Insurance: Why it sucks

What do you mean by get rid of the middleman. Are you saying that nobody should get health insurance.
Also, market mechanisms still work in the case of employee provided health insurance, just not quite as efficiently. Companies want to attract the best employees and a good way to do that is to offer the best benefits, including the best health insurance.
I might also add that a central libertarian critique of the insurance industry is the amount of government regulation of the industry creates a dearth of real competition so insurance companies don't really have to compete with one another all that much

Dan:

I thought that what I mean by "get rid of the middleman" was clear. It's "get rid of the for-profit insurance companies". Go back to the simple risk-pooling non-profit insurance.

Personally, I favor a national health plan: one pool of money, everyone pays in, and everyone gets benefits. That minimizes bureaucracy, and makes a uniform system for everyone. But even without a national plan, a variety of non-profit insurance providers - the basic risk-pool mechanism that's the origin of insurance - would be a vast improvement over what we have today.

And with respect to the idea of "Free market does too work, you can always get a different job if your employer offers shitty insurance"... Well, that assumes that you can afford to get another job - and that the other jobs you can get don't offer equally shitty insurance. People aren't infinitely mobile, and there isn't an infinite supply of jobs out there. Saying that you have a choice because you can pick employers that offer better insurance just doesn't apply to the real world.

And as for the regulation claim... Do you really, honestly believe that if the government *weren't* regulating insurance at all, that insurance companies would be providing the kinds of care that they deny right now? Or that they'd be charging *less* fees for the bureaucratic nonsense that they do?

Ah, but if you get rid of the middle-men, you still have the same problem: every dollar spent by somebody _else_ in the plan increases _my_ cost. So, ideally, I should find a plan that pays exactly what I want it to -- I'm male and single, so forget paying for maternity care, for example.

And, in a larger sense, this limiting of services provided is exactly what _must_ be done. If I don't have insurance, I'm not going to get annual physicals, but once I have insurance, I darn well want coverage for not just the annual physical, but the stress test and whole-body MRI too. If there isn't any method of rationing care, then no matter what the system, it fails. National health care systems like the UK's ration by queue: it makes you wait. Private pay insurance here rations by hassle: co-pays, forms, second opinions, etc. A totally free market system like we had before insurance rationed by money: if you couldn't pay cash, you didn't get it.

Perhaps the problem is that health care insurance has evolved to not be really insurance, but pre-payment of health care costs. Employer plans generally pay for regular care, as opposed to something like homeowners insurance, which only pays for large claims (over a deductible). If we made all health insurance have a $5,000 annual deductible, we'd have a lot less of the itty-bitty claims that cost so much to process. But, on the other hand, we might wind up with people skipping preventive services that save money over time (cancer screenings, hypertension meds, etc.)

There really is no perfect answer, since people's expectations (everything should be covered all the time) are just not feasible. Hence, the enduring difficulty.

(P.S.: As an ex-actuary, I've seen this from both sides. Look up "assessment spiral" sometime.)

Question for the libertarians that want to remove the "insurance" from "health insurance":

Do you understand and allow that many people don't have a tolerance for people becoming debilitated or dying from preventable or curable illness?

You have such a tolerance. Many people do not. The degree to which you demand all people develop such a tolerance, is the degree we forgive ourselves from listening to you.

If your personal callousness works best in a world that is infinitely and universally callous, that does not _imply_ that callousness _should_ be infinite and universal.

I have found it is practically impossible to get libertarians to agree with the logical consequences of this trivial truth. They assume the entitlement that the world should never dare to reveal their smallness, even by contrast.

A nice post, but it deals with only half of the problem. The other half is on the doctors' side. You have a bad knee. Not live threatening, but it hurts a lot. Doctor A in South-Dakota says "I can't help you, you'll have to live with the pain." Fortunately for you, doctor B at Johns Hopkins has developed something new. The unfortunate thing is that it'll cost $200,000. Does the (national) health insurance have to pay for it if you are 20? If you are 90 and have Alzheimer? If you ruined your knee by sporting, while your doctor said you shouldn't?

I darn well want coverage for not just the annual physical, but the stress test and whole-body MRI too

Lot's of people want Oxycontin too, that doensn't mean they can get it from their doctor (for the most part). Presumable in a non-profit insurance system, there would still be someone making sure that medical procedures are necessary and hopefully doing a good enough job that insurance costs stay reasonable and everyone gets the care they need.

The other reason the market doesn't work is the principal consumer, the one with the $100,000 expense, is only one of the hundreds paying for it. The insurer then tries to keep the hundreds happy and paying while shortchanging that principal customer. As long as they can delude most of them in thinking they have good insurance, they can continue to profit handsomely. Eventually the insurance function disappears entirely.

Slightly off topic, but you might like to see economics explained in simple language.
http://www.idkwtf.com/videos/latest-videos/principles-of-economics-tran…

Send people with mortgage questions to Calculated Risk. Tanta's ubernerd posts should handle them for a while.

Whoops. Forgot the http in the link. Here is the link to Calculated Risk.

mgarcia,

I think you are missing the point of the libertarian critique of health insurance in particular and, indeed, libertarianism in general. It is not neccessarily that a libertarian is saying "I'm going to take care of myself and everyone else can go to hell" (although to be fair, some actually do say that), it is saying basically that letting the market function with minimal interference is what ultimately leads to the best overall outcome and that interference in the markets almost always is counter-productive, causing more problems than it solves.

Mark CC:

"People aren't infinitely mobile, and there isn't an infinite supply of jobs out there"

This is certainly true. And, yes, you are correct that market forces do not cure inefficiencies (such as our valuation of health insurance) overnight. But the market does create selection pressures that lead to more efficient outcomes.
Also, my main concern about a single-payer system is the free-rider problem. Basically, in such a system the marginal cost to person for seeing a doctor unneccesarily is very small, relative to the perceived benefit to them. As such, costs for such a system can quickly spiral out of control (just look at the NHS in Britain). The only apparent solution then is to have the government start making decisions about what medical care is neccesary and which is not. Now, couple this fact with the fact that single-payer systems (at least, in every implementation that we've seen so far) must neccesarily private insurance (or even in some cases, individuals paying out of pocket for medical care) and you are now allowing the federal government to make your medical decisions for you. This is more of a philosophical point, but something to think about nonetheless.

mgarcia, libertarianism is a lot more humane than current socialistic system we have in this country (and I should know how Socialism looks and smells, because I grew up in Soviet Union). What it argues is that if you take government out of the equation - businesses lose any sort of protection, there are more of them on the market - people have more choice, companies are actually forced to start acting a lot more responsible to survive - everyone wins. Finally, because government is smaller and collects less taxes, people have more money left for charity and for themselves and their relatives.

spudbeach wrote: 'Ah, but if you get rid of the middle-men, you still have the same problem: every dollar spent by somebody _else_ in the plan increases _my_ cost. So, ideally, I should find a plan that pays exactly what I want it to[.]' There is such a plan! Don't buy any insurance at all. Then you only pay for what you spend.

While I agree with MarkCC in principle, I'm not quite sure that for-profit insurance companies are always bad. I think it's probably a matter of finding the right balance and right incentives for insurance companies to act nice. Many European nations don't seem to suffer from similar problems as USA and they do have their share of insurance business.

Anonymous: '[I]f you take government out of the equation - businesses lose any sort of protection, there are more of them on the market - people have more choice, companies are actually forced to start acting a lot more responsible to survive - everyone wins.'

That argument only works, if you can demonstrate that government regulation is actually impeding competition in a way that hurts the consumer. It's not good enough to just say so and wave your hands. (Incidentally, I've no trouble believing that such regulation exists, since political lobbying for more favourable legislation is a form of an investment.) Actually, your argument implies that regulation always has a negative effect on the consumer, which is even harder to support.

Your theory of why insurance sucks, although filled w/ great inductive theory, is like a moon shot hitting mars. Nice try, great technique, but thank god I did not go for the ride. Some folks just need to stick to what they know best, and not lead other thru fields never walked upon before.

Dan,
And the alternates to "government" limiting care are 1) insurers (Murder by Spreadsheet) or 2) self-selection due to inability to pay? Thanks, I'd prefer to take my chances with the government limits. It can hardly be worse that the current system (like say going in for pre-approved, covered surgery and getting a thousand dollar bill from an "out of network" anesthesiologist who practices in a member hospital).

Regarding job mobility and the free hand of the market. This does not exist for someone with a preexisting medical condition.

These people have two choices: stay at their current job and accept insurance that degrades each year by the process Mark CC has already pointed out, or get a different job where the insurance specifically won't cover the exact medical needs they have.

These are the people, as Lord suggests above, who are marginalized out of the insurance coverage pool.

And yet, these few with expensive medical needs are the very reason for having insurance in the first place.

My thanks to Mark CC for laying out the historical background so clearly.

Hi Mark,

Actuarial science, the most difficult mathematics that I have personally envountered, is one benefit of "insurance".

Flaky: 'if you can demonstrate that government regulation is actually impeding competition in a way that hurts the consumer'.

Fair point! But it was demonstrated time and time again. I don't have any references on hand at the moment, but you can write to me privately (first name AT last name DOTCOM).

(I don't know why I appeared as Anonymous in my previous comment, I am logged in via TypeKey as George Sudarkoff.)

Unfortunately, my wife and I have personal knowledge of insurance an insurance company doing exactly what was described, overtly and without embarrassment on their part. And we're not talking about pittance here, but hundreds of thousands of dollars worth, for a single patient. I've written a couple of blog entries about it:

http://ekzept.livejournal.com/156175.html

Worse, what that story does *not* include, is how this insurer can manipulation categorization and coordination of benefits so to also churn payments back and forth from health care providers to them, inducing confusion and *any* ability on the part of the patient's family to responsibly determine whether they can afford it or not. We're lookin' at a $60,000 bill because of this kind of thing, well over a year since the costs were incurred, costs which at the time were estimated to us at $2,000. All approvals and clearances through the insurer were obtained.

To me, it matters not if the "single payer" is a single large corporation or a government agency. (And government agencies *can* do this right. HHS might not be a model, but VA is.) If it's a corporation, they need to be limited by statute to a certain profit fraction, very much like defense contractors are.

Anyway, there are indirect costs incurred by the "free market" system which some of the commentators above so embrace. A lot of the trouble with assessments is that accounting procedures and rules don't count a lot of these costs. The accountants believe that if something is too complicated to model, they value it at zero, or they make some specious argument it's unimportant. This happens whether the valuation is a process, like medical insurance, or corporate book value. Valuation is always accompanied by a point of view and a purpose. It is not "objective".

If the problem with the "invisible hand of the market" is that employers are buying insurance, but employees are consuming it, wouldn't the middleman you should fight to remove be the employers, not the insurance companies?

Instead of having employers buy employees insurance, why not just pay everyone an extra $500 and let people buy their own insurance?

Of course the likely reaction of corporations would probably be to not give people insurance and to not pay them an extra $500, but at least in theory, corporations that weren't allowed to give insurance and an incentive would be forced to pay a higher salary to attract high-quality workers. For low-quality workers, you could even mandate that corporations either give their workers insurance or pay an extra $500/year (comes out to like $.25/hour, but we're using fictional numbers of course) over minimum wage and then gradually phase out the option to give them insurance.

If you see a market inefficiency, the solution should be to fix the incentives creating the inefficiency in the market, not government intervention. As a general rule, governments are even more inefficient than markets.

Something that Mark leaves out, I think, is that health insurance isn't really a distributed risk system in the same sense that, say, auto insurance is.

A person's odds of being involved in a catastrophic car accident, even on the scale of his or her entire life, are very, very low. That same person's probability of suffering a catastrophic health problem, on the other hand, is 100% (death), and his or her health-care related expenses are highly likely to increase dramatically not only as a function of age but also as a function of the continual creation of new health-care for him/her to consume.

In that way, then, the health insurance industry starts to function alot like a huge pyramid scheme and becomes reliant on an ever-expanding base to cover the rapidly increasing expense of caring for those at the "top," whereas with auto insurance (for example), the population of insured simply doesn't segregate itself into wildly disparate risk categories like that, not to mention that the overall level of risk (potential per-customer (adjusted) expense) involved is relatively stable over time.

It's a pretty intractable problem, honestly, and meaningfully addressing it probably is, in the long term, going to require a bit more effort than simply abolishing Blue Cross/Blue Shield.

