Consumers and Health Care
Ramesh Ponnuru says that individuals shopping for their own insurance plans on the individual market isn’t as ridiculous as it sounds because “There would probably be various standard packages offered by insurers, resources such as Consumer Reports and word-of-mouth, etc.” Ezra Klein offers a good common sense reply to this, but I think the situation could stand to get a bit more theoretical, since I think what Ponnuru is doing is fundamentally missing what’s good about markets.
Markets produce great levels of consumer satisfaction. And when consumer satisfaction is all we can ask for, then markets are great. What should a necktie or an MP3 player do, other than make the consumer happy? The Soviet Union was a fashion disaster and horribly backwards in terms of entertainment. But with regard to some things, we can make objective measures. Soviet apartment buildings are incredibly ugly, but they stood up. Of course our apartment buildings stand up, too. But sometimes consumer satisfaction is significantly in tension with objective measures. As societies get rich, they seem to converge on a diet that’s incredibly unhealthy. And this is because we have first-order food desires that were highly functional under a radically different set of circumstances. Nowadays, sophisticated Americans spend a lot of time attempting to retrain our first-order desires so that we crave heirloom tomatoes and sensibly sized portions rather than a Monster Thickburger.
But of course when it comes to food, both the objective and the subjective are very important. It would suck to live in some public health dystopia where we have to eat lentils and quinoa every day and talk about how awesome it is.
And when it comes to health insurance, the subjective is really really really unimportant. Whether or not I “want” prostate cancer screening has just about nothing to do with anything. There are tables one could draw about age and other risk factors and the reasonableness of performing such-and-such a test. And this is integral to our understanding of what a medical interaction should be like. Visiting the doctor is not like visiting a car salesman, where he’s working on commission trying to upsell you and you’re trying to be on guard and strike a good bargain. That would be terrible. This is why we make doctors take oaths and so forth. And it’s true, of course, that the doctor-patient falls far short, in practice, of the ideal of a commerce-free trust between a healer and a patient. But this is a problem. As is the commercial nature of the interaction between a health insurance company and a person trying to get medical care. Someone really does need to tell you that certain procedures are unnecessary or unduly speculative. But should that person be a representative of the interests of a profit-maximizing firm? Not really. Which is why we wind up having all these regulations.
It’s true that deregulating the insurance market would make it more “efficient” according to one technical sense of efficiency. It’d be more like the market for cheeseburgers or sneakers. And everyone would, by definition, wind up with the insurance package they want. But it wouldn’t produce good health outcomes, or efficiently allocate dollars toward health-maximizing ends.
78 Responses to “Consumers and Health Care”
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April 14th, 2009 at 5:27 pm
OMFG This is a really bad time of day to post that wonderful, awesome, delicious, delightful, sumptuously satisfying, mountain of massively mouthwatering munching madness!!! Gimmee, gimmee, gimmee!
April 14th, 2009 at 5:30 pm
Whether or not I “want” prostate cancer screening has just about nothing to do with anything.
This is true. So, you know, feel free not to talk about your prostate ever again.
April 14th, 2009 at 5:30 pm
It’d be more like the market for cheeseburgers or sneakers. And everyone would, by definition, wind up with the insurance package they want
Assuming everyone could afford the insurance package they want. Not a particularly good assumption to make.
April 14th, 2009 at 5:31 pm
folks who argue for a market approach to supplying health care mysteriously ignore the one essential truth that makes the entire idea total nonsense.
corporations, who provide most of services in that “market”, are, by law, required to look out for their own best interests. and most often, that involves maximizing profits. this is certainly the case with most corporations that provide medical services to individuals.
that reality, that duty imposed on corporations, BY LAW, is totally contradictory to the notion that the same corporation would be in a good position to provide quality, affordable health care to individuals who seek services from that corporation.
in any dynamic where the corporation has to consider the interests of patients that might conflict with the interests of the corporation, the corporation will ALWAYS seek to first protect the interests of the corporation. and patient care will invariably suffer.
that is not good or bad, it is just the way that corporations must operate.
what is amazing is that supposedly sharp policy folks do not start any discussion of the providing of health care by describing that simple reality.
they appear to want to simply ignore it because of its uncomfortable implications.
April 14th, 2009 at 5:36 pm
Matt, there is much truth to what you say, but I think you’re examples belie your argument. The Soviet architectural example is telling, insofar as that by any objective measure those structures satisfactorily fulfilled their purpose, without providing any customer satisfaction. I hope that healthcare doesn’t follow suit!!!
Furthermore, the dichotomy of monster thick burgers and lentils is also telling. Much of the current booming health food market is based on a realignment of what customer’s seek to be satisfied based on being better informed. I think this is much more in line with why the consumers role as purchaser in an efficient and transparent marketplace is so key. The problem with healthcare is the market is neither efficient or transparent.
Without a functioning market, health care providers have no positive incentives to reduce costs and improve quality. Rather, they become dependent on a limited pool of resources, more of which will need to be allocated towards enforcement mechanisms to ensure that minimum standards of care are being applied.
I agree that fundamentally healthcare is a different beast than most other consumer products, and that there are core conflicts-of-interest when services are payed for by for-profit payors. However, a system that doesn’t organically reward innovations in cost-reduction and quality improvements is no better.
April 14th, 2009 at 5:37 pm
in any dynamic where the corporation has to consider the interests of patients that might conflict with the interests of the corporation, the corporation will ALWAYS seek to first protect the interests of the corporation. and patient care will invariably suffer.
If they provide inferior patient care compared to their competitors they will lose business.
