Here is what I wrote on this blog the day after the election:
The big loss is that there will be no unified right-of-center voice in American politics. Toomey, Portman and the rest of them will do what they can, but it’s Trump who will be taken to define Republicanism, which is to say that Republicanism will henceforth be pretty much the same thing as Democratism.
It gives me no pleasure to observe that with the new Trump-endorsed Republican health care plan, I stand vindicated.
This is the bill we would have had even if a right-of-center Republican had been elected president. Unless you think that that president would have provided the legislature with more cover to do unpopular things. The Affordable Care Act is more popular than Obamacare — go figure. Hard to take away entitlements.
I haven’t looked at the Trump plan yet, but are you saying that there would have been some better Republican plan if Trump had not been elected? If so, where has that plan been for the last 8 years?
Roger: Several versions of that much better plan have been floating around among Republicans for years. See for example John Goodman’s version here.
There has long been a consensus among conservatives (and among many thinking liberals) that a large part of what’s wrong with American health care is that consumers, being overinsured, have an incentive to demand expensive treatments they’d never ask for if they were bearing the cost. This includes things like visiting the doctor because you think you might have a cold. Economists estimate that with better incentives in this dimension, you could cut health care costs by 40% and still get essentially the same health care outcomes we’re getting now.
Any decent health care legislation would address this problem by creating those incentives, e.g. by greatly increasing deductibles, having people pay medical costs out of individual HSAs, etc.
Most of the Republican candidates clearly understood this. Trump was one of very few who didn’t. I’m sure Paul Ryan understands it, but my guess is that Ryan thinks it would be futile to push for a plan that the president is either unwilling or unable to defend coherently.
So yes, I am near certain that the Republicans would have offered a far better plan — i.e. the sort of plan they’ve been talking about for years — if almost anyone other than Trump had been the president.
Is the idea with HSAs such that they be used mostly for the preventative, “every few months/years checkup,” or other minor procedures, while we have much higher deductibles for our more expensive and/or catastrophic care? I like this idea if I’m understanding it properly.
Though I am a Canadian where we have single-payer government-funded healthcare, my understanding of the problem with US healthcare is defensive medicine.
In a litigious society, it is much easier for doctors to order unnecessary tests than take the risk of lawsuits and rising malpractice insurance costs.
Extra testing means you find things that might not have killed you anyway given that you might die from something else first.
Consider that the US spends 18% of GDP on healthcare while Canada spends roughly 11% of GDP on healthcare and Canadians live longer on average. That’s a lot of waste in your system.
“Economists estimate that with better incentives in this dimension, you could cut health care costs by 40% and still get essentially the same health care outcomes we’re getting now.”
Yes, just look around.
Yes, there is a lot of waste in the system, but defensive medicine is a small part of it.
ObamaCare is such a disaster that it is hard for me to see how a new system could be any worse. Perhaps we will soon find out.
I’m no expert, but this is not my understanding.
1. Other industrialized nations seem to have more extensive insurance, yet lower cost healthcare and generally better outcomes. Is this consistent with Landsburg’s hypothesis?
2. The dominating fact of health care economics, as I understand it, is the extreme lumpiness of healthcare costs. That is, the great bulk of health care costs is expended on a tiny share of patients. Landsburg comes close to conceding this point in acknowledging that people with health savings accounts would still need catastrophic coverage.
Thus, while it may well wrangle the sensibilities of an economist to see so much care delivered at little or no incremental cost, I wonder about the magnitude of these inefficiencies within the context of healthcare costs generally. And, as others observe, that inefficiency is partially or wholly offset by the advantages of having more knowledgeable people advising ignorant consumers about their (potentially expensive) health care decisions.
3. Now imagine that the bulk of healthcare costs are expended on people with chronic conditions. Such people may been regular, if brief, attention from health care workers to get lab work done, etc. These patients will regularly max out any annual benefit limit, yet may not regularly reach the limits of a catastrophic policy. These are the people who would really take it on the chin under the Health Savings Account regime. And as we get older, there will be ever more people in this category.
Regarding patients who have done nothing to cause their own chronic condition (except refrain from dying), it’s not clear how sending them price signals will help them avoid the cost of their condition. Indeed, if these patients are no longer to be covered by insurance, the price signal would not even function to encourage more healthcare providers to enter this area of medicine.
Let’s recall the words of Friedrich Hayek in The Road to Serfdom, Chap. 9, Security and Freedom:
4. While Landsburg focuses on the waste of people visiting the doctor’s office when they have a cold, I suspect the place with the least bang-for-the-buck is [ominous chord] end of life care. Even experts in healthcare economics find that, when mom becomes unresponsive, they cannot help but ask for heroic measures to prolong her life. And thus at enormous expense, she will live on, a misery to herself and her loved ones, so that when at last he breathes her last, no one will be able to remonstrate against anyone else (or themselves) about how they didn’t demonstrate sufficient love for her.
This flat-out suck for everybody—the patient, the family, overworked healthcare providers, other patients, society, mortuaries, you name it. What’s the remedy?
But it’s easy to be glib here. After all, how can you recognize “end-of-life care”? Before the patient dies, it’s just “care.” This requires a degree of sophistication–with a candid acknowledgment that people can make the wrong decision. The only way you know for sure that a given expenditure was not worth it is to spend the money and feel the regret.
One partial remedy is to have healthcare directives with DO NOT RESUSCITATE written in bold red letters at the top. This really ignores the “degree of sophistication” argument, but maybe that’s as good as it gets.
Another remedy is to eliminate health insurance entirely, so that people know that the incremental cost of their decisions will fall on themselves and their heirs. This has certain efficiency advantages, but pretty forthright equity disadvantages.
