While Republican Jacksonians continue to claim that no health care reform is needed aside from tort reform/HSAs/more tax cuts, while Obama/Pelosi/Reid attempt to replace insurance company bureaucrats with government bureaucrats when it comes to medical decision-making, and while Reformist Republicans and Blue Dog Democrats attempt to figure out how to lower the cost of medical care and insure the uninsured without heading down the road to national bankruptcy or single-payer, there are some folks out there suggesting that we’re all trying to answer the wrong question. Sean Trende over at RCP has a thought-provoking analysis of the health care debate:
I’m not sure I’ve seen this argument in quite this form before, and if so it is likely because I’m completely off base here. But here’s a random thought on healthcare I’ve been toying with.
It seems the problem with the health insurance system is that we don’t really have a health insurance system anymore. Insurance, at least as traditionally understood, is a product you buy hoping you’re not going to use it. And indeed, you’re not likely to use it. In fact, you’re probably better off if you don’t ever use it. As such, you are probably going to lose money in the long run. But you spend the money anyway, because of the absolute calamity that would ensue if you drew the short straw without being covered.
Consider car insurance. I just did some rough calculations, and I’ve spent about $25,000 on car insurance premiums during my driving career. I’ve never caused an accident, so I’ve never really gotten anything out of this. I’ve been hit a couple times, and my insurance kindly paid for my repairs before collecting from the other drivers’ insurance. But the total damage to my car was less than $25,000, so I’d still have been better off not buying car insurance and taking the losses when I got hit. If I was Bill Gates, I would arguably be better off not buying any type of insurance, since I could afford any loss in the unlikely event I suffered a huge loss.
But for an economic mortal like myself, the fact is that if one day I was driving my car and got distracted by my son in the backseat and ran a redlight and hit someone, well, I could be absolutely financially wiped out without insurance. Car insurance protects against the increasing marginal cost that comes with above-normal liability. It spreads the risk through society of catastrophic car accidents, and even though the insurance companies’ actuaries make certain that society as a whole places a losing bet financially, it prevents unlucky individuals from being wiped out, which imposes other costs on society. It’s kind of win-win. But again, the idea is that most people will never, ever have to use their insurance.
I guess health insurance probably used to be like that. For most things there wasn’t much the doctor could do. When Ike had a heart attack, he got prescribed morphine and bedrest. This was the President of the United States, so I’m assuming that’s the finest care we had to offer. Insurance protected against the few catastrophic costs that were associated with health care at the time, and again, for the most part you didn’t use your insurance much unless something really bad happened.
But today, almost everyone will use health insurance at some time in their life; if you’re out of your twenties and have a family you probably use it several times a year. I’ve had a couple of major surgeries and have a major medical procedure yearly, and I’m in my 30s. My 2-year-old son has had two surgeries. All of these are very expensive, including the aftercare.
In other words, we’ve reached the point where we don’t have a system of health insurance anymore. Having health insurance is kind of like having property tax insurance — you’re know you’re going to get a big bill every year, so the idea of purchasing insurance for it is kind of silly when you come down to it. Bill Gates stands a reasonable chance of coming out ahead by purchasing health insurance, which is part of why premiums are so high. So I think the issue isn’t so much an issue of “health insurance for all,” so much as moving to a more rational health care financing scheme. But all the talk of health insurance reform increasingly strikes me a pounding a square peg through a round hole.
I’m not certain if this is right, and I’m not 100% sure what the policy implications are — I can think of plenty for the left and the right that would please their respective sides. But I think this is an interesting frame of the problem, so I thought I’d throw it out there. Thoughts?
I think that Sean is onto something, and both parties would be wise to drop the day-old, 1960s rhetoric over health care and address the issue in the context of the modern world. Republicans love to trumpet a world in which doctors and patients are the only ones involved in medical decisions, but that world doesn’t exist now, nor has it ever. And that’s a big part of the problem. Our employer-based health insurance system inflated the cost of medical care for everyone by violating that age-old principle of conservative economics: it insured (heh) that the average person would never have to actually pay his or her own medical bills. Instead, pools were created that spread risk, that relied on generous contributions from employers, and that allowed medical care to become basically unattainable to anyone without such insurance. That was all good and well until the modern economy stepped in and ended the days of four-decade-long employment with the same company, sending large numbers of Americans searching for individual health insurance or going without any insurance, and thus without most medical care.
