One of the Many Problems of the Health Care Debate

We need to stop talking as if the Medicare debate is a question of the Ryan Plan v. the Status Quo.

It would appear that we have hit a point in the public discourse on health care reform where we are pretending like the options are twofold: the Ryan Plan v. the status quo.  This is the way that pundit and politicians alike are talking in the main these days.

This is, of course, not only a false dichotomy in the sense that these are not the only two choices that exist, but also because neither is going to be the eventual outcome.  The Ryan Plan is both unpopular with the public and it has always lacked a political pathway through the legislative process.  Likewise, the status quo for Medicare/Medicaid is on an unsustainable path in fiscal terms and will require reform.

In one sense, perhaps, the debate is legitimate, but more in thematic terms as opposed to specific policy details.  To wit:  the question of whether health care for the poor and elderly should be voucherized or whether it should remain a single-payer system (as it has been for half a century).

I think it is pretty clear that the latter is going to win the debate (indeed, has already won).  As such, the debate should not be (if we want a real debate, that is) between private vouchers and the status quo, but rather how are we going to remold the status quo to deal with costs?

I know that some think that the Ryan Plan polls poorly because it has been attacked in the media.  However, I would offer a counter-hypothesis:  people actually do not like the idea of changing the system as dramatically as the Plan suggests.

Now, I will grant: some of this is the now-clichéd “Mediscare” bit, as some of the rhetoric has made it sound like Grandma will be tossed from the train if the Ryan Plan passes. This is, of course, untrue, as the Ryan Plan preserves Medicare for persons 55 and over. So, what it does is time shift the train-throwing. Fundamentally, the problem is that what the Ryan Plan does is save the federal government money not, as the phrase goes, by “bending the cost curve,” but rather it does so by cost-shifting the burden of paying for medical care to the individual. Is it any wonder that lacks support?

The bottom line is that we have had some type of single payer, defined entitlement approach since the 1960s–this creates a certain amount of expectation (and not unreasonably).  Further, the system has pretty much worked for all those decades, and as such it is not unreasonable to think that it can be fixed and continue to work (although any such fix has to acknowledge the demographic challenges of the aging Baby Boomers).  There is also the niggling fact that the rest of the industrialized world has managed to provide health care for its elderly and poor (and, actually, their whole populations).  If they can do it Europe, Japan, et al., why can’t the US (what with all our power and exceptionalness and whatnot)?

As such, the voucher idea strikes me as dead.  It is one of those things that sounds good if one is prone to think that mixing the phrase “market forces” into a conversation instantly improves the discussion,* but there is a wee problem of evidence to support the assertion.  And, I would add for the record:  I used to be that guy, and sometimes am still that guy.  Markets are great.  They are, however, not magical.  And, to date I have not seen anything to persuade me that Ryan’s vouchers provide the requisite magic to bring costs down.  As I have noted before, I am not convinced that the ever-popular “skin in the game” leads to much in the way of cost savings.*

To get back to the original issue:  at some point we are going to have to stop the current silly debate and move on to a more substantive one.  The sad thing is, substantive debates, what with all their wonky talk, empirics, and policy debates, are boring.  Boring isn’t good for campaigning.

What would really be helpful (and I shan’t hold my breath on this , mind you) is for the Ryan Plan true believes in the rank-and-file to stop pretending like their fantasy will some day come to pass and for the Status Quo Über Alles folks to do the same.  If the politicians realize that their tactics aren’t working, then they will have to shift more towards reality.  If, on the other hand, the votes wish to persist in Fantasyland, the politicians will gladly join us.

——

*Indeed, I would note the libertarian-leaning economist Tyler Cowen has stated “the vouchers idea won’t help cut health care costs.”  He discusses the issue here as well.

FILED UNDER: Health Care, US Politics
Steven L. Taylor
About Steven L. Taylor
Steven L. Taylor is a Professor of Political Science and a College of Arts and Sciences Dean. His main areas of expertise include parties, elections, and the institutional design of democracies. His most recent book is the co-authored A Different Democracy: American Government in a 31-Country Perspective. He earned his Ph.D. from the University of Texas and his BA from the University of California, Irvine. He has been blogging since 2003 (originally at the now defunct Poliblog). Follow Steven on Twitter

Comments

  1. TG Chicago says:

    I am not convinced that the ever-popular “skin in the game” leads to much in the way of cost savings.

    When it comes to one’s healthcare, we all have “skin in the game” — almost literally. That’s what changes the equation.

    If not for the rise in healthcare costs overall, how bad off would Medicare be? Aren’t costs rising more slowly amongst Medicare patients than amongst those in private plans?