April 14th, 2009 at 5:41 pm
You understand what it means to chafe right? With the low portability of health insurance now, people get row against their faceless health insurance bureaucrats who don’t cover their long-odd wants. But can you imagine when the government takes responsibility for the business? Whoo boy. What idiot politician is going to want to be politically responsible for the non-efficacious treatment his constituent wants? No, it’s going to be positively worse than the insurance system we have today, because people will see “bureaucrats”and the government oppressing them, which is a very popular psychological theme. Goodness, the entire corrupt arm of the government is out to prevent my use of X, rather than one seeing it as the coldness of the profit motive of modern health insurance.
How you think this will possibly control costs is beyond me. The system will be subject to huge political interference, particularly since we have them most knowledgeable consumers in the world. Many are going to read about X treatment and Congressman Blah will agitate for that just as he would any other Earmark. It will make people irrationally angrier, make the treatment more arbitrary and expensive, stifle innovation AND create the bugaboo of inequality that liberals fear so much in a two-tier system.
There is, I suppose, some pearl of humanism in the argument that everyone deserves health care no matter the cost. But to believe that there are going to be all sorts of these ancillary benefits, that somehow you will make “better choices” for individuals who are convinced they know better (I’m agnostic at whether they are or not), that somehow we innovation won’t slow, is contrary to all sorts of evidence around the world.
April 14th, 2009 at 5:45 pm
I agree that fundamentally healthcare is a different beast than most other consumer products, and that there are core conflicts-of-interest when services are payed for by for-profit payors.
What is that fundamental difference, then? What conflict of interest is there in the provision of for-profit healthcare (or is it just for-profit health insurance?) that doesn’t exist in the provision of other products and services?
April 14th, 2009 at 5:46 pm
Visiting the doctor is not like visiting a car salesman, where he’s working on commission trying to upsell you and you’re trying to be on guard and strike a good bargain.
Unless you’re in America, where there’s a chance that the doctor has a sweetheart deal with an MRI clinic. Or, more likely, the doctor has a whole host of tests that he/she would like to run that constitute defensive medicine, and you end up striking a deal on what gets done.
But that, of course, illustrates Matt’s point. There is an element of second-guessing right through American healthcare that isn’t present elsewhere in the developed world — another example being the problem of not knowing whether insurance will reimburse for a particular procedure until it has been carried out and the claim submitted — but the US practice is treated by Americans as if it’s normative.
April 14th, 2009 at 5:51 pm
Shorter charles: Can I haz healthcare? = can I haz cheezburger?
April 14th, 2009 at 5:51 pm
Suppose you are a liberal who has some concern for the fiscal issues. I’m not saying a fiscal conservative, you still have the proper rank order for your priorities, like lowering the defense budget and providing more social services, that sort of thing. You would like to transform the existing budget to fit your priorities.
Now you observe that our political system simply doesn’t do a good job at addressing major issues of any controversy. You seem to believe, Matt, that global warming is a major systemic risk issue affecting the future. Shouldn’t our government’s inability to bipartisanly commit to a carbon-tax agenda lower your belief in its ability to commit to prudent medical spending, even if there obviously exists a better equilibrium of treatments? Many people, some with some hysterics and some with some prudency, have been railing against exploding costs of unfunded entitlements like Medicare and Medicaid since the ’80s. Why are you convinced the government can “hold the line” for medical costs, when it hasn’t done so for any controversial issue in the past 20 years?
April 14th, 2009 at 5:57 pm
But it wouldn’t produce good health outcomes, or efficiently allocate dollars toward health-maximizing ends.
But good health outcomes and health-maximizing aren’t the only legitimate goals. Some people may want to forego superior health outcomes in order to save money and spend it on other things.
And that should be their right.
But the authoritarian left, which Matthew exemplifies, wants to ensure that the government controls everything, and deny people the right to make such a decision for themselves.
April 14th, 2009 at 6:00 pm
Very poor, Al. Troll harder!
April 14th, 2009 at 6:01 pm
Very stupid, pseudonymous. Troll harder!
April 14th, 2009 at 6:15 pm
Why is Al’s question so invalid? What convinces you that people will accept the new paradigm buttressed by better efficacy data? Will people not chafe at this? And if they do, will government commit to holding down costs?
And you understand that it is vitally important that they do. There is a path-dependence here in that the government provision is going to be incredibly hard to remove. That is an acknowledged strategy I see trumpeted here, in the realization that government programs are notoriously hard to end. Your probability position on this should be VERY CLEAR AND VERY HIGH.
April 14th, 2009 at 6:20 pm
“but they stood up. ”
The Spitak Earthquake (also called Leninakan Earthquake and Gyumri Earthquake) was a tremor with a magnitude of 6.9,[2] that took place on December 7, 1988 at 11:41 local time (07:41 UTC) in the Spitak region of Armenia, then part of the Soviet Union. The earthquake killed at least 25,000 people;[1] geologists and earthquake engineering experts laid the blame on the poorly built support structures of apartments and other buildings built during the “stagnation” era of Leonid Brezhnev.[3]
On the other hand, the Loma Prieta earthquake, in 1989, another 6.9 quake, only killed 63 people.
April 14th, 2009 at 6:23 pm
The assumption is false. We have lots of real-world experience with insurance of all types — life, casualty & property, car, annuities, and health insurance — and no where do we see the behavior Ramesh assumes would emerge in a health insurance “marketplace”.
First, there are so many variables involved, that standardization at a level that would make comparison shopping possible would be pretty meaningless.
Furthermore, in the absence of regulation, insurance companies that sell products to consumer markets try to avoid standardization, do not want to compete with each other on the basis of readily comparable products, and make their money exploiting the fine print. Just look at the problems emerging again from the fine print being exploited in the credit card and banking fees area.
Consumer financial products (and that’s what health insurance is, after all) is a distribution business. They compete on distribution — marketing, branch or agent networks, etc. — and on apparent (but highly opaque) price. As distribution businesses, they try to find every way to charge fees and every way to limit their obligations, while maintaining a positive image and keeping the unhappy customers from rebelling en masse.