The intermediate option is [more ominous chord] death panels. That is, making a judgment about what care to cover and what not to cover. Insurers already do some of this, declining to cover treatments that are not part of standard level of care. The challenge here is that we’d need people to say “Yes, this is part of a standard level of care for some people in some conditions–but not for you.” And that’s harsh, and provokes a backlash against elitist playing God, etc.
Tough nut to crack. But if we’re worried about focusing our health expenditures toward their most productive ends, I don’t think keeping the snifflers out of the waiting room is gonna fill the bill.
@ 5:
There are certainly quite a few absurd lawsuits in the US, and malpractice insurance for some specialties like obstetrics and neurosurgery is expensive. But that isn’t the big problem with health-care costs. The big problem with health care, as with the cost of a college education, is that a third party (often the government, and in medicine insurance companies which have become more or less another part of government) pay the bills, so there is no price competition and so little incentive to keep costs down.
Doctors doing Lasik surgery and cosmetic surgery get sued, too, but those procedures aren’t covered by insurance and so their costs have been dropping, while the rest of medicine sees rising costs.
It may look cheaper in Canada, but then we don’t have to wait a year for a hip replacement.
Larry Summers, hardly a raving right-winger, had a piece on this a while back. Costs soar when the government steps in to help people. When it ignores them (electronic equipment, for instance), things get much cheaper. In 1966 or 1967 a salesman came to my office to demonstrate an electric calculator. Plugged into the wall and could add, subtract, multiply and divide. Cost $1000 in 1966 or ’67 dollars. Today you can get a better one at Target for one 2017 dollar.
@SL:
Can you give us an estimate what you imagine the information costs are that arise if you switch to HSAs?
Let’s say that a 40-year-old man will cost on average $3000 a year under health insurance or single payer.
Let’s furthermore assume that with HSAs, if he educates himself, he will be able to cut that to $1500 on average.
Using an hourly rate of $30, that would leave him 50 hours p.a. to educate himself and to gain a sufficient overall medical understanding of how the various organs work, the advantages and limitations of medical technology and diagnostics and why a doctor would, for example, want to know your creatinine level or recommend ultrasound vs. MRI vs. CT in any specific case.
Do you think 50 hours will be sufficient for the average person to achieve that knowledge?
I think it’s fairly obvious that for most people, it won’t be.
What are your thoughts on what kind of information costs would arise with HSAs?
The solution would be to inform patients and family properly.
This can be as simply as the doctor framing the question realistically.
For example:
“Would you like to live for another 3 days, peacefully and without much pain, or would you like us to torture you for 3 more weeks?”
Doctors tend to have a much better of the life-expectancy of severely ill old patients than most people understand.
They just don’t like to tell the relatives, and they’re not exactly incentivized to, either.
For those who think tort reform is the answer: Tort reform is a state issue. Various states have tried it. Texas restricted medical malpractice suits severely, to the point where there hardly are any.
That was in 2003. The impact on healthcare cost growth was zilch (much to my surprise, actually).
This is one of the indications that healthcare costs/healthcare inflation growth are not driven by input costs, but rather by the pricing power of the healthcare providers and their ability to raise demand.
@nobody.really:
I have some interesting thoughts on the question of secular stagnation and capital returns on which I would like your opinion. Since this is very off-topic for this thread, perhaps you can mail me under:
casenightmareorange@gmail.com
@Steve 3
I don’t see an answer to Roger’s question. If they could have done better without Trump, why didn’t they do better before they had Trump? Why were there none of these better proposals put forward, and why were there none on the shelf waiting?
Ken B (#14): I do not have to explain why none of these better proposals were put forward, because these better proposals were put forward. See, for example, the Sessions-Cassidy bill.
In order to put forth such proposals successfully, one needs leadership at the top for two reasons: First, to browbeat legislators who are tempted to load up the bill with special favors to their constituents, and second to explain to the public why the bill is a good thing.
What we have instead is a guy at the top who seems to care only about one thing, and that’s being able to say that he killed Obamacare, without regard to the merits of the replacement. And most tragically, we have a guy at the top who is quite incapable of understanding the merits of Sessions-Cassady (or anything like it) and hence quite incapable of selling it to the public.
Hey, is that fair? I mean, nobody knew healthcare could be so complicated….
(It’s true; I did know, but was sworn to secrecy!)
@nobody.really:
So…?
nobody really was the only one who knew healthcare was complicated.
@Ken B
“I don’t see an answer to Roger’s question. If they could have done better without Trump, why didn’t they do better before they had Trump? Why were there none of these better proposals put forward, and why were there none on the shelf waiting?”
@Steve Landsburg
“Ken B (#14): I do not have to explain why none of these better proposals were put forward, because these better proposals were put forward. See, for example, the Sessions-Cassidy bill.”
We may get more information on how much support there is for proposals like the Sessions-Cassidy bill. It looks like the Ryan bill is going to fail. If so, we will see how many Senators speak up in favor of something like Sessions-Cassidy.
I don’t know enough about health insurance reform to have a big-picture opinion, but I do have some specific questions.
1. What’s up with selling insurance across state lines? All major carriers already sell in multiple states, so how does this proposal help? Is it just a ploy to do an end-run around state insurance regulators? Do state regulators significantly drive up costs? Plus, all insurance is local because it depends on the local doctor and hospital networks, so how does it help an Arizona resident to be able buy a plan with a Vermont network?
2. How much more cost-conscious would consumers be with HSAs versus deductibles and copays? Deductibles and copays already force some costs onto consumers and so discourage frivolous consumption.
3. HSAs cover only small-ticket items. How would costs on big-ticket items be constrained? How much savings is there in curtailing demand for small-ticket items?