  2. Dave Schuler says:

    Further, the system has pretty much worked for all those decades, and as such it is not unreasonable to think that it can be fixed and continue to work (although any such fix has to acknowledge the demographic challenges of the aging Baby Boomers).

    No, it hasn’t worked. Much of the built-in cost increase came in the 1970s and 1980s.

    Don’t get me wrong. I don’t believe the system we have now is sustainable but I also don’t believe we can or should go back to the market-based system that prevailed prior to 1900. And IMO believing in a market-based reform that looks only at the patient demand side of the system for cost control betrays a lack of understanding of our healthcare system.

    What I think people need to understand is that the problem changes over time. What might have been a solution in 1965 is different from what might have been a solution in 1976 is different from what might have been a solution in 1994.

    Solutions to the problems with our healthcare system today will please almost no one. Which is why we’ll postpone implementing them until the flywheel actually comes off.

  3. @Dave:

    No, it hasn’t worked. Much of the built-in cost increase came in the 1970s and 1980s.

    Well, I suppose it depends on what one means by “worked”–people did get medical care. Now, if you want to note that the problems we now face started in the past, I have no argument with that.

    My point about “worked” in that context is one about political perception as much as anything else.

    What I think people need to understand is that the problem changes over time. What might have been a solution in 1965 is different from what might have been a solution in 1976 is different from what might have been a solution in 1994.

    I concur.

    Solutions to the problems with our healthcare system today will please almost no one. Which is why we’ll postpone implementing them until the flywheel actually comes off.

    Sadly, I suspect you are correct.

  4. @TG:

    When it comes to one’s healthcare, we all have “skin in the game” — almost literally. That’s what changes the equation.

    I agree–although (as you know) that isn’t what most people who use that phrase mean.

    But yes, this is the fundamental problem.

  5. Dave Schuler says:

    Now, if you want to note that the problems we now face started in the past, I have no argument with that.

    It’s not just that it started in the past. It’s the compounding. When the healthcare system is 6% of GDP (and 2/3s paid for from tax dollars) growing at 2-3% faster than the non-healthcare economy looks okay. When the healthcare system is 17% of GDP (and 2/3s paid for from tax dollars) growtth at 2-3% faster than the non-healthcare economy is alarming. But the underlying facts haven’t changed. The increase in costs was unsustainable. It’s just more obvious now. That’s what “unsustainable” means.

  6. mattb says:

    Excellent summary as always.

    I think most rational observers who step away from the emotional politics and look at the bigger picture — as you have — would argue that its a matter of when, not if, we move to a national single payer system for all citizens.

    As you say, the sooner there could be some general agreement about this, the sooner we could actually start to address the question of what an “American” single payer system might look like.

    Then again, perhaps we are closer to that moment than many of us thought even a short time ago. The fact that two years in a row, the same basic arguments have been trotted out against two ideologically competing plans and, at least looking at 2010 elections and the recent microcosm of NY-26(?), have swayed the same core groups (right leaning independents and conservatives) to symbolically “vote down” change seems that it might be pointing to this.

  7. mantis says:

    The problem isn’t so much Medicare as it is the constant dramatic increase of health care costs overall. Fix the entire health care system to control costs, and you can fix Medicare. Of course, this means a single-payer system, and that’s evilhitlercommunism, so status quo it is!

  8. @Dave:

    The increase in costs was unsustainable. It’s just more obvious now. That’s what “unsustainable” means.

    I understand the point.

    updated: oops, cut and paste fail–fixed.

  9. lunaticllama says:

    Actually the Ryan Taxcut Plan will throw Grandma off the train as the pool that has real single-payer Medicare members dwindles, the buying power of that pool lessens, and fewer providers accept single-payer Medicare insurance. That’s simple demographics.

    The ACA tried to start a debate about real cost controls in our medical system and Republicans decided to spend the entire making things up on Fox News. Their actions suggest they have no desire to reign in healthcare costs, and want to simply line private insurer’s pockets and give tax cuts to the rich via the Ryan Taxcut plan.

  10. ej says:

    “And, to date I have not seen anything to persuade me that Ryan’s vouchers provide the requisite magic to bring costs down. ”

    I agree with this, but both his plan and the debate broadly are missing a big point. Though it could be better, its not lack of competition in the insurance market that is causing costs to explode. Its a the all “you can eat” 3rd party payer model, whether public or private, that has caused patients to over consume and more importantly, over the long run has removed many of the incentives on the part of providers to innovate in ways that reduce costs. What we should be seeing is what has happend with cosmetic dentistry and LASIC – cost coming down over time. But, with most healthcare, as long as the patient doesnt care how much a procedure costs at the point of treatment, there is not a strong reason for high cost medical facilites to try to keep costs down. If the healthcare matrket was function there shouldnt be two hospitals next to each providing the same service where one costs 10k for a proceude and the other costs 20k.