Occasionally, a company like Geico comes along and competes on the basis of a more transparent value proposition for consumers. But that’s exceedingly rare, and the rest of the industry doesn’t swoop in to compete head-to-head with the Geicos of the world on the same basis.
This fact of life is, btw, one of the major reasons why turning Social Security over to the private sector would be such a huge rip-off. Any theoretical advantages on the basis of superior “market” returns (slim to none, I know, but for the sake of argument accept there might be some) would be eradicated by the financial institutions’ distribution expenses, passed through to customers. In effect, the customers would be paying the FIs for the privilege of having a mandatory savings vehicle sold to them. It’s turned out to be the very expensive flaw in the pension privatization schemes in countries like Chile that are pointed to as models for the US to follow.
Really, folks like Ramesh should understand the basic structure of the business models they’re recommending for “market”-based “solutions”. History is, as we’ve discovered to our chagrin in recent months, actually pretty instructive on how financial markets and institutions work and don’t work.
April 14th, 2009 at 6:35 pm
What is that fundamental difference, then? What conflict of interest is there in the provision of for-profit healthcare (or is it just for-profit health insurance?) that doesn’t exist in the provision of other products and services?
Charles: well, there is one difference. I’m not sure what the term for it in economics is, but it’s as follows: let’s suppose Bill Gates needs a new car. Now, he can afford anything he wants, and the salesperson tries to sell him on a $3 million Bugatti. But, for whatever reason, Bill Gates opts for the $23,000 Ford. Maybe he just doesn’t want to appear extravagant. Or maybe he just doesn’t like expensive, exotic cars. But whatever. It’s his money and he opts for the vastly less expensive domestic light truck.
The above dynamic doesn’t really apply to healthcare. A consumer really never has the incentive not to opt for the more expensive treatment, even if said treatment offers even a fractionally improved chance of survival (or improved health, or what have you).
It seems to me this situation fatally undermines our ability to operate the provision of healthcare along free market lines.
April 14th, 2009 at 6:41 pm
t would suck to live in some public health dystopia where we have to eat lentils and quinoa every day and talk about how awesome it is.
Lentils and quinoa are awesome. What’s supposed to be wrong with lentils and quinoa? Unless you mean that I don’t get my requisite huge hunk of cheese intake, which would suck.
Here I’m going to pimp one of my old entries — short version, in the book of Soylent Green Soylent Green wasn’t green, and it wasn’t made of people — it was veggieburgers.
April 14th, 2009 at 6:48 pm
The above dynamic doesn’t really apply to healthcare. A consumer really never has the incentive not to opt for the more expensive treatment, even if said treatment offers even a fractionally improved chance of survival (or improved health, or what have you).
Huh? Of course the consumer has an incentive not to opt for the more expensive treatment: to save money. The same incentive he has not to opt for the more expensive version of any other product or service.
It seems to me this situation fatally undermines our ability to operate the provision of healthcare along free market lines.
I don’t believe it should be a completely free market. It should be regulated just like other markets. I don’t necessarily oppose laws that require a certain minimum set of services to be covered for certain health insurance packages, for example.
April 14th, 2009 at 6:55 pm
Huh? Of course the consumer has an incentive not to opt for the more expensive treatment: to save money.
Charles: How many people in our society would save money by opting for the less expensive treatment? The answer is practically none. People typically don’t pay out of pocket for healthcare.
April 14th, 2009 at 7:10 pm
Co-sign on #19. Lentils and quinoa, or barley, etc. is an awesome meal. Now I’d probably get annoyed with that every day, but then there’s always Chipotle burritos with black beans and rice!
April 14th, 2009 at 7:19 pm
Charles: How many people in our society would save money by opting for the less expensive treatment? The answer is practically none.
What are you talking about? People do it all the time. Both individual and group health insurers offer a variety of plans with different levels of coverage, different deductibles, different co-pays, and so on.
April 14th, 2009 at 7:19 pm
Well said MY. We should also deplore the–all too successful–efforts of recent years to erase the linguistic evidence that human beings stand in relations to each other and to institutions other than that of consumer/supplier. When I go to the public library, I notice that patrons, as they used to be called, are routinely referred to as ‘customers’; in the doctor’s office it’s ‘health care consumers’ rather than ‘patients’ and so on.
April 14th, 2009 at 7:28 pm
Jasper and Charles – the problem here is that with health care demand can be extremely flexible or extremely unflexible, which leads to massive market inefficiencies. For instance, people in their twenties are going to avoid paying for health care (or go the cheap route) because they feel more or less invincible. As a result, they underconsume health care, and make minor problems more costly.
Using Matt’s prostrate exam as an example, someone in that position wouldn’t just want the best exam possible, but he would want the best doctor possible to do the exam, because having the best could be a matter of life and death. Thus demand at that moment can be inflexible.
Thus, the health care market will be unlike any other market. When I go to the store to buy produce, for example, I don’t have to buy asparagus – I can eat green beans instead. But since I am hungry, I’ll end up eating something.
April 14th, 2009 at 7:39 pm
Jasper and Charles – the problem here is that with health care demand can be extremely flexible or extremely unflexible, which leads to massive market inefficiencies. For instance, people in their twenties are going to avoid paying for health care (or go the cheap route) because they feel more or less invincible. As a result, they underconsume health care, and make minor problems more costly.
How do you know people in their twenties “underconsume” health care? The claim assumes that there is some objectively correct level of health care consumption for such people. What is the basis for that assumption? How have you determined the “correct” level of consumption?
Using Matt’s prostrate exam as an example, someone in that position wouldn’t just want the best exam possible, but he would want the best doctor possible to do the exam, because having the best could be a matter of life and death. Thus demand at that moment can be inflexible.
