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September 15, 2006

Me. Talking About Health Care. I Know!

I've a feeling lots of folks glaze over when I start posts with "there's a new study out of...", but hang on a second, this one's a good one. The Commonwealth Fund reports that a full nine out of every 10 Americans who seek private insurance never buy. Of those who do apply for a plan, 20 percent are turned down or charged much more for a preexisting condition. And of those who settle for a cheaper, high-deductible plan, 40 percent eventually realize some of their medical costs aren't covered by insurance.

In other words, insurance on the private market is expensive. Too expensive for most of those seeking it. Employers aren't picking up a portion of the costs, there's no risk sharing so your past conditions and personal proclivities come into play, and it's not tax deductible, as it is for businesses. Add in that most folks rich enough to easily purchase private insurance will work in a position or for an employer who offers coverage, and you get a sense of how we're subsidizing (through employer deductibility) the wrong end of the spectrum. The bottom line is, for most folks, the only road towards comprehensive coverage leads through corporate headquarters.

It is, of course, a little unclear what social good is advanced by making it far cheaper (even in total terms) to buy coverage through your workplace than on your own, unless we believe that avid entrepreneurs should chill out and keep on with their data entry, or think corporations don't have quite enough power over their workers. It's always seemed to me that a system where government guarantees everyone insurance is optimal, and one where individuals are all forced to purchase coverage is workable. But the employer-based system is scarcely even a distant third -- it's a mess. Assume you've got a great idea, a dull job, and a kid with asthma. You look into private market insurance and realize it's too expensive, or risky. So you stay at your job. That's not precisely the outcome I'd think our society would, or should, favor.

Health care could be an enabler: Were it guaranteed to us all, it could offer the base safety and security that would allow us to pursue dreams, and larks, and low-compensation-but-potentially-high-return ideas. You could start a band, or finance an invention, or start-up a start-up. When those work out, they could be lucrative and beneficial to society. When they don't, you can reenter the mainstream workforce. But if you can't afford, but feel you need, health care, you never get that chance. In that way, employer-based health care drags down our economy, not to mention our personal efforts at fulfillment and innovation. It could be quite the opposite, with health care providing the base security for all sorts of wonderful things, confident that a failure will not bring long-term, disastrous consequences down on you or your family. It could be.

Crossposted at Tapped.

September 15, 2006 in Health Care | Permalink

Comments

Yeah but did hear what Schwarzenegger said?

Posted by: david mizner | Sep 15, 2006 11:46:09 AM

?

Posted by: Ezra | Sep 15, 2006 11:48:12 AM

"?"

It makes sense if you think about it...

Posted by: Petey | Sep 15, 2006 11:50:23 AM

This piece is dead-on.

Politically, UHC is a hard sell because an overwhelming majority of Americans already have health care, and thus can be made to fear that any change will be for the worse.

But buying insurance as an individual is expensive or impossible for many. And the freedom conferred by UHC should be a major political selling point.

Posted by: Petey | Sep 15, 2006 11:54:33 AM

Sorry. I actually have something maybe-relevant to say, before I get some work done. (Blogoholics anonymous, anyone?). Health care is a huge issue, a defining issue, maybe an organizing-principle issue, yet no Democratic canididate has yet made his or her issue. If I were Hillary, I'd try to own it, thereby turning a weakness, her failure to pass a plan when she was first lady, into a strength. Might also help her cred on the left. At any rate, Ezra, I trust you'll be helping us compare and contrast the plans of the contenders.

Posted by: david mizner | Sep 15, 2006 12:00:07 PM

"Health care is a huge issue, a defining issue, maybe an organizing-principle issue"

Yup. Along with Social Security and progressive taxation, it most definitely is an organizing principle.

"If I were Hillary, I'd try to own it, thereby turning a weakness, her failure to pass a plan when she was first lady, into a strength. Might also help her cred on the left."

It might. But then again, in '04, the differing details of the Dem Presidential candidates health care plans didn't matter one whit to what passes for an organized left in this country.

I'm hoping Johnny Sunshine offers something bold in '07, but I'm personally not sure how to politically frame a plan to let it survive the combat of a Presidential campaign...

Posted by: Petey | Sep 15, 2006 12:20:29 PM

I agree that our current system is the worst of both worlds.

I do wonder though if the downside you mention about lessening entrepenuership is in reality a downside though. Certainly I think innovation and entrepenuership is very important, but we also have to acknowledge that even with the higher risks of going it alone that we have now, most new ventures fail. Most fail quickly and spectacularly. I would guess that if we lower the barriers for entry, an even higher percentage would fail.

