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December 15, 2006

Lean On Us, When You're Not Strong...

H.G Stern at InsureBlog has a problem with the Wyden proposal:

First, it relies on a model called “Community Rating.” Basically, CR is the health insurance equivalent of “pay at the pump” auto insurance. It sure sounds nice: everyone pays the same rate, simple to administer, universal coverage (every car needs gas, right?). The problem is that not every car is the same, and not every driver has a flawless record. Same with health insurance: absent underwriting, folks who routinely run (and win) 26 mile marathons would pay the same as obese folks with diabetes. Thus, everyone ends up paying more.

Yikes -- that's quite wrong. For instance: The obese folks with diabetes end up paying quite a bit less. So do those who were once on antidepressants, or had hypertension, or were born with asthma. Community rating, where everyone pays the same, is a way of correcting for luck. That's not to say it doesn't end up flattening out virtue, at least to some degree, but the question is whether you think using the health care system, in general, is evidence that you're a bad person or had a health problem.

So let's, for instance, take the marathoner. You have any idea what Speedy McVirtue over there is doing to her knees? It's a wonder those things still bend. In a couple years, they may well not. Or she may step in a pothole, shattering her ankle. And it turns out marathon running can be dangerous for the heart -- shall we raise the premiums?

In other words, eventually, she'll be using the health care system too. If she has to pay a bit more in her years of good health, it'll keep her from paying far more than she can afford if things take a worse turn. Community rating, where we all share the risk for each other, admits that we don't have full control over these imperfect, glitchy machines we inhabit. Sometimes the failures are our fault; sometimes they're acts of God, or drunk drivers, meteorites. But we all have our flaws, and everyone eventually turns to Lady Luck only to see her frown. Community rating recognizes that, the current system denies it. I know which I prefer.

December 15, 2006 in Health Care | Permalink

Comments

Maybe people will finally start to understand this now that it's coming from the front page (instead of from some crank in the comments).

However, given the high levels of self-satisfaction some commenters have, I doubt it.

Posted by: Stephen | Dec 15, 2006 4:35:05 PM

Just out of curiousity, would smokers pay the same as non-smokers? Do they with private health insurance? Because unlike non-runners vs. runners, there isn't a luck element present, discounting any inherited X factor that makes one more likely to become addicted to nicotine. Moreover, being a non-smoker does not come with its own specific set of risks the way running does (knee injuries, hip ailments, etc.)

Smoking, though, has been proven over and over again to correlate with vastly increased incidences of heart disease, cancer, and all manner of other ailments we surely know by heart at this point. And insofar as I'm aware, smoking has no positive health benefits.

Posted by: litbrit | Dec 15, 2006 4:38:29 PM

Sorry, I meant to say "...unlike diabetics vs. non-diabetics in the third sentence above.

Posted by: litbrit | Dec 15, 2006 4:41:26 PM

I'm becomming convinced that the term 'community rating' is more confusing than helpful since it implies rather small groups (communities rather than cities or counties, etc.).

A far more helpful term is, IMO, 'risk pool'. It is very easy for folks to understand that the larger the people in the group, the less the group will reflect a mal-distribution of people with above average risk. The bigger the risk pool, the better. The best risk pool for the US would be the entire US. Next best would be areas of the country (pacific northwest, new england, the south, etc.). States are likely to be the risk pool for a plan like Wyden's, but for small states that risk pool is very small (SD, MT, ID, etc.).

However many of the questioners of the Wyden plan assume community rating means community, and that would be a very bad solution, for soon the suburbs would be cheap and cities very expensive.

So, can we stop calling for community rating, and start calling for large risk pools? This IS insurance, and what is being insured is risk.

The young and (suppossedly) healthy will complain about being in a risk pool, but they don't really understand the concept of insurance for unknown risks when applied to themselves instead of loss of physical property (fire, flood, weather, etc.). We need more education about the advantages of risk pooling for everyone.

Posted by: JimPortlandOR | Dec 15, 2006 4:45:21 PM

There's also a factor of: sometimes when you avoid treating the smaller conditions, they will compound, or lead to susceptibility to other conditions, or just plain worsen. Trying to punish people for using health care to get healthier is actually pretty counterintuitive when you think of it.