Huh? So what if having the best COULD be a matter of life and death? That doesn’t mean everyone will choose the best over an inferior but cheaper version – or none at all. Lots of things “could” be a matter of life and death. Given the controversy in the medical community about the benefits of prostate exams, many people might simply choose to avoid them entirely, judging the benefit not to be worth the cost.
April 14th, 2009 at 7:41 pm
What are you talking about? People do it all the time. Both individual and group health insurers offer a variety of plans with different levels of coverage, different deductibles, different co-pays, and so on.
Fine, “practically none” was on overstatement. But the broader point remains: unless you’re paying out of pocket, healthcare bills — especially those for major medical incidents that account for the bulk of spending — are largely paid by third parties. So, when you take this fact in conjunction with the enormous stakes involved (your survival, or your health, or those of a loved one), the price of the good would appear to be a far less important variable in determining the purchasing decision of the consumer than it would with just about any other good.
April 14th, 2009 at 7:55 pm
Without a functioning market, health care providers have no positive incentives to reduce costs and improve quality. Rather, they become dependent on a limited pool of resources, more of which will need to be allocated towards enforcement mechanisms to ensure that minimum standards of care are being applied.
April 14th, 2009 at 8:01 pm
Both individual and group health insurers offer a variety of plans with different levels of coverage, different deductibles, different co-pays, and so on.
That shows that people economize on health care plans, not on individual health care decisions.
April 14th, 2009 at 8:14 pm
Big Lentil is protein and anti-Yglesias. Seriously, you don’t like lentils? Big Lentil doesn’t care if you put bits of ham or bacon in there with the lentils. They’re cool like that.
April 14th, 2009 at 8:14 pm
It appears that “charles” has settled on trolling this thread for his evening’s entertainment.
April 14th, 2009 at 8:20 pm
I think MY has used that picture here before.
April 14th, 2009 at 8:24 pm
Fine, “practically none” was on overstatement. But the broader point remains: unless you’re paying out of pocket, healthcare bills — especially those for major medical incidents that account for the bulk of spending — are largely paid by third parties. So, when you take this fact in conjunction with the enormous stakes involved (your survival, or your health, or those of a loved one), the price of the good would appear to be a far less important variable in determining the purchasing decision of the consumer than it would with just about any other good.
But that applies to any kind of insurance against a potentially large loss – health insurance, car insurance, homeowner’s insurance, life insurance, mortgage insurance, disability insurance, and so on. There is nothing unique about health insurance in this respect.
And the consumer chooses what kind of coverage to buy from his insurer. The better your coverage, the more you’ll pay in premiums. You can get gold-plated health insurance that covers you for treatment at top hospitals by top doctors using the latest equipment and surgeries and drugs and so on. Or you can get cheaper insurance that covers you only for reduced or inferior health care services. Your bizarre idea that there is no price incentive for consumers to opt for lesser or lower-quality health care services simply isn’t true.
April 14th, 2009 at 8:25 pm
You’re not fooling anyone, ‘Mixnerspotter’.
April 14th, 2009 at 8:25 pm
First, healthcare, for the most part, isn’t “voluntary”. You go to the doctor when something is wrong, or, to try to keep something from becoming wrong. Second, people have a lot less control over their health than is typically considered when these debates come up. People can watch what they eat, not smoke, exercise, etc. – but how many can afford to eat nothing but pure organic food? And if you don’t eat pure organic food you are ingesting pesticides every single day. And how many of us live in perfectly unpolluted environments with pristine air and water? Studies show that tap water in many places now contain remnants of all kinds of prescription drugs that have weren’t absorbed and were excreted. Couple that with the overexposure we all have had to antibiotics through our milk and meats and you have a situation where people are now dying of infections in hospitals that used to be easily routed by antibiotics. Then there’s all kinds of toxic dump effects, poisons in home products, and on and on.
Using an insurance model based on homeowners or car insurance is useful only to a point: the concept of pooling resources to protect us collectively against being hit with bills we can’t pay. All of us need medical attention at some point, but we don’t know when, for what, or how much it might cost.
We started getting health insurance through employment because there was a wage freeze during WWII and employers began offering “fringe benefits” to attract employees. It wasn’t because of some deeply held societal belief that employer paid insurance was THE BEST OPTION. First there was NO option other than to go to the doctor and pay the bill yourself. Then people began to get insurance through their jobs, and as long as jobs were plentiful things worked out reasonably well. But as we have seen, along with horrendous price increases in healthcare we’ve also seen almost total destruction of job security in this country so the current delivery system has simply outlived its usefulness.
What people need to begin to internalize is this: Health Insurance companies provide no Healthcare. They exist because we, collectively, do recognize that, health being what it is, pooling our resources to spread risk makes sense. (Particularly given that we have spread poison everywhere on the planet.) The question on the table should be how best to pool our resources and spread risk for all of us, with the aim of providing healthcare. If we were starting from scratch and that was the question on the table, the answer would not be our current system.
April 14th, 2009 at 8:50 pm
First, healthcare, for the most part, isn’t “voluntary”.
So what? Food, housing, and clothing aren’t “voluntary,” either. These are all human needs.
Second, people have a lot less control over their health than is typically considered when these debates come up.
Again, so what? There are lots of kinds of misfortune over which people have limited control and that expose them to risk of serious financial harm. Their house could burn down. Their car could be totaled by a drunk driver. Their husband could abandon them and their kids. They could become permanently disabled and unable to work. They could lose their job and not be able to find another one.
Using an insurance model based on homeowners or car insurance is useful only to a point: the concept of pooling resources to protect us collectively against being hit with bills we can’t pay. All of us need medical attention at some point, but we don’t know when, for what, or how much it might cost.
And that’s why we buy health insurance, to cover us in the face of that uncertainty. Same as for other kinds of insurance. I’m still waiting for someone to identify what is supposed to be uniquely different about health insurance that makes it somehow inappropriate for the private insurance market, in contrast to all the other kinds of unpredictable expenses and misfortunes that we insure ourselves against.
