Time To Slip Into My Armchair

Kevin, M.D. asks to have health policy bloggers comment on this article written by Massachusettes governor Matt Romney, detailing his ideas for health care reform in the state. I'm no expert, but: I'm a blogger, I like health policy, and I'm in my pajamas; so let's go!

Before I run through his proposal, let me list the top five things necessary to refrom health care policy:

  • Disintermediate health insurance purchasing through employers. It's why we're in this whole mess.
  • Disintermediate health insurance purchasing through employers. Yeah, I said it twice, but it's that important.
  • Deregulate health insurance - there is no reason governments should be telling insurers what to cover and what to not. This only encourages purchasing more health care through inefficient insurance, and increases the price, thus pricing out the marginal consumer (with very little benefit to those remaining). It's a deadweight loss.
  • Deregulate prescription drugs and medical devices. More deadweight loss.
  • Price Medicare and Medicaid so as to discourage overutilization.
  • Reform the way we deal with malpractice and medical errors.

Much of this will have to taken care of at the federal level. Bush seems to trying to get #1/#2 taken care of with his tax reform. It's a good thing, but Ross and Graham disagree (apparently, their economics teachers taught them that businesses can quit giving employees a cash equivalent of $4,000 per person and just add it to their bottom line). #4 definitely is all federal, as is the Medicare half of #5. So that leaves the deregulation of health insurance, medicaid reform, and tort reform, which have both federal and state components. So a governor really has little left to work with.

Much to my surprise, the governor did a good job dealing with these. He realizes that deregulating health insurance will make it more attainable:

The first would provide bare-bones coverage to workers in small businesses and the self-employed who decline to purchase coverage themselves because the standard rate of $500 a month is too expensive. State law prevents insurers from offering policies with only basic benefits, and eliminating some of those requirements might allow insurers to charge much lower premiums.

Romney notes that by waiving some rules, New York cleared the way for private insurers to charge as little as $140 a month.

His proposals for Medicaid involved what seem like an expansion balanced with reform to decrease utilization and emergency room visits.:

Romney says as many as 106,000 of the uninsured are eligible for Medicaid but not enrolled. Critics say the administration has contributed to this problem by scaring away applicants with overly rigorous checks on financial assets. Nevertheless, Romney said his third strategy is a redoubling of efforts to sign up everyone who is eligible for coverage through the federal-state Medicaid program.

Romney hopes to cover the remaining uninsured, mostly the working poor and the long-term unemployed, by replacing the Uncompensated Care Pool, state's fund for providers who care for the uninsured, with what he called Safety Net Care.

...The governor also proposed to cut costs by stiffening the penalties for Medicaid fraud.

They have actually replaced the original article with a longer and harder-to-read version. But in the original they mentioned something useful about administering the program in a way so that truly low-income people would get coverage, while middle-earners who are wrongly on the doles get forced off. I can't find it now, but it was there.

Interestingly, he flew through malpractice reform rather, um, quickly:

The governor also proposed to cut costs by stiffening the penalties for Medicaid fraud; pushing the use of electronic records; and changing malpractice laws to reduce doctors' liability and dissuade them from practicing so-called defensive medicine.

I don't think the whole tort reform thing is as important as others; and seeing as it is the most politically contentious and the least likely to be done correctly, it's probably all the same if they let this other stuff play out first. The thing that worries me about the article in general is that it's a little light on specifics detailling how these things exactly will be accomplished. Basic tenets of political economy tell us not to be too optomistic.

Anyway, it's no libertarian health care paradise, but it's good state-level reform, especially coming from Massachusetts. I rarely expect politicians to correctly diagnose the problem - something Gov. Romney seems to have done.

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I think it's clear Bush is

I think it's clear Bush is trying to discourage employer-provided coverage, if the Post is correct about the potential new economic advisors he's seeking.

Just take a look at evidence from their CV's listed on my latest post:

http://www.isemmelweis.com/blog/index.php?p=25#more-25

I fully realize that health

I fully realize that health insurance costs are in lieu of wages, Trent. But individuals buying health insurance cannot bargain effectively, and that $4,000 will be nowhere near enough to provide adequate health insurance.

As you might expect, I agree

As you might expect, I agree with Graham. $4000 in cash going into an individual's pocket is not equivalent to the health insurance benefit which can be gained through an employer's stronger purchasing power and risk sharing, not to mention the greater information asymmetry when you compare an individual consumer to, say, a human resources department.

I have one comment on

I have one comment on deregulation of health care insurance. It was during the Clinton administration that health insurance providers were forced to cover pre-existing conditions. [There are still often waiting periods that vary from co. to co.]

With that regulation out of the way, I have no doubt health insurance providers would go back to the old 'no pre-existing conditions' clauses.

