Once again the real world is overwhelming my active participation in the blogosphere. Before I leave again for that real world I’d like to drop a thought for consideration.
The U. S. healthcare system is absolutely enormous and unfathomably complex. Within its boundaries it includes examples of nearly any approach to delivering healthcare services anywhere in the world and, frequently, at sizes that rival those approaches elsewhere. Most of us are probably aware of the fee for services model—it’s the approach to healthcare delivery that most of us encounter on a day to day basis but it isn’t the only approach.
We have not just one but several fully socialized healthcare systems. The largest is the Veterans Administration healthcare system. With spending of $96 billion per year it’s about 2/3’s the size of British National Health. There’s also the Indian Health Service. At roughly $4 billion dollars per year it rivals many other countries’ complete healthcare systems.
HMO’s frequently employ capitation systems. That’s a system under which healthcare providers are paid based on the number of patients they treat rather than what services they perform for these patients per se. Capitation is essentially the system that Italy employs.
The federal government’s employee healthcare system and the Medicare system approximate the single-payer system that some people advocate for the United States. France and Germany both have systems that can in rough terms be considered single-payer systems paid via payroll deductions.
As you can see within our singular system we encapsulate nearly all other systems. What baffles me is that, for some reason or other, the idea that an employer-based private insurance fee for service system is the system we have in this country. But that’s just part of the elephant not the whole elephant.
I think I may have mentioned before that in my real life over the years I’ve had clients who were individual physicians, hospitals, pathology laboratories, big companies, small companies, insurance companies, pharmaceutical companies, and companies that manufacture medical equipment and that the normal course of my business causes me to look at my clients’ books and gain some sort of understanding of how my clients’ businesses actually work. I can’t claim to have a clear view of the whole elephant of healthcare but I’ve learned the views of those who see the trunk very clearly, the ears very clearly, the legs very clearly, and so on and, as a consequence, I think I have a pretty good idea of the general outlines of the elephant and a few flashes of great clarity now and again.
Given that experience and viewpoint I’d like to give you this to chew on. Despite its many good even great qualities our system is looney. There’s no conceivable way that everybody can get all the healthcare they want and healthcare providers can get whatever they want for providing it. Furthermore any system in which the government with its deep pockets and regulatory capability bids against private individuals for healthcare services is neither good nor sustainable. It’s a flywheel ready to spin off.
I’m not sure the comparing size in terms of dollars spent presents a completely accurate picture. For example, VA spending may be 2/3 of the entire UK system, but the VA only covers about 8 million beneficiaries where the UK population is around 60 million. I think if you look at it in terms of number of beneficiaries, then the US is primarily an employer-based, private insurance fee-for-service system.
I think it’s actually the other way around: the number of people who are covered by an insurance company with the premiums paid all or primarily by their employer is actually relatively small.
From the total of those covered you’ve got to subtract the following:
veterans
native Americans living on reservations
those receiving Medicare
those receiving Medicaid
those receiving some other form of federal, state, or local aid
I think you should also subtract federal, state, and local employees from the total.
You’ve got to subtract those who are carrying individual insurance. No employer in that case.
Then you need to subtract the number of people who work for companies that self-insure. There’s no risk-bearing insurance company in the picture in that case. That’s more than half of those who have employer-based insurance.
What’s left? 10% of the population? Less?
The compulsory nature of Obamacare is what is disgusting. In Germany, I was able to opt out of the Krankenkasse system and save my part of the forced contribution.
I am able to opt out of Medicare Part B, as well, and I have.
Well, according to Kaiser 52% of Americans are insured through their employer. Even if you knock off half of those due to self-insurance (and I don’t understand why you would do that), that’s still a quarter of the total population. Federal and state employees comprise ~10 million people out of that 75 million+. So still 20% or more.
Your core point is true, that our overarching healthcare system is comprised of many systems. But the employer-based system still seems to represent the plurality, if not the majority, of it.
US Census reports that 58.5% of Americans report that they are insured through employment. It’s not clear to me whether that includes insurance through a government job or through a union/professional association.
I would probably go further than Dave and distinguish corporate employer-provided insurance and non-corporate (sole proprietorship, etc.). The tax treatment is materially different.
Maxwell, the difference between self-insurance and other employer-based plans is relevant to a lot of policy discussions that come up.
For instance, some people believe that insurance costs could be reduced by overriding state mandates; other people think the very notion outrageous. Self-insurance plans are already exempt from state insurance mandates, so neither the change would that significant from either p.o.v.
The latest CBO analysis for the reconciliation bill has some figures (millions of persons):
Medicaid & CHIP – 40
Employer – 150
Nongroup & Other – 27
Uninsured – 50
TOTAL – 267
“Other” includes medicare and uninsured includes illegal immigrants.