April 14th, 2009 at 8:57 pm
Isn’t the logical conclusion from this scenario that even more people are priced out of health insurance?
April 14th, 2009 at 9:35 pm
“So what? Food, housing, and clothing aren’t “voluntary,” either. These are all human needs.”
Yeah, but we don’t pay insurance to provide food, housing and clothing, still less, pay insurance that turns around and denies us food, housing and clothing.
Furthermore, most of us have the ability to spend less on food, housing, and clothing if we have less money to spend, ie. you might shop at Bloomingdales and I might shop at Sears, or even at Goodwill, and we still can both have the clothing we need. Setting aside issues of those in extreme poverty and the hosts of reasons surrounding that, basically a functioning society typically offers various levels of products and services to different income levels. Finally, even if I want to shop at Bloomingdales but have to go to Walmart, the disappointment doesn’t (well shouldn’t(!) have the potential to kill me.
BUT! My inability to pay for cancer treatment, or insurance that provides for cancer treatment DOES have the potential to kill me.
The reason health insurance is different from all others is that when it is withheld from people, they can die. And they do every day. Sometimes it’s withheld even when they’ve paid for it.
Second point, yes, you can suffer other kinds of misfortunes, which is why we insure property. We pool our risk and pay a fee in exchange for peace of mind. Which we generally get. BUT insurance works with respect to property damage because the odds are that not everyone will suffer severe losses and thus the company ultimately takes in more than it pays out.
When it comes to health, however, EVERYONE will need some form of medical care at some point, many times, as I pointed out earlier, for reasons entirely outside their control. Some will need new kidneys, some will have strokes, and some will sprain an ankle. We don’t know when we’ll need it or how expensive it might be. But we know we’ll need it sooner or later. And because we know that, we have agreed as a society that it is beneficial to have a mechanism in place to protect us against the uncertainty and potentially catastrophic consequences of a medical problem. We want a mechanism, and by default, we have ended up with private insurance, primarily provided through employment.
The reason that the private insurance market is inappropriate is because it has proven itself to be inappropriate. It is unaffordable. It is unpredictable and capricious. It is profit driven. People can’t count on it. People die because of it. Sometimes people can afford it and are still denied it.
The very fact that is is profit driven renders it inappropriate because the profit motive forces it to fail at doing the job we want it to do.
I contend that what we want is a way to combine our resources to protect ourselves against uncertainty, insecurity and financial hardship or disaster. In it essentials what that means is we want to pay some reasonably predictable, affordable amount into a collective pool, and know that when we need the service, we’ll get it, all of us, at the time we need it. Private insurance does not provide that.
We can have a lot of useful discussions about the best ways to pool our resources and deal with costs of services etc., but by insisting that the only way or the best way to do those things is through private insurance is demonstrably wrong.
April 14th, 2009 at 10:05 pm
Yeah, but we don’t pay insurance to provide food, housing and clothing,
So what? We still fund them privately rather than through the government, even though they’re not “voluntary.” So why does the fact that health care is also not “voluntary” (to the limited extent that that’s even true) mean it should not be funded privately?
Furthermore, most of us have the ability to spend less on food, housing, and clothing if we have less money to spend
And we also have the ability to spend less on health care if we have less money to spend.
My inability to pay for cancer treatment, or insurance that provides for cancer treatment DOES have the potential to kill me.
Your inability to pay for housing or food also has the “potential” to kill you.
The reason health insurance is different from all others is that when it is withheld from people, they can die.
No, that’s NOT a difference. People can obviously also die when housing or food is withheld from them. And the idea that life-saving health care would never be withheld if health care were funded publicly instead of privately is sheer fantasy. In countries like Canada and Britain people are routinely denied government-funded health care that has the potential to save their life, because of limits on their health care budgets.
April 14th, 2009 at 10:15 pm
I think there’s a distinction Matt is missing here that, unfortunately, sorta makes me agree with at least part of what Al said. To take the example of prostate cancer screening: The evidence on treatment and testing is pretty conflicting. Say you’re diagnosed at 55 with prostate cancer; odds are you won’t benefit from getting treated early, but a small percentage of people do benefit from treatment (in the form of not dying.) On the other hand, the treatment often causes impotence and incontinence. I think it’s completely fair to say that patients should have some role (within reason) between deciding if they want a small but real chance of dying vs. a larger chance of serious and unnecessary side effects.
On the other hand, consumers aren’t looking for choice in how to pay for medical treatment (though there are various arguments at marco levels about how best to pay for medical care, whether payments should be bundled, etc.) But what I would suggest is this: People, rightly so, want choice in medical treatment. Care is not insurance. No one really craves choice in insurance plans.
April 14th, 2009 at 10:21 pm
You really must have a health insurance plan before devouring that mouth-watering thick burger! It makes me drool!
April 14th, 2009 at 10:26 pm
No one really craves choice in insurance plans.
Of course they do. That’s why insurers offer so many different kinds of plan. Your choice of plan will likely depend on, among other things, your income, age, health status, lifestyle and tolerance for risk. If you’re a worrier, you might prefer a plan with high premiums that provides comprehensive coverage and low out-of-pocket costs, whereas if you’re more of a gambler you might prefer a low-premium, high-deductible “catastrophic” plan that only covers major medical expenses and leaves you to pay for routine and preventative care out of pocket.
April 14th, 2009 at 10:34 pm
Concede that the international convergence of mass-market food towards a pattern of deep-frying everything and dumping sweet-flavored sauce on it is a culinary disaster as well as health disaster. It wrecked a lot of Chinese food, it’s wrecking Thai food, it hasn’t caught up to Jappanese or Vietnamese food (yet). When I encounter General Tso’s Chicken (a Chinese-American invention), I wonder “Why am I paying $8.95 and upwards for Chicken McNuggets?” I’ve started to measure the success of Asian ethnic restaurants by how unsweet the food still is.