Apropos of this thread, attached is an article about a case in Los Angeles where an insurance company allegedly procrastinated approving a procedure until just before the insured died. The physicians were overruled by a bean counter at the insurance company and it doesn't make any difference whether the bean counter worked for a private company or the Government. A 17 year old girl is dead. Now of course, the anti-regulation folks who believe in every man for himself and the devil take the hindmost will defend the insurance company and insist that a single payer system would have done the same thing.

http://ap.google.com/article/ALeqM5hFp8DsNC_gJwb9q72kNfDiZCioSwD8TM2SAO1

It's a pretty intractable problem, honestly, and meaningfully addressing it probably is, in the long term, going to require a bit more effort than simply abolishing Blue Cross/Blue Shield.

Well, I think it's important for everyone to understand which sets of assumptions contribute to that "intractability", no matter what decision is made. Many of the arguments are oft' heard straw men with no actual legs.

I think it would also help to publicize in Web form contributions made by institutions to various political interests, notably contributions from insurance companies and from health care provider groups. There's nothing wrong with them doing that, of course, but there's equally nothing right about it being secretive.

I think a lot of this happens "in the dark", because the people with interests in the present system don't want the public to see choices framed for them in a clear manner. I mean, the general public cares about jobs and things, but it doesn't really care about capital formation. So, how much would it care if tax rates went to 60% across the board in order to pay for cradle-to-grave medical insurance?

Also, the idea of portable medical insurance is certainly appealing, often to companies who have to pay people to administer these things.

I fear the absence of distributed risk, like Nobody Important cites, means these systems don't work well if "half privitized". Many people I know simply don't want to get involved with the intricacies of picking their insurances, health care plans, etc. They simply want to know if they get sick they'll be taken care of. What would they give up to have that? What would they have to give up?

L Zoel wrote: "Instead of having employers buy employees insurance, why not just pay everyone an extra $500 and let people buy their own insurance?"

Because that doesn't solve, and in fact exacerbates, the biggest problem for the would-be-insured: any preexisting medical condition which pushes their risk above $500 worth of cost will make them uninsurable. Group plans allow employees who have PeCs to get coverage as part of the group.

A big problem, and one of the biggest reasons that I don't like insurance companies any more, is that even collective bargaining doesn't necessarily result in good insurance. At the university I work at, some bureaucrats nearly got lynched at employee orientation, because their was only one university insurance plan, and it sucked. The problem? Even though the university has thousands of employees, we've got "too many old people."

Mark, I'm surprised at your jab at libertarians. You say that cutting out the middle man is the problem, but don't you think that the government is responsible for implementing a middle-man? Why can't individuals buy insurance for themselves as they can buy car insurance for themselves? I'm not an expert but I'm betting it has to do with government intervention (tax incentives for employers paying their employees health insurance, privacy regulations limiting what sorts of info the insurance companies can ask for from their customers etc).

And I think you ignore a problem with the current system, individuals have little incentive to stay healthy, under a free market system healthier individuals would have lower premiums than non-healthy individuals, but under the current system that effect is limited (companies do give lower rates to younger people, but I'm not aware of any rate cuts for showing you are in shape or not smoking) and under a national system it would be completely gone.

There are several additional effects that can be important. Go back to your original pool of 1000. Then we discover one of the members is a hypochondriac, always panicing and running to the doctor. The other 999 don't think it is fair to pay more because of him. Then a seriously fat person with an expensive recurring cost in treatment of diabetes joins. The solution, try to kick him out, -or trick another plan into taking him.
So with multiple payers, there exists all kinds of incentives to avoid insuring riskier persons, and/or restricting the services.

Even with a single payer system, there still needs to be some system to determine what constitutes a covered proceedure, let too many expensive but medically marginal proceedures through and the cost will become too high.

EDIT: I meant why can't people buy affordable health insurance.

As usual, the glibertarians simply ignore the real world (what else is new), specifically in this case the fact that MANY other countries- via heavy government involvement- do a far better job than the US with quite a bit less expenditure. The problem is not government, but the expensive, parasitic overhead of the "insurance" companies. Which inherently CANNOT work efficiently because of the fact, ably explained by Mark, that in actual fact there is no such thing as health insurance. The "insurers" are actually running a highly inefficient system of prepaid healthcare, in which they play an almost purely parasitic role. Don't even bother listening to the divagations of doctrinaires who cannot or will not understand this- they're wasting your time.

Robin wrote: "Why can't individuals buy insurance for themselves as they can buy car insurance for themselves?"

Um, see my post above. Only if you're in perfect health, with no family risk factors, can you expect to get a reasonable rate as an individual. And as an individual, you're much more likely to get cut once you do have a costly problem. Individuals have no bargaining power in the health insurance market.

"And I think you ignore a problem with the current system, individuals have little incentive to stay healthy..."

Um, except maybe the incentive to not die? If that's not a strong enough incentive to keep people healthy, why do you think that a slightly lower premium would be effective?

@bigTom:

It's odd how some proposals for a more centralized health care funding system are met, in some quarters, with accusations that they amount to "rationing health care" and "letting old people suffer and die", despite the "utilization reviews" under the current system which essentially do the same thing.

Since distribution of maladies is likely, like many other phenomena, likely to follow a power law, there will always be people with expensive-to-treat and rare ailments. It isn't just a question of people abusing the system, like hypochondriacs. A system which overtly limits costs per patient also censors the part of the density which is a population who are simply unusual.

I also think the debate suffers from a diminishment in our collective interest in the common good. I don't mean socialism or communism at all. I mean simply that there is some notion that, like the common defense, citizens of a country have some stake in joint wellbeing, and if that is not there, their quality of life suffers. I think we have gone way too much in the direction of personal empowerment, part of that done by certain folks claiming anything which diminishes it amounts to some kind of totalitarianism.

Another problem with the insurance system that we have currently is the fact that you are not insured by the same company throughout your life. Company A gets your premiums while you are young, healthy, and don't cost anything. Company B gets your premiums when you are older, mostly healthy, but cost a bit more. And Company C, if you can find someone to insure you at this age, gets your premiums at the most expensive point in your health care life.

Company C has some really strong incentives to turn down procedures, while maybe they'd have less incentive to do so if they'd been collecting from you all along.

My personal view is the Australian, where I live, system is best.

Everyone gets Medicare. This will cover you for normal things - doctor visits, optometry, dentist (I think) etc. etc. You won't die on Medicare. You also get cheaper drugs.

If you want, you can pay and get private health cover. Now, the PHC won't screw with you because they know if they try and frig with you, you'll go back to the free medicare.

Um, see my post above. Only if you're in perfect health, with no family risk factors, can you expect to get a reasonable rate as an individual. And as an individual, you're much more likely to get cut once you do have a costly problem. Individuals have no bargaining power in the health insurance market.

Anyone who seriously thinks buying individual health insurance is like buying individual car insurance has either been very healthy, or has never attempted to buy individual health insurance. I've been there, and to be honest, I was lucky that I and my family were all young and healthy at the time.

Making a higher profit by dropping the most expensive users of health insurance, or refusing to offer it to them, is understandable at the individual-business level. At a higher level, it's a perverse incentive -- precisely the kind of incentive that makes a market intrinsically inefficient, by encouraging it to serve fewer people, and to refuse selling to the buyers who most desire to buy. Car insurance has this sort of incentive as well, of course, but the impact is much lower: it's far more likely that a person will be deemed uninsurable for health than that they will be in multiple expensive car accidents.

For full disclosure, I'm a Libertarian and I oppose nationalizing health insurance. I'm also a member of the armed forces and so I'm covered under the largest single-payer insurance system in the country (TRICARE).

That having been said:

1. I disagree with your assessment of the purpose of insurance. You oversimplified the historical background and implied (intentionally or otherwise) that insurance was originally intended as some sort of altruistic system where people willingly paid more into a risk pool than they expected to pay in a given year for health care so as to enable the pool of people to pay for the rare catastrophic medical condition by one of the pool members. Please correct me if I am misinterpreting your intent. The truth is that every business enters a given market with the express purpose of maximizing profit, as I'm sure you know. It's rather ridiculous to suggest anything to the contrary. This self-interest is neither inherently good nor inherently bad. In general, so long as all parties behave responsibly and ethically (that's _both_ the insurer and the insured), then it's a matter of coming to an agreement on cost for services rendered. This is the basic principle of the free market and requires no one but the buyer and the seller to agree on terms. Now, I only said all of that, not to insult your intelligence, but in the hopes that we agree on the basic principles.

2. Where things can go (have gone) awry is when those on the margins--the ones who cannot find what they consider to be satisfactory service at what they consider to be a reasonable price; the ones who have a pre-existing medical condition--must fend for themselves. Is it acceptable to have people on the margins is really the question, isn't it? After all, the vast majority of Americans actually _do_ have health insurance (using conservative estimates, we're at 84% coverage). What about that 16%? Why are they there? I think it'd be fair to say that they all fall into one of the two categories I outlined above. Government estimates are that over half of that 16% either can afford insurance but choose not to purchase it or they qualify for current government programs but don't use them. How great is the government's burden here? Is there any acceptable level of non-coverage? We already know that no one gets turned away from emergent care so the only issue is non-emergent care. Is there a line in the sand to draw?

(I know this is long, I apologize)

3. Any government program for universal health care necessitates cost control. This is because budgets are law and they are pre-approved for the upcoming fiscal year. As such, Congress must anticipate costs and establish the appropriation for each budget area. They currently do this under Medicare/Medicaid and Social Security as well as every other budget line item. In order to exceed those pre-established spending limits, a new law must be written (this is why President Bush keeps going back to Congress for "emergency spending resolutions" for continuing the war in Iraq). The point is that there _must_ be a limit. One can quibble about what that limit should be all day and what percentage of total government revenues that limit should represent, but the limit _still_ exists. That cap on spending necessitates that everyone that receives funding under that appropriation must budget accordingly. That means a set amount of equipment and services that can be provided. There is no way around that. This is where those waiting times Conservatives love to point out in countries with universal health care come from. If you only have 100 OB-GYNs, you can only handle so many patients at any given time. Also, those OB-GYNs will be paid according to some calculation that is necessarily capped by the amount of money the system allows. Where's the incentive for that OB-GYN to innovate? Some will do it because they are wonderful people. Do you think that's the majority of doctors? Even among those wonderful people, wouldn't they work that much harder if they knew that their hard work would be rewarded not just intrinsically, but also financially?

Having been a part of the military health care system, I can say with absolute certainty that the quality of the health care you receive is a crap-shoot. Some doctors are fantastic; others are uncaring. This is true in the civilian sector as well, but I do not have a means to address poor service within my single-payer system. If I complain, it goes through it's bureaucratic process which will ultimately lead to nothing (you'd be amazed what it takes to get rid of a "bad" doctor--not that different from getting rid of a "bad" teacher).

Now, that all being said, I'm not suggesting that the current system is perfect--far from it. What I _am_ suggesting is that a universal health care system is not the answer. Furthermore, you mentioned in a response to a poster that Libertarians should acknowledge that other people have lower tolerances for the marginalized (I'm paraphrasing). I 100% agree. 8% of the population is acceptable to me. It might not be for you. I also ask you to recognize that Libertarians tend to rankle at the idea that you would use the coercive power of the government to force me to accept your take on things. That is fundamentally what this boils down to. A consequence of freedom is that there is less security (in this case, you're less secure in your health care). While it isn't completely a zero-sum game, you can't deny that, in general, obtaining more security necessitates sacrificing freedom.

To paraphrase Ben Franklin, they who would give up freedom for security deserve neither.

Sorry for the (too) long post.

~Brian Souder

@Brian Souder:

We already know that no one gets turned away from emergent care so the only issue is non-emergent care. Is there a line in the sand to draw?

There is also a non-trivial category of people who have and pay handsomely for medical insurance, but who either cannot get insurance companies to pay for procedures their physicians say they need, or who accept procedures and, even after following all the rules and getting assurances about coverage and payment, discover the insurance companies won't honor the commitments they have made.

There is an additional assumption in your comment unrelated to this observation. That is that profit is the only motivation for people ("companies") going into business. That is false. It is profit, and "animal spirits", and the latter goes as far back as Adam Smith.

#18: Actually, having passed all the exams to become an FSA, I didn't find the math all that tough. Once you got the feel of it, it was actually kind of boring. Not nearly as hard as the math in the physics I did later.

#13: Yep, agreed -- no insurance coverage at all makes it cheaper for me, until I have a heart attack. Then, of course, I want _you_ to pay for it.