4. Advo #10 raises an interesting point about the costs of patients educating themselves. In other economic areas, with large information costs, specialists usually arise to capture economies of scale in becoming informed. Would that be more efficient here? Is this already happening? Are insurers filling that roll when they negotiate price menus with providers and put limits on what is considered medically necessary?
5. Is there an immigration angle here? Tech giants scream for imported labor when they have to pay engineers enough to raise a family, and everyone hops to help them. For decades, we have been importing cheap nurses to combat “nurse shortages.” Should we be importing cheap doctors to reduce doctor costs? Dean Baker hammers this point relentlessly.
Alternatively–and more consistent with Trump’s worldview–could we boost domestic production? Allegedly the number of applicants for med school, and the academic quality of that pool, is better than ever. Why not open more med schools?
Sure, med schools are expensive. But is it also the case that the Am. Medical Assoc. discourages the idea in order to keep the supply low, and the salaries high?
In lieu of, or in addition to, boosting domestic production, it may make sense to increase imports. Alas, if we bring in doctors from Mexico we’ll have to pay a 30% border adjustment tax….
Why doesn’t the US produce more physicians?
Various sources say the narrowest bottleneck isn’t the number of med school slots; the growth of Caribbean-based med schools has fixed that. Rather, it’s the supply of residencies, the 1-5 year training that comes after four years of med school. According to a 2011 Slate article, the US gov’t subsidizes residencies to the tune of $100,000/resident/yr. Without more subsidies, we don’t get more residencies.
What to do? Stat News (a Boston Globe affiliate) notes two remedies:
1. Missouri, Kansas, and Arkansas have passed laws to allow unmatched graduates to work in medically underserved areas without doing a residency—but the American Medical Association (AMA) and the Association of American Medical Colleges frown on the practice. As of last year, no doctors were taking advantage of this opportunity.
2. The AMA is calling on government, insurers, and foundations to help finance more residency spots.
But the Journal of the AMA (JAMA) reports that 99% of US med school grads practice w/i 6 years of graduation.
Well, actually, there was a right-of-center moderate in the President’s Office, right before Trump was elected. The whole theory that Obamacare was some sort of Socialist universal health care plan is contradicted by the facts.
The claim that corporations are losing money on Obamacare ignores the record-breaking profits that health insurers continue to collect.
UnitedHealth, for example, is the nation’s largest health insurer (and leaving the marketplace next year). UnitedHealth claims that Obamacare has reduced its 2016 earnings by $850 million. While they might have $850 million less than they wanted, UnitedHealth announced record-breaking profits in 2015, followed by an even better year this year. In July 2016, UnitedHealth celebrated quarterly revenues of $46.5 billion, an increase of $10 billion since the same time last year.
In 2015, Aetna reported annual operating revenue of over $60.3 billion, a record for the company. Although they had a pretax loss of $350 million on the individual exchanges, it pales in comparison to the profits they are receiving on their main product lines, which are much more profitable now that the sickest individuals were moved to the “high-risk pools”.
Obamacare even allows them to simply jump off the exchanges, and leave all those sick customers to other insurers. The Republicans point to that as proof that ObamaCare is in a “death spiral”, but they ignore the fact that other insurers have figured out ways to make money even on the exchanges.
The only way you could get more business-friendly than “record profits and increasing premiums” would be to cut taxes on the rich, and cut benefits for the poor, which coincidentally is exactly what the Ryan plan does.
It is disingenuous to pretend that Ryan really wanted a plan that helps people. Ryan has a reputation as a policy wonk, but all of his ideas are recycled from 1980’s-era Art Laffer speeches that weren’t even true back then, and have long since been disproven.
If Ryan was really interested in insuring people using private incentives, he would have proposed a “Medisave/Medishield” system like Singapore, where medical service is only lightly subsidized, and always costs something. Since out-of-pocket charges vary, the system was designed to encourage people not to visit the doctor unless they really have to. (At the end of the year, if you haven’t spent your “savings”, you get to keep some of it.) In terms of efficiency of financing and results achieved, Singapore is the most successful system in the world, by a wide margin, proving that private businesses can thrive as long as the incentives are aligned properly.
Instead, Ryan released a bill where the tax subsidy is not based on income or on usage of medical service, but on age. Under “RyanDoesn’tCare”, you are still punished for not having insurance, but the penalty doesn’t kick in until you are sick enough to need insurance. It is like they finally figured out the reason for the ACA, but just decided to make every part of it worse.
And they had seven years to come up with this plan. It would be as if you had seven years to redesign your website, and your winning idea was a long block of text, with no navigation, and red-on-green text (in comic sans).
That’s what Milton Friedman claimed in “Capitalism and Freedom” (I actually read that long ago).
Q – could “Sessions-Cassady” (or any of the other bills or proposals people find preferable) have been filibustered? If so, the answer to “why this bill” appears to be that it’s a first step representing what can be passed under reconciliation.
Steve,
What would your plan do with people hat are born with long term chronic conditions like Type 1 diabetes, or get treatable long term cancer, would you allow society to share that cost or tell them that they need to have lower income for the rest of their lives for being unlucky?
Steve,
Also, can you provide a link for your 40% claim? My guess is that this was estimated from some not clearly identified model, or a local average treatment effect in which case it may not apply in a general equilibrium framework.
The problem with the Sessions-Cassady bill is the same as with all right-wing healthcare proposals.
The idea is that you introduce HSAs and that will turn a population of scientific illiterates, creationists, new agers and anti-vaccers into educated consumers with the breadth and depth of medical knowledge required to make cost-efficient decisions on diagnostics and treatment.
And that seems to happen without any significant information costs.