April 14th, 2009 at 10:34 pm
I can’t even get a decent cable tv package. I shudder at what I’d get in a health insurance “market.”
April 14th, 2009 at 11:03 pm
“No, that’s NOT a difference. People can obviously also die when housing or food is withheld from them”
But that’s not what we’re debating. We aren’t debating the fact that life is unpredictable or unfair or that there are many different avenues to death or financial ruin. (Maybe you are, but I’m not.) I thought we were debating a specific portion of life’s unpredictability: our need for medical care — a specific thing we can’t predict and which we have agreed, as a society, is a problem that needs to be addressed. We are debating whether private health insurance is the best mechanism to protect us from health related insecurity and catastrophe.
I am contending that it is not. I am saying, furthermore, its failures have been proven by its own performance. The fact that we are having this discussion is proof of its failure. You throw out the argument about people being denied treatments in Canada and England but you don’t mention the fact, that in Canada in particular, people overall LOVE their system and find it to be a great source of national pride. (http://www.ourfuture.org/blog-entry/mythbusting-canadian-health-care-part-i) I don’t know if people are, in fact, denied lifesaving treatments in those countries, and if they are I’d like to know what they’re denied, and how often. But I do know for a fact that people die every single day in this country because they can’t get care. They also go bankrupt.
I didn’t say, by the way, that our system should be exactly like Canada’s or England’s (and their systems are different from each others). I don’t know what the absolute best way to go is and THAT is what the healthcare debate should actually be about. What is the fairest, least wasteful way to accomplish the objective of pooling our risks and providing healthcare service and security for all?
Finally, you don’t actually need someone to enumerate all the specific ways that private health insurance sucks, do you? You’re going on about how no one can convince you that the private system isn’t working — are you telling me you think it does? I mean, granted, in some times and some places for some people, of course it works. But the reasons that it doesn’t work for all people all the time are obvious and directly related to the profit aspect of private insurance, and always will be.
I understand that we don’t always have enough money to provide everything people might need to all people all the time but that doesn’t mean we shouldn’t try to accomplish that. Once again, how to do that is a question worth exploring, not how to preserve private insurance at all costs simply for the sake of preserving it.
April 14th, 2009 at 11:13 pm
If you are twenty or thirty something, do not save for a house or retirement. Save for your health care costs as you age. Avoid self employment and jobs without insurance as you age. You might get away with it when you are young, but individual insurance sucks once you get past 50.
Figure on one really serious illness in your 50s and you might be able to survive financially if it takes place in one year, but if it spans years you might not. After that illness you will not be able to afford a second. It will be difficult perhaps impossible to change insurers because of your pre-existing condition. It might be impossible to keep your insurance given the cost. Figure on avoiding treatment because you cannot afford it. Figure on looking forward to Medicare so you can get all the stuff fixed you couldn’t afford in your 50s. If Medicare isn’t around, maybe your kids can help.
I imagine most of those in favor of our current system are either insurance employees or someone who has never really encountered the system when vulnerable. Oh yeah, and Al. I never paid a penny for unbelievably good health insurance until I quit my job to start a business in my late 30s. It is very difficult for someone who is 25 to imagine what it will be like when they are 50, but you better do it. Your life might depend on it.
Look forward to the phone call from your surgeon saying they no longer accept your insurance even though it is with the largest insurer in the state. Look forward to negotiating with surgeon’s business office on how much extra you will need to pay for the cancer surgery. Anticipate the joys of negotiating after the fact with the lab that does the oncology work because they are no longer accepting that insurance either. Look forward to the price of procedures changing when the business office discovers you have very high deductibles.
All this happens every day, now. So health insurance is going to get better in the next 20 years? I bet not, what’s the incentive?
April 14th, 2009 at 11:14 pm
“So health insurance is going to get better in the next 20 years? I bet not, what’s the incentive?”
Exactly, Nat. Good post!
April 14th, 2009 at 11:26 pm
Paula,
What we’re debating is why health care, but not housing, food, clothing, transportation, etc., should be funded by the government rather than the private sector. I keep asking you what is unique about health care that justifies this special treatment, but you have yet to identify any such unique characteristic. You said that health care is not “voluntary.” But neither are food or housing. You said people can die is health care is “withheld.” But they can also die if food and housing are withheld too. You said that we pay for health care through insurance. But we also pay for all kinds of other unpredictable expenses through insurance. You can’t come up with a reason for treating health care uniquely because there is no reason.
The whole debate with you here is academic anyway, because single-payer health care isn’t a serious option. Obama doesn’t support it. Congress doesn’t support. There are no single-payer health care plans on the table. The health care reform debate is all about how much, and in what ways, to reform our private-insurance-based system.
April 14th, 2009 at 11:30 pm
Charles–seriously: I’ve worked as a health/public policy analyst for 5-6 years now and recently had to choose between different insurance options offered through my employer. I spent, maybe, 20 seconds.
People want health insurance to be easy far more than they want choice over whether to buy the PPO with an out of pocket maximum of $5,000 in-network vs. the HMO with a $1,000 OOPM but 30% co-insurance on out-of-network charges with a $15,000 OOPM for non-network coverage. (I mean, who the hell wants to compare that?)
April 14th, 2009 at 11:41 pm
Charles:
“What we’re debating is why health care, but not housing, food, clothing, transportation, etc., should be funded by the government rather than the private sector. I keep asking you what is unique about health care that justifies this special treatment”
You keep dodging my point and erecting a strawman argument. YOU may think that saying that healthcare shouldn’t be funded in some manner other than through private insurance because we don’t publicly fund housing, food, etc. but I have never made that claim. That’s your completely irrelevant argument.
What you don’t answer is my contention that private health insurance has failed as a delivery mechanism and just keep re-insisting that it is the “one true way”.