Posted by: Amanda | Dec 15, 2006 4:53:42 PM

Yeah, I was going to post over at InsureBlog about this, but every time I try to get into this discussion with him, he comes back at me with a argument I still don't understand about how sharing risk and sharing bad luck are not the same thing. I don't know, we went back and forth a few times and I still don't see the distinction.

In any case, the communities are currently planned to be state-wide as far as I know, and the only way they're going to differentiate on premium prices is by benefit package, community, and smoking status. So yes, they will charge smokers a different amount.

Posted by: spike | Dec 15, 2006 4:58:58 PM

"So let's, for instance, take the marathoner. You have any idea what Speedy McVirtue over there is doing to her knees? It's a wonder those things still bend. In a couple years, they may well not. Or she may step in a pothole, shattering her ankle. And it turns out marathon running can be dangerous for the heart -- shall we raise the premiums?"

Oh Lord, where to begin?

1.) Marathons are 26.2 miles, not 26 miles. And it's redundant to say "26 mile marathon" (or more accurately, "26.2 mile marathon")--it is understood that when you refer to a running race called a "marathon," that race is 26.2 miles. And yes, I realize this is from a quote and not Big Media Ezra.

2.) The whole bit about marathons and bad knees is a myth. I am not aware of any studies that conclude that marathoners, all things being equal, are at risk of permanent knee injury--to the contrary, marathoners seem to have a reduced risk of osteoarthritis (which includes most degenerative knee problems). I am vaguely aware of a few studies that suggest that endurance running can cause chronic inflammation in joints that have suffered a prior traumatic injury, but that seems to be such a small subset of marathon runners that you would think that you could address them on an ad hoc basis (i.e., if you blew out your knee playing football in high school, you need to consult your doctor and take various prophylactic measures before taking up marathon training in your 40s).

3.) The whole heart thing is a huge misunderstanding. It is absolutely true that you generally see an increased risk of heart attack/failure while running long distances--but this risk is only medically significant for those people with preexisting conditions! And for EVERYBODY, endurance running decreases the annual risk of heart attack/failure! So what does that mean? If you are at substantial risk of having a heart attack AND you're a runner, you'll probably have the heart attack while running. HOWEVER, running won't make people who wouldn't otherwise have a heart attack have one, and it generally decreases your risk over the next year of having a heart attack. Thus, the guy with a preexisting heart condition who dies jogging at 54? The fact that he was a runner probably bought him an extra 10 years, although it probably was what made him have the heart attack that particular morning (as opposed to sometime over the next two months).

Look, marathon running does entail some risks. First, very recent studies have shown a substantial increase in the risk of skin cancer, for obvious reasons. Second, most people see a significant decrease in their immune system after runs of two hours or longer, especially in cold weather--hell, I picked up a nasty case of pneumonia last winter training for (and running) Boston. Then there's the plantar fascitis, stress fractures, run-of-the-mill tendonitis, and other wear-and-tear aches and pains that most marathoners have to battle through while training. But unbendable knees and heart disease aren't among the risks.

Joe (5 marathons run, PR of 2:58).

Posted by: Joe | Dec 15, 2006 5:12:45 PM

While insurance certainly shouldn't punish people for bad luck or bad genetics, it does seem a bit wrong to essentially require everyone else to subsidize the risky choices of someone else. If it's okay to charge smokers higher premiums, why wouldn't it also be appropriate to have higher rates for, say, the morbidly obese, or users of other recreational drugs?

Posted by: George Tenet Fangirl | Dec 15, 2006 5:20:14 PM

Uhhh, Joe. Your last paragraph really reinforces Ezra's point. You're disagreeing over the hole instead of the doughnut. The issue is medical costs. Whether a marathoner accesses the healthcare system over knees and heart or tendonitis and skin cancer, the money is just as green as if it were reimbursing for a couch potato with acquired diabetes. That's where Ezra was going with it, and I think you proved him right.

Nice PR, though.

Posted by: Rick | Dec 15, 2006 5:38:42 PM

I nominate G. T. Fangirl for a risk pool of one: herself.