    Therefore the real debate is over how are costs to be contained. There are broadly two meathods. Either changes are made that cause patients to be more conscience of price, so that a competitive healthCARE enviroment emerges and something resempling market forces come into play (Ryan’s plan does not do this) or there is going to be a high level of bureaucratic rationing of services – or some combination of the two.

    The first would include things like changing tax treatments so low premium, high deductable plans become the norm or a personal savings based system rather then an all you can eat 3rd party payer model. The second is quality boards and such run out of HHS saying what treatment you are allowed to get.

    This is the real question at hand.

  11. sam says:

    “Its a the all “you can eat” 3rd party payer model, ”

    If that’s another way of saying “fee-for-service model”, you’re absolutely right.

    “There are broadly two meathods.” — Uh, there is another way — abandon the fee for service model. Massachusetts is attempting this. See, Massachusetts struggles to rein in health care costs.

  12. The fact that the current system has endured for so long suggests that it may in fact be pareto optimal. Any possible reform creates more losers than winners, so the status quo will always win.

    This is unfortunate because it mean things will not change until something about the underlying situation changes sufficiently to force them too.

  13. Steve Verdon says:

    I think it is pretty clear that the latter is going to win the debate (indeed, has already won). As such, the debate should not be (if we want a real debate, that is) between private vouchers and the status quo, but rather how are we going to remold the status quo to deal with costs?

    Wont happen. Never, ever. Get used to it.

  14. Steve Verdon says:

    Well, I suppose it depends on what one means by “worked”–people did get medical care. Now, if you want to note that the problems we now face started in the past, I have no argument with that.

    This is…well…really amazing.

    Hi, we’ll put into place a policy that is going to cause fiscal chaos a few decades hence, but since it is a few decades hence we’ll consider it a good/working policy today.

    Is that your position Steven? Really? I’d call that kind of a system flawed right from the start.

  15. @Steve:

    I’d call that kind of a system flawed right from the start.

    I never argued otherwise. But that wasn’t the point.

  16. ej says:

    sam,

    those things are now the same. In the MA idea, the patient still gets to consume as much as they want and doen’t shop around. Maybe that change will have some effect, but its still based on bureaucratic micromanaging.

  17. ej says:

    “fee for service” hasnt caused prices to rise drastically in any other market.

  18. Dave Schuler says:

    “fee for service” hasnt caused prices to rise drastically in any other market.

    Could you expand on what you mean by that, ej? If by “other market” you mean other countries, no other market has the bizarre public/’private system for funding healthcare that we do. The country to which we are most similar culturally, Canada, has a full-fledged national health system.

    If by “other market”, you mean the practice of law, engineering, and so on, none of the other professions has the massive level of public funding that healthcare does. I don’t recall physicians having contingency fees, either.

  19. ej says:

    Dave,

    I mean other industries – your groceries, clothing, electronics , lawn mowing, hair cuts, you name it. These are all “fee for service.” My point is there in nothing inherantly cost driving via that model. Thats because in all these cases people care about how much they spend.

    I would ideally like to have a healthcare system where that same dynamic is in play. For instance, if a patient it told he/she needs to go a see a specialist then he/ she should be shopping arouund to find a low price and take that into consideration. If the patient did that, providers would compete over price. They don’t do that now. Another example would be, I have a cold. Now i just go to my primary care and use up $250 worth or services. But i should be thinking to myself, do i really need to do that? And if I do maybe a lower cost retail clinic is what i do?

    These are the kinds of decisions that exist in all other markets that function. Healthcare costs have been driven up over the years because these forces dont exist. Essentially whether you have private or public insurance, you don’t care how much the actual healthcare costs.

  20. ej says:

    if health insruance worked more like car insurance – that it only kicked in for catostrophic losses and you still pay a good chunk in a deductable, then healthcare costs wouldnt be nearly as high.

    This is essentially how the swiss system works. They pay about 3 times more out of pocket on average for healthcare than the US does. And as a result a better functioning market emerges.

  21. Dave Schuler says:

    Unfortunately, there’s no way to get there from here.

    Additionally, you can skip haircuts or having your lawn mowed. Skipping a heart transplant or having a bone set is a very different matter and, at the current prices, one incident can make anyone but the very richest into a pauper.

  22. anjin-san says:

    I keep hearing Republicans talking about the need for consumers to “shop around” for medical insurance. It has me wondering if any of these folks have actually tried to do that. I know where I live, the options are quite limited. The last time I shopped for health insurance as an individual, the experience was a series of unpleasant surprises, and I ended up feeling lucky to get any coverage at all, even expensive coverage.

