Different forms of financing for different sorts of health care

David Goldhill’s Atlantic article on the U.S. health care system is one of the best things I’ve read on the subject in a while. He’s a business executive, and his interest is in setting up the right sorts of financial incentives for innovation in the sector, but from my reading he’s able to approach the subject in a way that’s ultimately pragmatic, and free of excessive free-market idolatry.

As he points out, the way we expect insurance to cover almost every sort of health care interaction is absurd and hugely inefficient:

Health insurance is the primary payment mechanism not just for expenses that are unexpected and large, but for nearly all health-care expenses. We’ve become so used to health insurance that we don’t realize how absurd that is. We can’t imagine paying for gas with our auto-insurance policy, or for our electric bills with our homeowners insurance, but we all assume that our regular checkups and dental cleanings will be covered at least partially by insurance. Most pregnancies are planned, and deliveries are predictable many months in advance, yet they’re financed the same way we finance fixing a car after a wreck—through an insurance claim.

... Insurance is probably the most complex, costly, and distortional method of financing any activity; that’s why it is otherwise used to fund only rare, unexpected, and large costs. Imagine sending your weekly grocery bill to an insurance clerk for review, and having the grocer reimbursed by the insurer to whom you’ve paid your share. An expensive and wasteful absurdity, no?

Is this really a big problem for our health-care system? Well, for every two doctors in the U.S., there is now one health-insurance employee—more than 470,000 in total.

As for single-payer systems, he notes that they might not be able to discover the necessary savings as the demographics of those countries tilt towards the aged:

Whatever their histories, nearly all developed countries are now struggling with rapidly rising health-care costs, including those with single-payer systems. From 2000 to 2005, per capita health-care spending in Canada grew by 33 percent, in France by 37 percent, in the U.K. by 47 percent—all comparable to the 40 percent growth experienced by the U.S. in that period. Cost control by way of bureaucratic price controls has its limits.

This seems right to me: Demographic pressures are real. Perversely enough, if we’d actually improved our health care system 20 or 30 years ago, we might’ve settled on a model like the NHS and got a good few decades out of it. Now that we’re finally getting around to it, it might be too late to adopt that model.

His recommendation is ambitious, and would require a long, continuous transition process, but it’s also quite thought-provoking:

A more consumer-centered health-care system would not rely on a single form of financing for health-care purchases; it would make use of different sorts of financing for different elements of care—with routine care funded largely out of our incomes; major, predictable expenses (including much end-of-life care) funded by savings and credit; and massive, unpredictable expenses funded by insurance.

Whether or not we could ever get such a system, of course, is another question entirely.

Health care values

A lot of the health care discussion focuses a lot on wonky technical jargon. I could happily wonk out all day, but perhaps there are genuine differences in the underlying values that are worth teasing out. And as should be expected with something as massive and complex as the U.S. health care system, much of the discussed reform addresses more than one belief at a time in a intermingled, potentially confusing way.

So here’s an experiment, now that I know that some people actually comment on this blog. Please respond to the following statements, saying whether you agree or disagree with them, and maybe even why:

  1. It’s fair to ask people who are younger or healthier to pay more (through taxes, premiums, etc) to help provide health care for people who are older or sicker.
  2. It’s fair to ask people who are wealthier to pay more to help provide health care for people who are poorer.
  3. The right kind of governmental involvement can help bring down the cost of health care treatment.
  4. The level of health care that Americans expect from doctors, clinics, insurance companies, and pharmaceutical companies is reasonable.

Health care and incrementalism

So, I don’t know why I keep blogging on this issue; it’s not like I’m some huge expert or that my personal health care situation is really bad. But here I go again:

Conor Friedersdorf argues that the health care reform package is vulnerable to stirring up irrational fears because it’s big and complicated and people are naturally risk-averse to large complex changes.

My grandmother, my mother, and countless other Americans may be misinformed about the particulars of health-care reform, and express certain misbegotten fears, but health care proponents would do well to understand the anxiety’s source: Theirs is ultimately a fear of rapid, sweeping policy shifts, especially those brought about by lengthy, amorphous legislative proposals that leave unclear exactly what might change the month after next.

I think this is a legitimate concern in general, just because of my own personal experience in work, and side projects, in life in general: Getting anything done in the world is about a hundred times more complicated than you think it should be. Sweeping national legislation in a country of hundreds of millions of people always has the potential for tons of unintended consequences, so sometimes it’s not irrational to want to stick with the devil you know. A lot of the thinkers I respect the most are the ones who are most humbled by the unknowability of the world, and I think a lot of well-intended reformers could do well to learn from that just a bit.