#6: And that just restates the problem: who decides what is reasonable and necessary? I assure you that if everybody in the US would get a whole body MRI every year, we would most assuredly catch at least 2 cancers early and get at least a dozen extra life years. So why not? Oh, because we can't afford it! Hence, the scarce good (medical care) must be rationed. Whether it's by an elected body, a panel of "experts", seeing who yells the loudest, or some other means, it's got to be done. Unlike you, I have less than full confidence in how well any group can do the job. Just look at how well vaccines are covered. If we haven't done a good job yet, what makes us think we can do a good job in the future?

Yes, I'm a pessimist.

New report on medical insurance in relation to treatment for colorectal cancer. It's got some great numbers and, while addressing colorectal cancer, gives a detailed sketch of the American medical system, including addressing the matter of privately obtained (non-employer-provided) medical insurance.

EDIT: Sorry, that article I just cited addresses all cancers, not just colorectal.

"There is also a non-trivial category of people who have and pay handsomely for medical insurance, but who either cannot get insurance companies to pay for procedures their physicians say they need, or who accept procedures and, even after following all the rules and getting assurances about coverage and payment, discover the insurance companies won't honor the commitments they have made."

Sure. But "non-trivial" is a relative term, is it not? How much is "non-trivial". The same point stands. Is there a line to be drawn in the sand somewhere? The current amount is too high. What amount would be acceptable. Surely you understand the law of diminishing returns...

"There is an additional assumption in your comment unrelated to this observation. That is that profit is the only motivation for people ("companies") going into business. That is false. It is profit, and "animal spirits", and the latter goes as far back as Adam Smith."

I didn't say profit is the "only" motivation. It is, however, the primary one. That being said, motivations in and of themselves are not inherently bad objectively. One puts a value judgment (subjective) on that. And what relevance does that have on the rest of my admittedly too-long post?

The thing about the "invisible hand of the market" is that is usually works remarkably well, and without anyone participating having to have extensive knowledge of the entire system.

There's a reason planned economies don't work very well.

@Caledonian:

There's a reason planned economies don't work very well.

While planned economies may not, based upon historical experience, work very well, that observation or fact neither disproves that some planned economy might not work superbly, nor precludes a planned segment of an otherwise unplanned or "free" economy from working excellently. No doubt, such planning has its costs, but all policy choices do, and it is simply a question of whether, on balance, the participating public consider them worth the benefits.

Energy resources in France and in Saudi Arabia are nationalized, and there is no private ownership of them, merely a kind of renting. The French have no problems introducing nuclear power on a major scale. We do. And we have the "invisible hand of the market" in our favor.

And even if it were true that ...

The thing about the "invisible hand of the market" is that is usually works remarkably well, and without anyone participating having to have extensive knowledge of the entire system.

... that wouldn't mean there aren't critically important things for which it fails.

Sure. But "non-trivial" is a relative term, is it not? How much is "non-trivial". The same point stands. Is there a line to be drawn in the sand somewhere? The current amount is too high. What amount would be acceptable. Surely you understand the law of diminishing returns...

I also understand that conventional accounting notions and economic approaches may be inadequate to deal with certain very real problems. You may argue they are the "best we have", but that's no proof. There are several examples where unguided "free market" forces fall short, notably ones where the operative discounting process reduces possible future catastrophic costs or enormous benefits to zero, because of insufficient insight or systemic impatience. And the actual and annointed political champions of the "free market" in the United States are never true champions. I cannot imagine a single Republican -- or Democrat -- who ever practiced such a faith, especially with respect to their support of the wholly socialistic (IMO) defense budget and its wanton and excessive procurement practices. If that can be tolerated under some specious set of assumptions and reasons, why cannot national health insurance? If unprofitable and non-competitive corporations can be bailed out by federal intervention -- actions justified as being part of a "free market" -- why can't a commitment to people's health be honored?

Your terms, of budget, and accounting, and of limited resources are contrived. Noone thinks of limits or efficiency when weapons systems are bought, or wars are engaged. There is no accountability. There is only accountability when interests wrapped in some fake conservativism don't like a government taking from those weapons makers and applying the funds to the health of U.S. citizens.

"You oversimplified the historical background and implied (intentionally or otherwise) that insurance was originally intended as some sort of altruistic system where people willingly paid more into a risk pool than they expected to pay in a given year for health care so as to enable the pool of people to pay for the rare catastrophic medical condition by one of the pool members."

The non-profit health plan isn't altruistic on the part of the payers -- the key point is that payers don't know in advance which one among them will lose the health lottery. In MarkCC's scenario, they pay an extra $100 not out of the goodness of their hearts, but as a kind of protection against bad luck; I believe the technical term for this is "insurance".

Just a few comments based on the UK NHS:
(apoligies for the length of this comment)

1) It was originally set up as a national system because of atruism and a sense of having a duty to care for ones fellow man. Devil take the hindmost, the previous system, was seen as bad.
2) The doctors and private hospitals said that it wouldn't work, they'ld all resign. It did work and they didn't all resign.
3) It was set up to provide, free at point of service to anyone who turned up, basic and emergency medical care.
4) It created an enormous arguement, similar to the discussion above. Now try suggesting doing away with it, everyone (well most everyone) in the UK sees the benefits of it even those who don't use it. They also moan about the parasites, freeloaders (non-UK citizens getting free health care), political interference, wasted money etc
5) The NHS has gone bad recently, last few decades for a number of reasons:
a) Politicians trying to apply business rational to it (it has become top heavy with overpaid business consultants/analysist and administrators). This has, eventually been recognised I think.
b) The definition of basic care has expanded to include things most people don't consider basic. This seems to be being addressed very slowly.

It is not perfect and some people object to not having their boob jobs paid by the NHS (boob jobs recommended by phsychologists, or because of induced back pain are done) and there are cost limits due to limited funds but it does serve the whole populace.

There is also private medical insurance, I have some, but that is for minor things that would keep me off work. Worth my while to pay to have it done quickly and let me get back to work. It doesn't exempt me from paying into the common pool. It is also required when I'm overseas, though explicitly excludes the USA (think about that, I am covered for every country in the world except the USA. Reason, USA medical care is so damned costly. It isn't any better).

Like all goverment departments, there is a tendency for bloat (more forms, paper pushers etc) and being a goverment department all attempts at standardisation, simplification and computerisation tend to fail and overrun budget, but at least these costs can be seen in the public audits and questioned.

There is also the problem of goverments stealing from the National Insurance (treating it as part of the general tax) and robbing the future to pay for todays political stunt, but this can also be seen in the public audits.

Most European (not just the EU) countries have some form of NHS, some superb and very costly (France, Sweden) some not as good and some that define what basic means and stick to it.
They are all facing a financial problem, but no-one wants to see them fail (except for some medical insurance companies perhaps).

Oh, almost forgot :o)
Nationalised health care is less expensive and wasteful than the private system.
Patients are more likely to be thought of as people, not commodities/profit centres, within the system by the nurses and doctors.

In closing, adopting such a system takes brave politicians willing to forgo the bribes/threats from the vested interests and do what is good for the people and the future of the country.

A story, from California, some ten years or more ago:

I had work health insurance through a big Blue for-profit-type. That company bought a pharmacy, to start filling prescriptions themselves.

They cancelled everyone's prescriptions and made them all get reauthorized under a new list of allowed drugs, and my pharmacist said were disallowing everything for months during the transition, for everyone he had with them.

Tried the 800 number. Repeatedly. Finally got a woman who refused to give me a last name, refused to give me a direct dial phone, refused to give me her boss's last name or any help at all, and barely spoke English.

("My boss? His name is Tom." "No, he doesn't have a last name." "No, he doesn't have a phone number." "No, I can't find him, he doesn't have an office." "If I want to see him I see him in the hall." "I don't understand you." "No, I can't write it down.")

I eventually tried the State of California 800 number instead, and got promptly forwarded to an agency that regulates health care providers in the state. No, they would not give me their direct dial number. They said they were not allowed to give it out to individuals, they usually only dealt with the insurance companies. But I got a nice person who did have a last name and took _my_ number and my story and said she'd check into it for me.

Half an hour later my phone rang. It was a Blue Cross manager. She only had a first name too. She said she'd gotten a call from the California regulator (by first name) and that she had checked, she had straightened out all the problems I'd called Blue Cross about, and had found a number of other problems I hadn't yet discovered with getting prescriptions renewed and doctors and pharmacists paid what they were owed on my account, and she was really glad to help me, and I didn't really think I needed to file a written complaint now, did I?

I said, send me the papework to file the written complaint, and I'll think it over.

Then I called the State of California 800 number back, got switched to the agency that regulates health care, asked for the helpful person there by name (no, they'd connect me, they didn't give out her number).

And I asked her --- how did you do that? Thank you, I apprecate that you did it, please tell me how.

And she said --- if you'd filed a written complaint with the State agency about your health insurer's behavior, it would have cost them $20,000 in paperwork to respond to it. They will do almost anything to avoid having to deal with a formal written complaint, including pay for your health care.

I told her I'd asked for the paperwork anyhow, and asked how I was supposed to know it was even possible to file a written complaint with the State, since there was no mention of it anywhere in the Blue Cross website or my healthcare docs that I could find. She said, isn't that interesting?

Blue Cross never sent me anything in the mail, and had no record I'd ever contacted them about any of this.

But the prescriptions were authorized and the medical bills paid the next day.

So I guess they figured I had no reason to complain.

I wish I could tell you how to contact your State agency regulating health insurance. I can't -- but dig for it.

I did tell this story to my then medical group's billing department -- _they_ had never heard of the agency. They told me later they did find it, and it was helping a lot getting paperwork done between doctors and insurers.

Tom #33: Dental is not covered by Medicare Australia. It's for entirely stupid reasons (something to do with a dispute between the doctor fraternity and the dentist fraternity at the time it was being set up) and it's supposedly going to be fixed Real Soon Now.
Incidentally, one thing that I haven't seen come up yet is the general topic of the government and wider society's relationship to public health.
When the government is responsible for a lot of health care, it also has an incentive to reduce costs. However, it can take a big-picture view. For example, a government with nationalised health care has a greater interest in promoting general health issues, or investing in preventative medicine.
Here's an example. It constantly shocks me that abortion, for example, is seen in the US as an issue of "choice" vs "life". In pretty much every other developed country, while these terms do come up, it's much more likely to be seen as a public health issue. When it's the government that pays for (medically indicated) termination, then the government has a stronger interest in developing good sex education programmes.
Same with substance abuse. The fiasco that is the "war on drugs" is, IMO, partly due to the fact that the US government simply does not understand that substance abuse is a public health issue.

In response to ezkept:

"I cannot imagine a single Republican -- or Democrat -- who ever practiced such a faith, especially with respect to their support of the wholly socialistic (IMO) defense budget and its wanton and excessive procurement practices."

You won't get an argument from me on that one.

"If that can be tolerated under some specious set of assumptions and reasons, why cannot national health insurance? If unprofitable and non-competitive corporations can be bailed out by federal intervention -- actions justified as being part of a "free market" -- why can't a commitment to people's health be honored?"

Oh. I see now. You're suggesting that since we spend taxpayer dollars like drunken sailors in the defense budget, we should do the same with National Health care as well? Sure. Why not? We have an unlimited supply of money, right?

Ok. Seriously. A lot of the excess in the defense budget (about 10-20% give or take on any given year) is the pork barrel spending. The excesses you're (legitimately) complaining about have everything to do with our budget process and the bill rider system.

"Your terms, of budget, and accounting, and of limited resources are contrived. Noone thinks of limits or efficiency when weapons systems are bought, or wars are engaged."

What? Budget, accounting, and Limited resources" are contrived because we don't think of limits or efficiency when weapons systems are bought? The logical fallacy here is astounding. One has nothing to do with the other. The limits are there for the DoD too, my friend, I assure you. You'd be amazed at how much of the military is cut from previous years. It is because of this that the President keeps asking for emergency spending bills. DoD gets a certain amount of money at the beginning of the year, we eventually run out of money (as is bound to happen when you're fighting a war) and then the President asks for more (new law). There's a limit there and the military _can't_ spend more that they are budgeted for. It's a violation of the law. And there's plenty of accountability. Feel free to drop me an email and we can discuss it in gory detail (assuming you're interested in expanding your knowledge-base rather than accepting pre-conceived notions).

~Brian Souder

Ignoring, for a moment, the practical details of the matter (though they always make such a difference), the benefit of nationalizing health care is clear.

