My Version Of Health Care Reform   4 comments

I’ve talked about this before with various friends and sundry, but I’ve never blogged about it.

The problem with the Health Care debate in this country is that most of the solutions offered are almost as complex as the problem they’re trying to address, or they’re stupidly simple without simultaneously making the overall problem more simple.  This is one case where our system, which has grown and evolved over time, has become unnecessarily complex.  I was finally going to blog about it this week, and then I happened to notice something truly remarkable: Mr. Denniger already wrote itTwice.  Holy tamoly, this is *exactly* what I’ve been saying about health care for *years*.

Note: I’m not particularly certain that my/his idea will immediately correct all the problems with our health care system.  One major problem not addressed, for example, is that the doctor population in this country is hugely rewarded for choosing specialty care as their practice, when what we really need is more general practitioners.  Another is that there is going to be a rather ugly transitional period here, since all medical billing is currently completely insane.  Just two examples.

But this is one case where I do agree fundamentally with conservatives who say that massive infrastructure isn’t what’s required to solve the problem.  Certainly there are issues here, even with Karl’s framework.  It removes medical bankruptcy, which is good.  It ensures that everyone  gets lifesaving care, which is good.  It doesn’t actually solve the long term problem of the free riders, though, since people still won’t get enough insurance, they’ll still go to the emergency room, and it doesn’t really matter if your debt is assigned to the IRS to collect if you’re never going to make enough money to pay it off.

However, it resets the playing field at “not completely, utterly, and overwhelmingly complex to the point of utter insanity”.  It turns insurance companies into true “amortization of risk” companies, which is what they ought to be (note: I’m not convinced that limiting by state is the best long-term solution, but it’s an appropriate place to get started).

It won’t fix everything, but it will certainly remove layers upon layers of obfuscation.

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Posted September 10, 2009 by padraic2112 in politics, Uncategorized

4 responses to “My Version Of Health Care Reform

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  1. Pat I admit I haven’t looked at the US legislation in any great detail but we have ‘freeriders’ or ‘freeloaders’ as we call them here. People who go to emergency with a sniffle or a temperature but to me it’s like social security. Sure some people abuse it but most need it. If we focus on the minorities there would never be any social security or socialised health. One suggestion was to have emergency ‘clinics’ not necessarily associated with a hospital to relieve pressure on emergency facilities in big public hospitals. I still maintain that despite a few system rorters, the universal option works. And works well. We also have the same problem with general practitioners, it’s more lucrative to specialise so attracting generalist MD’s is very difficult. Frankly I think MD’s deserve more remuneration than the specialists, they have to have wider knowledge. It’s a tough one and we haven’t addressed it well here other than offering MD’s financial incentives to go into rural areas. Basically, universal health is flawed but there will always be some who abuse the system however, the majority use it responsibly.

  2. I would contend that the problem no one is addressing has to do with what Washington calls the ‘free market’ vs. what we collectively think of as our ‘rights’. Bottom line is this: as long as the health care industry resides in the private sector the primary impetus is profit. Not ‘reasonable profit’, not ‘zero sum game’, but making as much money as can be made in order to benefit the stockholders. That is what companies do. Making the regulatory environment for health care sufficiently restrictive is a reasonable approach, but then you’d also need to put a robust enforcement arm into place as well as a non-trivial cost. And what company motivated by profit is going to enter a marketplace like that? And if they did, what level of service will they provide?

    This is, by the way, the reason there effectively ARE no more GPs in the medical marketplace; they can’t make enough money to pay off their $150-300K in med school loans. The role of ‘family doctor’ is increasingly filled by nurse practitioners, who are in very high demand right now, and ‘Doc-in-a-Box’ clinics. In fact my father (who has been in the medical industry for 40 years- not as a doctor, but as someone who advises them on business and regulatory matters) suggests that one could make a great living as an NP in most parts of the country.

    So what’s the fix? Any effective blanket solution must at least:

    -Eliminate the notion of profit from health care
    -Create incentives to become medical professionals
    -Have explicit, ethical and sensible policies towards allocation of resources
    -Manage the regional availability of medical treatment

    I don’t really see this happening with a private sector solution.

    • A company motivated by profit will enter a marketplace where they can make money.

      The problem I have is that people who look at market-based solutions usually harp on “the free market”. The free market is a useful tool for a lot of things, but as you point out (rightly and correctly), participants in the free market are there to maximize profit. As long as they can externalize their costs, they will do so.

      I look at the “Insurance companies must cover everyone at the same price” as a pretty simple regulation. It’s fairly easy to enforce. You can’t drop people. You can’t deny claims based upon cost, because the medical provider (via the third principle) can’t cost shift; they’ve already said, “This is our chemotherapy treatment and its cost”, and the insurance company has already included that in their service.