For many patients, if this were to happen -- well, you might's well hand them a loaded gun and tell them God speed.

Give good thought to the variety of ills out there that are chronic, or uncurable but treatable; and the cost of managing those ills.

Diana

It's true that individuals

It's true that individuals have less bargaining power than large companies. If insurance is deregulated, though, that will be balanced by overall lower costs and the likely removal of junk like co-pays. It will be less like "pay for someone else to pay for my medical expenses" and more like actual insurance: "cover me when I can't cover myself".

- Josh

I would add "repeal the

I would add "repeal the antitrust laws--at least as applied to doctors" to the list. Under current Bush administration policy, doctors are presumed criminals when they try to negotiate contracts as a group. The official rationale is that this is anti-competitive "price fixing". The real explanation is that the government, especially the current administration, wants to protect the insurers from rising physician costs.

Sure, guys; the percent

Sure, guys; the percent going to labor/owners hasn't changed in forever, but it will now all of a sudden because of "bargainng power." Whateve that means. If management could just take away that compensation because of such power, they would've done it already. The single biggest problem in health care is the tax incentive to overutilize health care resources via "health insurance" which is really just a term for "pre-paid care." Keep ignoring this.

As far as the pre-existing conditions regulations, that is a good point to bring up. I was talking more about regulations in some states that say certain standard things have to be done for certain conditions. Of course, pre-existing conditions wouldn't be such a problem if health care were disintermediated from employment.

I would love to see a study that tried to estimate the economic dead weight loss of health care regulation as a percentage of health care GDP. Any body know of one? And Skip brings up a good point about anti-trust and physicians. I can't decide where I would rank it on my list - probably last for now. What do you think, Skip?

Actually, the "no

Actually, the "no preexisting conditions" clause could be a good thing, because it encourages people to get health insurance while they're still healthy rather than waiting until they're sick.

One of the justifications given for forcing everyone into a group through a single payer plan is that if you have voluntary groups, healthy people will tend to stay out of them because they will be more expensive than individual coverage for a healthy person. However, the simple answer to this is not to allow sick people into the groups unless they have prior group coverage. That should have the effect of mostly wiping out individual plans.

Now, I'm not necessarily saying that health insurance is even necessary (though I think catastrophic coverage probably is) or that it needs to be group-based, though I can't think of another way to avoid having people lose coverage just because they're sick unless they're evaluated as a group.

The big question with this is what the market would tend to produce as far as entry requirements for a group. A group could conceivably say "healthy people only" and then try its best to kick people out who became sick. However, people don't tend to like being locked in to a single vendor, and I think competition would tend to produce a system with a certain amount of mobility but that still strongly encouraged joining a group as early as possible.

I think things would get a lot simpler if we first eliminated all the "split the check" systems and stuck to good ol' high deductible plans.

Can I just say that I

Can I just say that I absolutely love this site? After a class where I get attacked by fifty people for suggesting that we should privatize the legal system, it is so wonderful to find a bastion of people who actually understand economics.

Diana: "With that regulation

Diana: "With that regulation out of the way, I have no doubt health insurance providers would go back to the old ‘no pre-existing conditions’ clauses."

That's a feature, not a bug. Insurance is a means of managing uncertainty. For chronically ill patients, there is no uncertainty; they're definitely going to be expensive. They don't need insurance, they need welfare. Obfuscating the issue by requiring insurers to provide charity but calling it insurance helps nobody.

Well, Trent, my specialty is

Well, Trent, my specialty is antitrust not health care, so the issue may be more of a priority for me than you. But I think that the antitrust problem integrates with several other flaws in the current health care system. For example, you mentioned how state regulation demands insurers provide particular services. The FTC often uses these regulations as a pretext for antitrust intervention. Say there are 10 practicing OB-GYNs in a particular area. State law says insurers must offer OB-GYN care to all subscribers. In the FTC's mind, this gives the insurer an absolute right to have a contract (on terms favoarable to the insurer) with the 10 doctors. If the doctors insist on negotiating a contract as a group, the FTC claims this is "coercion" because, without the ten of them, the insurer can't legally operate within the state.

Antitrust enforcement also prevents accurate pricing information from making itself known to customers. A health care manager in Colorado once told me that the primary care doctors in her group were losing money on childhood vaccinations--the vaccines cost them more than the insurer would reimburse them for. If the doctors have lunch and discuss this problem, they are *criminally* liable for price-fixing under the Sherman Act. Doctors may not discuss any price-related terms without advance permission from the FTC.