The market is wonderful. It's efficient, it's innovative, it's faster-growing than government can ever be. But it gains these abilities by targetting itself, by ignoring opportunities that are not profitable. The market functions under a system similar to biological evolution. One of the hallmarks of biological evolution is the end-state of it - extinction. In the pursuit of the best, the lesser organisms die.

This is generally fine when the lesser organisms are businesses. Businesses don't have civil rights, don't have identity. They can be revived, repackaged, restarted with new management. We don't care very much about that. Sure, I might shed a tear for the passing of Coca-Cola, but there are plenty of other sodas that will quench my thirst equally well and be just as tasty to boot.

But when the lesser organisms are people, well then that's a different story. The market, to be efficient, must ignore the parts which are unprofitable. Translated from theory-speak, this means that it must let people die who are too expensive. And the definition of 'expensive' can be pretty shocking at times.

This is the fundamental failing of the market. It grows in leaps and bounds and is the best form of economy we've ever dreamed up, but almost by definition there are sectors where it will not adequately serve the needs of all people. When that need is iPods, we don't care. When that need is critical operations and medicine, we do.

Brian Souder says that 8% of the population being uninsured is acceptable to him. I say that's 24 million people. That's the combined population of America's 10 largest cities (according to Wikipedia and a spreadsheet that took *entirely* too much effort to assemble). It's also the combined population of America's 18 smallest states. He's willing to accept 18 states full of uninsured people. I'm not.

This is where government steps in. It can, without overly much effort, serve *everyone*. That's the benefit there. Use the market for as much as humanly possible, but when you absolutely need to get a product to everyone, use government. The alternative is dreaming up some perfect incentive plan (implemented by the government, in an interesting quirk that almost renders this sidequest irrelevant) that will encourage the market to serve everyone, but which the market will instead grow around and coopt to its own purposes (which is exactly what it's supposed to do).

Added benefit of a government-run program is less bureaucracy. I can hear you laughing now, but honestly, it's true. The government doesn't need advertising - everyone already receives its product. The government doesn't need to partition people into risk groups and decide whether or not to cover them - everyone already receives its product, and at the same price. Both the market and government need to decide which procedures and medications are approved, but it's centralized. Rather than a separate group in every company deciding the same things, you have a single government board doing so, which means less people. Both the market and the government need to have people personally served and managed, which will be rather equal between the two. The only cost which the government intrinsically requires above the market is oversight, and the current oversight model that government requires on the insurance companies is at least the equal to what government will require on itself.

In broad overview, health care is one of the products which seem to be perfectly fitted for government to run. The devil is always in the details, of course, but there's no way to simply sweep it under the rug with a quick "Of course the market will do better" comment. All things being equal, government will do *much* better. Things are never equal, but at least then any failing of the government plan are due to implementation, not theory.

Having been a part of the military health care system, I can say with absolute certainty that the quality of the health care you receive is a crap-shoot. Some doctors are fantastic; others are uncaring. This is true in the civilian sector as well, but I do not have a means to address poor service within my single-payer system. If I complain, it goes through it's bureaucratic process which will ultimately lead to nothing

The reason that individually purchased insurance is only available at high expense is that the insurance industry has been highly regulated by concerned liberal types to the point where anyone offering medical insurance has to pay for vast amounts of mundane stuff that would be better treated in a simple free market - dental checkups, optical prescriptions, etc etc.

Personally, I would much prefer a system where I can buy the mundane stuff myself, and pay for a relatively cheap insurance in case of disaster.

Coming from the UK originally, I do have to say that state run health care is, empirically, the worst option of all. Assuming you "hate Bush" or "hate Clinton", do you really want to see the next Bush or Clinton having control of funding of health care for the vast majority of the population? That model has been a disaster in the UK, and would assuredly also be so in the US.

Steve Massey: I've no idea whether or not nationalized health care has been a 'disaster' in the UK, but from what I've heard it hasn't been too bad.

Let's not just look at the UK, though - it's far from the only country to do this. What about France? Germany? The Nordic countries?

Afaik, they've all done quite well with public insurance.

two observations.

1. there is no such thing as non-profit. if you want to provide medical care to millions of people, you need staff, secretaries, businessmen, etc. they will always care more about their own payments, work environment, and outsource something to friends and relatives. the question pretty much can be distilled to this: who will decide what is the acceptable cost? it is not easy. that's why market is a good thing. it works out the price for us.

2. you can't that easily reduce overhead with taking out the middle man, and having the government doing healthcare. even the greediest, biggest insurrance company is an efficient machine compared to a government. if the government touches something, the expenses are multiplied tenfold, and the time to do something likewise.

however, there is a possiblity to consider.

in Sweden (if i'm not mistaken) there is a smart system. there are multiple insurrance companies. but they can't select members! they have to accept anyone who wants to join. people pays a percent of their payment to a common pool, and this pool is divided between companies based on number of members.

i think this construct offers the advantages of the competition without introducing the problems of it.

Coming from the UK originally, I do have to say that state run health care is, empirically, the worst option of all. ..... That model has been a disaster in the UK, and would assuredly also be so in the US.
Posted by: Steve Massey

Steve; you are either ignorant or have a very poor memory.

The UK health system isn't perfect but, I say this as a UK subject who is still one, the UK system isn't perfect but it covers everyone, not just the rich.

Empirically you state, lets see some of this empiricism.
No liberterian philosophy simply facts and figures.

Not what percentage of GDP is spent on health care but how effective and widespread that healthcare is. In the US a large percentage of healthcare costs is spent paying dividends to shareholders.

You may be rich enough to afford private medical care and believe in devil take the hindmost.
I do have private medical insurance and I believe I have a duty to my fellow subjects so am happy to pay my NI as well.

Enlightened self interest is what it is called.

Healthy workforces improve the economy.

Mark,
Thanks for posting. Good description. Some comments:

You can buy individual catastrophic medical insurance fairly inexpensively. I have seen individual policies with a $10,000 annual deductible where the premium is very reasonable. Yes, it would hurt to have to pay the first $10,000, but in the case of a catastrophic illness, accident it might be the small part of the bill. One suggestion might be to buy it when you are healthy and keep it even if you get other coverage from an employer. If you get sick and you bought a guaranteed renewable policy then they can't cancel you. (other than for lack of payment)

The solution to the health care insurance isn't simple. It is very difficult to legislate behavior and have that legislation accomplish what you want. There has to be the correct incentives for the right entities. That is the difficult part. In the insurance system we have a huge disconnect between the consumers, the providers, and the people paying for the insurance. (private or government provided health care have similar problems, one person paying someone else's money for a third person's benefit - very inefficient.)

Therein lies the difficulty, people do things due to incentives. (monetary and non-monetary) It is a non-trivial problem.

it matters not if the "single payer" is a single large corporation or a government agency. (And government agencies *can* do this right. HHS might not be a model, but VA is.) If it's a corporation, they need to be limited by statute to a certain profit fraction, very much like defense contractors are.

It is somewhat naive to make this a government vs. market argument since government already pays for half of all healthcare. At one end of the spectrum public health is in the government interest as much as the person, at the other end are all the elective and experimental innovations that are best handled by the market. Both must work well and a line be drawn between them.

Jim,
I always hear people telling me about these inexpensive plans - they pull out advertisements or the yellow pages and point to them as examples of how easy it is to opt out of our current system. Well, the problem with most of these plans are that they will either reject you if you have any illness history or risk factor, or will raise your rates unbelieveably when you actually use your coverage for anything other than a hangnail. I applied for one and was denied due to having once seen my doctor for upper back pain (due to too much computer time). The fine print on the paperwork they sent me spelled out how they could raise my rates when/if I had a serious problem. It's not something they put on their ads since the amount they could raise your premiums pretty much means you will cancel. I called and asked for some actual figures and after some hemming and hawing they came up with a figure of about 1400/month. Not something I could afford. This would of course be in addition to that 10,000 deductible.

As for being able to get care for emergent conditions, the conditions covered in this definition are not what most of us will end up needing care for. The health problems that dog us as we age are often things like cancer (try getting chemo at your local ER when you find a lump in your breast) or high blood pressure or heart disease. With the exception of a heart attach or stroke, your ER is not going to do much for you.

To Jim responding to Jim,
You are correct that if you have a current illness or medical situation then you cannot get the catastrophic coverage for cheap - if at all. Just as you can't buy homeowner's insurance if your home is on fire. You have to buy it BEFORE you get sick. As Mark points out there is no magic in the insurance premium. Even if there were no expenses, the premium would be based on claims and if you allow people to self select purchasing to when they think they will need the coverage then you have to charge more premiums. (even assuming a high rate of return, Health insurance is priced mainly on an annual set of expenses unlike life or disability insurance.)

At one time I worked for a large mutual insurance company. We had a voluntary payroll deduction permanent life plan. The three underwriting categories were declined, smoker (tobacco usage) , non-smoker (no tobacco usage). The underwriting was very abbreviated. Employees were paying the whole premium and they chose the amount of coverage (within limits) and whether they wanted the policy or not. After a few years we looked at the claims. For the non-smokers the actual number of claims was close to the expected number of claims. For non-smokers the average size of an actual claim was close to the expected size of claims. So for non-smokers the premium was close to what the insurance company thought they would see in claims. (after expenses etc.)

For smokers the actual number of claims was about 2 times larger than the expected number of claims. In addition, for smokers the actual average claim size was about 2 times larger than the expected average claim. (Fairly normal distibution, so we not seeing one $100,000,000 claim with the rest being $1,000 claims and getting an average that was misleading.) My point is that people will self select if you give them a chance. (Not blaming them, they didn't do anything unethical, illegal or wrong. They operated in their self interest.) Fortunately, it was a very small block of business (You can't cancel life insurance policies except if they don't pay or there is fraud - neither of which applied.) and so they adjusted future premiums on future policies up.

I didn't mean to imply that one should replace current coverage with catastrophic coverage. Please don't do that on my recommendation.

Perhaps as an earlier poster said a good solution would be an insurance voucher. You could move from insurance company to insurance company without underwriting restriction, but you couldn't take the voucher money in cash. Still gives the insurance companies incentive to compete for benefits, quality of service, and preserves the insurability aspect of the public.

I would be very, very leery of using defense contractors as an example of government funding working as it's supposed to.

I would also like to point out that I've heard many, many horror stories about the VA and its treatment of veterans - and from what I can tell, usually the veterans have little choice but to accept what they're given.

In summary:

There's too much beauracracy in insurance companies and I don't believe in market based ideas. Instead, we should hand the system over to a larger beauracracy in which there is no competition!

I found this article lacking much intelligent insight... and math.

"As usual with arguments about the invisible hand of the market, it's a load of rubbish."

I find it hard to believe that someone who has argued so knowingly against the frauds that are creationism and intelligent design-- essentially the belief that order cannot arise spontaneously but must be directed by an intelligent central planner-- can descend to creationist levels of ignorance when the subject turns to economics. Your argument seems to be that insurance is bad because it's run for profit, so it should be turned over to the federal government, which can only safeguard the common good.

You've fallen victim to two great destructive myths. The first is that profiteers are benefited by the free market and harmed by regulation. The second is that government regulation benefits the people rather than the corporations. I would suggest a quick refresher course in public choice theory, which should disabuse you of these notions. Big corporations often love government regulation, because it stifles competition and gives a greater advantage to already established businesses. And far from being a great altruistic safeguard for the downtrodden, the currently existing web of government healthcare regulations in this country is mostly designed to safeguard the profits of large insurance and pharmaceutical companies at the expense of the general public. (Here is a brief history of government health regulation in the US and UK.)

Bottom line: A decentralized system based on free competition will do a much better job of keeping prices low than a government-run system, because big corporations have a much easier time manipulating the government than do ordinary people.

I'm all for the free market to handle this with one and only one regulation.

There should be one pool of people. You can compete on benefits/price but you can't divide the population into those who are 'likely to stay healthy' -vs- the rest of us.

And while I'm no fan of insurance companies, I'll concede this. The young/healthy should be required to purchase health insurance. Just like we are required by law to buy auto-insurance, the same should go for health insurance.

In essence, allow insurance companies to compete with medicare and also allow the government to provide medicare for all. If the private market can do better, than so be it.

The only real problem with the UK NHS is that by the standards of health care expenditure in other OECD countries, it is seriously underfunded. (Looking up the comparative data is left as an exercise for the reader.) If health care expenditures in the UK were raised to the average of the industrialized world, there would be few complaints about it. But note that in spite of this underfunding, the UK has excellent life expectancy statistics, so at some basic level it's still doing the most important things right.