Posted by: Dave Justus | Sep 15, 2006 12:38:46 PM

Its far more important how entrepreneurship is channeled. Consider the amount of money going into marketing pharmaceuticals ...

... if the brass ring (in taking largely publically-funded basic research and developing a commercial product) was proving to the satisfaction of a commission that the drug offered public health benefits to justify the expense and place it on the subsidized perscription drug list, there could easily be less total money spent on accessing revenue streams, and at the same time a larger amount of money devoted to commercialization research.

Posted by: BruceMcF | Sep 15, 2006 1:12:11 PM

One thing that I see happening is that parents with kids out of college in the twenties who aren't holding down jobs with good benefits is that the parents will pay to get them covered through Golden Rule or similar plans because if their kid gets sick they will sell their house and drain their retirement plans so the health insurance that the kid can't/won't pay for, the parent gets to protect themselves.

Posted by: cathy | Sep 15, 2006 1:16:21 PM

Some of us thoroughly enjoy it when anyone starts out an in-depth discussion with the phrase "There's a new study out of....". Gives us a chance to learn sommething.

Posted by: Balta | Sep 15, 2006 1:20:41 PM

This is dead on. Having been out there with private insurance, it can be a budget killer. One year the monthly premium increased from $430 to $525!

Posted by: CParis | Sep 15, 2006 1:24:44 PM

I still think you are looking at yet another band-aid fix, and again, ignoring the core problem which is the cost.

Posted by: Fred Jones | Sep 15, 2006 1:42:50 PM

"I still think you are looking at yet another band-aid fix, and again, ignoring the core problem which is the cost."

Y'know, Fred, if your concern is the overall societal cost of healthcare, UHC is your one and only friend...

Posted by: Petey | Sep 15, 2006 1:54:35 PM

Dave - you could also argue that the people not going in right now are the ones who have a more accurate picture of the risks involved, and opt to stay at the data entry job because of the cost of health care. How many entrepreneurs end up just going without health insurance because of the prohibitive cost? That's actually a serious question - I have no idea, and the answer would give us a good sense of whether the current non-risk-takers would be less capable or are just better informed. Or less married to someone with health insurance - what percentage of entrepreneurs end up leaning on a spouse for coverage?

CParis - you don't know the half of it. Companies close blocks of business every few years by making minor adjustments to the plan they're currently selling. This allows them to gradually cherry pick healthy people from the old plan, who can pass underwriting for the new, lower-premium plan. With the sick people bundled together in an old product, they can justify annual increases of 30% or more based on claims usage.

Fred - one of the major problems of cost is that, in many things, "an ounce of prevention is worth a pound of cure." But no insurance company wants to pay for somebody's ounce of prevention when they can pass the buck to the customer (who often won't bother at all then) or another insurance company. Eliminate the cost-shifting and buck-passing that makes up a whole hell of a lot of modern health insurance, and cost-efficient prevention models become much more attractive.

Posted by: Kylroy | Sep 15, 2006 1:55:01 PM

ezra: and it's not tax deductible, as it is for businesses.

well, not legally true, is maybe practically true for many folks. All health costs (including over the counter meds and eyeglasses, etc.) are deductible if they exceed 7% of adjusted gross income.

Posted by: JimPortlandOR | Sep 15, 2006 2:25:09 PM

Man what a huge market segment - uninsured sick people. I'm sure the invisible hand will kick in any minute now with a multitude of insurance companies competing for their business. Prices will plummet. Can't wait.
-J

Posted by: John I | Sep 15, 2006 2:29:02 PM

Still trying to get the joke about this being the 'Capitalist Corner' . . .

Anyway, Dr. Thomas Sowell writes on this topic on a regular basis but I missed where any of his thoughts are noted in your posts.

Not seeing where an employer is subsidizing anything. Healthcare benefits by employers are given in lieu of increased wages. Benefits like these can be traced back to times when federal wage controls were in place and benefits like this could be given without the employer getting in trouble for paying people “too much”.

Now some are asking for an even more out-of-control system where the government is the insurer too. If you think that insurance companies are bad just wait until you have to deal with health insurance run from the equivalent of TVA or the Postal Service.

Want the actual costs to come down? How about dropping any incentive for businesses to provide health insurance at all. When the user is paying the undiluted cost then the shopping and bargaining begins.

In the article that you cite I missed where many people your age opt-out of employer subsidized healthcare plans. There is a substantial number of the “uninsured” in that group and I used to be one of them. I certainly do not advocate forcing people to take insurance if they don't want it, but from your stated view it might be something for you to consider advocating. If they were paying premiums and not using the benefits the overall premium prices should drop, especially when the regulators see what is happening on the balance sheets of the insurance companies.

