Since I've been on the medical school interview circuit, I've been trying to educate myself on the health insurance issue. I'm impressed with a lot of what I've heard (from those who were willing to talk to me, anyway - several gunner fellow interviewees refused to share their opinions). As I've learned more, I've come up with some thoughts, but haven't talked about most of them in interviews because I feel like my positions are pretty out of the mainstream. So I was happy to read
this editorial in the Washington Post today. I don't agree with all of what Mallaby says, but there's a lot that coincides with what I've been thinking.
The cost of providing health coverage has exploded along with medical inflation; between 2000 and 2003, the percentage of Americans covered by employment-based health benefits fell from 63.6 percent to 60.4 percent, according to the Employee Benefit Research Institute. With a little extra push, this slow attrition could become a stampede for the exit. And, according to an article Thursday by my colleagues Jonathan Weisman and Jeffrey H. Birnbaum, the Bush administration is mulling the idea of eliminating the tax incentive for companies to provide health coverage.
Would this be an error? The answer is complicated. But tax-sheltered corporate health care is unfair and wasteful. People at small companies and temporary or unskilled workers often get no coverage. Meanwhile, privileged workers get coverage that's over-fancy because it is subsidized by taxpayers and doubly wasteful because it separates the decision to spend money from the responsibility for paying. So long as the bill is on the company, the doctors and patients who make medical choices have no incentive to constrain spending.
Individual purchasing of health coverage would create an incentive to shop wisely for insurance, especially if the shoppers used after-tax dollars.
I think this is pretty accurate.
There are a lot of things wrong with the state of health insurance today, but there are two issues that I think get overlooked. First of all, employer-provided health insurance causes more problems than it solves. As Mallaby mentions, people who don't work for big companies get screwed. Also, people who work for companies that make goofy decisions about what to pay for are out of luck, and people who lose their jobs are in big trouble. Tying health insurance to employment just doesn't seem like a good idea.
Secondly, health insurance covers too much. Can you imagine what it would be like if your car insurance covered oil changes and wiper blades? It would be astronomically priced, Jiffy Lube would have an incentive to collude with State Farm, and consumers would have no incentive to seek out reasonably priced oil changes.
The analogy with health insurance is clear, I think, as far as it goes: prices are driven up because regular costs are hidden in premiums, there's price-fixing, and consumers don't look for good prices. But there's another way in which insurance drives up health care costs: it costs a lot of money to file those claims! Insurance companies are notoriously unhelpful, so doctors have to pay office staff to learn insurance codes and wander through phone menu mazes in order to get reimbursement. If people paid directly for regular office visits, physicians wouldn't have to process nearly as many forms, and they wouldn't need so much support staff.
Anything that encourages the decoupling of insurance with employment should be a step in the right direction. If everyone is on equal footing regardless of employment, availability of coverage should be distributed more fairly. And if people see the true costs of their health insurance (rather than having a large portion paid by their employers and the rest taken by paycheck deduction) they'll not only start shopping for good prices, but start choosing more sensible coverage plans. For most relatively healthy people, a plan focused on catastrophic coverage would be a better deal, even before it starts driving down costs by making armies of insurance coders unnecessary. (It definitely would be for me, and I'm less healthy than is probably average for my age.)
[*]Obviously, this brings us to the question of fairness for people who aren't relatively healthy, or who can't pay out of pocket for a checkup. The free-market solution begins to break down here. Health care isn't a commodity; we can't just refuse to treat people who can't pay.
Here, again, I look to car insurance for an analogy. If car insurance were optional, a lot of people who drive crappy cars or don't think the cost/benefit ratio is favorable wouldn't get it. (In fact, I know a lot of people who'd fall into this category; if you're a safe driver, live in a safe neighborhood, and don't have an expensive car, insurance isn't really a good deal for you.) Then only rich people would be able to afford it, because they'd have to bear the costs of all the uninsured people running around getting into accidents. To prevent this, we require everyone to carry collision insurance.
So I suggest mandating health insurance. (Catastrophic coverage only; if you want your annual checkup covered that's up to you.) When we force the young and healthy to get coverage, the risk pool is spread out and coverage becomes more affordable. Granted, underwriting is still in play, so high-risk people (as well as poor people) will probably not be able to afford insurance. Mallaby thinks we should regulate what risk factors insurance companies are allowed to consider, but I'm not sure that's a great idea. I'd lean toward either providing vouchers or establishing a state high-risk pool, something like the state hurricane insurance in coastal areas. This would have to be subsidized, but I think that's an acceptable societal expense. Certainly we pay one way or the other.
Obviously, I'm far from being an expert in this field, but it's something I'm very interested in, so I welcome any responses. I'm sure there's a lot I haven't taken into account.
[*]One criticism I always see of this sort of plan is that if preventive care (e.g. an annual physical) isn't covered, people won't take advantage of it and thus will end up with worse problems in the future. First of all, people clearly don't take full advantage of preventive care as is. Secondly, I think this ignores basic economics: insurance companies have an interest in not paying out for expensive illnesses, so if preventive care is in fact worthwhile, they'll provide incentives for patients to use it, just as car insurance companies give discounts for taking defensive-driving classes.
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