    There are a lot of different gas stations in town, but no matter how much I “shop around” gas is pretty expensive. I can drive across town and save a few cents a gallon, but I burn gas and waste valuable time doing so. And my engine needs a carbon flush every year if I feed it cheap gas. The market does not magically solve all problems.

  23. ej says:

    but dave, you still can shop around to which provider gives the service. This is key. Right now we have tons of people picking more expensive care simply because they dont care. And having people care doesnt force everyone to go bankrupt. Does car insurance not still kick in for a crash even though it doesn pay for your oil change?

    You can have a system of catostophic insurance that prevents you from going backrupt, but things like doctors vists get paid for out of pocket and procedures you pay a coinsurance up to a point, so you are incentivied to shop around. You got get the $5k procedure instead of the $10k one now.

    The worlds healthcare systems like Switzerland and Singapore, that work the best, work along these lines.

    And there are plenty of ways to start moving there. They can start but equalizing the tax treatment of insurance paid for by your employer and healthcare by yourself. Right now the tax code incentivises comprehensive plans which causes more consumption. If you got rid of this, all of a sudden total healthcare spending falls. One of the people on Obama’s economic advisory council wrote a paper on this years ago and, and if i remember correctly, he estimated this step alone would cut total costs somewhere around 15%.

    You could also change medicare by getting rid of the premiums but create a deductable. You could start charging variable copayments for medicaid. You could start setting up health savings accounts mixed with high deductable, low premium plans.

    There are plenty of ways to move in this direction -it can be done. The democrats just spent a ton of political capital pushing it in the other way. If they had so desired, they could have just done what I described.

  24. ej says:

    anjin-san,

    If this is in response to me, I am talking about shopping around for healthCARE not healthINSURANCE. This is why i dont think the Ryan plan will actually do much to reduce total healthcare spending. It doesnt address healthCARE.

  25. anjin-san says:

    For instance, if a patient it told he/she needs to go a see a specialist then he/ she should be shopping arouund to find a low price and take that into consideration.

    Great plan. My mother is 78 and is being treated for cancer. She has trouble remember critical doctor appointments. How exactly is she supposed to manage “shopping around” for cost? I am certainly willing to help, but she is difficult about accepting help, and sometimes flat out refuses. This is a very common thing with aging parents.

    It’s easy to outline a best case scenario on a blog, getting it to work in the real world is another thing. Heck, maybe we can arrange to have her pay in chickens…

  26. ej says:

    and in healthcare there remains huge differences in the cost of any given procedure between providers. This shouldnt be happening. Gasoline doesnt varry much because market compatition has pushed the price down to the lowest cost. If healthcare works the same way people would be getting their procedues done at the lowest price facilites. The others would have to change or would go out of business.

  27. ej says:

    anjin-san ,

    I’m not saying this system is perfect. But im not comparing it to a perfect system. The alternative is your 78 year old mother is told at some point she isnt allowed to have a certain procedure. Or price controls just create such huge waiting lines for services that she never gets to see a doctor until its an emergency.

    Keeping the status quo is not an option. Something has to change. And raising taxes by a ton just kicks the can down the road a coupel decades – prices will just keep going up. This is what was done in the 80s with SS – they raised payroll taxes. This is what Clinton did with Medicare- he raised the cap level on the payrol tax. And this is what we keep doing on the spending side is just create mroe government subsidies. And now we are back to the problem again. Something needs to be done to stop cost growth.

  28. @ej:

    Gasoline doesnt varry much because market compatition has pushed the price down to the lowest cost. If healthcare works the same way people would be getting their procedues done at the lowest price facilites.

    The issue becomes: does health care in fact work that way?

    To reiterate what Dave said above: I can choose to not go on vacation to save gas. I can carpool to go to work. However, when my kids fall off his bike and hurts his arm and his head, we got to the emergency room and get the x-ray and the CT and whatever else we need and worry about the cost later.

  29. anjin-san says:

    ej… have you ever spent much time with someone who is seriously ill? “shopping around” is not always an option. When my dad was diagnosed with brain cancer, he was just not up for comparing oncology practices for pricing.

  30. ej says:

    Steve and anjin-san,

    Most healthcare costs are not emergencies like what you just described. Most healthcare costs are either routine treatment or cronic issues that you do have time to look around. But even if you dont have the ability to do so every time, if a signifigant amount of people are, then this still causes the compeditive force to work. When you go to the grocery store, are you shopping around every time you go? No. But the prices at store x are not that much different than store Y because a signifigant amount of people do shop around causing prices to move together.

    I know not everyone is familiar with all other countries health systems, but this is indeed how Singapore and Switzerland work. They spend much less on healthcare in the system and providers list their prices for most services.

    Or look at certain services in the US – Lasic and cosemetic dentistry as examples- people shop around for these. Any parent that has gotten their kid braces knows about this. Why couldn’t people shop around for other non-emergency healthcare services?