I’ve read a lot of right-wing stuff on healthcare reform, starting with Milton Friedman’s original article on the topic, and none of them so much as mentions information costs, let alone does even a back-of-the-envelope estimation to see if this policy approach makes any sense.
Advo 24
I suspect so. I don’t know about doctors, but it is certainly the case with public school teachers that there are artificial barriers to entry. It’s true of taxis, and in California beauticians. It seems widespread.
“People of the same trade seldom meet together, even in merriment or diversion, but the conversation ends in a conspirancy against the public, or a contrivance to raise prices.”
Steve, I think you’re being too easy on Ryan and congressional Republicans. They’ve convinced Trump that without 60 votes Obamacare can’t be repealed en masse, so they have come up with this dog’s breakfast. But if they had any spine, they could easily sidestep those phony constraints, as suggested here: <a href="http://www.powerlineblog.com/archives/2017/03/the-parliamentarian-dodge.php" here.
A reasonable principle should be that if integral parts of a piece of legislation were passed via reconciliation, the whole thing can be repealed with 51 votes. That wouldn’t even set much of a precedent, because the ACA was unique in the way that it was passed. The real problem is that there are too many fainthearted Republicans in Congress who subscribe to the view that once an entitlement is conferred, it can never be taken away.
Sorry, that link is: http://www.powerlineblog.com/archives/2017/03/the-parliamentarian-dodge.php
Advo: You keep talking about “information costs”, but also keep ignoring the biggest information cost of all, namely: If I have a non-urgent reason to visit the doctor, no insurance provider can possibly know whether I prefer that visit to, say, a car repair. Only I know that, so only I can make that decision efficiently. And to make the decision efficiently, I have to know the value of the resources that will be consumed by my potential doctor visit. The only solution that anybody has ever devised to that sort of information problem is the price system, where consumers face prices that more-or-less accurately reflect the resource costs of their options.
The whole point of prices is to solve information problems. The whole point I’ve been arguing is that the health care market is rife with information problems that only prices can solve. Your constant invocation of “information problems”, as if you were bringing something new to this table, is frustrating and occasionally infuriating.
5 Ahmed Fares,
No. The bulk of the costs is not due to malpractice avoidance. This is nothing more than a political talking point – similar with trying to point to cows farting as the main cause of global warming.
It’s been a while since I’ve read the study (back in 2010) but Malpractice avoidance accounts for less than 10% of healthcare costs.
The efficiency part is unclear to me.
If I miscalculate and go to the doctor instead of dealing with my car, who bears the cost when I crack my engine block? I do. But if I miscalculate and go to the mechanic rather than the doctor, who bears the cost when become paralyzed and need a lifetime of round-the-clock care? I’ll bear a lot–but very likely, society will bear most.
Which is not to say that I disagree with Landsburg as far as he goes; at the margin we’d want patients to bear the net incremental cost of their decisions. But net means the cost offset by the benefit, including the avoided costs. So this boils down to a factual question: What are the costs, and what are the net benefits? It’s not beyond the realm of possibility that the social benefits of asking the doctor to take a look exceed the costs.
N.r 35
The efficiency thing is actually quite simple: most bang for the buck. The hypothesis is N bucks gets me a visit to the doc or a car repair. Which gives the bigger bang is the more efficient choice.
Ken B: I think you missed nobody.really’s point about who bears the cost if I make a decision that turns out regrettable ex post — and the prospect that the answer is different in the case of the car repair than it is in the case of the doctor, thereby creating a bias toward too many car repairs and not enough doctor visits.
@Steve 37 okay on rereading that looks right.
Fair question. But must the bias be that way?
Who pays for the injuries to the woman hit by the unrepaired car?
@SL:
We know what insurance coverage via insurers costs; these kind of information costs are rolled into the premiums.
Granted, the insurer cannot make optimal individual decisions for each individual case; it can just make decision based on average assumptions regarding cost-efficiency. I don`t know how high the (unaccounted) efficiency loss is here, maybe not that high.
But we don`t know at all what kind of “soft costs” HSAs would cause to patients; we can only assume that these would be much higher than the soft costs they face under the current system(s), because they would be required to make many more medical decisions, with potentially far bigger consequences, than they do know.
I think that it is not unreasonable to expect an economist who advocates HSAs as a solution to do some kind of analysis to get an idea just how big those soft costs would be.
Perhaps they’re not that big; I wouldn´t know. To my knowledge, none of the proponents of HSAs has ever done such an analysis.
I think, however, that if, say, Krugman proposed some kind of economic policy which imposed an annual time expenditure of maybe 100 hours? on every adult citizen of the US, you would be highly critical of him if he didn´t address that expense at all.
I think that for HSAs to make sense, you would need sufficient medical knowledge so that if you go to the doctor with a complaint, and he says “let´s do these twenty blood parameters and a ct”, you should understand in general terms what most of these do and why a ct is preferable to an ultrasound (or the other way around) in this case.
I think that for HSAs to be efficient they would require a fairly high degree of medical knowledge from the patient, otherwise the patient will just end up rolling the dice.
Prices are useless if you don’t know what you are buying.
Sure, a patient a patient with a headache will know what an MRI costs.
He will also know that an MRI will exclude or confirm the presence of a brain tumor.
However, knowing whether or not an MRI is cost-effective requires the patient to understand how likely it is that he has a brain tumor, based on his symptoms and history as well as other tests.
And that requires a fair amount of medical knowledge, the acquisition of which may be more costly than the MRI itself.
This market-based approach may still be the most efficient; but give the major impact of these soft costs, they should not be completely left out of the analysis.
@JamesKahn 31
The GOP’s ability to win election depends critically on the assumption (by their voters) that their entitlement programs will not be taken away.