PD –
Thanks. I understand that from a policy perspective the distinction is important at times. What I don’t understand is why self-insurers wouldn’t fall into the category of “employer-based private insurance fee for service system.” They are employer-based, they are private, and I presume the vast majority are fee for service. The fact that there isn’t a separate insurance agency internalizing the risk seems like a relatively minor distinction.
I think similarly about the distinction between corporate- and non-corporate employers. The differences do matter on the ground level, but the overarching approach is basically the same.
Andy that looks to me like that chart is of “nonelderly”
Its due to the Law of Large Numbers.
What that means is that for a sufficiently large company if the expected cost of insuring their work force is $150 million, the Law of Large Numbers says taht the actual cost is going to be “close” to that $150 million. How close is “close”? Depends on the underlying distributions, but once you have an idea about that distribution you can get an idea of close as well. In other words, such companies face very small risks even though their health care bill might be fairly large.
The simplified version is suppose I offered you the following bet. Suppose the bet was I pay you $1,000 if after four flips the number of heads and tails is not {2,2} and if it is you pay me $100. Taking that bet would likely pay out in your favor. Your chance of winning is 80%. So your expected winnings are $800 and your expected losses $20.
No suppose we flip that con 10,000 times and we change the payoff condition so that the proportion of heads and tails is within the range (0.49,0.51). Would you still take the bet? I hope not because the chances of me winning are very, very high.
Maxwell, I’m not sure the category is unfair, it’s just (and I believe this is Dave’s point), when talking about health care insurance reform, the incentives are different for an insurance company administers an employer’s self-insurance plan. Here’s his post (with useful links) on the matter:
http://theglitteringeye.com/?p=7910
The non-corporate business category is largely a personal issue. If I buy my insurance through my office on the plan offered to employees, I have to pay a 15.3% tax on the premiums. So my choices are either to incorporate or go onto my spouse’s plan. I believe there are incentive issues here when you start asking why small businesses don’t provide insurance.
PD Shaw,
You’re right, I should have picked up on that. And just to be clear, I’m not disagreeing with the thrust of Dave’s post – that our health care system is balkanized – I’m just suggesting it might be useful to make comparisons based on person’s covered as well as money spent.
BTW/ Keith Hennessey appears to be doing a good job identifying whither the money comes and goes on the healthcare reconciliation bill:
http://keithhennessey.com/2010/03/18/understanding-health-bill-two/
Thanks for linking to that post, PD – I missed that one at the time, but it was a good read.
I think the conclusion from your post should be that we all need to be in the same system. I do not mean single payer, it could be Verdon’s HSA model or a France like model, but we should all be in the same kind of system, even the Medicare recipients. Eradicating Medicare would end the career of whoever was responsible, but it is necessary. Our fragmented system makes the politics of reform impossible.
Steve
As PD noted above, the incentives are different. There’s no rescission, for example, in the case of self-insurers. The adverse selection criticisms don’t apply (which is another way of saying the same thing). Indeed, in my experience the only segment to which they apply at all are to the individual insurance market and I have personally seen too many examples of the opposite to believe that the criticisms hold water.
To be clear, I don’t think that HSA’s being tacked onto our current system will solve any problem. But right now our current system is one that is shockingly hostile to saving for health care expenses at a point in life when people will most likely incur large expenses. Isn’t that just amazingly stupid? Why do we have this system? Guys like Barack Obama. Note I said like.
Why do I say that? Because Obama would have voted in favor of Medicare. He is a technocrat and he thinks that if we can just put the experts in charge why things will be just peachy. Its a variant on the “wise ruler” view of government. The thinking is: If we can just find a really wise person and make them our ruler we’ll be okay.
Problem is we also live in a democracy where we elect our rulers. This process has given us rulers like:
George W. Bush,
Richard Nixon,
Jimmy Carter,
Tom Tancredo,
Dennis Kucinich,
Trent Lott,
Dan Rostenkowski,
etc.
Are these people “wise”? Are they the ones you really want to have power over you? The answer has to be yes, because we did precisely that.
Now, imagine we get a single payer system…then we put in power politicians like Trent Lott and George W. Bush? Or Jimmy Carter and Dennis Kucinich? Do you feel all snug and comfy in your bed knowing we have such shining and wise and erudite leaders? Or are you thinking, “Great how much are they going to f*ck things up?”
I think a model were people are given subsidies for purchasing health insurance and where health insurance companies cannot turn down a person might help. I’d also considering making it so that people can also keep a portion of their subsidy if they don’t use all of it. This would create an incentive to shop around for a good deal. In other words, we make sure people have access to health care, and for those who need help getting they get it, and at the same time create and incentive to shop around and look for a good deal, the plan that best suits the individual. And at the same time end Medicare and put the elderly on the same program.