I had high hopes when I began reading Isabel Sawhill of the Brooking Insitution’s proposal for a compromise on healthcare reform. They were soon to be dashed. She (and presumably the Brookings Institution) proposes a “hybrid solution” with both public and private components:
Democrats would have to accept some form of premium support for the elderly in return for Republicans accepting a public option for the non-elderly. Over time, individuals would then vote via their enrollment decisions on which option they liked better. The government would be forced to compete with the private sector on an equal footing. And the private sector would not be able to raise premiums without limit. Best of all, seniors and working-age Americans would be in the same system, leading to more fairness and greater efficiency for the system as a whole.
This strategy is hampered by a complete and utter lack of understanding of healthcare insurance and the sources of cost increases in the healthare system. First, healthcare insurance companies revenues rise as healthcare costs do. They have little or no incentive to control costs. Second, the majority of employer-provide healthcare insurance plans are in fact self-insurance. Insurance companies act only as administrators for these plans and in general receive a percentage of payouts as their compensation. No incentive there. Third, in every market healthcare insurance is an oligopoly. State regulations ensure that. There isn’t enough competition among the few providers to produce cost savings and precious little incentive to do so.
Why not cut to the chase and go directly single-payer? That’s where that train is heading.
Not that that would produce cost savings, either. A single-payer plan can control costs in the presence of the political will to do so. As evidence of the lack of such will I would submit the enactment of serial “doc fixes”. Time inconsistency, people.
If there’s one thing we should have learned from the last several years of furious thrashing over healthcare reform it is that not much will be done until the whole thing goes kablooey. That may be sooner than we think. Can the Fed continue to be the primary purchaser of Treasuries forever?
I’ve always been skeptical of the public option for many of the reasons you suggest. But I also know that public and private entities operate under different rules and are subject to different legal restrictions. I believe a public option either will not be competitive with the private sector and serve merely as an intermediate tier Medicaid for a higher risk pool, or the private sector will not be able to compete and the public option will merely become the single-payor system.
Right now Illinois state workers are complaining that they are being forced into the state run health insurance program, which they say is more expensive and poorly managed. Just because there is a public option to private insurance doesn’t necessarily mean or do anything.
Hmmm, interesting, but is it revenue they care about or profits? If it is the latter I think you need to rethink.
The reason I say this is that because this is true of any firm. Raise input costs and the revenues will have to rise as well provided the “quantity” sold does not change. Given that many people obtain insurance via employers this might be where the problem occurs.
I’m not saying you are wrong, just that your argument doesn’t strike me as looking at the right thing. Do profits increase as costs increase for health insurance firms? If the answer is yes, then you are quite correct. If the answer is no, then you are wrong.
I vaguely remember that ACA limits profits as a percentage of revenue for insurance companies. There was a FrumForum post about it some time ago but I’m having trouble finding it again. If that’s the case, then there’s a big incentive to increase the quantity of medical care.
I like single payer, or even full on government employment for the biggies – emergency care, cancer, bypasses, but I’d like to keep the ability to buy a rotator cuff surgery if it’s going to be being rationed. In Canada you can get to the front of the non-emergency waiting list based on who you know. I’d much rather it be about who can pay.
We also need to address supply. A well defined path from Physician Assistant / Nurse Practitioner to G.P. would be a good start.
It costs no more to administer a $4,000 tonsillectomy than it does a $7,000 one. If your premiums are relative to costs (as they are when the it’s an actual insurance program, i.e. the insurance company bears risks), a $7,000 tonsillectory is significantly more profitable.
Have health insurance profits been growing at a rate faster than the economy? If the above is true, the it would see the growth rate in profits would follow the growth rate in revenues which you are linking to the growth rate in costs. I admit I have not data, but is that the pattern?
@Sam
“A well defined path from Physician Assistant / Nurse Practitioner to G.P. would be a good start.”
As I think I recounted here, when I went to have my knee looked at a while back, the fellow who did the looking was a Physician’s Assistant. He could do everything except surgical procedures. I’m not sure we need a path from that to a GP. We need more PAs and NPs, I think.
If a PA wanted to become a surgeon eventually, he’d have to start basically from scratch. What’s wrong with a career path that starts at nurse and ends at surgeon without having to start all over again? Just having that career path as an option might have more people training to be NP/PAs.
He also needed to be supervised by a G.P. which would prevent him from being able to go to an under-served area. I see no reason a PA with a few years under a G.P. shouldn’t be able to go practice somewhere they’re starving for new G.P.s.
“Have health insurance profits been growing at a rate faster than the economy?”
No. Private insurance companies are interesting. They seem to make little attempt to hold down costs, they just pass them on. They also value market share a lot, which makes them overly sensitive to public criticism. One public case of an 8 y/o denied care, which probably would not have worked anyway, and they fold.
Steve
“Have health insurance profits been growing at a rate faster than the economy?â€
The presence of non-profits may be a factor.
Through higher premiums? I’m thinking it isn’t the profit motive that is causing rising costs, I’m thinking it is the market structure. With employees getting health care via employers (i.e. tax subsidized in a fashion) and if health care is a superior good, that set up is particularly bad in terms of rising costs.
In other words, the profit motive, while a convenient whipping boy is not really the problem…FDR’s policy of letting health care be an untaxed form of compensation that was also exempt from wage control laws set the stage for the problems we have now.
Dave,
You hit on a terrible truth when you wrote: “If there’s one thing we should have learned from the last several years of furious thrashing over health care reform it is that not much will be done until the whole thing goes kablooey. That may be sooner than we think. ”
Just watch what is happening to the British NHS – expenditure more than doubled in past ten years but service continues to degenerate. Just one example from this week’s news: ‘Woman loses baby after eighty hour wait for Caesarian Section as no maternity beds were available.’
The Government now proposes further ‘reforms’. The NHS has had many ‘reforms’ . Each one has increased costs and worsened the service.
Reform of a bureaucracy, in the sense of making a radical change which leads to improvement of the service, is impossible. Like a Borgia necklace, a bureaucracy tightens its choking stranglehold in response to any interference. Watch it happen.
Max
Dr. Gammon,
You need a website sir. Or something. There is too little of your writing out there for us to look over quickly and easily, in my opinion.
Steve,
Thanks for your suggestion. I shall get my computer skilled children to set it up.
Max