>>That’s a feature, not a

>>That’s a feature, not a bug. Insurance is a means of managing uncertainty. For chronically ill patients, there is no uncertainty; they’re definitely going to be expensive. They don’t need insurance, they need welfare. Obfuscating the issue by requiring insurers to provide charity but calling itinsurance helps nobody.<<

Ask women who have stayed home to raise families while their spouses built up their careers if it's a feature or a bug. Ask them if they should be forced into welfare. [I'm speaking of course of the probable 50% or so of them who will likely end up divorced and cut off of their spouse's insurance.]

I think it's a feature that has been worked out, and should continue to be in some form or another so that people who have contributed to society in one way or another aren't left out in the cold.

Diana

P.S. Just curious, did y'all

P.S.
Just curious, did y'all fix cut and paste issues, or is it because I'm running Firefox now?

Diana, Ask women who have

Diana,

Ask women who have stayed home to raise families while their spouses built up their careers if it’s a feature or a bug. Ask them if they should be forced into welfare. [I’m speaking of course of the probable 50% or so of them who will likely end up divorced and cut off of their spouse’s insurance.]

I think you're misunderstanding Brian. Insurance - paying a small amount of money regularly for the purposes of avoiding sporadic large sudden costs - is a means of managing uncertainty. Though people with pre-existing conditions need help, insurance is not the remedy. Insurance only works well when it is used to manage unpredictable 'catastrophes', not for managing things that are known and predictable. One of the reasons why health insurance is so expensive is because it is used to pay all sorts of things - doctors' office visits, minor prescriptions, etc - that don't involve uncertainty at all. It distorts the market for what would ideally be covered effectively by insurance - catastrophes.

People with pre-existing conditions should be helped with money, whether it be charity (my preference) or govt handouts (likely your preference), but not insurance.

There's no such thing as

There's no such thing as society.

- Josh

I’m speaking of course of

I’m speaking of course of the probable 50% or so of them who will likely end up divorced and cut off of their spouse’s insurance.

It's funny how people accept this as a given. Perhaps women (and men) would make better spousal choices if there were more incentive to do so.

Jonathan, Am I

Jonathan,

Am I misunderstanding Brian, or is much being overlooked?

Take for example a person who has epilepsy, be it from birth, or accident.

There are often multiple medications, not many of which are 'cheap' , usually bi-yearly lab tests, the overuse[my opinion] of the eeg, and the mri of the head that can run upwards of 2 grand.

Besides the everyday expense, if a patient maintains a seizure free life for a minimum of 3 years, neurologists now insist on weaning the patient from their meds. [groan]

While these things may be expected -- the patients reaction to withdrawal from medication is not, possibly leading to an ambulance trip to an er, repeat of already standard labs, eeg, mri, plus any treatments for injuries related to the seizure[i.e. breaking a bone in a fall, lacerations, etc.]

These are just possibilities from one type of illness. Many can offer up expected, as well as unexpected costs -- and I just don't, imo, find it acceptable to force all people to accept handouts or welfare to cope with these things. Health insurance used to be about patients -- what the hell happened to that?

Diana

There’s no such thing as

There’s no such thing as society.

- Josh

Okay, then let's say I have a vivid imagination.

Diana

(different Brian

(different Brian here)

Diana, what is the difference between a 'welfare handout' and a mandatory/universal 'health insurance' which covers all costs, foreseeable or otherwise?

As Jonathan and the others have pointed out, it simply isn't 'insurance' when the cost is pre-existing, ongoing, or otherwise certain. In your example, the only thing that would be insurable (that is, a real risk or uncertainty) would be problems relating to an unforseen seizure, not the ongoing costs of medicating epilepsy.

I can see where an insurance company would either give a heavy discount to or require a epileptic to maintain meds in order to maintain coverage, though.

A single-payer system that would cover epileptics as described by you *is* welfare, and NOT insurance. Understanding the true nature of the problem is the first step in figuring out all the means to tackle it.

Since it isn't a matter of insurance, the answer lies in understanding charitable foundations or welfare schemes that don't suffer (inordinately) from incentive & moral hazard problems. I imagine that, ala Will Wilkinson's point, that any government program should be a stopgap measure to carry people from one charitable operation to another, rather than a broad plan.

I suppose Diana has a point

I suppose Diana has a point about exit, in addition to her desire to be charitable. It could be difficult to change insurers if your payouts were terminated when you take up a different contract. She is concerned (among other things) that if I contract epilepsy, I will never be able to switch insurers again because I will lose coverage for my future epilepsy treatments from my old insurer and my new insurer won't give me coverage for anything having to do with what would now be a pre-existing condition of epilepsy.

I suppose I had better shop for an insurer that offers a contract like my life insurance does for accidental amputation--namely a one-time payout if the condition occurs. The promise of lifetime coverage for a condition, but only if I continue to insure with them against other, unrelated mishaps, could lock me in for life.