People who jabber about the "free market" in health care should just be ignored; they have no clue about how health care works or how it's managed (far better than in the US) in other countries. They're just blinkered ideologues. The comparison to anti-creationism is asinine- scientists do not cling to their pet theories at all costs no matter how much experience refutes them, the way market fundamentalists do.

Bottom line: A decentralized system based on free competition will do a much better job of keeping prices low than a government-run system, because big corporations have a much easier time manipulating the government than do ordinary people.

True. It will likely keep prices low (lower than government can do on its own without dictating prices). For the average person.

For those who *are* chronically sick, though, the free market is inadequate. They will *not* be served, except at ruinous rates that they likely can't afford. That's pretty much the entire point of Mark's post. Government-run care (or, possibly, one-pool free-market care) avoids this by *preventing* people from being stratified into risk groups and thus being costed right out of medical care. The lower-risk people end up paying more than they 'should', but in return the high-risk people pay less.

#5

The NHS (National Health Service) works on the basis that a you are entitled to treatment approved for your condition it by NICE (National Institute for Clinical Excellence) will be given if your doctor recommends it. NICE will normally approve a treatment for a condition if it typically costs up to about £30,000 ($60,000) per quality-adjusted life year. Experimental and non-approved treatment are funded on a case by case basis, you are entitled to approved treatments.

A £100,000 treatment for a 20 year old with a bad knee would qualify on the basis that the quality of life improvement is large over a very long period. For a 90 year old with Alzheimer's would probably not qualify, purely on clinical grounds. A non-senile 90 year old in good general health (and therefore likely to survive surgery, recover and get a few years of activity afterwards) would have a reasonable case. Hip replacements are given to nonagenarians if their health is good enough for there to be a reasonable chance of surviving surgery and recovering.

There should be one pool of people. You can compete on benefits/price but you can't divide the population into those who are 'likely to stay healthy' -vs- the rest of us.

So in other words, you don't want insurance. You want health welfare.

It would seem to be much more efficient - and effective - to establish other programs for the care of the chronically ill. Insurance is an inappropriate mechanism to pay for people who guaranteed money sinks rather than risks.

Caledonian, I'm not going to get into a battle of semantics here but my concept of insurance is to spread the risk. If you don't accomplish that goal, then why bother?

Given our ability to detect diseases or predisposition to a disease before a baby is even born, would that mean that child is immediately in the high risk or uninsureable population?

So in other words, you don't want insurance. You want health welfare.

Considering that health welfare is pretty much exactly what a government-run "cover everyone" plan would be, and the problems solved by health welfare would be precisely those that were highlighted in the article and comments, yes. Health welfare is what we want.

I'm a young, healthy individual that wants to ensure that the nobody in my country dies simply because they don't have $50k to pay for anti-cancer treatment. Living a healthy life is something that I want anyone to have, not just the well-off (even though I count myself among that group).

It would seem to be much more efficient - and effective - to establish other programs for the care of the chronically ill. Insurance is an inappropriate mechanism to pay for people who guaranteed money sinks rather than risks.

Cal, you're a died-in-the-wool hater of government programs, especially those which reek of socialism. Don't pretend that you want expanded Medicare benefits.

...It would seem to be much more efficient - and effective - to establish other programs for the care of the chronically ill. Insurance is an inappropriate mechanism to pay for people who guaranteed money sinks rather than risks.
Posted by: Caledonian

So it is more efficient, in your universe, to have multiple bureaucracies?
One for each deadly disease and mutation, each with its own set of directors being paid and ferried around in jets.

From a purely overhead cost point of view one set is cheaper.

The main point though is deciding how you consider your fellow citizens/subjects.

Just a quick 2 cents here. And by the way, do any of you know anything about either insurance or healthcare?

Modern health insurance is pure insurance, which covers rare events, but a mix of health maintenance and risk sharing (for the rare events) coupled to price agreements that bring better than market prices to those in a plan. As far as financing, because of the relative low profit margin with health insurance, investments are essentially in low risk bonds.

Uncontrollable cost increases in the health care industry over the past 25 years have made all profitability assumptions suspect, and ruined most cost cutting strategies. HMO's and managed care, one the big idea, have been displaced with brand new schemes that put more cost onto the consumer. The new ideas may cut back utilization (and thus, claim costs) on the middle class, but will do nothing to hold down price pressures on either the poor or on the aged.

We may be reaching a tipping point where significant numbers of working people will need health care and be unable to afford it - because they have no insurance. If this happens, the pressures from the collapse may be enough to force us to make the necessary changes. If not, we'll keep muddling slowly to disaster.

And just one note: having worked in several claim departments over several decades, I know of no one who feels any pressure to deny valid claims.

That news may not fit the Hollywood stereotype, but there it is.

re: the 8% acceptable losses limit.

i have an easy solution, why not make it NHS, but to cover the 8% that is an acceptable exclusion, why not simply say the wealthiest 8% are the ones excluded? that way people get their health coverage, and the free market still has a solid and sizable chunk of individuals to cater to - the rich. private health care then is available to the market most likely to be able to afford their services, the rest of the population has coverage that won't destoy them, and no one is really left out.

not a bad idea, no?

(anyone want to lay odds that the libertarians will say this is unfair?)

Caledonian, I'm not going to get into a battle of semantics here but my concept of insurance is to spread the risk. If you don't accomplish that goal, then why bother?

Precisely!

Insurance can only be usefully bought before it is recognized that long-term treatment is needed. If you were an insurance company, would you sell a fire policy to someone whose house was burning down? Of course not - that would be a guaranteed payout.

If you try to force the insurance system to cover people with known long-term illnesses, of course it's not going to work properly. Insurance costs for everyone would have to go way up, because the insurance companies have to compensate for the riskless losses they're forced to eat.

Part of the problem is that many people here are operating on the assumption that 'insurance' is the mechanism that should pay for medical care in general. Why they're making that assumption, I don't know - possibly they're just not interested in thinking beyond the familiar status quo.

If we are going to make societal provisions for people who cannot be insured because of pre-existing conditions, it will have to be outside of the insurance system. That much is obvious.

Presumable in a non-profit insurance system, there would still be someone making sure that medical procedures are necessary and hopefully doing a good enough job that insurance costs stay reasonable and everyone gets the care they need.

what a nightmare having to worry about private health insurance. you need to hire a lawyer, doctor, and accountant to help navigate through all the paperwork and protocols and b.s. and in the end, the public ends up paying for a lot of the nation's health care anyway. Mentioning the big, bad "S" word is enough to scare most americans into obedience to the big businesses that "care" for you. Business run health, the imperial system, and jesus beliefs are evidence that america's socialized education doesnt work either. Keep 'em ignorant-theyre easier to mislead and control.

If you are looking for an investment adviser, why not choose a mathematician? Like James Harris Simons.

http://en.wikipedia.org/wiki/James_Harris_Simons

Who knows, he may even have a job for you.

Why are the arguments always the same? Markets work in some cases and when kept under control (which doesn't necessarily mean taxing them and wraping them in red tape, just poke them occasionaly). However they can only work in some cases, Adam Smith was only writing about grain markets. Health care does not fit the "grain distribution" model. Effeciency in a free market is measured in profit, not work done; hence you get the situation Mark describes where loads of people are putting far more work into avoiding work than doing any. For some reason Libertarians tend to call those who want to exchange their money for actual services, as opposed to some useless service they don't want, workshy.

For some reason Libertarians tend to call those who want to exchange their money for actual services

That's not at all what we're discussing here - we're talking about people who, at all costs, do not want to exchange their money for services.

That's the point!

caledonian, how do you address the situation of an otherwise healthy fetus being determined (by genetic testing) to be predisposed to a serious illness?

Are you saying that this shouldn't be addressed by insurance?

I think its rather ironic that such an economic discussion exists in a blog that has so much critique of intelligent design. All the comments pretty much split up into social and free market arguements. I personally dont consider myself a religious person and dont blindly follow the ways of Marx or Smith. And generaly, Id rather make my own models of a situation rather than rely on someone elses. Without getting into a useless debate thats been heared by most of you at least 100 times from both sides, set up your model, and like Mark likes to say, "do the math". Mentioning the government entity or the hand of the market is just plain silly...here at least.

an otherwise healthy fetus being determined (by genetic testing) to be predisposed to a serious illness

What about it?

Caledonian, my question is should that family be able to purchase health insurance at the same rate as a family who has a healthy child? If so, at what point does having an illness translate into 'high risk' insurance premiums?

Why is it the Libertarians always come up with the same arguments whenever this topic comes up? Markets may get you a cheap DVD player, but if you want to cover the whole of a population for healthcare, then only government can do it.

And having worked for the NHS for a fair while, I find it laughable to imagine that having a complex series of exemptions based on wealth makes any sense at all.

I met one formerly wealthy cancer patient, whose Swiss tax domicile status went after, as he admitted, he sold 'all his shares to pay for treatment'. I have seldom seen someone so grateful to be told that he qualified for NHS treatment. Its very easy to be a formerly rich person after big medical bills arrive, no matter how strong your faith in the market.

The NHS is less than perfect, and has been historically underfunded and frequently badly run. But it delivers decent healthcare to the whole UK population for about half the cost per head of the US model, with less complexity, cheaper drugs and some degree of equality. Its one of the institutions which British people actually admire, whatever their gripes, and despite everything, gets an 85% plus approval rating from those who use it. How many HMO's can say the same thing?

Caledonian, my question is should that family be able to purchase health insurance at the same rate as a family who has a healthy child?

Is this hypothetical family at equal risk, less risk, or greater risk than this hypothetical alternative family?

Does it matter to you if the condition is one that doesn't develop later in life? What if it requires treatment from birth onwards?

What if the tendency is only identified when the child has grown to adulthood?

if you want to cover the whole of a population for healthcare, then only government can do it

Says who?

It is, however, pretty darn clear that insurance by definition cannot cover the whole of a population - some other system must be found. I fail to see any reason why government must be the only solution to this problem. Perhaps you haven't explored alternative avenues much?

Caledonian, I'm not tying to build a straw man but let's go ahead and say that we know (before the child is even born) that it has serious medical issues which will require many $$$$ to address and even then, there is a chance that this child does not live a full and productive life.

This isn't a 'excessive assumption'. I bet that many people here know of a child who would fit this profile.

As I understand your position, insurance isn't the right vehicle for these people and should be handled another way. Is that correct?

Caledonian - what other avenues could be explored? Insurance by the private sector means access by income, which immediately excludes those who are too poor to buy insurance, and makes it marginal for those who can only afford the bare minimum. Perhaps charity should help those who cannot afford to pay for healthcare? But what if the charities resources are overstretched? Or possibly certain groups simply will not supply certain services (Catholic hospitals and abortion, for instance), or do not have the resources to do it well.

The only means for everyone to have access to an adequate level of healthcare is for government to either:
a) mandate the private sector to do so, and fine the sector if they do not. The private sector is unwilling to do this, and if if they have to, then it is entirely in their interest to put up as many barriers as possible, or discharge poorer patients ASAP. This is exactly what has happened in the case of homeless people being dumped by US hospitals away from the private hospital (which had to take them in) after being discharged as soon as the hospital could get away with it.

b) Or government (at various levels) could force everyone to take out private insurance - which would be both upsides and downsides for the insurance sector, but would be a terrible hardship for those who cannot afford it (as well as denying people 'choice'). The 'solution' free-marketeers always come up with is to have a complex arrangement of tax-breaks, co-payments, special funds, etc. All of which is paid for by the taxpayer.

There is of course another option, which is to simply ration healthcare by income - if you can afford it, you can have it. If you cannot, then you can't. Its perfectly logical, works in terms of a free-market, and gives people 'choice'. Its main drawback is that it means people can die because they cannot afford healthcare - which is probably the major downside in most peoples book.

A government run system is simply insurance for everyone, paid for by taxes. It has no vast system of paper moving around simply to communicate between hospital, GP, patient and insurance company. There's no co-payments, negotiation over drug bills, or reduction of cover after claiming. It has far fewer incentives to deny people treatment because of cost (17-year old girls would be less likely to be denied a liver transplant, for instance), and can buy drugs far cheaper, because of their size within the market. And if you dont like the way its run, you can always use the ballot box to show how you feel. And its cheaper.

There may be alternatives, but they're not very good ones.