Obamacare wasn’t very popular; but that was to a large degree because for many people, it didn’t go far enough, not because a substantial majority of people didn’t like the idea of a healthcare entitlement program.
Entitlement programs are just very popular.
A complete repeal of Obamacare, and in particular of the Medicaid expansion, would make it very clear to people that for example all that talk about replacing Medicare with a privatized voucher program could actually become reality.
This change in perception would give the Democrats a large majority in the Senate and Congress in very short order.
The fact that we’re even discussing the possibility of a replacement/repeal which will cost some double-digit million people their coverage is a sign of how far out of touch with their voters the federal GOP is.
What the GOP is currently doing is political suicide.
If this bill passes, it will haunt them for many years to come. A full repeal might be even worse.
A nice question illustrating a larger point: MANY/ALL choices have externalities, or the potential for them. Classical economic theory, which is premised on atomistic, externality-free transactions, fails to account for this kind of complexity. Thus, we should expect the real world to operate with less efficiency than the world of econ models.
But more narrowly: Yup, a choice to skip a doctor visit and to skip a visit to the mechanic can each produce externalities. So is there any reason to think that we could gain efficiency through trying to influence an actor to do make one visit rather than the other?
I’m guessing we’d need to consider—
• The magnitude of the harm arising from a bad outcome. (A weighted average expected value of the outcomes?)
• The amount of benefit to be derived from securing expert advice (that “knowledge” thang).
• The amount of the avoidable cost socialized.
My gut sense is that the costs that get socialized in heathcare exceed the costs that get socialized un car repair. But it’s just a guess.
@advo 41
“The GOP’s ability to win election depends critically on the assumption (by their voters) that their entitlement programs will not be taken away. Obamacare wasn’t very popular; but that was to a large degree because for many people, it didn’t go far enough….”
That seems at odds with the fact that Republicans made very clear they were going to repeal/replace Obamacare and got the presidency and both houses of Congress. I don’t think any of those who voted Republican did so under the illusion that Republicans would further expand Obamacare.
Of course the politics of an actual replacement are trickier than those of a hypothetical one, but what would really kill Republicans’ chances in 2020 would be to fail to follow through on their pledge.
As to whether the replacement will much of an improvement, I’m also not very hopeful, but that’s a separate argument. I’d rather the federal government get out of health insurance altogether beyond Medicare and Medicaid. I’m no fan of those programs either, but I realize there’s no hope of dismantling them.
Submitted for your approval:
1. March 6 LA Times:
“Fully 68% of Americans want to keep what works [in Obamacare] and fix the rest, while just 32% prefer the GOP’s repeal and replace approach, according to polling from Hart Research. Moreover, the polling showed most Americans — including 54% of President Trump’s voters — have a favorable view of the Medicaid system, which would face steep cuts under the Republican plan.”
2. She voted for Trump. Now she fears losing the Obamacare plan that saved her life.
3. The Health Care Plan Trump Voters Really Want:
“The Kaiser Foundation organized six focus groups in the Rust Belt areas — three with Trump voters who are enrolled in the Affordable Care Act marketplaces, and three with Trump voters receiving Medicaid…. They were not, by and large, angry about their health care; they were simply afraid they will be unable to afford coverage for themselves and their families. They trusted Mr. Trump to do the right thing but were quick to say that they didn’t really know what he would do….
They spoke anxiously about rising premiums, deductibles, copays and drug costs. They were especially upset by surprise bills for services they believed were covered. They said their coverage was hopelessly complex. Those with marketplace insurance — for which they were eligible for subsidies — saw Medicaid as a much better deal…. They expressed animosity for drug and insurance companies, and sounded as much like Bernie Sanders supporters as Trump voters….
Several described their frustration with being forced to change plans annually to keep premiums down, losing their doctors in the process. But asked about policies found in several Republican plans to replace the Affordable Care Act — including a tax credit to help defray the cost of premiums, a tax-preferred savings account and a large deductible typical of catastrophic coverage — several of these Trump voters recoiled, calling such proposals “not insurance at all.” ….These voters said they did not understand health savings accounts and displayed skepticism about the concept.
When told Mr. Trump might embrace a plan that included these elements, and particularly very high deductibles, they expressed disbelief. They were also worried about what they called “chaos” if there was a gap between repealing and replacing Obamacare. But most did not think that, as one participant put it, “a smart businessman like Trump would let that happen.” Some were uninsured before the Affordable Care Act and said they did not want to be uninsured again. Generally, the Trump voters on Medicaid were much more satisfied with their coverage.
There was one thing many said they liked about the pre-Affordable Care Act insurance market: their ability to buy lower-cost plans that fit their needs, even if it meant that less healthy people had to pay more. They were unmoved by the principle of risk-sharing, and trusted that Mr. Trump would find a way to protect people with pre-existing medical conditions without a mandate, which most viewed as “un-American.”
If these Trump voters could write a health plan, it would, many said, focus on keeping their out-of-pocket costs low, control drug prices and improve access to cheaper drugs. It would also address consumer issues many had complained about loudly, including eliminating surprise medical bills for out-of-network care, assuring the adequacy of provider networks and making their insurance much more understandable.
[O]nce a Republican replacement plan becomes real, these working-class voters, frustrated with their current coverage, will want to know one thing: how that plan fixes their health insurance problems. And they will not be happy if they are asked to pay even more for their health care.”
nobody et al 35/37/42 — before going too much further with this, it seems to me there’s a distinction with “externalities” that are self-imposed.
Driving a car (on public roads) is a direct threat to others, which justifies all kinds of laws, liability coverage etc. (in theory even minimum maintenance standards but at some point things get too intrusive).