Actually, you already advocate it by forcing the entire nation to pay for anybody who can get an appointment, prescription or procedure at a medical facility.

Currently, my employer has me pay 20% more than my lowest-tier income coworkers to subsidize them. Not complaining, just letting you know that every employer is not an evil collection of heartless 'capitalist' bastards.

Not seeing where you are subsidizing anybody.

Now, if you wish to see a nation where everybody is at the same level of misery, national healthcare is your answer.

Posted by: Guy Montag | Sep 15, 2006 2:31:29 PM

I pay for a personal plan at Kaiser Permanente in southern California, and now that I have passed 50, the escalation in premiums is the not distant future is going to be a serious challenge for my modest income.

This is not entirely senseless, of course. Although I do not have a serious, chronic condition, the chances that a male in his 50's will develop one is quite high. And, the peculiar development of the medical/pharma complex is toward making those inevitable chronic conditions that come upon people in their 50's and early 60's into very, very expensive propositions.

Posted by: Bruce Wilder | Sep 15, 2006 2:33:21 PM

also have to acknowledge that even with the higher risks of going it alone that we have now, most new ventures fail.

It's not simply entrepreneurship, though; gaps in coverage can work as a disincentive (or weigh down the bank balance) when changing jobs, especially if you have young children who fall through the gaps in state provision. An adult who gets sick can usually tough it out for a few weeks until the sainted coverage kicks in at a new job; that's much less feasible if you have a child.

If free-market conservatives truly favored a free market, then they would be up in arms at the structural friction that ties people to jobs they'd gladly leave, if it were not for the loss of health coverage.

Posted by: ahem | Sep 15, 2006 2:33:32 PM

If you think that insurance companies are bad just wait until you have to deal with health insurance run from the equivalent of TVA or the Postal Service.

Pure scaremongering. Exactly how would it be worse than the existing daisy-chain of bureaucrats brandishing clipboards?

Want the actual costs to come down? How about dropping any incentive for businesses to provide health insurance at all. When the user is paying the undiluted cost then the shopping and bargaining begins.

Yes, because individuals are in such a great position to bargain with healthcare providers, especially when they're sick. What we'd give for that kind of informational or situational advantage.

Posted by: ahem | Sep 15, 2006 2:37:13 PM

Dude the Postal Service kicks serious ass and is a shining example of outcome oriented government at its best. Now if you said DHS or FCC you could start to make a point.

Posted by: John I | Sep 15, 2006 2:46:22 PM

ahem,

Pure scaremongering. Exactly how would it be worse than the existing daisy-chain of bureaucrats brandishing clipboards?

I am advocating a shorter chaing of bureaucrats, you are advocating a 100% bureaucrat run system. You answered your own question and supported my objection to your position.

Yes, because individuals are in such a great position to bargain with healthcare providers, especially when they're sick. What we'd give for that kind of informational or situational advantage.

Let's see, when healthcare costs were low, hardly anybody had healthcare insurance. The costs rose with the numbers of people who had insurance and, somehow you think that making it a giant Orwellian system it will magically get cheaper?

Methinks others are the scaremongers.

Ezra, when can we talk about hybrids and global warming?

Posted by: Guy Montag | Sep 15, 2006 2:55:31 PM

John I,

You seriously think the USPS is a better organization than the private firms that almost always provide better service?

Also, try using the facilities in the 22202 and 22215 zip codes.

Posted by: Guy Montag | Sep 15, 2006 3:00:58 PM

John I,

Ugh, just coming out of the lunch coma. Sorry.

Posted by: Guy Montag | Sep 15, 2006 3:03:09 PM

Guy,

I am advocating a shorter chaing of bureaucrats, you are advocating a 100% bureaucrat run system.

I look forward to hearing you advocate the existence of unicorns.

As much as you like, you can't deny -- or magically abolish -- the massive bureaucracy in the US's private health care system.

Private insurers and private care providers have a huge incentive to deny coverage or pass the bill on elsewhere. (Not to mention almost zero incentive to provide preventative care, but that mainly affects actual health care spending rather than administrative costs.)

How about some facts? Canada has a national health plan run by bureaucrats, so administrative costs must be higher, right?

Wrong. They spend half as much.

"Administration accounted for 31.0 percent of health care expenditures in the United States and 16.7 percent of health care expenditures in Canada."

http://content.nejm.org/cgi/content/abstract/349/8/768

Posted by: theo | Sep 15, 2006 3:32:48 PM

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