Yes, the problem with market models here is that the commodity and the market do not have elastic prices. We could all "go on strike", refusing en masse to pay insurance premiums or go to doctors, but, then, who will sacrifices themselves or their children to such a principle simply to achieve affordability? And you can take the situation with medical care and, when you introduce mental health care, it gets much worse.

Sorry, I think the distinction between "Let them pay for care out of their own pockets else do without" and the suggestion that society outright euthanize people who are too difficult or expensive to treat is much finer than proponents of the former pretend.

As I understand your position, insurance isn't the right vehicle for these people and should be handled another way. Is that correct?

As I understand your hypothetical, yes, that's correct. The child is not "at risk" of needing serious medical care, the medical care is essentially a certainty. There's no insurance system that can handle guaranteed payoffs - the only way to handle them is to artificially raise the costs of insurance for all the low-risk people.

As a similar case, many people complain about hospital bills being too high, but part of the reason for that is that hospitals are forced to treat people who can't pay for the services, and that money has to come from somewhere.

When insurance companies are forced to treat high-risk individuals and groups as though they were normal-risk, that means the cost of insurance has to go up. And thus people can't afford it any longer, and then we have complaints about people not being insured...

It's like how the Bush administration sets literally impossible goals for schools to meet, then uses their failure as an excuse to institute voucher systems. People force the insurance system to break itself, then demand national government insurance to fix the broken system.

When insurance companies are forced to treat high-risk individuals and groups as though they were normal-risk, that means the cost of insurance has to go up. And thus people can't afford it any longer, and then we have complaints about people not being insured...

Okay, federal bridges and highways need care with probability approaching one, too. We don't buy "insurance" for them. Would you be happier, Caledonian if the government system were titled "people maintenance" or something like that?

Okay, federal bridges and highways need care with probability approaching one, too. We don't buy "insurance" for them.

We could, if we permitted it and wished to do so, choose to buy insurance against the possibility that the infrastructure would need more-than-basic maintenance. I'll bet there are companies that would be willing to calculate the odds and offer the service.

I would also note that the government system for taking care of our road system often doesn't work very well - sometimes with nearly-invisible and mundane consequences, sometimes with dramatic and tragic consequences.

For the sake of argument, for the moment I'll accept your position that insurance should be those who are not known money sinks.

How do you address those that are 'known money sinks'?

My apologies if I've misrepresented your position.

I would also note that the government system for taking care of our road system often doesn't work very well - sometimes with nearly-invisible and mundane consequences, sometimes with dramatic and tragic consequences.

Neither does procurements of weapons systems but that doesn't stop an annual orgy of buying them.

Besides, your point that

We could, if we permitted it and wished to do so, choose to buy insurance against the possibility that the infrastructure would need more-than-basic maintenance.

is a mere deflection. We don't. So if we don't do it for roads, why not for "people maintenance"? Didn't answer my question if the change in terms would suffice to gain your support.

How do you address those that are 'known money sinks'?

My point - that insurance is an improper mechanism for dealing with that problem - doesn't require me to forward any solution to the problem. I make no particular claims about what solutions are possible or which solutions are desirable.

One thing is clear: either some source of funding must be found, or those patients must go without treatment.

... doesn't require me to forward any solution to the problem.

it may not. but others do have solutions to the problem, however imperfect you consider them to be. so, in the absence of other candidates, any problem which has to be solved, as you so starkly described, is solved by candidates in hand.

Caledonian, to argue that a given solution is NOT the best solution, it behooves you to provide a better solution.

After all, the burden of proof should be on the one with the plausible task - it is impossible to show that a given system is the absolute best out of all possible systems, but it is simple enough to show that it is inferior to some other system, and therefore CANNOT be the best.

So ... Do you favor government purchasing health care for all citizens, allowing some (mostly the poor, which is the sort of thing that leads to class warfare, which is never good for anyone involved) to just die in the streets of treatable and preventable illnesses, or do you have some third solution that is superior to both?

If you know of no such third solution (and let's not count "hybrids" where the government provides a basic level for everyone and then people can buy more on top of that, because that's not the point - the point is that either the government ensures the poor don't die of treatable illnesses, or they will do so), then refusing to state which of the two known alternatives you prefer is simply refusing to participate in the debate, which is perfectly legitimate, but raises the question of why you bothered posting anything in the first place.

Caledonian, to argue that a given solution is NOT the best solution, it behooves you to provide a better solution.

Wrong.

What's disturbing is that most of the people who spout nonsense like this actually seem to believe it.

What's disturbing is that most of the people who spout nonsense like this actually seem to believe it.
Posted by: Caledonian

Interesting.
Argueing against something without putting up an alternative and claiming what you are argueing against is false.
Now who else does that?

If we assume that the present system is not working as it should (or as people would prefer it to) then an alternative is required. Call it whatever you like, if using the word insurance offends ones sensibilities, but seek a solution or leave it to others and accept theirs, don't just be a knocker.

Merry (fill in your prefered festival here) to all

I don't think it's a requirement to have a better solution in hand before you are free to criticize the current system.

That said, given one underlying principle (mine at least), that everyone should have access to healthcare regardless of their health, I choose a system that is essentially
1) medicare for all
2) private companies allowed to compete
3) one pool of individuals, no cherry picking

Notice I was able to avoid using the word insurance lest it confuse the situation.

#99
rmp,
I agree that it is sensible to criticise what one considers a poor existing system.

However, as you have so concisely done, an alternative (or change proposals to the existing system) must be offered else you'll be stuck with the status quo (not my favourite group).

Now you just have to sell it to the politicians :o)

Oh yes, my comment #98 was against knocking proposed alternatives to a system that most people see needs changing without offering another or defending the existing system.
There will, of course, be discussions between those proposing different alternatives.

I do think that, when it comes to matters of public policy, you can take several approaches.

(1) You can say that the desired policy goal, in itself,
is undesirable. In that case, you only need to state why,
and make the argument that society is better off not
satisfying that goal. You don't need to make an alternative
proposal - the point of your argument is that the goal
itself is wrong.

(2) You can say that the goal itself is desirable, but a
proposed solution for how to achieve that goal is
incorrect. You can argue against that either by showing
that the proposed solution does not, in fact, achieve
the goal, or by arguing that the solution is sub-optimal.
However, in this case - when you're arguing that a
particular solution is sub-optimal, but that the goal
is desirable, then I think you are obligated to propose
a counter-solution.

We can cast those into scientific terms, and see how they work there.

When you look at a piece of crackpottery that solves a problem that doesn't really exist, then all you need to do is knock it down as nonsense. For example, "memory-of-water" explanations for homeopathy are a pile of rubbish. I don't need to propose an alternative explanation for how homeopathy works - the problem itself: "how homeopathy works" is invalid. I do need to show why homeopathy is a pile of rubbish.

I can also look at scientific problems, like how gravity works. We've got newton's law of universal gravitation, which is a very good solution. I can argue for an alternative description of gravity. But if I just argue that Newton's law stinks as an explanation of gravity, and that we shouldn't use it, because it's such a rotten law - if I don't propose an alternative - then my argument isn't going to get very far. Because Newton's law works for *most* cases. If I throw it away without any replacement, then I'm left in a situation where I used to be able to make predictions, but now I can't.

Getting back to health care and insurance:

The goal is making it possible for everyone to afford the medical care that they need to be healthy.

You *can* argue that that goal is undesirable - that it's better to let people who can't afford medical care to do without. Personally, I find that to be a thoroughly repulsive argument, that rich people are more entitled to a healthy life than other people - but you can make that argument.

If you *don't* make that argument - that is, you accept the idea that providing affordable healthcare to all members of society is desirable - then, I think, you're obligated to provide some proposal for how to achieve it. We know that you can provide good quality health-care to all members of society: it's done throughout most of the developed world. There are successful universal health-care systems in Canada, the UK, most of Europe, Taiwan, and plenty of other places. They work - they provide healthcare to all members of society, and they do it at a lower cost, and with better outcomes, than the current US system which leaves many people out. So we *know* that government run universal health care systems *can* work. So we've got a solution that can work. If you want to argue that universal care is desirable, but that a government-run system is not a good solution, then I think you *are* obligated to propose an alternative. If the goal of affordable universal healthcare is both desirable and achievable with some solution, and you're arguing that we *shouldn't* do it because the solution is bad, you do need to provide a counter-proposal that achieves the goal without the problems you point out.

Mark: Thanks for explaining what I meant quite well!

And yes, you can criticize a solution without proposing another one - you can say "The proposed solution has these problems", and that's fine - maybe someone else can fix them.

But if you just say "The proposed solution is bad", without identifying specifically WHY it is bad, or if you try to argue that because it has flaws it should not be acted upon, it behooves you to show that it is either worse than doing nothing, or worse than some alternative solution.

Caledonian, you were saying "The proposed solution is bad", didn't clearly explain why that is, and didn't try to argue that either doing nothing or something specifically else would be better.
Thus, as it stands, your arguments indicate that you believe that the general solution of government-funded health insurance is the best solution known. Feel free to correct me, specifically by showing a better solution. (And yes, "no solution" is potentially better, but only if you can show HOW.)

You *can* argue that that goal is undesirable - that it's better to let people who can't afford medical care to do without. Personally, I find that to be a thoroughly repulsive argument, that rich people are more entitled to a healthy life than other people - but you can make that argument.

If you *don't* make that argument - that is, you accept the idea that providing affordable healthcare to all members of society is desirable

False duality. The position you favor is presented as the negation of a position that will be generally reviled, but it isn't really. You're trying to get people to swallow the idea that if they reject the offensive position, they must accept yours.

Caledonian, you were saying "The proposed solution is bad", didn't clearly explain why that is

My humor quota for the day has already been met. But thank you for trying.

Caledonian:

How is it a false duality? I'm arguing that there's a goal that *I* find desirable - namely, that everyone should be able to afford medical care.

The alternative to that is *not* everyone can afford medical care - in which case rich people live healthier lives than poor people.

If you want to make the argument that affordable health-care for everyone isn't a desirable goal, then you *are* arguing that it's best for people with money to be able to afford health-care which is denied to people with less money.

I don't see any false duality there. Not(Everyone can afford healthcare) is equivalent to (There some people who cannot afford healthcare.

Note that I'm not arguing that the two alternatives are "government run health-care" and "private health-care", where "private-health-care" necessarily implies that there will be people who don't get care. I'm starting with what *I* believe to be desirable: "Everyone can afford healthcare", and working from that. You can argue that government-run healthcare is awful in all manner of ways without disagreeing with the goal that I've stated. But if you disagree with the desirability of the goal, then you are necessarily arguing that it is desirable for people who cannot afford healthcare to go without.

How is it a false duality?

You're excluding branches of the contingency tree, and presenting a false choice as a consequence.

Maybe you're doing it intentionally. Maybe you're so blinkered that you can't even see the exclusions. But it makes little difference either way: your argument is invalid.

But if you disagree with the desirability of the goal, then you are necessarily arguing that it is desirable for people who cannot afford healthcare to go without.

Wrong.

Let me translate Caledonian for you: "My political belief trumps your life".
The lives of the poor are inconsequential when compared to the "greater good" of preventing ANY government interference in the markets.

And yes that makes him every bit as bad as those leftists in the west that supported Stalin after it became clear that he was a monster.

If he's excluding branches, Caledonian, surely you can identify them.If you're not just lying and trolling for the sake of trolling.

I read the numbers once on the bureaucracy surcharge, as it were, under the current US heath system, and it was over 30%.
If you're paying a $600 insurance premium, monthly, over $200 of it is paying the salaries of the people at the doctor's office who call the insurer to argue that you really needed treatment; the letter writing back and forth between the insurer, the doctor, and you as to who gets to pay the questionable cost; the person who sends you a nasty letter from a new insurers' underwriting department telling you that falling on your face 5 years ago makes you ineligible for coverage now; the guy who decides to drop coverage on whom who have been paying for supposed maternity coverage, because now that they are pregnant, they will have actual bills; etc, etc, etc.
A lot of that can be streamlined with single-payer health care.