This is generally where the moderates on both sides step in and suggest that if everyone is required to buy their own health plan, even if the state has to subsidize this purchase, the problem will be solved. But this solution falls short. It just doesn’t make sense for insurance companies to insure someone who will be a virtually guaranteed net loss to the company, a problem that didn’t exist when the risk could be spread among several dozen (or several hundred) employees. And yet as Sean points out, given that health care is now something individuals require on a pretty regular basis, more and more of us are either unable to be insured in the individual market without paying an unreasonable premium or are denied coverage when it is needed most because the condition is pre-existing. This makes sense from an economics perspective but not from a quality of life perspective — it’s basically the rationing of care by any other name, only it’s done by the private sector and not by the government.
I’m pretty sure that if the Democrats have their way, we’ll basically end up with a system with the same problems that we have now, only the bad guys will be government bureaucrats and not insurance companies. This will continue to be the case until somebody figures out a system that, as Sean points out, finances the care that we all need, and will continue to need, in the most efficient and economically sensible way possible. I’m pretty sure the current health insurance system isn’t it.
July 24th, 2009 at 5:53 pm
Dave,
I know you love using the “Jacksonian” label but it’s not just the Jacksonians who are insinuating that no health care reform is needed.
http://firstread.msnbc.msn.com/archive/2009/07/22/2004847.aspx
“Why not let it be examined in the marketplace of free ideas?” Giuliani said, arguing for the free market. “If it’s so good, what’s the rush?”
Giuliani went on to say, “We don’t have a health emergency.” And because of that, he argued, Congress and the president should take the time to “avoid a horrible mistake?”
July 24th, 2009 at 6:07 pm
That’s what Mitt is saying too Tommy Boy:
http://briefingroom.thehill.com/2009/07/22/romney-to-obama-why-havent-you-called/
July 24th, 2009 at 6:10 pm
Tommy Boy is right, the Jacksonian label is totally out of place here — and this anti-Palinite is normally a fan of the term.
July 24th, 2009 at 6:11 pm
Things are falling apart in the House Democratic Caucus.
http://thehill.com/leading-the-news/house-healthcare-talks-break-down-in-anger-2009-07-24.html
July 24th, 2009 at 6:16 pm
Also, health insurance still exists. I have a catastrophic-only plan for which I pay a little over $100/month. I’d be about $10K out of pocket in a catastrophe.
I used to have a concierge doctor to whom I paid cash, and I’ll be returning to him before long now that my business is growing.
The good ole’ days are still here, if you want them.
July 24th, 2009 at 6:27 pm
This is Rush Limbaugh’s argument, that folks should just pay their medical expenses and only insure for catastrophic coverage. The rest is just haggling over definitions.
Just read that the Obamacare pushes seniors to commit assisted suicide to get them off the expense sheet. Hope and change, people.
July 24th, 2009 at 6:30 pm
There are misaligned incentives in healthcare and the method of financing the system hasn’t kept up with the revolution in medical care.
However funding healthcare has become a crisis for mostly for one reason Americans are getting older and fatter.
If Americans had the same age pyramid as during the 1960′s financing healthcare with the current system would be manageable. If Americans weren’t as fat, the demand on the system would also not be as high.
However Americans are getting older and fatter. Those are long-term problems. We may need to look at ways to encourage healthy behaviors and more family formation.
July 24th, 2009 at 6:32 pm
Unfortunately Liz, that doesn’t work for people who live from week to week, which is a huge number of people. So, if they get hit hard, they go bankrupt, and leave the doctor/hospital holding the ba, thus huge premiums for the rest of us.
Metro can do that, and its a smart move for him. But many just have to default if they get hit with the big one, and the rest of us pay the tab, in taxes and in premiums.
July 24th, 2009 at 6:34 pm
#7 Family formation? I don’t see how you can tie this to social conservatism, when it’s red-state America that’s fat. We urban hipsters are far more healthy.
July 24th, 2009 at 6:40 pm
Illinois, if they get hit hard, the catastrophic is there for them. Y’know? Catastrophic insurance could be required, much like car insurance is required. But if people want to find a country doctor and out-of-pocket for yearly check-ups, I think they should be able to.
July 24th, 2009 at 6:41 pm
By the way, fat and old is awesome. It’s what makes America great. I reserve the right to be that way some day myself. Being fat and old is more of a right than healthcare.
