Deinonychus antirrhopus

Since I have nothing substantive to add:

Change all of the "Crane's" to "Cranes", unless it's a possessive. Nearly all of your instances are plural nonpossessive. Plural possessive would be "Cranes'"

Oh, man, Slartibartfast, are you asking for it...

We have this weird semi-socialist health care payment system, and the prescription from the left is always it needs more socialism. Why don't we try less? Socialism never works, why should it be different in Healthcare? We don't use a socialist system for food and water, both of which are "necessities" -- why in healthcare beyond historical circumstance.

What is the only healthcare proceedure to dramatically drop in price in the last 50 years? Lasik eye surgery, which is completely free market -- no "insurance" pays for it. Coincidence? I don't think so.

Yahoo! Someone on the left finally gets it! What most people call "health insurance" isn't insurance, and thinking about it as insurance makes clear thinking difficult to impossible.

I claim to be a reformed socialist, but here's where the leftie in me pops out:

If the main problem with national insurance is that it's a tax and therefore an economic drag, how is having the cost of a necessity spiralling out of control any less of a drag?

Put another way: right now I'm paying $372/month for my family of four for private insurance. To me, if I received an equivalent level of service for paying $375 a month in taxes, why should I care?

Also the point's been made before, but could be made again: the health care industry went nuts about Clinton's plan, and got people to go nuts about it by saying it would eliminate choice from the system. Take a look at HMOs and ask how many choices you really have.....

Not saying that government is the answer -- I've seen enough nightmare stories from Canada and Britain -- but as prices climb, the private providers need to have an argument other than "But we're not government!"

Dan,

There are many differences between our current scheme and a national health ""insurance"" scheme besides what you describe. I'll talk about two of them.

Firstly, not everyone has an HMO. I don't, and a lot of people in the country don't. Under socialized medicine, we'd all be part of one huge HMO, with no other choice.

Secondly, costs are spiraling out of control in our current system because (a) demand can't keep up with supply, and (b) the costs imposed by malpractice lawsuits. Having the government take over the provision of healthcare isn't going to make these problems magically go away. Either your taxes are going to go up each year by the same amount your premiums are, or health care is going to have to be rationed, giving you and your family less access to care for the same amount you are paying now.

In order to end the current health care mess, we need three fundamental reforms:

(1) We must enact tort reform. The increasing
frequency of malpractice lawsuits and
the increasing size of jury awards plays
a major role in increasing malpractice
insurance premiums (which can run to
50K/year or higher; that's 25% of
the average doctor's salary), which in
turn get passed on to the consumer.
Standing in the way of such reform is
the American Association of Trial Lawyers
and associated lobbies.

(2) We need to increase the supply of
health care. The normal response of
a market to an increase in demand is
an increase in supply. However, the
American Medical Association works
very hard to keep the supply of
doctors artificially low by restricting
the number of medical schools in the
country. We need to remove this barrier
so that the supply of health care can
rise to meet the demand.

(3) We need to separate the catastrophic
care functions of insurance from the
routine maintenance and prevention
functions of insurance and provide the
latter by alternative means. Only
when consumers are exposed to the cost
of their routine care can price
discrimination and other market forces
come into play to act as an incentive
to reduce costs.

If the main problem with national insurance is that it's a tax and therefore an economic drag, how is having the cost of a necessity spiralling out of control any less of a drag?

Put another way: right now I'm paying $372/month for my family of four for private insurance. To me, if I received an equivalent level of service for paying $375 a month in taxes, why should I care?

A high price is not equivalent to a high tax. Taxes come with a "tax wedge" (a.k.a. a deadweight loss). Now from a purely utilitarian stand point one could try to argue that the improvement from raising taxes and having the government supply someting offsets the deadweight loss.

As for this specific instance, do you really think the taxes are going to be equivalent to what you are currently paying for health insurance?

Oh, I left out one more fundamental reform:

(4) Insurance companies must not be allowed to
drop coverage for those who have suffered a
catastrophic outcome, even if the victim
stops working, takes another job or does
something else that would normally let the
insurance company cease coverage. This is
the flip side of "you can't insure
a pre-existing condition." If insurance
companies are allowed to easily drop those
with catastrophic outcomes, then they
have ceased to act as mechanisms for
pooling risk and are essentially taking
money for nothing.

Steve:

Thanks very much for sharing you thoughts on the subject. I think your analysis is, as usual, pretty much on the money.

Tom Ault:

Unfortunately, I suspect your suggestions are politically impossible.

IMO malpractice reform is largely a red herring. Total malpractice payouts account for less than 1% of total health care costs. While the figures you cite may be true for certain specialties it's far less true for others. And doctors could exert control on these costs themselves by stricter self-policing. That they continue to be reluctant to do this suggests that doctors believe they can get relief in other ways. Further, my own experience with the inner workings of the insurance industry suggests that at least part of the problem is that the industry has forgotten how to make money in the insurance business—they've relied for some time on the stock market. Years of high stock market profits have given them unrealistic expectations about year-to-year revenue increases. So they're increasing revenues in the most straightforward way they can think of by raising rates.