(Original Brian) Diana:

(Original Brian)

Diana: "These are just possibilities from one type of illness. Many can offer up expected, as well as unexpected costs – and I just don’t, imo, find it acceptable to force all people to accept handouts or welfare to cope with these things."

I think we just have a problem with language. Forcing insurers to accept customers that they otherwise wouldn't *is* a form of welfare, and an especially inefficient one at that, since it drives up costs for healthy customers. I'm not saying that chronically ill patients shouldn't get treatment. They should, but the only possible way is with handouts of one form or another. That's reality, whether it's "acceptable" or not.

There’s no such thing as

There’s no such thing as society.

Just to piss off Beck in case he's inlooking, I think it's more accurate to say there's no such thing as an individual, independent of society.
:argue:

Take for example a person

Take for example a person who has epilepsy, be it from birth, or accident.

Diana,

The point some here are trying to make is that insurance is only insurance if there is an element of risk. If the condition is already known, a health care policy which covers this condition may or may not be desirable - but it shouldn't be thought of as insurance.

For babies born with medical conditions, the only way to actually insure them is for their parents to purchase insurance before they are born - before the condition is discovered.

I think it's time I stepped

I think it's time I stepped out of the shadows to comment on this one. I am one of those much discussed, but seldom seen, individuals...the People of the Pre-Existing Condition. As a nineteen year veteran of a liveable, but incurable disease, I still advocate totally free markets in health care, and I adamantly oppose any government intervention in said markets. I realize what this might mean. But the fact that I happen to be on the receiving end of an unfortunate stroke of fate does not obligate other people to pay for my medical bills, or to subsidize me via insurance. No one is going to force me into welfare, either. Maybe in a free market of medical care I would end up looking for charity (though I hope that a free market would actually drive down the cost of care and make it easier to obtain). If I did end up looking for charity in such a situation, it would be voluntary charity, not subsidies that other people are forced to provide for me, which is what insurance in its present state is. I don't expect that it would be a total picnic. But I cannot place an obligation on other people to pay the costs of my illness. It is not their fault or their responsibility.

Regarding pre-existing

Regarding pre-existing conditions, these are the regulations the HIPPA Act of '96 introduced:

In 1996, a law was introduced to the pre-existing condition forum. The HIPAA (Health Insurance Portability and Accountability Act of 1996) determined that there are certain conditions health insurance carriers may and may not cover. HIPAA defines a pre-existing condition as:

"A condition (whether physical or mental), regardless of the cause of the condition, for which medical advice, diagnosis, care or treatment was recommended or received within the 6 month period ending on the enrollment date."

In effect, insurance carriers cannot exclude:

* Newborns
* Pregnancy (even late entrants)
* Adopted children or children placed for adoption under 18 years

Insurance carriers can exclude:

* People who have never had health coverage
* People who previously had health coverage, but in less time than the plan's pre-existing exclusion period
* People who are late entrants (basically, people who did not enroll when they could have)
* People who have been without coverage for 63 days

However, these exclusions are generally limited in duration:

* Regular on-time entrants may only endure an exclusion period of 12 months following enrollment. Applicable to those who received treatment for a condition 6 months before enrollment (i.e. you were treated for melanoma on January 1, 1999: you can enroll up to July 1, 1999 and still be eligible but you must wait until July 2000 for benefits to begin).
* Late entrants must endure a longer exclusionary period of 18 months, but maintain the same eligibility requirements for regular on-time entrants above.
* HMO's may affix a "waiting" period of 60-90 days if they have no pre-existing exclusion policies.
http://www.4insurance.com/health/conditions.asp

Given these reasonable conditions/stipulations -- by apparently even the insurance companies standards[i.e. the fact that the exclusions are generally limited in duration, when they needn't consider coverage 'legally' anyway.] I don't understand why y'all would believe that anyone who is able to be covered by a pre-existing condition is anymore accepting 'charity' in some form than say, a person of a certain race or ethnicity who receives health care coverage.

Health coverage providers are in the business of 'people' and I would think it only good business practice to be as accomodating to the population as possible.

Finally, as Trent stated earlier in the thread -- I would LOVE to see a study that tried to estimate the economic dead weight loss of health care regulation as a percentage of health care GDP, rather than everyone just pulling 'pre-existing conditions and these regulations are forced charity' out of their asses.

Diana

My Fiancee who is a very

My Fiancee who is a very healthy 25 yr old just recently was diagnosed with Thyroid cancer. A week ago they removed her Thyroid and now the prognosis is very good. Her insurance runs out in November and I need to get her on to somthing. Although with this precondition it seems to be hard. Can you give me any help on this matter. I would really appreciate anything.
thanks,
Trevor Short