“On the right, there are those who argue that we should end the employer-based system and leave individuals to buy health insurance on their own.”
Barack Obama 9/9/09
I’m not sure this is such a right-wing idea since it would be accomplished by raising taxes and regulating insurance markets. But it is a good idea. Here’s why.
It seems like there are two complaints with our current health care system.
The first is that we are spending too much on health care. This is a funny problem to have. We never get this with food or cars or anything. In those markets when people spend too much they start buying less smoked salmon and more potatoes or less Acuras and more Hondas. Or maybe they keep driving the old clunker. These decisions are made on a person-by-person basis. The funny thing about health care is that nobody feels like they are paying for it. Everyone understands, after a two-year campaign to beat it into our skulls, that we spend too much on health care. But few feel like they use too much.
There is too much psychic distance between consuming these services and paying for them. Doctors get paid by health insurers, health insurers get paid by employers, and the employers pay them by not paying us. Since folks never see the money they never miss it. The normal means of cost control, people thinking about how much they can afford, is gone. It’s people at Medicare, Aetna, or some new government agency who look at the costs but regular folks in Grand Rapids who decide whether or not to consume the service. If we want to save money on health care, we need to use less of it. Since we’d like to use infinity amount of health care, it’s either markets or rationing keeping us below that bound.
This comes up because our health insurance system is not really risk pooling so much as obfuscation. When every office visit (even the predictable one) is paid for by “insurance,” the only effect is to trick people into thinking they’re not paying for their own health care. But somebody has to pay for it. And that somebody is everybody. We pay in the form of lower wages and higher taxes. Insurance ought to be for the unexpected. If people know they’re going to use a certain amount of health care we’d be better off if they just saved the money and paid the doctor instead of the employer giving to the insurance company which will in turn give it to the doctor for us.
I have something crazy in mind: I need some medical care. I see some advertisements. One doctor offers the best care in town. Maybe a PA or NP promises close to the same quality at a lower price. I call around and ask what it would cost to have my thing done. They give me their price. I pick the one I think is the best deal, because I know and care how much my consumption costs. To get to this point is tricky. It would take something like taxing employer provided health insurance (getting rid of this removes one roadblock between consumption and cost), a tax-free, rolling-over health savings account for most everything, and a high deductible health plan for emergencies. Throw in a no-discrimination-for-preexisting-conditions regulation and you’re starting to get there. The point is we need people to know and think about how much health care they buy.
I guess this raises the second problem with what we’ve got today; that of distributive justice. Some people are poor and because of their poverty they are unable to buy much health care. If we think poor people are too poor, maybe we should just give them money. Or maybe seed their HSA and pay their HDHP premiums. Just as food stamps help people eat without the need for government farms (except for farm subsidies, but let’s not go there) and a U.S Grocery Service, so too we can provide for the poor without resorting to tax-paid doctors and treasury-backed insurance plans. Sure this gives people extra incentive to be poor, but the same is true for any redistribution program. Given the choice between people dying in the streets and people suckling at the taxpayer teat, I guess the moral hazard is something we have to live with.
Though the incessant red-blue squabbling obscures it, the future does not have to belong to some point between status quo and government-provided care. This doesn’t have to be a one-dimensional problem.
Sep. 10, 2009 at 8:29 am
Thanks for the insight. I’m curious to know what you make of what Obama said immediately after the quote you used to open your piece:
“I have to say that there are arguments to be made for both approaches. But either one would represent a radical shift that would disrupt the health care most people currently have. Since health care represents one-sixth of our economy, I believe it makes more sense to build on what works and fix what doesn’t, rather than try to build an entirely new system from scratch.”
Sep. 11, 2009 at 5:44 pm
Tuuk
In general I like this plan.
My concern with making the costs more salient to individuals is that I wonder what type of consumer we make. My concern is especially around preventative measures… if I have to pay 200 dollars to check to find out if I might get sick at some point in the future, am I going to do it? I doubt it, especially given how people tend not to see their life with the appropriate amount of risk. What if its covered by insurance? hmm… maybe more likely. But the problem of this structure is that I am now going to overdo the treatments, especially if my trusted doctor (who is paid on a per-treatment basis) keeps suggesting something new. Thus in the former situation (what you offer), people pay less and costs go down in the short run, but perhaps up in the long run if people don’t do preventative stuff. In the latter scenario, cots are higher, but if we have effective doctors then at least we minimize the cost of preventable long-term disease. Why not find a way that treatment comes out of our pocket (like that atlantic article from this last month), but preventative is covered by some type of insurance structure.
Sep. 13, 2009 at 9:13 pm
@Adam:
I think the technical and logistical challenges are not too great. The biggest danger is that companies stop providing health insurance without increasing pay by the requisite amount.
It seems the political challenges are more significant.
Andrew Sullivan writes:
“In an ideal world, I’d like to scrap the US system entirely, sever the connection between employment and health insurance, allow individuals to buy insurance from competing healthcare exchanges, and leave the rest to fee-for-service medicine. But it is a political fact that this won’t happen in America, as solid a fact as that the NHS will not be abolished by the next Tory government.”
Why this is, I’m not sure. What are the arguments in favor of employer-based health care? I can’t really think of any. I guess people just can’t conceptualize such a world and its potential benefits.
Sep. 13, 2009 at 9:25 pm
@Peter Boumgarden:
I agree the discouragement to get preventative care is a major problem with what I propose. I think it’s important enough to require some sort of government intervention. I would not prefer government-staffed free clinics that provide basic services. A law mandating that individual health insurance plans cover these basic services outside of the normal deductible is preferable.
Another option is to let the insurance company deny a claim if the patient did not follow the proper course of preventive care or early detection. Kind of like your car’s warranty being contingent on the completion of factory scheduled maintenance. That’s kinda mean though.