Self-insure yourself. Don't forget to put aside enough money to cover the most expensive set of medical procedures you are EVER likely to incur.

If each possible current or future medical condition is pulled from the risk pool, then the risk pools will only include those who are both genetically endowed to be healthy or who lie about their current status. Would Fangirl like to have monthly/quarterly drug screen run on her to make clear that she hasn't slipped into the recreational drug group and screwed up her risk pool? And don't forget the monthly weigh-ins to prevent weight build-up to mess up the pool.

Posted by: JimPortlandOR | Dec 15, 2006 5:40:04 PM

Two things:

1) Community rating works only with the mandate for participation. Without it, it's useless. I know the Wyden plan has that element to it, but not mentioned above.

2) Heart disease, forms of cancer, and diabetes all have very strong ties to lifestyle issues. Bad luck plays a part, but we are pulling the collective trigger ourselves.

Posted by: Alex | Dec 15, 2006 5:42:07 PM

Jim, I might well be okay with a risk pool of "everyone, without exception" but that's not what this plan involves. What reasons are there to (price) discriminate against smokers? And why would those reasons not also serve as reasons to discriminate against other groups?

Posted by: George Tenet Fangirl | Dec 15, 2006 5:44:38 PM

I wasn't taking umbrage at Ezra's conclusion(which I generally agree with)--just his (possibly sarcastic) denegration of marathoning as something that too-good-for-themselves uppity-ups do until they get their comeuppance and can't walk because of their bad knees. Or have a heart attack.

And thanks on the PR. I was a 4:29 mile/15:30 5000m middle distance guy in high school and college, then took close to 10 years to get fat and pick up a pack-a-day habit, then decided to get back in shape and do something I loved. I've only been running "again" for three years, racing for two. I was training for a run at sub-2:50 in January, but a severe stress reaction (at least I avoided a fracture) cost me six weeks off and another six of light running. Meaning that next fall is the next time I realistically could try for a serious race.

Posted by: Joe | Dec 15, 2006 5:50:03 PM

[Some forms of h]eart disease, [a few] forms of cancer, and [Type II] diabetes all have [statistically significant] ties to lifestyle issues. Bad luck plays [an enormous] part [in almost all cases (e.g., only 10% of smokers develop lung cancer)], but we are pulling the collective trigger ourselves [in those minority of case].

(Above quote corrected to make it accurate.)

Posted by: Joe | Dec 15, 2006 5:57:48 PM

Bad luck is what happened to my best friend Cynthia. She was a vegetarian, non-smoking, slim, exercise fan (running, treadmill, gym, you name it).

The bad luck was that she worked for a law firm that did not offer health insurance to its secretaries.

At age 37, after a few weeks of what she thought was stress-related acid stomach, she wound up in the ER where the doctors found a tumor on her pancreas. They operated and sent Cynth home with Hospice's phone number. When she died, just ten days after the shocking diagnosis, the hospital sent her mother a bill for over $80K.

We need universal health care. We all do--runners, smokers, vegetarians, Prozac-poppers, and carnivores alike. Enough already.

Posted by: litbrit | Dec 15, 2006 6:23:50 PM

litbrit, that is an awful tragedy. but your friend's mother is not liable for the bill. (my family went through something similar.)

while your friend's mother may feel some ethical obligation to pay something, she cannot be forced to. her daughter was an adult and liable for her own debts, which roughly speaking do not get assumed by one's parents after you're 18.

Posted by: chris | Dec 15, 2006 6:52:44 PM

JimPortlandOR, said:

"The young and (suppossedly) healthy will complain about being in a risk pool, but they don't really understand the concept of insurance for unknown risks when applied to themselves instead of loss of physical property (fire, flood, weather, etc.). We need more education about the advantages of risk pooling for everyone."

The young understand perfectly well that it is not to their advantage to be put in the same risk pool as old people for medical insurance. Now if we were talking auto insurance that would be different.

Posted by: James B. Shearer | Dec 15, 2006 7:39:38 PM

Just out of curiousity, would smokers pay the same as non-smokers? Do they with private health insurance? Because unlike non-runners vs. runners, there isn't a luck element present

Presumably the smokers would pay for their additional health care costs via taxes on cigarettes.