I believe that Say's Law applies with special force in health care. In and of itself increasing supply in health care will not reduce costs. And, as I said, I don't see any way to induce the medical profession to allow it to happen. A fifteen year largely unsupervised gravy train gave them, too, unrealistic expectations for revenue growth. And income is notoriously "downwards inelastic" as the economists say.

Your other two suggestions are even more difficult. I can't see consumers willingly bearing higher health costs so long as they can see an alternative. Health care increases already are a main component of the rate of inflation. And how would you suggest forcing insurance companies to retain high-risk insureds? Fiat? Whereever it's been tried it's resulted in insurers fleeing in droves.

I am a salaried physician at a VA medical center. I agree with most of what Tom Ault suggests. I have written about this topic before, and I briefly summarize my views below.

First postulate: Pure market forces do NOT work in regards to health care because of unexpected high costs (medical catastrophes). The same is true for home and car owners: an unexpected tragedy can cost hundreds of thousands of dollars.

Second postulate: Unfortunately, due to a combination of human nature and generations of living in a mollycoddling nanny state, adults will not act with prudence and foresight to insure against unexpected catastrophes.

This leads to my health care financing proposal:
1. Catastrophic health insurance for all adults and their dependents is mandatory. The required coverage will rise or fall based on typical medical costs.
2. Such insurance will NOT be provided by employers, so that coverage will be completely portable (and completely out-of-pocket).
3. Insurers must accept ALL applicants for catastrophic health insurance coverage (no cherry picking). Rates will be based solely on the ages of covered persons.
4. Insurers can offer more extensive health insurance plans and will be free to set rates and choose who to cover.
5. Persons who cannot afford catastrophic health insurance will be covered by Medicaid.
6. Medicare will be phased out. Poor elderly persons will get health care coverage through Medicaid.

This proposal treats health insurance like car or home insurance. Government involvement is minimal except for the Medicaid safety net. Persons can choose health plans based on their needs and out-of-pocket costs. They will be more sensitive to health care costs because the money comes right out of their pockets. This will rein in the escalating costs of medical care.

There's one thing in Gregory Tetrault's comment with which I agree: pure market forces do not work with respect to health care largely because there is no free market in that industry. The likelihood of such a market emerging approaches zero.

The largest single component in health care costs is not malpractice insurance costs, hospital costs, or pharmaceutical costs. It is physician salaries. The average physician salary is around $250,000. The median physican salary is around $150,000. Both have been increasing at a multiple of the general inflation rate every year since 1965 when we began our national experiment in socialized medicine. Physicians are the gatekeepers of the pharmaceutical industry and entry into the field is restricted by law. There is no real hope of controlling the increase in the cost of health care without controlling the rate of increase in physician salaries.

Physicians are the gatekeepers of the pharmaceutical industry and entry into the field is restricted by law.

And therein lies the problem. By restricting entry you restrict the number of suppliers and give them market power. By restricting MDs to being the only ones who can prescribe prescription drugs also gives them market power that they can use strategically.

Removing the barrier to entry would result in lower prices. The counter argument is that there would be a decline in quality of medical care provided. However, I'm not sure this has to necessarily be the case. Currently MDs are not required to test periodically to keep practicing which would be consistent with increasing quality of care provided. Hence I'm not totally convinced the current institutions are not about quality, but more about erecting a barrier to entry to raise prices.

"Removing the barrier to entry would result in lower prices. The counter argument is that there would be a decline in quality of medical care provided. However, I'm not sure this has to necessarily be the case. Currently MDs are not required to test periodically to keep practicing which would be consistent with increasing quality of care provided. Hence I'm not totally convinced the current institutions are not about quality, but more about erecting a barrier to entry to raise prices."

They're also not required to compete against very many new entrants. Such competition also tends to drive up quality even among already-qualified incumbents.

Wasn't there a component of Hillary-care that included a restriction on the number of medical students admitted to medical school?

Insofar as artificially restricting supply, boy, I couldn't agree more.

Most of what people see a doctor for could easily be handled entirely by an RN, or even an EMT with some RN training. It doesn't require 9 years of school and $100,000 to say, "Huh. You have the flu. Go home, keep taking aspirin to keep your fever down, call me if you can't keep water down and we'll write you a prescription." That way we could use doctors for conditions that actually are complicated enough to need 9 years of schooling (cancer, chronic pain, etc., etc.)

But because we've equated "health care" with "doctors" we have an artifically limited supply of care givers. In my happy happy world, RNs do more of the work, make more money, get more prestige, and we get more RNs. They're happier, doctors are happier because they don't have to rush in and out of different rooms giving each patient 5 minutes of medical care and the patients are happier because they pay less.

Just found this site, maybe by Marginal Revolutions, but I can't remember:

http://www.angelfire.com/pa/sergeman/issues/healthcare/socialized.html#canada

The problems w/socialized HC - haven't poked around yet, but could be interesting.

These new MSAs should be interesting, companies are taking a hard look at the opportunities.

Hokay, so what prevents using the co-op model? I'm thinking that a group could place a provider on retainer, so to speak, to provide basic services to the client population in return for some fixed fee arrangement along with agreements to limit liability to actual damages and submit to arbitration in lieu of the courtroom. There might be some utility in having catastrophic coverage separately or as an additional fee-for-service arrangement.