That being said, the current system’s pretty horrible, so at some point you have to take risks and change things. And it’s not like the world’s standing still even if you don’t change government policies. Conor argues for a number of small reforms, that individually can be passed and can incrementally improve the situation, instead of one giant reform, as more realistic and ultimately more likely to help more people.

In response to Conor, however, Matt Steinglass is arguing that incremental reforms can become impossible if the status quo is too complex.

Substantively: the reason one often can’t pass individual planks of the reform in isolation is that taken individually, each plank generates perverse consequences that will lead to strong opposition from a particular constituency. Universal community rating, for instance, will make health insurance for the young and healthy more expensive. That creates adverse selection, as the young and healthy will drop out. And adverse selection threatens private insurers’ revenues: they lose their best customers. So to kill such a bill, private insurers will trade on young people’s fear that they’ll lose their health insurance. And they’ll be correct!

I might argue that Matt’s trying to cut along the wrong axis. Maybe it would be useful to imagine keeping most of the planks, but making the individual planks less sweeping. For example, instead of saying everybody is required to buy health insurance, start with saying that everybody age 40 and up is required to buy health insurance, with subsidies to help those who are of age but poor. That doesn’t get you to 100% coverage overnight obviously, but neither does a omnibus package that never passes.

Health care costs vs. coverage

These numbers seem significant:

These numbers come from YouGov and The Economist, and based on the source, I’m inclined to believe them. The full poll is here.

Health care inflation would appear to be a much bigger worry among the public than the number of uninsured. Of course, it’s not as if the issues are unrelated: The cost of health care is a giant part of the reason there are so many uninsured, so that priority might reflect, say, a faith that addressing the cost of health care inflation would naturally lead to more widespread coverage.

But regardless, this would seem to imply that the general direction of the health reform package goes in the wrong way. In the near-term, it’s far easier to increase coverage: You simply have to figure out what’s the least politically painful way to raise that revenue, and then spend it on more people than before. It’s far harder to disentangle the incentive systems that are leading to such a wastefully expensive health care system. But if you only increase coverage without figuring out costs, maybe all you do is bankrupt the country faster.

Today in mermaid news

Weta, the special effects company who did the Lord of the Rings films, have made a functioning mermaid tail for a woman with amputated legs.

...the Auckland woman wrote to them two years ago asking if they could make her a prosthetic tail. She was astounded when they agreed. ... She lost both legs below the knee from a medical condition when she was a child and told Close Up last night her long-held dream had come true. “A prosthetic is a prosthetic, and your body has to be comfortable with it and you have to mentally make it part of yourself,” she said.

Taxing a cash crop you've already got

A California state assemblyman is proposing that the state government legalize marijuana and tax it, at a time when it could really use the money:

The law, which would make California the first state to legalise marijuana, would inject an estimated $13bn a year in revenue into California’s empty coffers. Governor Arnold Schwarzenegger on Friday signed a $130bn budget that raises sales and income taxes, and dramatically slashes spending. States across the country are facing massive revenue shortfalls, as income and real estate tax receipts fall and outlays for unemployment insurance and health coverage rise.

I’d be all for it for a few reasons. Partially because I’m just pro-legalization in general. But partially because I think it’d be fairly healthy overall for this country if the Republican party were to crack into two pieces, and this could help that. I know that the system here is totally rigged against third parties, but a guy can dream …

Annals of medicine, February 2006

“If he could have done this, Michelangelo would have been a surgeon.”
Plastic surgeon Dr. John Millard on his liposculpture technique, in which fat is removed precisely to create definition in areas such as abdominals or buttocks

“Her return to smoking is not the best thing. She smokes fag after fag. But if that’s what she wants to do, we can’t stop her.”
Dr. Bernard Devauchelle on the post-recovery habits of Isabelle Dinoire, recipient of the world’s first face transplant

“Yeah, I want to pick him up. He wants me to pick him up. I can’t. I want to, but I can’t … Woke up from surgery and I had no arms and no legs. No one told me anything. My arms and legs were just gone.”
Florida mother Claudia Mejia, who was given a quadruple amputation by an Orlando hospital after delivery of her newborn, and has been told she will have to sue the hospital to receive an explanation as to why the amputations took place