PLUS, the entire economy will benefit from people who are actually getting treatment for their diabetes instead of passing out behind the wheel of a Big Rig; asthmatic children being able to attend school regularly instead of missing huge chunks in allergy season because their inhaler got discontinued and the doctor hasn't found a good replacement still on the list of accepted prescriptions; working moms dropping in to a clinic for bronchitis instead of dropping at work and being sent to an emergency room because it turned into pneumonia.
It's not only humane; it's a good idea to keep people healthy so they can be productive members of society. You can have several chronic ailments and still work, if you have luck, good treatment, and fortitude. But good treatment is a necessity; give a diabetes patient some nutritional counseling now and avoid a kidney transplant for the same person 11 years later. Doesn't it make sense economically to keep people who are ill in the workforce, if possible? Doesn't it make sense to try to catch problems when they are small and cheap to treat, rather than when they are ER issues?

But, OMG, that's socialist thinking, so even though it's a good strategy, we can't possibly consider it. "Invizable hand, sav me from da commiez!"

If he's excluding branches, Caledonian, surely you can identify them.If you're not just lying and trolling for the sake of trolling.

Stimulus, response... stimulus, response... don't you people ever think?

No wonder you're so quick to label things as the work of trolls - you really can't tell the difference.

Tell us, Mr. Ralston: what is the negation of "providing affordable healthcare"?

For that matter, perhaps you can explain to us all why the conversation mysteriously shifted from insurance to affordable healthcare, hmmm?

Caledonian:

You're still avoiding actually answering the question.

As I said: my argument starts from the premise that everyone should be able to afford healthcare.

¬(Everyone can afford healthcare) ⇒ Exists people who can't afford healthcare.

Your little gambit about "the negation of providing affordable healthcare" is just more weaseling. The negation of "providing affordable healthcare" is "not providing affordable healthcare". You can play with the words - instead of saying "rich people get healthcare and poor people don't", you can say "healthcare is unaffordable for many people". But those two statements mean exactly the same thing: people with money get healthcare; people without don't.

How about instead of continuing to play the snide asshole, you actually engage in the argument, and *state your position*. If I've made an error and created a false duality, then *tell me what the error is*. What case am I missing?

Caledonian wrote: "My point - that insurance is an improper mechanism for dealing with that problem [of people whose need for health care is a certainty rather than a risk] - doesn't require me to forward any solution to the problem. I make no particular claims about what solutions are possible or which solutions are desirable.

"One thing is clear: either some source of funding must be found, or those patients must go without treatment."

I take the phrase about insurance being an "improper mechanism" to mean that the basic concept of insurance is to provide for payment upon some contingency, and a certainty (regarding need for health care) is not a contingency. I agree.

I also don't see a necessity for Caledonian to propose a solution to the problem, or more precisely, for us to await a solution from him. I'm quite happy to have a discussion of solutions on a voluntary participation basis.

Third, I think Caledonian's final point (in the absence of funding people will go without care) is incontrovertible, barring a vanishingly unlikely outbreak of free care for all who need it.

Now, on to a discussion of solutions. I am supposing that free/charity care will not provide for all who are excluded from a private payer system by reason of insurability or affordability issues, so at least a part of any solution will be publicly funded through taxes.

A primary difficulty with a two-tiered system of paying for health care (those who can be insured have their costs paid via insurance; the "uninsurable" and those who can't afford premiums commensurate with actuarial predictions of their costs have their care paid for partially or wholly with tax dollars) is essentially the same as a problem faced by the Medicaid program in the U.S. That is, the lower the numbers in such a government-funded program, particularly to the degree program beneficiaries tend to be those with less political power, the less political support it will have, making adequate funding a constant issue. This tends to lead rather inexorably to lesser quantity or lower quality of healthcare (or both) for those in the government-funded system.

"Spreading the risk" by including the healthy and wealthy in a government-funded program leads to a different set of problems, more typical of those faced by the Medicare program in the U.S., and by government-funded healthcare-for-all programs in other developed countries. The political base for such programs is huge, creating disincentives to limitations on care ("rationing"). This tends to lead to the cost of such programs constantly bumping up against the willingness of the public to fund them, and the ability of the government to adequately fund programs in areas outside of health care.

Obviously, neither these extremes nor any mixed solution will be a panacea, though as Mark CC has pointed out, other nations are arguably doing a better job balancing quality, cost, and access than the U.S. is currently.

You're still avoiding actually answering the question.

No. You have utterly failed to understand what the question is, and so the answer makes no sense to you.

I once watched a child attempt to complete an exercise on multi-digit multiplication, but he had incorrectly internalized the procedure the teacher had shown him. So he would 'correctly' follow the procedure, produce an answer, compare it to the given correct answer - and be stumped.

He traced through his actions several times, comparing what he had done to the mental copy of the 'correct' procedure in his mind, looking for a simple mechanical error, but he couldn't find one. He was doing it the 'right' way. And the possibility that his understanding of the 'right' way was wrong never entered his mind.

You're making a rudimentary error. I could explain it to you many times, but if you don't recognize yourself that you are wrong, the knowledge would do you no good. I cannot cause you to suddenly see the invisible premises that are distorting your reasoning.

If you cannot properly form arguments in natural language, you should stick to the formalisms of mathematics. Its rigor makes it harder to fail as you have failed.

This really saddens me because I thought we could have a meaningful discussion on this topic. It hits close to home for me (as I suspect it does with most people). While I've been trying to go the extra mile to understand Caledonian's position, it is clear that he/she isn't interested in sharing exactly what that position is.

We are too dumb to understand the question. Perhaps we could start a separate thread for those of us unenlightened ones to engage in the conversation. At some point, I would expect that we could 'graduate' to the level of competence to once again engage Caledonian.

Companies want to attract the best employees and a good way to do that is to offer the best benefits, including the best health insurance.

I find this is frequently not true. Yes, the best possible companies at the highest levels of whateverthehell will want the best possible employees, but not everyone works in That America. There are hundreds of thousands of people working in positions from pink to blue to white collar where they just need a decently competent person who won't make too many waves. A lot of us, like it or not, are completely expendable especially if there's someone around who may or may not be as good as us but is willing to take more crap for less money.

As a small business owner, one of the things I had on my Christmas list was something that would take me out of the 'insurance provider' role. My role should be to provide people with jobs that provide enough money for 'them' to buy the services they need. I don't directly buy their groceries, pay their mortgage or pay for their auto insurance.

Even republican businessmen I know would favor a government provided single payer system. As small business people we provide NO value to the equation with the possible exception of providing access that they can't get on their own. This can be remedied simply enough.

Tell me to pay more in wages, I can deal with that. Tell me to provide health care and I'll not be so receptive.

rmp wrote:

"Even republican businessmen I know would favor a government provided single payer system."

Those wouldn't be Republican businessmen who are insurance company executives, I take it? ;-)

Well I thought that went without saying ; )

Caledonian: Are you just trying to teach us all via the Socratic method? Haven't you learned that that isn't the best method in the asynchronous environment of blog comments? Face to face, you can circle around the answer and force the student to learn something by themselves, because you're right there providing feedback. In a comment thread, it just seems like you're being an evasive asshole.

Yes, we 'learned our lesson' on calling it insurance, though I'd wager it's as much to get you back on track than any actual correction. But that's nothing more than a change in word choice - we all mean the exact same thing when we call it 'affordable healthcare'. You're obviously trying to teach us something a bit larger here.

You're making a rudimentary error. I could explain it to you many times, but if you don't recognize yourself that you are wrong, the knowledge would do you no good. I cannot cause you to suddenly see the invisible premises that are distorting your reasoning.

I'm curious - did you say the same thing to the child who couldn't multiply?

The hypocrisy of this statement is even more stark when you really compare it to the example you gave of the child. The child *knew* he was wrong because he had the correct answer to compare it against. Given time and motivation, he could work out what was at fault and come up with the correct algorithm. If you acted the same toward the child as you are here, you'd simply be looking over his work and declaring it wrong with no further information. After all, if he can't just *tell* his answer was wrong, you explaining to him how he was wrong wouldn't do him any good. Right?

Stop trolling and start talking, if you want to actually converse. Anything else is indistinguishable from malice and incompetence.

Stop trolling and start talking, if you want to actually converse. Anything else is indistinguishable from malice and incompetence.
Posted by: Xanthir, FCD

For it to be malice cal would actually have to know something we don't. I suspect that s/he finds it hard to explain what s/he means because s/he isn't sure what s/he means.

Argueing about the use of the word insurance is odd; in the UK the NHS is funded (or should be) by a tax called national insurance; along with other things such as welfare benefits.
It is ensuring the supply of basic (and not so basic) health care to all those living in the UK; and is an assurance of available health care free at the point of supply. All taxpayers in the UK and their employers contribute.

As I see it, there are only a three main options:

1) No goverment help. Pay yourself or no medical care except that supplied by charities. All hospitals and medical education private.

2) 100% goverment supplied health care, all hospitals and medical education goverment owned/controlled. No private health care allowed.

3) A mix of goverment and private.

Of these I opt for number 3.

But 3 is what you have in the USA you say!

Well yes and no.

I would suggest the European/UK/Japanese/Singapore models are worth looking at.

In those places;
a) the goverment owns hospitals (private hospitals are allowed of course but aren't common).
b) The education and training of medical personnel is standardised (doesn't result in a uniform output but the rules are the same for all) and regulated.
c) Basic (definitions differ from place to place as to what is basic) healthcare is paid for by contributions from all taxpayers who earn above a certain amount. In India they'll treat you and then work out how much you owe based on your income.
d) Medical insurance is available for those who wish to go private, however this is an additional cost to the individual they still have to pay into the general pool (no discounts given).
e) The state does do cost benefit analysis on treatments given and drugs used. This is a bone of contention amongst the public and medics; both sets of people argue against it, sometimes for the same reason. However there aren't infiite funds so some method of resource allocation is required.

It isn't easy working out how to work option 3 to best advantage, each country has developed their own rules.

In the UK non-residents are treated free then sometimes the goverment will back charge their country of residence.

In Singapore, non-residents have to show that they have insurance or a way to pay for the service before being admitted. Also, you can pay extra to get a better room (three classes of ward when I used it); the medical care doesn't differ.

Europe has as many systems as countries.

In some countries dental work is paid for as part of the health service in others it isn't.

The commonality between all these systems is the removal of the "for profit" ethos that insurance companies and private hospitals must have.

It can easilly be argued that a healthy populace is more productive and so good for the country. However the driving force behind most of the NHSs was moral.
Seems being moral is good for the nations health as well as the peoples.

The devil is in the details.
The USA also has the large problem of entrenched insurers and private hospitals who don't (well the managers anyway) want to see much change.

If public reaction to the story that the EEOC determined companies could zero health benefits for retirees 65 and older is any indication -- and should it prove to be representative -- there's a fair bit of anger at companies and government out there, whether this fits into anyone's notion of the proper way to run an economy, a society, or not. I don't care what it is called, or how it looks from some squeaky clean Buckley-like tower and castle: Something needs to be done about this, and the mood seems to be to compel government to act, after repeated and reported abuses. Whether or not companies respond in the fact of government regulation, people see them taking and abusing regulations -- even if they follow them -- so feel they are justified in doing the same. If business comes on the side of single payer, as health care providers seem to be increasingly in favor, it's hard to imagine federal resisting, no matter what their political stripe.

BTW, because of the distortions of the American medical payments system (a.k.a. "insurance"), physicians are trained to practice "American medicine", cow-towing to insurance companies desire for many tests and "objective determinations" of illness. Even in this American system, I prefer many foreign trained doctors, including UK and, now, Argentina. This is in anticipation of some people having problems with:

The education and training of medical personnel is standardised (doesn't result in a uniform output but the rules are the same for all) and regulated.

cited by Chris' Wills above. I'd stick around and wait for reactions, but can't, as I'm busy.

We have a problem: no insurance system, no matter how well it works, can handle 1) people with pre-existing conditions and 2) people that can't afford to pay for their level of risk.

I'm willing to listen to intelligent suggestions on how we can find a solution to this problem. If we'll need to abolish insurance completely, so be it - but we need to explicitly recognize that fact if that's the case, and the new system needs to be specified.

@Brian Souder (and others):

Insurance is, as I learned in Econ 101 (micro) "exchanging current known cost for unknown future cost." All arguments that take another position fail. The fact is that single-payer systems are more efficient than the market can possibly be. The per-capita cost of any other G-8 country's insurance program is _much_ smaller in both dollar amounts and percentage of GNP than it is in the U.S. Remember, you free-marketers, that the patient does not and cannot, unless a physician, determine what health care he or she requires: the physician does. Health care therefore cannot ever follow a market model because the actual consumer is the physician, the gatekeeper to the system.

Thank you, Cal. ^_^ That was nice and clear.