  31. anjin-san says:

    Keeping the status quo is not an option. Something has to change.

    I agree. But simply expecting the market to magically solve problems is not realistic. No Democrat I know is saying “just raise taxes and all will be well, leave everything else as is”. That is Fox News BS.

  32. ej says:

    anjin-san,

    No they are saying raise raise taxes and create some bureuacratic micro-managing panel that will reduce somehow costs.

    I gave you expamples and logic on why price mechnisms would reduce costs. You dont have to agree, but critque those if your don’t. Just waving you hands and saying no, thats just magic speek is not a rational argument.

    I can easy say the reciprial to you – government agencies don’t magically reduce costs.

  33. Ben says:

    ej – none of the other industries you gave as an example are absolute necessities. All of them are completely elective or luxury items. In the end, people are screwed when it comes to health care, because they need it to survive. The only industry you mentioned that is akin to a necessity is gasoline. And yes, gas prices are largely consistent across the country. But I wouldn’t call them stable. Gas prices have quadrupled in the last 20 years. And they’ve basically doubled in the last 3 years.

    Also, most people don’t WANT to shop around for different doctors, because they have a doctor who they’ve gone to for years, who knows their history and intimate details about their life, and that they trust. Most people are extremely reluctant to change doctors for any reason. And when you need to see a specialist, it’s usually something pretty important that needs to be seen quickly. The only example you gave that I agree with is the use of urgent care clinics rather than emergency rooms, which my wife and I have used several times.

  34. ej says:

    gasoline prices change because the costs of oil keep changing – stability and consistant prices are two different things.

    But on the necessity. Food, clothing and housing are all necessesities are they not? do these prices vary greatly between providers right nest to each other? Has food and clothing prices constantly been rising for 60 years?

    Yes people don’t want to shop around. And if it is the case that you really want tos tay with your doctor you will but others will look around. Do people not shop around for an orthadontist? Why don’t you think that will happen with other types of providers?

    This isnt a quesion about one thing people want vs another they dont. Any change to the system is going to be painful. Do you think people want much higher taxes? Do you think people want long waiting lines? Do you think people want care rationing? Something has to give.

  35. wr says:

    There’s another problem with ej’s solution: If normal, non-urgent care is going to be paid out of pocket, then a lot of normal, non-urgent care is going to be skipped, at least as long as unemployment remains high. If you’re trying to decide which bills you need to pay right now and which will have to wait, you’re not going to spend that hundred bucks or two simply because you’ve had an upset stomach for a couple of weeks.

    And when you finally can’t stand the pain anymore and you drag yourself to the emergency room and the doctors discover that your stomach cancer has spread, you’re going to be sucking up a lot of that government money. Maybe hundreds of thousands of dollars. Which might have been mostly saved if the cancer had been spotted earlier.

    The inability of poor people to afford preventative care is already one of the great drivers of health costs, since they wait for treatment until they have to go to the emergency room. By transferring even more of these costs to the “consumer,” you all but guarantee huge bills later on.

  36. Ben Wolf says:

    Something needs to be done to stop cost growth.

    One of the things countries like switzerland do to control costs is ban insurance companies from making a profit.

    But an asbestos dog will chase a paper cat through hell before the republicans ever allow such a reform. In fact the republicans have made clear their opposition to anything that may negatively impact profits. Until that is addressed you can forget about cost control.

  37. David M says:

    Patients are not consumers, health care services are not cell phone plans and the sooner that talking point goes away the better. Sure, more transparent pricing would be better, but it’s impact is likely to be minimal at best.

  38. Steve Verdon says:

    Has everyone not been reading ej’s posts? Looks that way to me. Here I’ll highlight an important part just about everybody has missed:

    You can have a system of catostophic insurance that prevents you from going backrupt, but things like doctors vists get paid for out of pocket and procedures you pay a coinsurance up to a point, so you are incentivied to shop around. You got get the $5k procedure instead of the $10k one now.

    […]

    if health insruance worked more like car insurance – that it only kicked in for catostrophic losses and you still pay a good chunk in a deductable, then healthcare costs wouldnt be nearly as high.

    In other words, when bad stuff happens you are covered by insurance. Shopping around probably wont be done as much because you’ll be back in the mode of “I’m not paying the bulk of the costs.”

    When your car is rear-ended do you shop around for a mechanic, or do you figure, “meh, I’m paying the deductible, so where ever is fine”? If this is the case, then bring up catastrophic situations to “counter ej” is not really responding to his idea.

    ej is saying that by taking healthcare that is not catastrophic and making it so people have more incentive to “shop around” would help constrain costs.