Then you weasel out by saying it doesn’t matter because single payer isn’t on the table anyway, which still doesn’t address my core argument.
You don’t address the core argument because you can’t.
April 14th, 2009 at 11:50 pm
As predicted, Mixner (aka “charles”) has spent the last eight hours trolling for his own personal entertainment here and here
April 15th, 2009 at 12:01 am
Then you weasel out by saying it doesn’t matter because single payer isn’t on the table anyway, which still doesn’t address my core argument.
You don’t address the core argument because you can’t.
It’s always touching to see the new kids earn their stripes on their first Mixner/charles trollfest. And Mixner’s inexhaustible and monastic devotion to his calling is pretty fascinating too, in a train wreck kind of way.
April 15th, 2009 at 12:10 am
That’s a reasonable point, but it’s far from being the primary one in my view.
The central difference between health care and, say, restaurant food is the difference between something that is a commodity people can do without and something that is a necessity/right. In the case of commodities, markets are fine, because if the commodity ends up out of some people’s price range they’ll manage; the fundamental object is for people providing the commodity to maximize their profits. In the case of something like health care (or education, or water, or electricity) the basic object is service delivery – the more people receive the service, the more successful the program is. If a great deal of money is being made off health insurance but a substantial part of the population can’t afford it, that’s a failure.
Which is why commodity delivery should more or less be left to the private sector, which is very good at making profits, while service delivery should be left to the government, which is accountable to its citizens to see that services are delivered fairly to the whole population and not just the wealthy.
April 15th, 2009 at 12:15 am
You keep dodging my point and erecting a strawman argument.
No, it’s not a strawman. You keep claiming that health care should be funded through the government because it is unique in some way, but every one of your claims of uniqueness has been false. You haven’t identified any such unique characteristic of health care.
What you don’t answer is my contention that private health insurance has failed as a delivery mechanism
Since you haven’t defined “failed as a delivery mechanism” in any kind of clear empirical sense that would allow your assertion to be verified or falsified, it’s worthless. What evidence do you have that health care would “succeed” (or merely be less of a “failure”) “as a delivery mechanism” if it were funded through the government rather than private insurance? And I do mean EVIDENCE, not more rhetoric and unsubstantiated assertion.
April 15th, 2009 at 12:28 am
What evidence do you have that health care would “succeed” (or merely be less of a “failure”) “as a delivery mechanism” if it were funded through the government rather than private insurance?
I don’t know, ask the people on Medicare and medicaid.
How many of those eligible for Medicare do not have at least a minimal access to health care services?
Not to state the obvious, but the free market is optimally efficient for distribution of goods and services only if certain assumptions are satisfied. Those assumptions are not even approximately satisfied in the case of health care, just as they are not satisfied in the case of national security and law enforcement.
April 15th, 2009 at 12:29 am
Katherine,
Your argument is also incoherent. The vast majority of “services” are funded privately. Why should health care be different? You say, “the more people receive the service, the more successful the program is.” But that’s true of any “service.” You say, “if a great deal of money is being made off health insurance but a substantial part of the population can’t afford it, that’s a failure.” But lots of for-profit services are unaffordable to a substantial part of the population. Why does this mean they should be funded by the government?
And unless you’re proposing to ban private health insurance, even if we had a government-funded health care system there would certainly be a market for private insurance to supplement or substitute for the government system, just as there is in Canada and Britain. Wealthy people would continue to get superior health care through such private insurance.
April 15th, 2009 at 12:35 am
How many of those eligible for Medicare do not have at least a minimal access to health care services?
Everyone in America has at least minimal access to health care services.
Not to state the obvious, but the free market is optimally efficient for distribution of goods and services only if certain assumptions are satisfied. Those assumptions are not even approximately satisfied in the case of health care,
What assumptions would those be? In any case, no one is claiming that the market is “optimally efficient.” Just more efficient than a government-funded system would be.
just as they are not satisfied in the case of national security and law enforcement.
National security and law enforcement are public goods. Health care is mostly a private good. The limited kinds of health care that would qualify as public goods (the kinds that would fall under the public health category) are already funded or guaranteed by the government. Things like municipal sanitation services and health codes for restaurants.
April 15th, 2009 at 12:38 am
You’re not fooling anyone, ‘DMonteith’.
April 15th, 2009 at 12:48 am
Charles–seriously: I’ve worked as a health/public policy analyst for 5-6 years now and recently had to choose between different insurance options offered through my employer. I spent, maybe, 20 seconds.
Seriously? 20 seconds? Then you’re pretty foolish, considering the potential costs and benefits of different options.
Your claim is just absurd on its face. Health insurers wouldn’t offer different plans with different levels of coverage and different cost structures if there weren’t a market for them.
April 15th, 2009 at 12:52 am
Everyone in America has minimal access to health care.
minimal in the case of everyone is quite different from the minimal in case of those eligible for medicare.
There is no evidence that free market is more efficient than government in case of health care. I disagree even with Matt’s assertion that this may be true in a ‘technical’ sense. Otherwise the VA hospitals would have been closed a long time ago, and the government would have just given money to the veterans to buy health insurance in the open market, and the need for programs such as Medicare would not have arisen.
April 15th, 2009 at 1:11 am
If they provide inferior patient care compared to their competitors they will lose business.
Because their customers will be dead.
April 15th, 2009 at 1:12 am
See, the deregulated financial services industry has done so many wonderful things for our retirement funds and pensions. Now why would not want the same kind of free market for your health care?
April 15th, 2009 at 2:41 am
Perhaps wrinkles are the most terrible kid of beauty distortion that one may face. Basically wrinkles appear due to growing age.Apart from that there are many a reasons due to which premature wrinkles appear on your face or skin.