You are correct in both your assumptions. An actual insurance system can't handle those two situations. What's worse, as technology advances the first group (people with pre-existing conditions) will get larger and larger. Whereas before they were just part of the risk, now we can determine what they are likely to have beforehand, and thus lower our risk (and premiums!) by excluding them.

Technology is really an insurance killer, I think. Insurance is COMPLETELY about the unhealthy profitting on the backs of the healthy, but it works because nobody knows just who the unhealthy ones in the pool are. You pay in because it might be you. Once you have a diagnostic for something, though, the equation changes. You can verify that people don't have (future?) disability X before letting them join, thus reducing or eliminating the risk of one disease or problem showing up in the pool and lowering the expected average payout. This lets you reduce premiums, which is efficient.

Problem is, with sufficient technology, everyone gets segregated into their own personal risk groups. We all know exactly how unhealthy we are going to be, and so we pay exactly how much we will need. This is identical to no insurance at all. Insurance thus defeats itself except for the few things that are still unpredictable like accidents.

So, this is a long-winded way of saying that, given the current state of medical diagnostics and the expected future improvements in them, health insurance as we know it pretty much does have to be abolished because otherwise it will abolish itself through market efficiency. Better to be ready for it so we can handle the fallout.

This is where medical welfare comes into play. The occasional expensive person *needs* the resources of the healthier masses to pay for care. However, the uncertainty that cloaked their identity before and allowed insurance to serve their needs has been (will be) peeled away, and so we intentionally blind ourselves so that they can continue to benefit as they once did, for moral and societal reasons.

Everybody pays into the system with taxes, and draws from it directly. Everybody is treated the same. This works identically to how insurance once did, where most people pay more for healthcare than they actually cost in order to subsidize the unhealthy/unlucky people.

As far as I can tell, this is the only possible solution that doesn't involve poor people dying because they can't pay for medicine.

As noted, there are certain benefits that can still make this better for most. Because we are intentionally blind, we don't have to worry about risk. Huge groups of actuaries are unnecessary. Since we're non-profit, we can cut out a lot of overhead that would have gone to shareholders. Since we're government, we can cut out the excessive profits the executives make as well. Finally, since we're government, you get relatively decent transparency of operations and spending that is completely absent in the corporate world, possibly spotting and ending inefficiencies and graft (though I won't hold my breath on this point).

These all combine to lower premiums fairly significantly, which (I believe) can easily counter the rise in premiums encountered by reabsorbing into the pool the people we can currently identify as high-cost.

Rather than going government, we can go single-pool insurance, which is a weird hybrid. You're making insurance intentionally blind itself. This sort of self-defeats the concept of insurance, but whatever. We can call it something different, like hybrid healthcare.

Hybrid has the downside of still being for-profit, which raises prices, but there may be benefits to the market continuing to handle things. I'm not sure, though. Essentially you're pitting the extra cost of profits against the extra cost of government.

So, this is the part I'm not sure about. Anybody got some reasonably convincing arguments about hybrid healthcare versus government healthcare?

Remember, you free-marketers, that the patient does not and cannot, unless a physician, determine what health care he or she requires: the physician does. Health care therefore cannot ever follow a market model because the actual consumer is the physician, the gatekeeper to the system.

Um, no. It's the patients who choose which physicians to go to, what treatments to accept, and which opinions to go with. Physicians can only refuse to offer treatment.

So, this is a long-winded way of saying that, given the current state of medical diagnostics and the expected future improvements in them, health insurance as we know it pretty much does have to be abolished because otherwise it will abolish itself through market efficiency.

I don't think this means the end of insurance. It's the end of insurance as the means by which society is kept in a manageable state - as the pool of people that aren't viable candidates for insurance increases, the need for alternative measures increases as well. There will still be lots of people that can get and should be insurance. There just won't be enough of them, relatively speaking.

For these reasons, I'm doubtful that eliminating insurance is likely to be part of a solution, although I acknowledge the possibility. It will probably be more fruitful to look for methods that specifically address the needs of the uninsurable first.

Having healthcare be affordable is another matter... and we need to specify what we mean by 'affordable'. It's never been affordable for anyone - that's why we have insurance. Affordable protection of some kind is what I think people mean to say.

Selfishly, I care about the effect of the subprime mortgage/credit mess in terms of the evaporating equity of my home, in Altadena, higher in the foothills and North of Pasadena, California. My wife and I bought it 19 years ago. I also care about this in comparison, with my zip code (for all of Altadena), for the state of California, for the USA, and phase differences (lags or leads).

Over the past decade, it appreciated (boom!) by an estimated 293.7% [compared to 306.9% in my zip code, 205.9% in California, and 109.8% in USA] using the Zillow web site which does mysterious things with local sales of comparable homes. Most of that equity inflation happened in the past 5 years: 222.5% [compared to 162.8% in my zip code, 100.2% in California, and 56.6% in USA].

In the past year, as stuff hit the fan, the value began to decline (bust!) by -0.7% [compared to -4.4% in my zip code, -10.9% in California, and -7.7% in USA]. Most of that came within the past 30 days: -4.3% [compared to -3.0% in my zip code, -3.4% in California, and -2.6% in USA].

I also care how long the real estate deflation will last. Some estimates are that it can be 30% nationwide to bring mortages in line with incomes. Some think it can soft-land with smaller decline. Some expect a real estate depression, with 50% loss of equity.

Of course, there is a heterogeneous distribution by state, by neighborhood, within each, and between apartments, condos, rented homes, and mortgaged homes.

So who knows? What I'm feeling is subjective reaction to rapidly declining on-paper home equity, when I never seriously planned on selling now, nor spent that equity in 2nd mortgage or home equity loans.

And a certain anger than factions in both major parties want my taxes to bail out greedoids and fools who bought on dubious terms, planned to flip, or over-leveraged for credit spent on consumer and luxury goods. That would, relatively, punish me for being prudent.

So I'm not so affected by economic theory, despite having published in the field of Mathematical Economics. I am affected (subjectively) by the political and economic effects of people who can't to the Math, or did it wrongly, or did it right and concealed their results from those with whom they had an obligation to disclose.

I really think we need to abandon the concept of 'insurance' in so far as it's used to mean a pooling of risk among those that have little risk.

With very few exceptions, over the course or our lifetime, we will move from a 'low risk' pool to a 'high risk' pool.

This is if everything is 'good'. If not, you can be born into a high risk pool.

This is not analogous to fire insurance. But I suspect you already know that.

I really think we need to abandon the concept of 'insurance' in so far as it's used to mean a pooling of risk among those that have little risk.

That isn't what it means. Those that have much risk can also enter the pool. But they must pay more.

As we become more and more sophisticated in our ability to determine an individual's health care needs, I'm at a loss as to what benefit there is in 'spreading the risk'. If we know (before you're even born) that you will incur large health care costs, it only makes sense that we charge them appropriately. So in other words, what's the point. Spread the cost or don't. Just quit pretending that it is something other than what it is.

Silly me for imagining that a prosperous industrialised nation might be able to decide, on grounds of altruism, not to let poor people die in the street. Clearly healthcare is in fact purely an economic issue with no connection to issues of human suffering or empathy.

rmp wrote: "As we become more and more sophisticated in our ability to determine an individual's health care needs, I'm at a loss as to what benefit there is in 'spreading the risk.' If we know (before you're even born) that you will incur large health care costs, it only makes sense that we charge them appropriately. So in other words, what's the point. Spread the cost or don't. Just quit pretending that it is something other than what it is."

Most states prohibit insurers' use of genetic information for underwriting (acceptance/denial, pricing), and the federal government is likely to follow suit in the near future. If those prohibitions are eventually overturned in the future, and genetic testing developed to the point of being able to predict various conditions with certainty, then yes, to that extent we would be spreading cost rather than risk with regard to those individuals. (Realize, though, that the best genetic testing won't predict such drivers of healthcare costs as car accidents, so there will still be plenty of cases where it's risk rather than cost certainty that's being spread.)

ekzept wrote: "[T]he EEOC determined companies could zero health benefits for retirees 65 and older...."

That isn't quite what happened. Most companies with health plans provide substantially less in benefits to employees and retirees over 65 (some provide none at all), relying on Medicare to make up the difference. Shockingly to most employers, a federal trial court in Philadelphia some years ago said this was age discrimination, in effect requiring employers not to take into account the fact that people 65+ are eligible for Medicare. This put in legal jeopardy the vast majority of employer health plans across the country, which of course had been formulated with the knowledge that Medicare was available.

A federal appeals court overturned the trial court's ruling, clearing the way for the EEOC to put out regulations explicitly allowing employers to do what the vast majority of them have been doing, at least recently - give less (or zero) in benefits to those 65+.

Many companies had reacted to the original trial court ruling by saying that if they were required to equalize medical benefits for under-65s and those 65+, they could not afford comprehensive benefits for those over 65 (who as a group have far higher medical costs), so they would stop offering medical benefits to both groups. Thus the court ruling and EEOC regulation can (and I think should) be seen as preserving health plans for under-65s.

NASSIM TALEB
Epistemologist of Randomness and Applied Statistician; Author, The Black Swan
http://www.edge.org/q2008/q08_17.html#hillis

The Irrelevance of "Probability"

I spent a long time believing in the centrality of probability in life and advocating that we should express everything in terms of degrees of credence, with unitary probabilities as a special case for total certainties, and null for total implausibility. Critical thinking, knowledge, beliefs, everything needed to be probabilized. Until I came to realize, twelve years ago, that I was wrong in this notion that the calculus of probability could be a guide to life and help society....

So it is wrong to just look at a single probability of a single event in cases of richer possibilities (like focusing on such questions as "what is the probability of losing a million dollars?" while ignoring that , conditional on losing more than a million dollars, you may have an expected loss of twenty million, one hundred million, or just one million). Once again, real life is not a casino with simple bets. This is the error that helps the banking system go bust with an astonishing regularity -- I've showed that institutions that are exposed to negative black swans, like banks and some classes of insurance ventures, have almost never profitable over long periods. The problem of the illustrative current subprime mess is not so much that the "quants" and other pseudo-experts in bank risk management were wrong about the probabilities (they were), but that they were severely wrong about the different layers of depth of potential negative outcomes. For instance, Morgan Stanley lost about ten billion dollars (so far) while allegedly having foreseen a subprime crisis and executed hedges against it -- they just did not realize how deep it would go and had open exposure to the big tail risks. This is routine: a friend who went bust during the crash of 1987, told me: "I was betting that it would happen but I did not know it would go that far".

Here in British Columbia, we have one healthcare insurance provider and one auto insurance provider for (basic car insurance).
For auto insurance this concept of one provider sucks - big time. The crown corporation has to provide less tiering of risk drivers therefore safe drivers do not get compensated as commercial providers could.
The other fundamental difference in auto insurance is that there is a spending cap. If your car is damaged beyond a certain point they just call it a day, give you a bunch of money and you go buy another car. This cannot be achieved in health insurance.
Lastly on the health side we are also dealing with rising costs. As technology improves, newer treatment costs more and prolonging the lifespan of individuals creating yet more burden on health spending as a whole.
So if we are stuck with one band of insurers and an escalating cost I don't know if any adjustment of the insurance system can be able to deal with it.

Mark W in Vancouver BC

So I did not read all the comments. But none of those I did read point out some key facts about other parts of our economy that are affected by high medical and insurance costs.
High cost of medical care is one reason US Companies have decided to move operations over seas where people either have single payer care of no health care. Its not the only reason but it is one of them.
Second unpaid medical bills are the root of many middle income financial problems. I was unfortunate enough to get laid off at the same time my wife needed to have a very expensive surgery. We had insurance that covered about $7k out of the $14k bill, however she could not work for 6 months and I was laid off. I managed to pay my mortgage for 8 months until I found a job but other debts finally took their toll and I had no choice but to file for relief from the bankruptcy courts. Had I not been burdened with $7000 in medical bills I would not have had to take that road. How many other americans have had to file for bankruptcy because of large medical bills?

Single Payer care is the only way to go, with a strong push toward healthier lifestyles for Americans. For instance in my daughters school they have Physical education 1 time per week. PE should be a manditory daily event for all school children k - 12.

if you can demonstrate that government regulation is actually impeding competition in a way that hurts the consumer. It's not good enough to just say so and wave your hands. (Incidentally, I've no trouble believing that such regulation exists, since political lobbying for more favourable legislation is a form of an investment.) Actually, your argument implies that regulation always has a negative effect on the consumer, which is even harder to support.