Also, saying that marathoners don't have knee problems is sort of self-selecting. If you've gotten to the point where you're in shape enough to run a marathon, odds are it's because you didn't develop knee problems during the training stage. It's the non-marathoners or marathon-hopefuls who have to see the doctor about what to do about their knees.

Posted by: Constantine | Dec 15, 2006 7:42:16 PM

Shorter nearly everyone:

God forbid someone, somewhere, I wouldn't like if I met is spending what was, and ought to still be my money.

Posted by: Davis X. Machina | Dec 15, 2006 8:40:56 PM

Community rating doesn't exclude the option of discounts for healthy behavior (as opposed to healthy luck). That would be a sensible part of any plan, I should think.

Posted by: Sanpete | Dec 15, 2006 9:25:19 PM

As someone with a chronic illness (arthritis) I'm totally in favor of community rating. Why? It's not for completely self serving reasons. I've purchased comprehensive health insurance for myself since I finished college at 22. I doesn't seem fair to me that now, 20 years later, I can't buy insurance at all unless I have a job. Until I was 40, I was healthy as a horse. Today, I use a lot of expensive drugs and have frequent doctor visits.

Community rating is recognising that it's really mostly luck, and that there's no way to know what's going to happen to you in the next 15 or 20 years. I'd be interested to see a poll of poeple who are so rabidly anti community rating 20 years out. I don't imagine some of them would still hold the same views.

Posted by: Jaye | Dec 15, 2006 11:08:44 PM

Fundamentally, once you accept the concept that people have a right to health care, then national health insurance is an inevitable consequence of that.

The loony libertarians will openly say there is no such right, and that hospitals should be allowed to let people die in the streets if they can't pay for treatment. 90% of the American public disagrees with that, which is why we have laws saying that the ER has to provide emergency care to anyone whether they can afford it or not.

But, once you've conceded that everyone should get the health care they need, then insurance companies and their complicated buck-passing schemes become nothing more than unnecessary overhead, wasting money that should be spent on actual treatment instead. Insurance companies make money by collecting premiums and trying to do whatever they can to avoid paying out claims. This behavior has no social value, so the existing model of insurance is worthless and needs to be dismantled. And the public reputation of insurance companies is low enough that I'm not at all sure this is politically impossible to do.

Perhaps national insurance, whether done by community rating or some other method, would give a relative advantage to older Americans compared to the young. But so what? The moral impact of this is substantially blunted because the elderly and the young are not two separate groups of people, but the SAME people in different stages of their life.

Posted by: Firebug | Dec 15, 2006 11:40:05 PM

All right, I'm sold on Wyden. I mean, not really from a policy perspective, but its basically better enough than the SQ.
Pass it, and then we can all start clamoring for single payer, and no one can accuse us of displacing more feasible and moderate alternatives.
Fair enough?

Posted by: R/W | Dec 16, 2006 12:46:10 AM

In UHC, It would be soemwhat easier to solve the problem of smokers and drinkers, in the risk pool. Simply add a tax to tobbaco and alchohol products, strictly to offset healthcare costs related to drinking and smoking. Legalising most illicit drugs and similarly taxing them solves another. The real problem is coming up with a "fat" tax. Taxing "junk" food would be handy, but thus defining "junk" food, in a legal sense would be very difficult. I even think such taxes could possibley be integrated into a plan like Wyden's, but it really would be ideal for UHC. Pay as you play.

Posted by: DuWayne | Dec 16, 2006 1:13:23 AM

Firebug said:

"Perhaps national insurance, whether done by community rating or some other method, would give a relative advantage to older Americans compared to the young. But so what? The moral impact of this is substantially blunted because the elderly and the young are not two separate groups of people, but the SAME people in different stages of their life."

So how about we only charge people over 40 and give care to young people for free since they don't need much anyway? This might seem unfair to old people but it really isn't since old people and young people are really the same people in different stages of their life.

Charging young adults the same rates as older adults has nothing to do with fairness or morality but would simply reflect the fact that older adults have more political power than young adults. Political power that they have already used to rig the system in their favor in numerous ways.

Posted by: James B. Shearer | Dec 16, 2006 1:41:43 AM

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