April 15th, 2009 at 4:31 am
Perhaps wrinkles are the most terrible kid of beauty distortion that one may face. Basically wrinkles appear due to growing age.Apart from that there are many a reasons due to which premature wrinkles appear on your face or skin.
BTW I love your blog!
April 15th, 2009 at 8:14 am
But of course, running our health insurance system so that people have such choices is a big part of what is wrong with it. To make insurance affordable for everyone, we have to pool risks, not separate them out so that some people get relatively cheap insurance and others can’t afford coverage.
risk pooling is why group coverage through an employer is ordinarily more affordable than buying your own policy, for example.
April 15th, 2009 at 10:41 am
In the late 1840s Ireland exported food while a million folks died of starvation and 2 million of typhus…but Charles, the market worked by delivering food to those with the money to pay for it.
April 15th, 2009 at 10:41 am
There are lots of kinds of misfortune over which people have limited control and that expose them to risk of serious financial harm. Their house could burn down. Their car could be totaled by a drunk driver. Their husband could abandon them and their kids. They could become permanently disabled and unable to work. They could lose their job and not be able to find another one.
And that’s why we have fire departments and fire safety laws, police and drunk driving laws, Social Security Disability and unemployment programs, all of which are dealt with by the public sector.
They’re not perfect, and there is no relationship breakup aid (that I know of), but we as a society recognize that for-profit insurance does not adequately prevent the harms caused by any of these things.
April 15th, 2009 at 11:20 am
Everyone in America has at least minimal access to health care services.
Absolutely true. And that’s the problem. In America millions of people only have minimal access to health care services.
April 15th, 2009 at 1:00 pm
matt Y simplifies everything by saying that the free market’s only objective is to meet teh subjective product needs of consumers. For identical commodity products (food, energy, etc….) free market theory suggests that these goods are provided more cheaply as well. Matt, this was one of your poorer efforts.
April 15th, 2009 at 1:39 pm
The problem is that such a market will probably not please health consumers, since health cae consumers are not who the insurance comapies will see as their customers.
Everyone hates buying theatre and concert tickets through Ticketmaster–their ridiculously high “convenience” fees, and everything else about the TicketMaster ticket-buying process feels like an ordeal that must be survived in order to attend the event one wants to see. Bands inveigh against Ticketmaster and try to do without them until forced to relent.
So why does TicketMaster survive? Their customer–the one they go out of the way to please–is the venue. And they keep the venues very happy.
Given that ultimately the people who buy health care insurance will want the insurance company to pay some health insurance claims, even in a fully open market–especially one where health insurance is required of all citizens–insurance companies are unlikely to choose the health care consumer as the customer constituency that they most want to make happy.
April 15th, 2009 at 2:07 pm
As soon as you socialize medicine either through insurance or by delivery, you politicize healthcare. When healthcare becomes a political football and your tax dollars that are supposed to be paying for it are taken by the government for another favorite and more poitically valuable project, guess what? No healthcare. High taxes AND inaccessable healthcare. No private care either. And the only people who would complain and hold the politicians responsible are too sick to do so.
April 15th, 2009 at 2:49 pm
As soon as you socialize medicine either through insurance or by delivery, you politicize healthcare.
Kate: We’ve half “socialized” medicine already. The reforms people want to see enacted that would universalize health insurance would take us from 50% to eventually (maybe) 70% “socialized” medicine. And there’s not the faintest possibility private sector health care will disappear, so under a government-guaranteed system of universal health insurance in the US, people will still be able to purchase all the private health care their money will buy.
April 15th, 2009 at 3:05 pm
in responding to charles, who’d responded to my post,
brewmn Says:
If they provide inferior patient care compared to their competitors they will lose business.
Because their customers will be dead.
amusing, but true.
also, as Maxx noted, individual consumers who might receive bad results from health care providers are not really the constituency that providers are really interested in making happy.
in our system, most often employers make the decisions about which companies are going to provide services. employees are provided choices -sometimes very few, sometimes more than a copule – but they are rarely, if ever, able to simply go out and shop for the provider they believe to provide the best care, as they might go out and buy the car of their choice.
so again, the problem arises: a company, often a corporation, makes decisions about health care for their employees, and that decision will ALWAYS be informed heavily by a cost/benefit analysis that is ALWAYS going to reflect that corporation’s preferences and needs.
the implications for the consumer’s “health” are secondary.
and while word-of-mouth dissatisfaction may bubble up from time to time about specific providers, most often individual consumers are not in a position to say yes, or no, regarding specific companies that may have a bad reputation.
employees often have to make choices from a list of bad and or not-so-bad options.
that’s the reality of the so-called “market” of health care options.
April 15th, 2009 at 3:21 pm
Re: National security and law enforcement are public goods. Health care is mostly a private good.
Health care has been a community responsibility since the Paleolithic (we know from fossil evidence that even the Neandethals cared for their sick and injured). Meanwhile there have been lengthy eras in human history when law enforcement an even national security were treated as private goods.
April 16th, 2009 at 7:30 am
If you are twenty or thirty something, do not save for a house or retirement. Save for your health care costs as you age. Avoid self employment and jobs without insurance as you age.
April 16th, 2009 at 10:14 pm
Hi guys. Writing gives you the illusion of control, and then you realize it’s just an illusion, that people are going to bring their own stuff into it.
I am from Afghanistan and learning to write in English, give please true I wrote the following sentence: “In the terms and conditions for airline ticket sales.”
Thank you so much for your future answers
. Seibert.
April 18th, 2009 at 1:49 pm
[...] Read more: Matthew Yglesias » Consumers and Health Care [...]
April 18th, 2009 at 5:38 pm
That sounds suspiciously like saying we HAVE to follow the “advice” of the sawbones slaves of the pharmaceutical industry. if that’s your intent, FUCK YOU!
BTW that burger needs lettuce, tomato, pickle, and Red Bull barbecue sauce.
And beer!