      Now, you’re right that it doesn’t address the incentives problem for medical professionals; but while that’s a related problem you don’t want it tightly coupled to your health care basics, because otherwise once you *get* enough GPs, you’re subsidizing people to become GPs when you don’t need as many any more.

      As I said, this doesn’t solve the free rider problem for people truly without means. If you’re young and don’t think you need health insurance and you get cancer, you’re paying dues to the IRS to pay off that debt. If you’re unable to pay, though, you can’t pay the dues to the IRS anyway.

      But we don’t know how many people actually can’t afford reasonable health care, because we don’t have a price set for reasonable health care; everybody’s playing a different game. You implement a system like this and let it run for 5 years and you’ll have a real idea of how big the uninsured problem really is, because the IRS can issue the actual hard numbers (this many people required the government to pay for health care, this many are making their payments, this many are not, etc.) Then you can revisit. Maybe you decide to subsidize certain portions of care using a particular program and those people paying medical debt to the IRS for those kinds of care get a break. Maybe you decide that the free rider problem is really endemic, and you then revisit the idea of a mandate.

      This isn’t (in spite of Denniger’s tootin’ his horn) a solution to the problem of health care. It’s a solution to the problem that health care is too complex to unwind all of the externalities and interdependencies so that you can build a reasonable solution. It clears the table of all of the chaff, requires actual sanity in billing, removes externalities in insurance, and generally makes it so that the system is a lot easier to quantify and understand.

      THEN you fix the individual problems that crop up.

      Here’s a credible example of where this sort of idea has worked. On Mar 2, 1971, it became illegal in this country for a credit card company to charge a consumer more than $50 for fraudulent charges to their credit card. The burden is on the credit card company to prove a charge is authorized, instead of the burden being on the consumer to prove a negative. Credit card companies howled that it would make it impossible for them to compete. But guess what? All credit card companies had to follow the same rules, so they figured out how to make money. They made different levels of verification policies, put the merchants in charge of following whatever verification policies made sense to the merchant’s acceptable losses in their particular industry, and everything worked fine.

      Did it prevent identity theft? No, but only impacts the consumer if credit card companies make it too easy for people to get credit (which they do, and that’s a separate problem that needs to be corrected, sure), otherwise the credit card company or the merchant eats (most of) the cost of the identity theft. Did it prevent other problems in the credit industry? Nope, we still need to look at those problems (like Checkpoint and credit bureaus and whatnot).

      But it did make the market for credit cards bear the cost of the theft or misuse of the cards. It was great for consumers. Sure, some companies try to game the system, but it works remarkably well for basically a vanishingly small audit and oversight cost.

      This is about leveling the playing field. Everybody gets charged the same for a service, regardless of who they are or their insurance carrier. Medical institutions have to charge based upon the cost (this doesn’t entirely remove the notion of profit, but it does remove the externality to the sick person of having to subsidize someone else’s care because they don’t have insurance or their insurance company uses collective bargaining to force the hospital to charge them less, so the hospital has to recoup its costs by charging other people more). If you’re an insurance company, your incentive is now to figure out the best coverage that covers the most number of people at a price they’re willing to pay. That’s a tough job, but the actuaries in insurance are the best in the world, so they’re going to figure it out.

      Sure, it may turn out that nobody wants to play the game in certain states. But then at least we will know where the problem is. Maybe some state has a high population of retirees (with high medical costs) and not enough healthy people who are willing to pay for insurance at all at a price that an insurance company needs to charge to cover those retirees. Maybe then you have to change the rules. Maybe then you need a public option for that state.

      But then you’ll know, and you’ll have hard numbers to work with. Right now, we have nothing usable to actually tell us where to go…

  3. This proposed system is intriguing. Being a more traditional federalist, I’d like to see it run in one state, with the state’s version of the IRS doing the collecting. Other states could take notes and adopt it if it works.

    As a lawyer, I can tell you that the tort reform aspect of this system would be HUGE. It is the lawyers (on both sides) that profit in a filthy way from the medical industry. If someone’s operation goes wrong, they sue the surgeon, the anesthesiologist, and the companies that made the instruments that were used in the operation. Malpractice insurance companies’ lawyers step in for the doctors, and the big companies hire very expensive lawyers (hundreds of dollars per hour; a first-year out of law school will be billed at $250/hr or more; partners’ work may be over $1,000/hr). The parties settle, and the plaintiff’s attorney collects 40% of the winnings. Because jury verdicts run into the millions of dollars these days, the settlements are proportionally large.

    The free market works for private companies when competition is protected. Even though the insurance companies are in it for profit, if you remove the monopolies that they currently enjoy (by the one-employer, one-plan system), the guaranteed competition should contain prices. The tort reform may even increase profit margins while prices decrease. I’d love to see if this would work.

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