    Will it solve the problem entirely? Probably not. Is it simply a demand side policy? Yes, and so there might need to be other policies for the supply side that Dave brings up. Still, just because it isn’t a magic bullet doesn’t mean we shouldn’t consider it.

    ej – none of the other industries you gave as an example are absolute necessities.

    Taking a kid who runs a fever into the doctor is not a necessity either, but people will sometimes do that. Give the kid children’s advil, monitor the situation, and wait to see if he gets better. A bottle of children’s advil and a day or two off work is probably a hell of alot cheaper than going in and taking up time with a nurse and a doctor. And in today’s world with telecommuting you could probably work from home and avoid the day or two off from work.

    That is the kind of thing ej is talking about. Not everything healthcare related is an absolute necessity. That kind of talk is just rubbish.

  39. ej says:

    “One of the things countries like switzerland do to control costs is ban insurance companies from making a profit.”

    Insurance company profits are about 2% of sales. And Blue Cross and Kaiser Permente are not for profit. MN already has a law forcing all insurance companies to be non-for profit. Insurance company profits are not the reasons why healthcare costs are high – health insurance is expensive because healthcare is expensive. Attacking corporations for the all of the worlds problems is nothing more that scapegoating.
    wr,

    I have some sympathy to this argument, but as a whole preventative care does not reduce total costs. Because most people getting these treatments never needed them. If this was such a huge cost saver, private insurance companies would be paying you to go get physicals, etc.

    But even if there where some savings, why do you think a lot of people will put off this stuff only to make the cost more int he future? Do a lot of people just let their car deteriorate until it literally falls apart? Do people do that with their homes? I sure there are some, but most people do realize you need to spend on maintenance.

    Once again, I point to the examples of Singapore and Switzerland. As far as I understand, they spend less on healthcare, its out of pocket driven and people arent collapsing in the streets because they waited too long.

  40. Steve Verdon says:

    There’s another problem with ej’s solution: If normal, non-urgent care is going to be paid out of pocket, then a lot of normal, non-urgent care is going to be skipped, at least as long as unemployment remains high.

    Yes, you can’t have your cake and eat it too, that is what ej is saying. We’ve tried that approach and it failed.

    We need something new.

  41. ej says:

    thank you steve,

    thats essentially what im saying.

    But it isnt just whether you go to the doctor or not with the cold. Even if you must get care, you still have a choice of where to get care. Its I need a specialist, i have to find a new specialist anyway, so i mind as well take price into consideration. Chosing the $5k option over the $10k option will do a lot to get costs down.

  42. anjin-san says:

    One of the things countries like switzerland do to control costs is ban insurance companies from making a profit.

    And here we get close to the heart of the matter.

    As our friends on the right constantly tell us, the function of a business is to make a profit. The function of a health insurance provider is to make a profit. Not to provide the highest possible standard of care, not to keep costs down, not to help America deal with a serious structural problem.

    Now I like profit as much as the next guy, but we are not talking about dry cleaning here. We are talking about life and death, every day of the year. We are talking about the viability of our society.

  43. Ben Wolf says:

    Swiss insurance providers are banned from earning any profits from the basic plans which cover 99.5% of the countr’ys population. I said this was one of the reforms needed to control heslth costs, not the only one. It also happens to be one of the reforms ubiquitous in health care systems which work better than ours.

    Stop lying, or at least don’t be such a wordmonger when you try to pull the wool over someone’s eyes.

    I’d suggest you take a page from Wiley Stoner Ragshaft the XVII. He gets his quota of bull out in fifty words or less.

  44. wr says:

    Yes, ej, when people have to choose between feeding their kids and fixing their cars, the cars don’t get fixed. In the Magical Free Market Land, of course, Mr. Rational Consumer never makes this ultimately poor choice. But here in the real world that’s what happens.

    The other thing that happens in Magical Free Market Land is that insurance companies see they can keep costs low if they encourage their customers to take advantage of preventative care, rather than risk huge expenses later. In the real world they don’t like to pay for preventative care, choosing instead to find ways not to pay when expenses kick in — such as cancelling policies as soon as illness is discovered.

    As for your statistic about insurance company profits, you leave out the fact that several tens of percents of insurance company “expenses” are devoted to finding ways not to pay for care to protect those profits. You take away the profit motive, you take away a lot of waste in the system.

  45. sam says:

    @ej on MA trying to move away from the fee-for-service model

    sam,

    “those things are now the same. In the MA idea, the patient still gets to consume as much as they want and doen’t shop around. Maybe that change will have some effect, but its still based on bureaucratic micromanaging.

    As long as the providers are setting the price, there will be no change in the upward pressure on costs. The Massachusetts scheme does away with that to a large extent. You might call that bureaucratic micormanaging, but if it does bring prices down and folks receive proper care, micromanage away as far as I’m concerned.. As for people shopping around…you get a scary number on your PSA test, and you’re off a certain age, tell me you will “shop around” for a urologist. Things don’t work that way.