However a burden on “society” from medical costs exists because we’ve *voluntarily* agreed to codify a moral obligation. Might be a fine thing to do, but also seems to put the idea of reaching back to control the underlying behavior in a different context. At some point if this leads you to mandate insurance people don’t actuarially “need” (the basis for the ACA) or regular checkups, control what people eat, drink, smoke etc., you need to go back and rethink the whole thing. Sorry I get kinda stuck on the “free society” thing.
Advo – it seems this is what different policy ‘worldviews’ usually boil down to: if you can’t trust people to make decisions that are in their own direct interest such as how to spend an HSA (the ‘deductible’ in a catastrophic policy) without waiting to see a doctor until they’re puking blood, you’ll surely be led to single payor managed by “the great and the good”.
@nobody.really #44
“If these Trump voters could write a health plan, it would, many said, focus on keeping their out-of-pocket costs low,”
so they want to pay less for doctors and hospitals …
“control drug prices”
and they want to pay less for drugs …
“and improve access to cheaper drugs.”
and they want more drugs to be cheap …
“It would also address consumer issues many had complained about loudly, including eliminating surprise medical bills for out-of-network care,”
and they want to pay less when they go out-of-network …
“assuring the adequacy of provider networks”
and they want to be able to go to more doctors …
“and making their insurance much more understandable.”
and they want to spend less effort understanding insurance.
So, in a nutshell, the interviewed Trump supporters want more, more, more, more, more, and more for themselves. I think I see a pattern here.
Is this in any way surprising? When asked, who wouldn’t respond in kind?
The problem is not that people want a free lunch. The problem is that they’ve been promised one.
Obamacare included benefits and reciprocal costs. For seven years Republicans have attacked the law for having costs. But they somehow neglected to mention that if you take away the costs, you can’t keep the benefits. In effect, they’ve trained their constituents to expect a free lunch, and implied that they’d deliver it–if only the voters with give them the power. But now, like the dog who actually catches the car, they’ve achieved their objective but have no plans for what to do.
And their fearless leader, far from helping to gloss over the problem,doubled down:
“We’re going to have insurance for everybody,” Trump told The Washington Post. “There was a philosophy in some circles that if you can’t pay for it, you don’t get it. That’s not going to happen with us.”
“[They] can expect to have great health care. It will be in a much simplified form. Much less expensive and much better,” he said.
So after seven years of promising to pull a rabbit out of a hat, the Republicans are now center stage, hat in hand. It’s showtime!
@Kahn 41:
That seems at odds with the fact that Republicans made very clear they were going to repeal/replace Obamacare and got the presidency and both houses of Congress. I don’t think any of those who voted Republican did so under the illusion that Republicans would further expand Obamacare.
As nobody.really lays out, TRUMP very much ran on a platform of “more and cheaper coverage for everyone”. A lot of the time, Trump sounded like he wanted to implement some universal healthcare system.
But even people like Ryan were giving people the IMPRESSION that their healthplan would provide “more and affordable healthcare for everyone” etc. because of the way they attacked the ACA.
Ryan et al attacked the ACA for things like “high premiums” and “high deductibles” and “lack of coverage”.
They didn’t actually say that their own plans would be better in that regard, but this kind of fine distinction evaded voters. It would, after all, be rank dishonesty to criticize Obamacare for high premiums and high deductibles and then implement your own healthplan leading to even higher premiums, higher deductibles and/or less coverage.
In addition, the GOP has been saying a lot of crazy libertarian stuff for a long time, and never followed through on it. So GOP voters, in so far as they rely on the programs that are on the GOP’s hitlist, have gotten comfortable with the assumption that this is just so much talk.
You could see that in a lot of interviews with working-class Trump supporters. Most of them actually didn’t know that the Medicaid expansion was part of the ACA. Many others didn’t even know that the ACA was indeed Obamacare.
When interviewed, those Trump voters would say things like “they won’t repeal the Medicaid expansion because that would be too terrible for too many people”.
Working-class GOP voters generally don’t realize that for someone like Ryan, the fate of the people who will lose their Medicaid coverage isn’t a relevant policy consideration.
The GOP has *never* been honest with its lower-income voters about the consequences of its policy plans. If it was, it would be relegated to permanent minority status.
Well, now those voters are finally getting some inkling of what the GOP has planned for them.
About the information costs of HSAs, here is a basic analysis of how costly that might be.
The key difference between HSAs and a third-party payor system is that under a third-party payor system, it is largely the doctor who decides on diagnostics and treatment (subject to insurer rules) and the patient has only a relatively small role.
Under an HSA system, the patient would to a large degree assume the role of the doctor in deciding on diagnostics and treatment. An HSA system is substantially a DIY healthcare system.
This kind of arrangement can only work efficiently if the patient acquires comprehensive medical knowledge.
The HSAs require patients to do a medical doctor’s work. That requires training and education, which is not free.
Here is a back-of-the-envelope calculation how much it might cost to become sufficiently qualified to make efficient medical decisions/self-treat under a HSA system, assuming that a person needs 10% of the knowledge of a medical doctor:
A medical student will study perhaps 12000 hours and incur $120k in tuition.
10% of that, at an hourly rate of $30 (low-income people are likely to need more time to absorb the same information): 1200 hours x $30 = $36,000. Plus 12k in tuition costs: $48,000.
And then perhaps an hour per week in perpetuity to keep that knowlege reasonably up to date: 52 x $30 = $1,560 p.a.
For a period of 40 years (from 25 to Medicare age), discounted at 4%, this would have a present value of $30,876.73.
So the overall information cost of the HSA system until age 65 would have a present value of $78,876.73.
