best, and I find it difficult to believe that you, or anybody, would believe that a less than ideal outcome, when it comes to your health, is acceptable. And you need proof of that also?

At this point I think I should say something else, but I'm actually at a loss for words.

Oh, and in case you're wondering I decided to go for a bike ride this morning before I went golfing, because I wanted to.

Posted by: Marc | Mar 15, 2006 1:07:00 PM

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