July 24th, 2009 at 6:43 pm
#9
As America ages this causes healthcare to become a larger part of the economy. This is a problem as it limits economic growth while imposing higher healthcare and entitlement costs.
July 24th, 2009 at 6:50 pm
Old people aren’t a problem for the economy. We’re all going to be there one day unless we die young. This is one of the things that peeves me most about this Utopia stuff, I thought Logan’s Run was pure fantasy but some liberals really want this stuff. It’s inhuman really.
July 24th, 2009 at 6:52 pm
There are things that can be done now to increase the number of people who carry insurance.
Nearly 1/3 are people who work for small businesses (3-10 employees) that don’t offer insurance. We could create associations where those companies could band together to purchase insurance for their employees with the same rates as big companies pay.
We could make health insurance premiums deductible, making it less expensive by an amount equal to the taxes on premiums.
We could allow the selling of a second tier of policies that reduce premiums if insured elects a coverage where there is no punitive damage liability rights (self-elected tort reform). This has multiple consequences. It reduces the excess care given in order to protect against lawsuits. It reduces malpractice premiums. It creates a situation of excess capacity in system, which by itself should reduce costs or slow the growth rate.
There are many things that could be done that don’t involve nationalizing the health care system.
July 24th, 2009 at 6:57 pm
Liz,
“Just read that the Obamacare pushes seniors to commit assisted suicide to get them off the expense sheet. Hope and change, people.”
That’s what happens in Europe. Under socialism, people stop being people, and are just cogs in the wheel.
July 24th, 2009 at 7:00 pm
still hurting,
“We could allow the selling of a second tier of policies that reduce premiums if insured elects a coverage where there is no punitive damage liability rights (self-elected tort reform). This has multiple consequences. It reduces the excess care given in order to protect against lawsuits. It reduces malpractice premiums. It creates a situation of excess capacity in system, which by itself should reduce costs or slow the growth rate.”
Dang, that idea has some real merit. I’ve never heard it before. Did you think of that yourself?
July 24th, 2009 at 7:01 pm
#13
I’m not arguing for Logan’s Run. I’m pointing out that unless Americans start having more children our nation will face dire consequences.
The elderly will suffer in a situation where there aren’t enough young people to support our nation.
July 24th, 2009 at 7:10 pm
Gotta say, this is one of the more interesting discussions on healthcare I’ve read on this site.
I do have one question – if we go with the idea of only having catastrophic insurance, what’s to prevent the insurance companies from either denying coverage or making it so expensive to people with pre-existing conditions that we have another large section of the country unable to afford THAT coverage? Which means they won’t be covered, still need care, and still wind up being covered by the rest of us. Assuming the idea is everyone must be covered, you’d have to make the insurance behavior illegal.
July 24th, 2009 at 7:17 pm
Liz, I’m talking about catastrophic as being similar to what metro has. Multi millions can not pay for a 5 thousand or 8 thousand, or anything more than their pay check… that’s all they got. SO catastrophic doesn’t work for them, because even smaller amounts hurt them and the 10K theny just can’t handle at all. They take bankruptcy, and the rest of us pay their bills through taxes and premiums.
July 24th, 2009 at 7:40 pm
Persistence pays off
July 24th, 2009 at 9:27 pm
This post is exactly on the money. Insurance is only meant to cover major, unforseeable events, not routine, controlled events. We don’t put every gas tank fillup, every oil change, every carwash, and every new tire on our car insurance. Why should we do the same for our medical expenses?
Government trying to mandate everyone into doing so will only increase medical costs and decrease the quality of care.
July 24th, 2009 at 10:17 pm
I agree that health insurance is archaic. Now how do we come up with a modern conservative solution. We should find out from conservative politicians in Canada and Europe, how they would improve the national health care they get.
July 25th, 2009 at 10:58 am
I thought further on this and it wouldn’t work. For the same reasons health care insurance doesn’t work now. It comes down to defining “catastrophic” – for one person, that may mean five figure bills. For another, that might mean 500 dollars in one month. So catastrophic insurance for the richer would be cheaper than for the poorer, because the chance of some treatment costing 500 is far greater than one costing 10,000 – so the poorest would have the highest insured rate, which they can’t afford, and you have the same thing we have now – lots of poorer folk, uninsured for anything, but still needing care we all would be paying for one way or another.