Let’s say the average cost of healthcare until age 65 under a third-party payor system is $4,000 a year (it would actually back-loaded, as the bulk of those costs occur after age 55), and assume that the HSA system saves half of that. That’s $2k in savings per year. Discounting that over 40 periods would yield a present value of $39,585.55 in savings, much less than the incurred information costs.
…you’ll surely be led to single payor managed by “the great and the good”.
You say that like it’s something bad. But that is how it’s done (more or less) everywhere else in the developed world.
The above post was directed at iceman #45.
@nobody.really:
Have you read this:
http://michaelprescott.freeservers.com/romancing-the-stone-cold.html
by the way?
It gives insight into Ayn Rand’s Nietzschean, anti-christian, anti-humanitarian value system that drives Ryan’s policy agenda.
Advo writes, quoting iceman,
But of course it’s not done that way by most of the rest of the developed world. France, Switzerland, UK just to name three off the top of my head are not single payer.
But insurance is so heavily regulated that there is little practical difference.
I’m not sure there is any country which doesn’t leave any room for at least supplementary private insurance.
Does anybody get the same feeling I do when listening to Republican health insurance proposals? I always get the feeling that I am listening to wishlists of tiny little items that sound good in isolation but don’t add up to much or gloss over major points. I never get the feeling of a coherent whole. On the other hand, I understand the ACA/Obamacare even if there are parts I don’t like. It sounds like an actual coherent but flawed system.
An HSA sounds good, but how much can that do that wouldn’t be done (and is already being done) by higher deductibles? Mandating that insurance can’t be cancelled sounds good, and mandating that pre-existing conditions must be ignored sounds happy clappy too, but how do you stop the adverse selection problem and how do you keep insurers from simply exiting the market? Mandating policy sales across state lines sounds ridiculously trivial.
I very reluctantly turned against a libertarian view of health insurance after waiting years for a right-of-center coherent counter-proposal that didn’t sound like minor happy-clappy talking points. Ann Coulter’s recent column is pretty damning because it can’t come up with a single convincing point: http://www.breitbart.com/big-government/2017/03/01/ann-coulter-provide-universal-health-care-using-one-easy-trick/
But, “hey Zazoobs, what about the Cassidy-Sessions bill?”
Yes, indeedy, that’s a good question. There really might be something there. So, my comment above is limited to the feeling I get when I listen to high-profile Republicans like Ryan.
FWIW, I’ve tried grappling with Cassidy-Sessions, and it gets murky at critical junctures. That could very well be my lack of understanding, but murkiness on key points makes me suspicious. How does it deal with adverse selection? It has something about mandatory enrollment, so some sort of mandate. But not really a mandate, because it anticipates people may drop coverage, and so it has a penalty for non-continuous coverage. How is that going to be enforced? What pol is going to stand up to hard luck stories about people who dropped coverage? There is a tax credit for insurance, but that sounds complicated. And it can’t be large enough to cover the full cost of insurance, so hard-up people are going to drop coverage. And what about people who fall between the cracks because they aren’t focused on their tax returns? Sounds like, in order to be effective, it has to be a pretty heavy-handed system to sweep everyone into it. And there is talk about risk adjustments when people switch coverage. Sounds complicated. A risk-adjusted premium for someone with cancer will be about $300,000 per year.
Yes, yes, I’m pretty ignorant on this, so maybe Cassidy-Sessions would be a good idea, but I need some convincing. Alarm bells go off when I see it called “bold and unconventional,” and sketchy. I would find it much more reassuring if a plan started by saying it was modeled on some existing, stable plan somewhere that we could go look at.
I would also be open to a libertarian plan that started with the assumption that some sort of welfare-style plan was needed to sweep up all the hardluck and miscellaneous cases and would then put an alternate system beside it for informed people who wanted a better system. (Medicare-for-all plus whatever the free market can come up with.) Indeed, I don’t see why libertarians aren’t open to having the two running side by side and competing, like the Post Office and UPS/FedEx. A problem with this, of course, is that single-payer would probably be subsidized and an unfair competitor. But, there could still be a sorting equilibrium because the single-payer system would be lower quality and a lot of people would want better. Seems like I’ve heard this is the case in other countries; seems like we should be looking at how those work.
But always remember, I don’t know much about this stuff, so I’m just blathering. “Tis like the breath of an unfeed lawyer. You gave me nothing for it. Can you make no use of nothing, nuncle?”
advo48
‘As nobody.really lays out, TRUMP very much ran on a platform of “more and cheaper coverage for everyone”.’
Based on the fact that Obamacare had raised costs and reduced options for most of the country.
nobody.really 44
Relying on the LAT, NYT, and WaPo for cherry-picked polls and anecdotes is not going to persuade me of anything. These were the outlets that were laughing at Trump’s chances in the election. If vast majorities really just wanted to keep a new improved and more powerful Obamacare, well that was Hillary’s and the Democrats platform, and we had a referendum on that. It was a clean sweep. (And spare me any retort about the popular vote.) I think I will just have to agree to disagree.
@ Steve,
“Advo: You keep talking about “information costs”, but also keep ignoring the biggest information cost of all, namely: If I have a non-urgent reason to visit the doctor, no insurance provider can possibly know whether I prefer that visit to, say, a car repair.”
Really, the biggest? Can you provide evidence to back that up? The statement you made was also incorrect. I don’t know if I prefer the doctor visit to the car repair, because there’s uncertainty into the true value of the doctors visit. If I’ve been sick for a month, the value of the doctors visit could range from $0-$2,000,000+ depending on whether I have mononucleosis or a deadly but treatable form of cancer. A doctor, through tests and evaluations can probably get a pretty good estimate on how valuable his treatment would be for the average individual, whereas as an individual it’s difficult for me to evaluate the value of my treatment, especially before going to see the doctor. Maybe I am savvy and can come up with a probability distribution and figure out my risk-adjusted expected value but most people probably can’t do that with out significant time inputs. Why should we assume that the cost you’re suggesting is “the biggest”?
