This happens with me frequently. My interest will be piqued by the caption of an editorial, column, or op-ed and I read it, prepared to disagree vehemently with whatever it has to say. On reading it I find that I agree with most of what the writer has to say. That was the case with David Goldhill’s Washington Post op-ed, “Insurance is what makes U.S. health-care prices so high”:
Consider this: Health insurance is a product so terrible that few Americans voluntarily buy it without receiving a sizable subsidy.
“No one would design a system like the one we have. And no one did,” UnitedHealth Group CEO Andrew Witty wrote this month. “It’s a patchwork built over decades.”
Today, insurers are accused of pushing up prices for medical care and then denying legitimate claims. Their leaders are said to be greedy or incompetent. In reality, we have a more fundamental problem: Health insurance can no longer pay for or manage modern health care, and the patchwork that Witty described is not fixable. It makes no sense to try.
One of the key problems is that what is called “healthcare insurance” in the United States isn’t actually insurance. For a plan to be insurance the insurer must bear risk and premiums must be proportional to risk. What we call “healthcare insurance” isn’t insurance at all. It’s a healthcare maintenance plan paid for by insureds, employers, or the government. Mr. Goldhill actually makes the same point in his piece:
Health insurance was meant to work like other kinds of insurance: When policyholders got sick, they would use the collective financial resources of the healthy to cover their costs. But this model was designed to pay for emergencies such as hospitalizations — not to “share the risk” of erectile dysfunction, weight loss, lifelong management of chronic conditions, or the mental health treatment needed by 1 in 5 Americans. The Centers for Disease Control and Prevention estimates that 90 percent of America’s health-care expenditure goes toward chronic and mental health conditions.
It’s as if homeowners’ policies expanded from insuring against fires and floods to also covering utility bills and property taxes, or even replacing worn-out furniture.
I think the point he’s making here is solid:
When insurers are the primary payers, the marketplace is distorted. So much of what Americans hate about the system — limited networks, paperwork, billing mistakes, terrible customer service, opacity — arises from the way clinicians serve insurers’ business priorities rather than patients’ needs.
The same problems obtain when employers are the actual customers or the federal government is the actual customer:
Policymakers cement the centrality of this model. Medicare, Medicaid and Veterans Affairs health care all have been dressed up as pretend insurance. Americans individually pour hundreds of thousands of dollars into the system through premiums and deductibles, yet they somehow keep believing that someone else is paying for their care.
Here’s his prescription:
To replace its obsolete insurance structure, America has two choices.
One is to emulate other nations and make health care a social utility, with government controlling supply and prices to ensure equal access to care. But this model utterly fails to drive the innovation that’s essential to improving health outcomes. Had the United States copied Britain’s National Health Service when it was established in 1948, Americans might today enjoy the glories of equal access — to roughly 1948-level care.
Instead, America should get the entire industry to compete vigorously for customers — for patients, that is, not insurance companies. Spending power needs to shift from insurers and government subsidies back to individuals, through mechanisms that patients control. Competition among providers for dollars spent directly by prudent consumers would not only bring prices down but also encourage more innovative approaches to packaging care. And this care would be better aligned with patients’ diverse needs.
In such a system, insurance and government would play their traditional functions but no longer act as the industry’s primary customers. Insurance would spread the financial risk of rare and major episodic medical needs. Governments would subsidize vulnerable populations so they could fully participate in the marketplace for ordinary health care.
Sadly, his proposal will not work. There is plenty of scholarship demonstrating that patients do not make decisions about their own healthcare sufficiently prudent to maintain their health and control costs.
Let’s consider the list of stakeholders that have little interest in controlling costs:
- Insurance companies
- Employers
- The federal government
- Providers
- Patients
It’s little wonder that prices and costs have increased so rapidly over the last 50 years and continue to do so.
It’s a positive feedback system and the behavior of such systems is well understood. They keep going out of control until they collapse. When will that happen? As Adam Smith observed more than two centuries ago there is a great deal of ruin in a nation.
I do believe I’ve made essentially the same points here for quite some time. Except one.
I disagree with the notion that “scholars” have proved that consumers will not economize. Rich people might pay for cosmetic surgery out of pocket. Regular people don’t. If cosmetic surgery was covered by insurance, they would demand procedures. And I suspect that many, not all, people would make different lifestyle decisions if the poor health effects were not covered by insurance. Potato chip and Twinkie sales would suffer.
@Drew, agreed, but on the other hand,
“Competition among providers for dollars spent directly by prudent consumers would not only bring prices down but also encourage more innovative approaches to packaging care. And this care would be better aligned with patients’ diverse needs.”
That recipe has been implemented with dental care to which access remains available only for the upper classes.
I’ d also like to add that the financialization of insurance is incompatible with moral values and coverage decisions. Nervous CEO’s are stuck between their fiduciary responsibility to shareholders and their moral duty to the policy holders.
The fiduciary will out or CEO will out.
Unlike Medicare and Medicaid, the VA is socialized healthcare. Unlike Medicare and Medicaid, there are VA Hospitals and/or Medical Centers. Unlike Medicare and Medicaid, medical personnel receive their paycheck from the VA. (Some doctors have an outside practice.)
The wait times are longer, but vets are used to standing in line.
Today I picked my wife’s prescriptions at the local hospital. I had to pass through metal detectors. They were installed in the last week or so in esch entrance in response to the gruesome murder of the insurance CEO in NYC. The few staff I spoke to were visibly concerned and uneasy.
I think we have crossed some threshhold. What sort of medical system will we have when the professionals are afraid of their patients? I can imagine providers leaving medicine. Then what?
The US is getting to be a very ugly place. Now two murders by arson on the NYC subway.
All of my facilities in rural areas were getting regular death threats during Covid. That’s not new sorry to say.
Coincidentally I am reading Chapin’s book on the history of health care. She is a fairly partisan libertarian/conservative. Anyway, just on the origins of insurance and what was intended it became clear sometime around the 1900-1920 era when medicine finally had some stuff that worked that costs were increasing and that in particular most people had no way to pay for hospitalization or acute care like surgery and deliveries but they were also unable to afford routine doctor visits. In response a lot of place developed pre-paid health care plans. Businesses, mutual aid societies, groups of doctors. These generally included more than hospitalization, providing fairly comprehensive care though with fewer specialists. A shortcoming is that it often included only the worker ie the male.
So as far as origins go, we really arent doing that much different than what we started. However, we now cover a lot more people and we we now have a lot more care to offer. What seems to clear to me is that people need a way to pay for large, lump payment care.
(Just a note that what the CDC calls chronic illness expenses may not fit with what many of us think. for example, they list cancer care and cardiovascular care. When you need a CABG or valve replacement that is generally due to longstanding issues but I think most of us think of that as acute care. Anyway, their definition of acute care is pretty limited.)
Steve
Long term is heart failure, diabetes, COPD, rheumatoid arthritis.
In many cases the patient could manage his own care if he had access to the medication and supplies.
I have COPD, the government pays thousands for plastic tubes, mouth pieces, an air pump that could be manufactured for Walmart for a few dollars if the AMA didn’t have to wet their beaks.
Medical professionals are well trained and certainly worth their salt but alternative medicine is needed for the great unconnected where unaffordable care is no care at all.
Maybe there’s a market there for the cartels to exploit?