  46. Ben Wolf says:

    What ej doean’t get is that the swiss system isn’t working well, and what success the government had in restraining costs is due to exactly the “corporate-bashing” reforms he rejects.

    Price controls, a ten year ban on new medical procedures, mandated benefits, standardized health plans, a ban on profits and a 37% decrease in the annual salaries of swiss GP’s.

    The hybrid “market” that switzerland has institutionalized is having serious problems managing costs, because young people have incentives to underinsure and older people are incentivized to overinsure. Meanwhile swiss insurance companies try to overinsure young people with supplemental policies (which are the only ones from which they can legally earn a profit), and try to underinsure older people by denying the supplemental policies. The swiss are actively trying to make access to health care more difficult, recently passing a patient tax.

    Markets don’t work in health care.

  47. sam says:

    “The swiss are actively trying to make access to health care more difficult, recently passing a patient tax.”

    Jesus. What’s a patient tax?

  48. Ben Wolf says:

    @sam

    The first six visits to a doctor are paid out of your own pocket. Your insurance won’t help until after that.

  49. Steve Verdon says:

    Chosing the $5k option over the $10k option will do a lot to get costs down.

    I agree, time and circumstances permitting price shopping is good.

    In life or death, go with what is got the best chance of working.

    I think that is where people are falling down, they are thinking you mean price shopping as you are having a heart attack. No of course not. But we should encourage price shopping when and where we can. Is it a magic bullet? No, but could it help? Probably.

    wr,

    Yes, ej, when people have to choose between feeding their kids and fixing their cars, the cars don’t get fixed. In the Magical Free Market Land, of course, Mr. Rational Consumer never makes this ultimately poor choice.

    Nobody has said that the free market is a nirvana. Not even close. So you can dispense with the strawman there.

    The other thing that happens in Magical Free Market Land is that insurance companies see they can keep costs low if they encourage their customers to take advantage of preventative care, rather than risk huge expenses later.

    Uhhmmm no. Nice in theory, but I don’t think this is true and I believe ej already pointed this out..

    As for your statistic about insurance company profits, you leave out the fact that several tens of percents of insurance company “expenses” are devoted to finding ways not to pay for care to protect those profits. You take away the profit motive, you take away a lot of waste in the system.

    Citation please. I don’t doubt this happens, but 20 or 30% of expenses or more? I need to see a reliable source.

    Ben,

    What ej doean’t get is that the swiss system isn’t working well, and what success the government had in restraining costs is due to exactly the “corporate-bashing” reforms he rejects.

    Hahahahahah…. oh that’s rich.

    I write that because when I point this out I get excoriated for being an evil conservative @$$hole. Ben, are you and evil conservative @$$hole? [kidding]

    All kidding aside you are correct, aside from Singapore and the Dutch systems all other countries are not doing well…however, they are doing better than us. So, would using something we see in Switzerland and Singapore help? Probably? So why the hostility?

    Markets don’t work in health care.

    […]

    Price controls, a ten year ban on new medical procedures, mandated benefits, standardized health plans, a ban on profits and a 37% decrease in the annual salaries of swiss GP’s.

    Price controls, wage controls, bans….hmmm doesn’t sound like a market to me. Sorry.

  50. Steve Verdon says:

    I’ll also add that not only is nobody saying a free market is nirvana, but that nobody is truly advocating a free market in health care…not even me. None of my comments in this thread have, and I’m pretty sure none of my posts for the last 3 years or more have either.

    Anyone arguing that the free market is awful for health care is really arguing against nobody…well nobody other than a figment of their own fevered imaginings.

    And a free market being awful in health care is not a valid argument for using some market based incentives to help reduce costs provided the impact to overall health outcomes are not overly impacted in an adverse manner.

  51. Ben Wolf says:

    @Steve Verdon

    You might want to re-read my post, because the point is that health care is an area where the profi motive distorts the system. The only success in restraining costs in switzerland has come from regulation.

  52. ej says:

    Ben,

    But why does the profit motive “distort” the system? Why doesnt this happen in other markets? Do you say the profit motive distorts your grocery store? You don’t think other areas where there are contracts the other party tries to minimize what their payments are?

    But even if there are problems, your argument is essentially because this idea isn’t perfect then toss it out. But what are we comparing this to? You don’ t think the various highly government controlled single payer systems across the world find ways to deny you care in various ways in order to reduce costs?

    We have been living for years based on the notion that every one should be able to have unlitmitted healthcare and not have to pay for it (or at least not much of it). Something has to give.