– There are four words to be included in a proposal if you want it thrown out: complicated, lengthy, expensive, controversial. If you want to be really sure that the Minister doesn’t accept it, you must say the decision is courageous.
– And that’s worse than controversial?
– Oh, yes! Controversial only means “this will lose you votes”. Courageous means “this will lose you the election”!
Yes, Minister, Season 1, Episode 6 “The Right to Know” (at 15:45).
You’ve just described the economic model for K-12 education in the US.
???
Yes, in 2017, premiums for the benchmark plan in Obamacare marketplaces increased from 9 to 116 percent, according to the Department of Health and Human Services, with an average increase of 22 percent. That’s much higher than in prior years, when the average increases were 7 percent (2016) and 3 percent (2015).
But roughly 84 percent of enrollees qualify for tax credits. So on a net basis, in 2017 a 40-year-old nonsmoker making $30,000 would see no change, or even a slight reduction, in the price of the benchmark plan in all but two states, the Kaiser Family Foundation estimated.
Moreover, less than 4% of the US population gets its insurance through the Obamacare marketplaces. Most people get their insurance through their employer’s group policies—and growth in healthcare spending has slowed during Obamacare–even below the levels forecast by Obamacare proponents.
Finally, most Obamacare enrollees report satisfaction with the law. If it matters.
Couldn’t have said it better if you had been Kellylanne Conway herself. (Are you?)
Cherry-picking is the practice of selectively picking authorities to support a pre-determined conclusion. So what’s the appropriate remedy for cherry-picked polling: Citing data from more, more recent, or more authoritative, polls? Or abandoning reliance on data and simply clinging to your pre-determined conclusions instead?
Nope, I refuse. I’m resolved to agree with you, regardless. So if you insist on disagreeing with me, you’re just going to have to disagree to do it.
Anyway, that’s my proposal. Are we disagreed?
(Sorry if I come off as so agreeable; I’m really not like that in person….)
50 & 52:
I hear “but other countries do it differently” and often think “American exceptionalism”. Like elevating individual liberty over state power, sometimes even despite someone’s notion of the “common good”, and yes even where there may be information asymmetries. Maybe this makes us uniquely able to resist the political temptation to make best-of-all-world promises like better *and* cheaper healthcare with no significant tradeoffs. As I’ve said before, perhaps avoiding long queues for important (and often innovative) procedures is the ultimate luxury good for which we would expect wealthier societies will pay an increasing proportion of their income.
P.S. If you think Rand was “Neitzsche-an” beyond a very superficial level I suggest you revisit Rand.
Incidental Economist: Cassidy-Collins explained in 4.5 minutes.
@nobody.really #62
“Incidental Economist: Cassidy-Collins explained in 4.5 minutes.”
Note: Cassidy-Collins is completely different from Sessions-Cassidy. Cassidy seems to be a busy guy.
Cassidy-Collins also sounds ridiculous. It would create an entirely new system while leaving the ACA in place, and the new system would vary by state, and each state would choose which one to go with, so we would get many different systems across the country. So, it would roughly treble the complexity of the current system.
This makes Cassidy and Collins sound like nuts which undermines the credibility of Sessions-Cassidy.
“Sinaporeans pay for much of their own care out of their own pockets, and their major insurance program is designed to cover long-term illnesses and prolonged hospitalizations, not routine care…. The island state has excellent health outcomes while spending, as of 2014, just 5 percent of G.D.P. on health care. (By comparison … the United States spent 17 percent.)
However, there has never been a major Republican policy proposal that just imitates what Singapore actually does….
First …. [u]nder their Medisave program, they spend money saved in mandatory health-savings accounts, to which employers contribute as well. Second, their catastrophic insurance doesn’t come from a bevy of competing health insurance companies, but from a government-run single-payer system, MediShield. And then the government maintains a further safety net, Medifund, for patients who can’t cover their bills, while topping off Medisave accounts for poorer, older Singaporeans, and maintaining other supplemental programs as well.
So the Singaporean structure does not necessarily minimize state involvement or redistribution. It minimizes direct public spending and third-party payments, while maximizing people’s exposure to what treatments actually cost. And the results are … extremely impressive….”
The bill died today. Too much Republican opposition.
Mr. nobody: “2. The dominating fact of health care economics,
as I understand it, is the extreme lumpiness of healthcare costs.
That is, the great bulk of health care costs is expended on a tiny
share of patients.”
Yes, this follows from the fact of aging.
And human biology is universal; which means it applies as well
to all those “equal outcomes for less $$” Edens.
So what magic fairy dust permits them to treat the terminally ill
on the cheap?
“Though I am a Canadian where we have single-payer government-funded healthcare, my understanding of the problem with US healthcare is defensive medicine.”
It isnt just defensive medicine that drives doctors to practice like this. Patients WANT more tests. Patients think they are getting better care if the doctor orders more tests, more scans, puts them in the hospital more, and gives them more medication. There is a very common rating system called the Press Ganey system whereby patients evaluate their physicians. These scores are taken very seriously, and can inform hiring and salary decisions, and hospitals spend millions of dollars addressing these scores.
They have also been examined in the New England Journal and it was found that Press Ganey scores were INVERSELY correlated with healthcare outcomes. The way to get good scores isnt to give good advice or do the right thing for your patient, and it isnt even to be nice and develop a trusting relationship with them. The way to get higher scores is to just order more and more unnecessary tests, invasive or otherwise, with undue risk or otherwise.