Dissecting the Reason Healthcare Plan

Commenter Ovi, in response to my inquiry into options other than Universal Healthcare, provided this newly released video from Reason.

I’ll dissect it step by step.

The opening statement itself is misleading because it states that the system of insurance itself is the reason that most people don’t shop for price when it comes to health care, but other insurance industries however are incredibly competitive so the statement doesn’t make much sense. The real issue isn’t an insurance system, because the premiums of insurance are directly related to the cost of what the insurance covers, the real issue is that something like 90% of those insured by private health care get their health care through their employer and because of this have lost the sense of personal cost.

The comparison to the fall of non-advancing or stale services or products  like jeans and foodto health care is a poor comparison. As time goes by the cost of old medical technologies (that haven’t been surpassed by new technologies) has gone down, its the creation of newer and often less helpful medical interventions combined with a philosophy that health care should be distributed without pecuniary thought that have driven up medical costs. If health care was a stale industry or one like the utility industry, for example electricity that only adapts to cheaper alternatives, we wouldn’t have rising health care costs. People aren’t willing to pay whatever it takes to buy an apple or a pair of jeans but they are when it comes to medical procedures so the industry adopts new practices to support this and costs go up.

The statement “in 5/6th of the economy individual choice and competition works” is also misleading because it implies that other than health care the rest of the economy runs free of regulation and restriction which simply isn’t true. The electricity industry, which it uses as an example of a correctly functioning free market immediately before this statement, is often horribly limited in choice and competition and is one of the nations most heavily regulated industries.

The main problem I have with the Lasik example is that Lasik isn’t a life expectancy extending medical procedure (which is largely why it isn’t covered by medical insurance, the same way vision insurance is usually separate) and so it isn’t bound by the perspective problems that infect those that are. It is much easier to measure the convenience of no contacts/no glasses in dollar value than it is years of one’s life. Also medical technologies other than Lasik, including life extending ones, get cheaper and better as underlying technology (like lasers for Lasik) get cheaper and better. The implication in the video is that this isn’t true.

I don’t know enough about the Mass. health care system to make any reasonable comments about it, but this point only argues against the current health care proposals (if they do indeed mirror the Mass. system) and not against other functioning, cheaper, equally or more effective systems of universal healthcare.

Okay, now that we’ve hit the boiler plate intro stuff, it’s time to get into the 3 step plan.

The employer based system is a large concern and a clear problem with our health care system, but for better or worse it’s what we have. It’s often said that politics is the art of the possible, and in this case neither side of the aisle has much interest in removing it due to the pressures of the labor unions and companies that have spent tremendous effort creating and arguing for improved health insurance packages. Also a direct and forced removal of the employer based system would see a large premium increase for those 90% of people who have insurance through this system because their collective bargaining power would be removed (which provides them the cheaper and thus more comprehensive plans) and so there’s no constituent pressure to remove it either.

Who is this practicing physician that talks about going to the doctor to get blood pressure management (which can have drastic effects on life expectancy) advice and for information about resolving ingrown toenails (which can be  incredibly painful and debilitating) as wasted dollars? Certainly this information can be provided in cheaper ways (through things like simple science-based medical information websites for example) but that information is medically relevant and should be provided. It’s also important to be able to go to doctors for this kind of information because self diagnosis can be  a terribly dangerous thing to do. The thing is that a diagnostic doctors visit will inevitably be priced on the value of that doctor’s time and it doesn’t matter if you’re getting your potentially cancerous lump diagnosed or your toenail looked at the price will be the same.

I guess the real point here is whether doctor’s visits for these reasons should be covered by insurance or purely out-of-pocket. I’m not sure about the specific regulations on this so I’ll decline to comment on that aspect but in a purely free market I think it’s pretty speculative to state that there wouldn’t be plans that covered these things (especially if there’s enough constituent demand to get regulations on such coverage passed, which I don’t know if there has been).

The “all you can eat buffet” critique of our current system stands in stark contrast to the earlier comment about Mass. rationing health care. What is it guys, do you want rationing or not? And what exactly is better about the free market insurance companies rationing health care as opposed to the government doing so?

Extending the tax exemption to the individual health insurance market seems like a relatively good idea if we don’t fund it on the deficit. We’ll have to find cuts or other taxes to cover this new tax deduction, it won’t be free. I’m unsure of how extending the tax deduction to the individual market without completely removing the job based market provides individual workers with employer provided insurance more options.

The analogy of buying homeowner’s insurance after the fire to buying health insurance with a preexisting condition is relevant only in the case where someone hasn’t lost their previous insurance for some reason beyond their control. Perhaps the regulations forcing insurance to accept people with preexisting conditions is too broad and should be narrowed to only those who’ve lost their insurance because their previous insurance was forcibly severed either by the insurance company or because that individual lost their employer provided insurance, etc. Also if those who develop a condition while under insurance can’t freely change insurance because no insurer will pick them up now, how will the free market pressures operate? High risk individuals will have to stay with their current plans while low-risk individuals can move to cheaper plans which entirely defeats the point of insurance. Those who get sick will be punished as their premiums will continue to rise as the non-sick move to cheaper plans.

The troubles of mandated coverage is worded well here. We must be careful of what coverage we mandate that insurance companies provide because we can overstep our bounds. However the example of teetotallers paying for alcohol abuse treatment is flawed for a couple of reasons. First is that alcohol abuse is in large part influenced by environmental factors, including genetics and so saying that those who have had the chance to avoid these factors shouldn’t have to pay for the risk is like saying because my family doesn’t have a high risk of cancer I shouldn’t have to pay for a plan with cancer insurance. This builds a system where those who were born with high risks because of their lineage and their location are forced to pay much higher premiums for their coverage. Second is that it  implies that no mandated coverages should exist, in which case we end up with more instances of people who are uncovered for medical risks that didn’t turn their way and need either financial assistance or will simply burden our economy with bankruptcy when those costs are levied directly against them instead of the insurance pool. Does it overstep my feeling of individual liberty? Yeah, it does. But does it provide a better system of managing risk with lower negative effects on the economy? I think it does. At least we can agree that this point is much more complicated and expansive than the video makes it seem.

There are many ups and downs to allowing interstate health care market, and since this post is already way too long I’ll save those for another day. I’d suggest a little research on the topic though since it’s certainly not as simple as they make it out to be.

My understanding of the relevant studies on Health Savings Accounts is that they have little to no effect on health care costs as a whole because the amount that they’d cover represents an insignificant minority (1-2%) of health care costs. Any benefits would require an overhaul of the health care system that included changes to the availability of cost/quality information (of which there is just about none). I’m in favor of this even without HSAs. HSAs seem like a non-solution to rising health care costs.

Overall I didn’t find these offered solutions very compelling, but I agree with the end that either way what we’re doing now is just the start.  This solution overlaps the one provided provided the GOP in late October (I believe) in that both remove the interstate restrictions, both remove the preexisting conditions restrictions, and both would result in expensive high risk pools. The CBO review of the GOP health care proposal was abysmal with it only extending coverage to 7 million more Americans and reducing the deficit 68 billion where the Dem’s bill extends it to 36 million Americans and reduces the deficit by 104 billion. But hey, at least its free market principled!

The video in large didn’t present any new ideas and so I encourage any interested parties to research the points more and attempt to crush my statements. Or to provide arguments for why my points are otherwise invalid or unimportant.

And sorry for how long this is.

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