  53. ej says:

    steve,

    “I’ll also add that not only is nobody saying a free market is nirvana, but that nobody is truly advocating a free market in health care…not even me. ”

    this is what im saying – you can try to create market incentives within the system in order to make it work better without going to an entirely free market system.

    Right now we do not have anything close to a free market system and haven’t for many decades now – and the lack of price signals is one of the main drivers of the current mess.

  54. David M says:

    Right now we do not have anything close to a free market system and haven’t for many decades now – and the lack of price signals is one of the main drivers of the current mess.

    Patients are not consumers. Shopping around for health care is a silly idea and a distraction from actual solutions to increasing health care costs. Not only is it a bad idea, it’s a political impossibility. People don’t want to be exposed to increased health care costs and aren’t gong to sign up for a plan with that as it’s main selling point.

    Besides, “fee for service” medical care is a model we want to move away from.

  55. Steve Verdon says:

    You might want to re-read my post, because the point is that health care is an area where the profi motive distorts the system. The only success in restraining costs in switzerland has come from regulation.

    No need to read because I think the profit motive is not a factor. Kaiser, Blue Cross, those are non-profit. Medicare? Government and hence non-profit. That’s a sizable chunk right there.

    In fact, I’d go the other way, part of the problem might be a lack of profit seeking or more broadly, seeking an optimal outcome. After all, that is the idea behind consumers doing what they do. Look for the best outcome given their constraints. Profits is like a flip side to the consumer problem (not exactly as there is no constraint in profit maximization, but there is in cost minimization and all profit maximizing firms minimize costs).

    David,

    Patients are not consumers.

    Sure they are. They are consuming health care resources.

    Shopping around for health care is a silly idea and a distraction from actual solutions to increasing health care costs.

    In the right context no not really. Sure, if you are having a heart attack or you got hit by a car you aren’t going to shop around and ej isn’t saying anyone should.

    However, not all of health care is for things like heart attacks or auto accidents and such. Some of it can wait, you can shop around, and to the extent that it helps that is all the better.

    And there is not going to be any “big idea” that solves this problem. Health care is likely going to be solved via a thousand tiny cuts. It isn’t a giant Gordian knot where you tug on just the right thread and whooosh it all unravels and we are transported to the land of milk and honey.

    People don’t want to be exposed to increased health care costs and aren’t gong to sign up for a plan with that as it’s main selling point.

    I don’t want to be exposed to higher housing, food, and heating costs. So where is my subsidy for those? For that matter I don’t want a higher cell phone costs, movie costs, or even want to pay more for diet Coke.

    If the above is going to kill any meaningful reform we should simply just give up. Stop discussing it, stop posting on it. Tell politicians to stop posturing about it. Just put it out of our minds till, as Dave puts it, the fly wheel comes off. Because any real reform is going to fail this condition.

    Besides, “fee for service” medical care is a model we want to move away from.

    Right, having absolutely no price signal what-so-ever will work really well at allocating resources.

  56. steve says:

    Basic numbers to tell you why ej’s ideas likely wont work. 50% of people account for 3% of our spending. That spending is amenable to his proposal. Most spending occurs for chronic disease or for large limited time spending, think chemo or surgery. Since you will go over your deductible, people concentrate on quality not price.

    ej also does not quite address total costs. If people delay needed care, are costs higher in the long run? Data is mixed on this, but it clearly happens. Also, the actual data looking at what happens when you make people pay more is mixed. For poor people, it tends to not cut costs as they shift spending to other areas.

    “Besides, “fee for service” medical care is a model we want to move away from.”

    Just wrote a paper on fee for service and non FFS for our hospital. You can make arguments about why FFS increases utilization, but lots of countries with lower costs than ours use FFS models and have lower costs.

    Nice quick review of Swiss system.

    http://healthcare-economist.com/2008/02/26/swiss-healthcare-system-part-ii/

    Steve

  57. Ben says:

    However, not all of health care is for things like heart attacks or auto accidents and such. Some of it can wait, you can shop around, and to the extent that it helps that is all the better.

    Except that a large chunk of people will simply not do anything non-emergency to conserve out-of-pocket costs. They will simply wait for something to reach emergency level of severity, where it will then be covered in full after a deductible. So we will have people sitting around living with health problems, not doing any preventative care, skipping physicals and things of that nature. And more of them will end up developing chronic or emergency situations, which will end up being covered anyways.

  58. sam says:

    @Steve V.

    No need to read because I think the profit motive is not a factor. Kaiser, Blue Cross, those are non-profit. Medicare? Government and hence non-profit. That’s a sizable chunk right there.

    But how about the profits of the providers? Those entities you listed are the payers-to-the-providers. If costs are increasing, where is the money going if not to the providers? It’s not evaporating.